-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LIrw7wK0YAxXeLSksAA+7xW094nlbyWYaR2XIhbW0yKpRa0bFwqEUApXbnSizvGv OGpR95NeNnvM/jHCoPwEPg== 0000950136-96-000814.txt : 19961001 0000950136-96-000814.hdr.sgml : 19961001 ACCESSION NUMBER: 0000950136-96-000814 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 36 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960930 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PALATIN TECHNOLOGIES INC CENTRAL INDEX KEY: 0000911216 STANDARD INDUSTRIAL CLASSIFICATION: PHOTOGRAPHIC EQUIPMENT & SUPPLIES [3861] IRS NUMBER: 954078884 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-22686 FILM NUMBER: 96637189 BUSINESS ADDRESS: STREET 1: 214 CARNEGIE CENTER STREET 2: SUITE 100 CITY: PRINCETON STATE: NJ ZIP: 08540 BUSINESS PHONE: 6095201911 MAIL ADDRESS: STREET 1: 214 CARNAGIE CENTER STREET 2: SUITE 100 CITY: PRINCETON STATE: NJ ZIP: 08540 FORMER COMPANY: FORMER CONFORMED NAME: INTERFILM INC DATE OF NAME CHANGE: 19930825 10KSB 1 FORM 10-KSB =============================================================================== U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------------ FORM 10-KSB [ ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) or [X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from September 1, 1995 to June 30, 1996 Commission file number 0-22686 ------------------------------------ PALATIN TECHNOLOGIES, INC. (Exact name of small business issuer as specified in its charter) DELAWARE 95-4078884 (State of incorporation or organization) (I.R.S. Employer Identification No.) 214 CARNEGIE CENTER - SUITE 100 PRINCETON, NEW JERSEY 08540 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (609) 520-1911 Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: COMMON STOCK, PAR VALUE $.01 PER SHARE Check whether the Registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. |X| Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or by any amendment to this Form 10-KSB. |_| The aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the stock was sold, or the average bid and asked price of such stock, as of September 24, 1996, was $21,111,385. The Registrant's revenues for the period ended June 30, 1996 were $24,457. As of September 24, 1996, 11,537,412 shares of the Registrant's common stock, par value $.01 per share, were outstanding. Documents incorporated by reference: None. Transitional Small Business Disclosure Format: Yes [ ] No [X] =============================================================================== TABLE OF CONTENTS PART I PAGE ---- Item 1. Business......................................................... 1 Item 2. Property......................................................... 16 Item 3. Legal Proceedings................................................ 16 Item 4. Submission of Matters to a Vote of Security Holders.............. 17 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.................................. 17 Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations................. 18 Item 7. Financial Statements............................................. 21 Item 8. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure........................... 21 PART III Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act................ 22 Item 10. Executive Compensation........................................... 25 Item 11. Security Ownership of Certain Beneficial Owners and Management... 30 Item 12. Certain Relationships and Related Transactions................... 33 Item 13. Exhibits, Financial Statements and Reports on Form 8-K........... 36 Signatures.................................................................. 40 Unless the context otherwise requires, (a) all references to the "Company" or "Palatin" include Palatin Technologies, Inc. and its wholly-owned subsidiary, RhoMed Incorporated ("RhoMed"), (b) all references to "Interfilm" relate to the Company prior to June 25, 1996 (the effective date of the Merger, as such term is hereafter defined), and (c) all references to the Company's activities, results of operations and financial condition prior to June 25, 1996 relate to RhoMed. PART I ITEM 1. BUSINESS. INTRODUCTION Through its wholly-owned subsidiary, RhoMed, the Company is a development-stage biopharmaceutical company dedicated to developing and commercializing products and technologies for diagnostic imaging, cancer therapy and ethical drug development utilizing peptide, monoclonal antibody and radiopharmaceutical technologies. Since June 25, 1996, the effective date of the Merger, the business of RhoMed represents the on-going business of the Company (see "History and Merger" in this Item 1). The Company concentrates its activities in two technology areas, each of which the Company believes has potential diagnostic and therapeutic applications. These technologies involve the Company's (1) Metal Ion-induced Distinctive Array of Structures ("MIDAS") metallopeptide technology and (2) direct radiolabeling techniques. The Company believes that the MIDAS technology represents a platform technology which could enable the design and synthesis of novel peptide analogs or mimics (see "Research and Development -- MIDAS Technology" in this Item 1). Further, the Company believes that its MIDAS technology may provide the Company with the flexibility to generate its own pharmaceutical products, and the ability to target and complement existing product portfolios and technological bases of other companies. The Company is developing two products incorporating its direct radiolabeling technology, (1) Leu-Tech, an infection and inflammation imaging product (see "Direct Radiolabeling Technology -- Leu-Tech Diagnostic Imaging Product" in this Item 1), and (2) PT-2, a radiotherapeutic peptide somatostatin analog for cancer therapy (see "Direct Radiolabeling Technology -- PT-2 Cancer Therapeutic Product" in this Item 1). The Company is at an early stage of development and has not yet completed the development of any products based on either its metallopeptide technology (MIDAS) or its radiolabeling technology. Accordingly, the Company has not begun to market or generate revenues from the commercialization of any such products. It will be a number of years, if ever, before the Company will recognize significant revenues from product sales or royalties. There can be no assurance that the Company will be successful in entering into strategic alliances or collaborative arrangements that might result in significant revenues to the Company. The Company's technologies and products under development will require significant time-consuming and costly research, development, pre-clinical studies, clinical testing, regulatory approval and significant additional investment prior to their commercialization, which may never occur. There can be no assurance that the Company's research and development programs will be successful, that its products will exhibit the expected biological results in humans, that its products will prove to be safe and efficacious in clinical trials, that its products will obtain the required regulatory approvals or that the Company or its collaborators will be successful in obtaining market acceptance of any of the Page 1 Company's products. The Company or its collaborators may encounter problems and delays relating to research and development, regulatory approval, manufacturing and marketing. The failure by the Company to address successfully such problems and delays would have a material adverse effect on the Company's business, financial condition and results of operations. When used herein, the words "believes," "anticipates" and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. HISTORY AND MERGER Palatin Technologies, Inc., formerly Interfilm, Inc., was incorporated under the laws of the State of Delaware on November 21, 1986. From November 4, 1993, when Interfilm acquired Interfilm Technologies, Inc., a New York corporation, through May 9, 1995, Interfilm was primarily engaged in the business of exploiting the rights related to its interactive motion picture process, including the production and distribution of interactive motion pictures for initial exhibition in theaters and subsequently in enhanced versions for distribution to the home market. Interfilm consummated an initial public offering on October 28, 1993, and on May 10, 1995, the Board of Directors of Interfilm decided to substantially curtail the operations of Interfilm and its subsidiaries. Interfilm, prior to June 25, 1996, had conducted no business activities since May 10, 1995. Merger with RhoMed. On June 25, 1996, a newly formed, wholly-owned subsidiary of Interfilm, Interfilm Acquisition Corporation ("InSub"), a New Mexico corporation, merged with and into RhoMed Incorporated ("RhoMed"), a New Mexico corporation, and all of RhoMed's outstanding equity securities were ultimately exchanged for equity securities of the Company (the "Merger"). As a result of the Merger, RhoMed became a wholly-owned subsidiary of the Company, with the holders of RhoMed preferred stock and RhoMed common stock (including the holders of "RhoMed Derivative Securities" as hereafter defined) receiving an aggregate of an approximately 96% interest in the equity securities of the Company on a fully-diluted basis. Additionally, all warrants and options to purchase common stock of RhoMed outstanding immediately prior to the Merger (the "RhoMed Derivative Securities"), including without limitation, any rights underlying RhoMed's qualified and nonqualified stock option plans, were automatically converted into rights to receive, upon exercise, the Company's common stock, $.01 par value per share (the "Common Stock"), in the same manner in which shares of RhoMed common stock were converted. Since the former stockholders of RhoMed acquired, by reason of the Merger, more than a 50% controlling interest in the Company, the Merger has been treated, for accounting purposes, as a reverse acquisition. Consequently, the historical financial statements of the Company prior to June 25, 1996, are those of RhoMed. In connection with the Merger, certain pre-Merger assets and liabilities of the Company and one of its wholly-owned subsidiaries, consisting principally of certain intellectual property and litigation claims against Sony Corporation of America and related entities, were transferred to an unaffiliated limited liability partnership for the benefit of the Company's pre-Merger stockholders as of a record date of June 21, 1996 (see Item 3, Legal Proceedings). Page 2 On July 19, 1996, the Company filed an amendment to its Certificate of Incorporation (the "Charter Amendment"), which (1) effected the change of name of the Company from Interfilm, Inc. to Palatin Technologies, Inc., (2) increased the total number of authorized shares of the Company's Common Stock from 10,000,000 to 25,000,000 and (3) effected a 1-for-10 reverse split of the Common Stock. As a result of the Merger and the Charter Amendment, each share of RhoMed preferred stock was converted into .46695404349 shares of Common Stock, and each share of RhoMed common stock was converted into .184332593 shares of Common Stock. RESEARCH AND DEVELOPMENT -- MIDAS TECHNOLOGY Role and Function of Peptides. Peptides, short chains of amino acids, play important roles in regulating a variety of biological functions. Natural peptides function by conforming or bending to fit specific molecules on cell surfaces, called receptors, thereby signaling the cell to initiate a biological activity. Many important biological functions that are affected in this manner include overall growth and behavior, inflammatory responses, immune responses and wound healing. In order to effectively regulate cell signaling, a peptide must bind to its target receptor with high affinity. The affinity of a peptide for its target receptor is highly dependent on its three-dimensional shape or conformation. Many naturally occurring peptides are flexible and can take on multiple conformations, allowing them to interact with more than one type of cell receptor, and to control multiple functions within the body. However, when such peptides are used as drugs, this multiple reactivity is a disadvantage as it may lead to side effects. The ability to construct high-affinity, receptor- specific peptides offers a significant opportunity to develop potent receptor-specific drugs. Introduction to MIDAS Technology. The Company believes that its MIDAS technology can be used to rationally design and produce receptor-specific drugs. Using MIDAS, highly stable metallopeptide complexes are formed, in which the metal ion locks or constrains the peptide into a specific conformation. By designing MIDAS metallopeptides to mimic the conformation required for a specific receptor, a stable, receptor-specific drug, with high affinity and enhanced biological activity, can be made. The Company believes that it has been difficult for the pharmaceutical industry to develop effective peptide-based drugs for two major reasons: 1. Molecular instability - Many peptides are highly unstable in the body, becoming rapidly degraded by proteases and peptidases (natural enzymes). 2. Inefficient binding affinity - The molecular configuration of peptides often precludes them from binding efficiently to the three-dimensional shaped receptor site present on the target cell. This inefficiency results in low levels of biological response. The Company believes that it has demonstrated, in both in vitro testing and animal models, the ability of specific MIDAS-based peptides to overcome these two hurdles. Accordingly, the Company believes that this technology offers a new platform for drug development, with the potential to overcome obstacles which have limited the development of peptide drugs. No MIDAS peptide product has been tested in humans, and there can be no assurance that results obtained in animal and in vitro studies can be obtained in human studies, or that MIDAS peptide products will prove to be safe and efficacious in clinical trials. Page 3 The Company's MIDAS technology is intended to allow the design and development of metallopeptide mimics of native peptides, as well as other types of molecules, such as steroids. The Company believes that MIDAS metallopeptides can be specifically and rationally designed to act as drugs to treat diseases for which a receptor-specific pathway or interaction has been identified. Because of the intrinsic design of MIDAS peptides as metallopeptides, they are highly resistant to peptidase and enzyme degradation. The Company believes that MIDAS peptides will provide superior performance, compared to conventional peptides, by remaining biologically active in the body, with minimal degradation, for longer periods of time. The Company believes that at least some peptides made using this technology can be administered orally, with no significant enzymatic degradation. In addition, the Company believes that random combinatorial libraries of MIDAS molecules can be developed and used for screening to provide one or more lead molecules specific to a given biological receptor target. The Company has designed methods for random combinatorial libraries using MIDAS, but has not yet constructed any such libraries. To date, the Company's research efforts have focused on development of MIDAS analogs of tuftsin, a natural immunomodulatory peptide, and on development and evaluation of a series of MIDAS analogs specific to the family of RGD amino acid-specific receptors, which are involved in platelet activation, angiogenesis and related biological events. MIDAS RM-T-1 Construct. The Company's lead MIDAS tuftsin analog, RM-T-1, is a five-amino acid construct, which may be labeled with technetium-99m or isotopes of rhenium. When labeled with technetium-99m, the Company believes that RM-T-1 can be used as a diagnostic agent to diagnose infections and inflammations. RM-T-1 is in pre-clinical evaluation, with animal studies being conducted at the Company's facilities and at Brookhaven National Laboratory. The Company is also evaluating the use of RM-T-1 and related analogs, complexed with a non-radioactive isotope of rhenium, as immunostimulatory agents, to stimulate and regulate the body's immune system, with potential application as a therapeutic agent for treatment of a variety of conditions involving a compromised or deficient immune system. The Company intends to continue animal and in vitro studies with RM-T-1 and related analogs for identified indications, and if results warrant, to initiate one or more clinical trials for use of RM-T-1 and related analogs. There can be no assurance that the Company's tuftsin program will be successful, that products, if any, will exhibit the expected biological results in humans, or that products will prove to be safe and efficacious in clinical trials. MIDAS RGD Constructs. RGD is a well characterized three-amino acid peptide sequence which binds to a variety of integrin receptors, including the GP IIb/IIIa receptor found on platelets, and vitronectin and fibronectin receptors found on a variety of cells, including endothelial cells and certain tumor cells. The Company is developing and evaluating a series of MIDAS RGD analogs, and is conducting in vitro evaluation of specificity and affinity to various integrin receptors, including platelet GP IIb/IIIa receptors and vitronectin receptors. Initial pre-clinical work on development of a MIDAS metallopeptide for the GP IIb/IIIa receptor is supported, in part, by a Phase I grant under the Small Business Innovative Research ("SBIR") program awarded to the Company by the National Institutes of Health of the Department of Health and Human Services. The Phase I award is for $94,970, and, contingent upon completion of Phase I, the Company Page 4 can apply for a Phase II SBIR grant in an amount of up to $750,000, although there can be no assurance that Phase I will be satisfactorily completed, or that a Phase II grant will be awarded. The Company is continuing its research on biological activity and specificity of MIDAS RGD constructs, but has not yet identified specific product applications. There can be no assurance that the Company's MIDAS RGD research and development programs will be successful, that products, if any, will exhibit the expected biological results in humans, or that products will prove to be safe and efficacious in clinical trials. Other Opportunities. The Company develops MIDAS peptides by applying its proprietary technologies in the areas of peptide design and engineering and radiolabeling chemistry. After the Company identifies a receptor-specific pathway or interaction relating to a selected disease, the Company intends to use rational drug design principles to develop a MIDAS peptide that it believes will, upon labeling with a metal ion, bind to the receptor target with high affinity. The Company is evaluating a number of product opportunities for its MIDAS technology, and believes that this technology may have medical applications in a variety of areas, including immune disorders, cancers and cardiology. The Company intends to expand the research and development of these other MIDAS applications primarily through strategic alliances with other entities. No predictions can be made regarding the establishment or the timing of such alliances. The Company expects to devote resources to these other areas to the extent funding is available. No prediction can be made, however, as to when or whether the areas of research described above will yield new scientific discoveries, or whether such research will lead to new commercial products. DIRECT RADIOLABELING TECHNOLOGY The Company has developed and patented radiolabeling technologies for the direct radiolabeling of antibodies, peptides and other proteins with diagnostic and therapeutic radioisotopes. Leu-Tech Diagnostic Imaging Product. Leu-Tech, a product under development that utilizes direct radiolabeling technology, is a murine (or mouse) monoclonal antibody-based product designed to be labeled with the diagnostic radioisotope technetium-99m, a commonly-used radioisotope which emits signals that can be detected using widely available nuclear medicine diagnostic equipment. When labeled with technetium-99m, Leu-Tech is intended for diagnosis of infections, occult abscesses, sites of inflammatory disease and other conditions involving high concentrations of white blood cells. The Company believes that the Leu-Tech product can be used for the rapid diagnosis of a variety of undiagnosed infections and occult abscesses. Occult abscesses are hidden infections that are generally characterized as being highly localized. Examples of typical occult abscesses include infections of the intra-abdominal area, such as intestinal, spleen, liver or urinary tract abscesses, as well as bone, prosthetic and other abscesses. In a typical abscess, as in most infections, large numbers of white blood cells congregate at the site of the infection. Thus, if the location of concentrations of white blood cells is known, the site of the infection is also known. It is crucial in the diagnosis and treatment of occult abscesses that the location of the infection be determined, as location will frequently determine the type of therapy which is appropriate. The rapidity of diagnosis with Leu-Tech is intended to make it possible to apply nuclear medicine technology to emergency critical care problems such as appendicitis, an acute diagnostic emergency not currently addressed by nuclear medicine. Page 5 The most specific procedure currently available for nuclear medicine imaging of sites of infection involves removal of blood from the patient, isolating white blood cells in the patient's blood, radiolabeling the white blood cells and injecting the radiolabeled white blood cells back into the patient. The radiolabeled white blood cells then localize at the site of the infection, and can be detected using nuclear medicine diagnostic equipment. This procedure is expensive, difficult to perform and generally takes at least twelve hours to perform. The Leu-Tech product has been formulated as a lyophilized, or freeze-dried, kit containing the modified antibody and chemicals required for the radiolabeling process. Prior to use, Leu-Tech is labeled with technetium-99m by a radiopharmacy, which is a specialized nuclear medicine pharmacy, or by a hospital's nuclear medicine department. Leu-Tech is designed to bind, in the body, to white blood cells already present at the site of the infection. In addition, Leu-Tech does not require handling or processing of patient blood. Preliminary human clinical trials have been conducted under an Investigational New Drug application (see "Governmental Regulation" in this Item 1) held in the name of an investigator, using product provided by the Company. Twelve patient studies have been conducted using the current product formulation, with images obtained in a variety of diseases, including acute and suspected appendicitis, pulmonary infections and other abdominal infections. In some cases, diagnostic images have been obtained within five minutes of administration of Leu-Tech, and in all cases in which a definitive diagnosis could be made, diagnostic images have been obtained within ninety minutes. The Company has obtained an exclusive option and is currently negotiating a definitive license agreement for the antibody and cell line used for the Leu-Tech product. In addition, the Company is negotiating long-term contractual arrangements for the manufacture of purified antibody necessary for Leu-Tech, as well as the final manufacture of Leu-Tech. Such manufacture must be done under good manufacturing practice requirements prescribed by the United States Food and Drug Administration and other agencies (see "Manufacturing and Marketing" in this Item 1). To date, the Company has manufactured only small or pilot lots of the Leu-Tech product, and has not determined whether commercial quantities of Leu-Tech can be manufactured. There can be no assurance that the Company can successfully negotiate acceptable contractual arrangements for the manufacture and production of Leu-Tech, or that contractors will be able to successfully manufacture Leu-Tech. If the Company successfully negotiates acceptable contractual arrangements for the manufacture and production of Leu-Tech, and if clinical results warrant further development, the Company intends to file an Investigational New Drug application in its name and initiate human clinical trials on one or more selected indications. There can be no assurance that the Company's Leu-Tech development program will be successful, that Leu-Tech will prove to be safe and efficacious in clinical trials, that Leu- Tech can be manufactured in commercially required quantities at an acceptable price, that Leu-Tech will obtain the required regulatory approvals or that the Company or its collaborators will be successful in obtaining market acceptance of Leu-Tech. The Company or its collaborators may encounter problems and delays relating to research and development, regulatory approval, manufacturing and marketing. PT-2 Cancer Therapeutic Product. PT-2 is a rhenium-labeled somatostatin peptide analog being developed by the Company which is intended to treat cancers by regional delivery of tumor cell-targeted radiotherapy. Somatostatin is a class of peptides which targets receptors found on certain cancers, and at lower levels on certain normal tissues. The product is intended to combine the tumor targeting Page 6 potential of somatostatin analogs with the cancer toxicity of rhenium-188, a radioisotope which emits high energy beta radiation. In development work to date, the Company has developed a reproducible, easy to use, and high efficiency direct radiolabeling method for PT-2; developed a lyophilized final product formulation; conducted biodistribution studies of PT-2 in normal animals using several different routes of administration, including intra-venous and intra-cavity administration; conducted biodistribution studies of PT-2 in tumor-bearing animals; and demonstrated that PT-2 has a specific therapeutic effect in animal models of three different human tumors -- lung, prostate and breast cancers. With regard to administration of PT-2, the Company believes that systemic administration of somatostatin-based radiotherapeutic agents will not be efficacious. In trials conducted by other groups to date, the absolute uptake of the radiotherapeutic agent following intravenous administration is generally too low to effect a therapeutic response. The Company is developing methods and protocols for local and regional administration of PT-2 which the Company believes will overcome problems associated with intravenous administration. The Company believes these methods provide significant advantages over systemic administration, including: high probability of tumor binding, resulting from sequestration and juxtaposition of the radiolabeled peptide against the tumor; maximal tumor irradiation, resulting from both direct binding of the somatostatin peptide to its receptor and non-specific local irradiation; irradiation of micro-metastasis in regional lymph nodes through regional lymphatic system clearance mechanisms; and rapid clearance from the blood stream, once PT-2 has entered the blood stream, minimizing irradiation of non-target organs. The Company believes PT-2 may have applications with any compartmentalized cancer which is somatostatin-receptor positive. The cancer must be compartmentalized in order for local or regional administration to work and must express somatostatin receptors in reasonably high levels in order to obtain the targeting benefits of PT-2. Expression of somatostatin receptors varies by type of cancer. However, until human clinical trials are conducted, specific clinical utility and applications, if any, cannot be determined. The Company has completed a series of pre-clinical studies and is designing initial clinical trials to obtain proof-of-concept. The initial patient population to be studied are patients with metastatic breast cancer to the pleura. PT-2 will be administered by infusion directly into the pleural cavity. This trial will be designed to obtain objective evidence of efficacy, including tumor stasis or regression and improvement in cancer-associated biological markers. The trial will be designed so that results can be obtained within six to eight months of initiating human clinical trials. There can be no assurance that the Company's PT-2 development program will be successful, that PT-2 will exhibit the expected biological results in humans, that PT-2 will prove to be safe and efficacious in clinical trials, that the Company will obtain the required regulatory approvals for PT-2, or that the Company or its collaborators will be successful in obtaining market acceptance of PT-2. The Company or its collaborators may encounter problems and delays relating to research and development, regulatory approval, manufacturing and marketing of PT-2. PT-2 requires a source of radioactive rhenium, preferably rhenium-188. This isotope can be produced by a variety of methods, including a generator system; however, clinical grade radioactive rhenium is not currently available in the United States. The Company is aware of an experimental generator system developed in the United States by Oak Ridge National Laboratory, and an additional Page 7 experimental generator system available in Europe. The Company does not intend to seek to commercialize any source of radioactive rhenium, but is aware of and is in discussions with other companies seeking to commercialize radioactive rhenium. There can be no assurance that, regardless of the status of product development by the Company, any acceptable form of radioactive rhenium will ever be commercially available in the United States or other countries. The Company is currently negotiating a license to use a specific somatostatin analog for its PT-2 product. There can be no assurance that the Company will be able to conclude a license agreement on acceptable terms. If the Company cannot conclude a license, the Company will either abandon PT-2 product development or will seek to develop a substitute using its MIDAS technology. There can be no assurance that the Company would be able to develop a substitute using its MIDAS technology in a reasonable period of time. Research and Development Expenditures. In the ten months ended June 30, 1996 and the fiscal year ended August 31, 1995, the Company spent $869,896 and $619,354, respectively, on research and development activities, including MIDAS. Other Products. The Company manufactures and markets, under the trade name RhoChek, a quality control test product for measuring the immunoreactive fraction of radiolabeled antibodies specific to certain cancer antigens. The Company intends to discontinue product sales of RhoChek in fiscal 1997 (see "Results of Operations" in Item 6). MARKETS FOR PRODUCTS The Company's products and technology are intended to be utilized in two distinct pharmaceutical markets. One market, intended to be addressed by the Company's Leu-Tech and PT-2 products and certain potential products resulting from its MIDAS technology, is the nuclear medicine market. The other market, intended to be addressed by other products resulting from the Company's MIDAS technology, is the larger market of pharmaceutical drugs. The nuclear medicine market involves both diagnostic imaging and therapeutic applications. For imaging, trace amounts of a radioisotope are injected into a patient and detected with nuclear medicine diagnostic equipment, generally a gamma camera. For therapy, radioisotopes which emit radiation lethal to cancer cells are employed. While all of the Company's proposed products, including products resulting from its MIDAS technology, employ a metal ion component, the metal ion is used for MIDAS applications to provide the required three-dimensional conformation to the molecule, but the metal ion need not be radioactive. Thus, the Company believes that products resulting from its MIDAS technology can be used for a variety of medical applications where non-radioactive, receptor-specific drugs are desired. The Company believes the MIDAS technology may be applicable, for instance, to include immune disorder, cancer, and cardiac therapy. There are a limited number of receptor-specific, peptide-based drugs commercially available, but none which employ a metallopeptide. GRANTS AND COLLABORATIVE RESEARCH The Company applies for grants with the National Institutes of Health and other federally-funded agencies ("Research Grants") to develop its products and technologies. Since inception, the Company has been awarded over $2.1 million in peer-reviewed Research Grants. At June 30, 1996, the Company had one active SBIR Phase I Research Grant, and subsequently has received preliminary indication that Page 8 three additional SBIR Phase I Research Grants will be awarded. There can be no assurance that these Phase I grants will be awarded, nor can there be any assurance that Phase I will be satisfactorily completed. The Company has, where scientifically or technologically merited, actively solicited Cooperative Research and Development Agreements ("CRADA") with agencies of the federal government, involving collaborative development activities with the Company. The Company currently has one active CRADA with Brookhaven National Laboratory, and has completed CRADAs with Los Alamos National Laboratory, Oak Ridge National Laboratory and Sandia National Laboratory. COMPETITION The biopharmaceutical industry is highly competitive, both in the area of monoclonal antibody-based products and in the area of peptide-based products. The Company is likely to encounter significant competition with respect to its proposed products currently under development. Some companies with established positions in the pharmaceutical industry are better equipped than the Company to develop, refine and market products based on technologies applied to the diagnosis and treatment of infectious diseases and cancers. Many of the Company's competitors which are engaged in the biopharmaceutical field, and in particular the development of antibody-based and peptide-based products, have substantially greater financial and technological resources and sales and marketing capabilities than the Company, and have significantly greater experience in research and development. Accordingly, the Company's competitors may succeed in developing products and the underlying technology more rapidly than the Company and in developing products that are more accurate and useful and less costly than any that may be developed by the Company, and may also be more successful than the Company in marketing such products. The Company is pursuing an area of product development in which there is the potential for extensive technological innovation in relatively short periods of time. The Company's competitors may succeed in developing products that are safer or more effective than those of the Company's potential products. Rapid technological change or developments by others may result in the Company's present products and potential products becoming obsolete or non-competitive. The Company believes that the technological attributes of its proposed Leu-Tech diagnostic imaging product, including the ease of preparation, rapidity of imaging, apparent targeting specificity and use of technetium-99m (the most widely available radioisotope) will enable the Company to compete effectively in this market. However, the Company is aware of at least one other company developing an antibody-based diagnostic imaging agent for specific infection-related indications, on which clinical trials have been completed, and another company developing a peptide-based diagnostic imaging agent for similar indications, which is in early phase clinical trials. PATENTS AND PROPRIETARY INFORMATION The Company aggressively seeks patent protection for its technology in the United States and, selectively, in those foreign countries where in the Company's judgment such protection is important to the development of the Company's business. The Company's patents and pending applications are directed to radiolabeling of antibodies, antibody fragments, and peptides; MIDAS metallopeptides; and to methods for making and Page 9 using the foregoing in diagnostic and therapeutic applications. The Company owns or has rights to 13 U.S. patents, 17 pending U.S. patent applications, and counterpart patents and applications in strategically selected foreign countries. Certain of the patents and pending applications owned by the Company have been assigned to a third party to secure long-term financing but the Company has retained the exclusive right to practice these patents itself and to grant license under these patents to third parties. The Company is obligated to make monthly payments to the third party in discharge of the Company's debt obligation. From June 1, 1996 through May 1, 1997 the payments are $20,000 per month, and thereafter $91,695 per month through May 1, 1999. On completion of scheduled payments, all rights to the patents and pending applications will be assigned to the Company. In the event of default by the Company, the third party has the right to require the Company to cease using the patents, and to sell or exclusively license the patents to other parties. The patents and pending applications pertain to the Company's Leu-Tech and PT-2 products. In addition, the Company has semi-exclusive rights in a basic United States patent relating to direct radiolabeling of antibodies, and its Canadian counterpart. Two of the Company's basic U.S. patents for direct radiolabeling of antibodies and other proteins were involved in a priority-of-invention contest (interference) in the U.S. Patent and Trademark Office with a patent application owned by a third party. This proceeding has been settled, and the Company's patents are now emerging from reissue proceedings in which the scope of the Company's claims has been somewhat limited. Management believes that the current claim scope will not materially adversely affect the Company's current product development plans, and is sufficient to protect the Company's underlying inventions. One of the Company's granted European patents (directed to selection of patient-specific antibody cocktails) is involved in an opposition proceeding at the European Patent Office. The Company has received a favorable first decision, but the opposing party has filed an appeal. Management believes that the final outcome of this proceeding, even if adverse to the Company, will not have a material adverse effect on the Company's current product development plans. The Company's success will depend in substantial part on its ability to obtain patents, defend and enforce its patents, maintain trade secrets and operate without infringing upon the proprietary rights of others, both in the United States and abroad. In general, the patent positions of companies relying upon biotechnology are highly uncertain in general and involve complex legal and factual questions. To date there has emerged no consistent policy regarding the breadth of claims that are properly accorded to biotechnology patents. There can thus be no assurance that patents will issue from the patent applications filed by the Company or its licensors or that the scope of any claims granted in any patent will provide meaningful proprietary protection or a competitive advantage to the Company. There can be no assurance that the validity or enforceability of patents issued or licensed to the Company will not be challenged by others or that, if challenged, a court will find the patents to be valid and enforceable. In addition, there can be no assurance that competitors will not be able to circumvent any patents issued or licensed to the Company. In the United States, patent applications are maintained in secrecy until patents issue, and publications in the scientific and patent literature lag behind actual discoveries. As a result, the Company cannot be certain that its scientists were the first to make inventions covered by its patents and patent applications. Page 10 In the event a third party has also filed a patent application relating to an invention claimed in a Company patent application, the Company may be required to participate in an interference proceeding decided upon by the United States Patent and Trademark Office to determine priority of invention, which could result in substantial uncertainties and cost for the Company, even if the eventual outcome is favorable to the Company. An adverse outcome could subject the Company to significant liabilities to third parties and require the Company to license disputed rights from third parties at undetermined cost or to cease using the technology. There can be no assurance that the validity or enforceability of the Company's patents, if issued, would be upheld by a court. While no patent that could be potentially infringed by manufacture, use or sale of the Company's product candidates has come to the attention of the Company, the Company's product candidates are still in the development stage, and neither their formulations nor their method of manufacture have been finalized. There can thus be no assurance that the manufacture, use or sale of the Company's product candidates will not infringe patent rights of others. The Company may be unable to avoid infringement of any such patents and may have to seek a license, defend an infringement action, or challenge the validity of the patents in court. There can be no assurance that a license will be available to the Company, if at all, upon terms and conditions acceptable to the Company or that the Company will prevail in any patent litigation. Patent litigation is costly and time consuming, and there can be no assurance that the Company will have sufficient resources to pursue such litigation. If the Company does not obtain a license under any such patents, is found liable for infringement, or is not able to have them declared invalid, the Company may be liable for significant money damages, may encounter significant delays in bringing products to market, or may be precluded from participating in the manufacture, use or sale of products or methods of treatment covered by such patents. The Company relies substantially in its product development activities on certain technologies which are not patentable or proprietary and are therefore available to the Company's competitors. The Company also relies on certain proprietary trade secrets and know-how which are not patentable. Although the Company has taken steps to protect its unpatented trade secrets and know-how, in part through the use of confidentiality agreements with its employees, consultants and certain of its contractors, there can be no assurance that these agreements will not be breached, that the Company would have adequate remedies for any breach or that the Company's trade secrets will not otherwise become known or be independently developed or discovered by competitors. If the Company's employees, scientific consultants or collaborators develop inventions or processes independently that may be applicable to the Company's product candidates, disputes may arise about ownership of proprietary rights to those inventions and processes. Such inventions and processes will not necessarily become the Company's property, but may remain the property of those persons or their employers. Protracted and costly litigation could be necessary to enforce and determine the scope of the Company's proprietary rights. Failure to obtain or maintain patent and trade secret protection, for any reason, could have a material adverse effect on the Company. Certain of the Company's patents are direct to inventions developed with the Company or within academic institutions from which the Company earlier acquired rights to such patents with funds from United States government agencies. As a result of these arrangements, the U.S. government may have rights in certain inventions developed during the course of the performance of federally funded projects as required by law or agreements with the funding agency. Page 11 Several bills affecting patent rights have been introduced in the United States Congress. These bills address various aspects of patent law, including publication, patent term, re-examination, subject matter and enforceability. It is not certain whether any of these bills will be enacted into law or what form new laws may take. Accordingly, the effect of legislative change on the Company's intellectual property estate is uncertain. GOVERNMENTAL REGULATION The manufacture and marketing of pharmaceutical or biological products requires approval of the United States Food and Drug Administration ("FDA") and comparable agencies in foreign countries and, to a lesser extent, state regulatory authorities. In the United States, the regulatory approval process for antibody-based products, which are considered "biologics" under FDA regulations, and for peptide-based products, which are not considered "biologics," is similar to that for any new drug for human use. The FDA has established mandatory procedures and safety standards which apply to the clinical testing, manufacturing and marketing of pharmaceutical products. Noncompliance with applicable requirements can result in fines, recalls or seizure of products, total or partial suspension of production, refusal of the FDA to approve product license applications or to allow the Company to enter into supply contracts, and criminal prosecution. The FDA also has the authority to revoke previously granted product licenses and establishment licenses. Generally, there is a substantial period of time between technological conception of a proposed product and its availability for commercial sale. The period between technological conception and product license application to the FDA is usually five to ten years for in vivo products. The period between the date of submission to the FDA and the date of approval has averaged two to four years for in vivo products, although the approval process may take longer. The amount of time taken for this approval process is a function of a number of variables, including the quality of the submission and studies presented, the potential contribution that the compound will make in improving the treatment of the disease in question and the workload at the FDA. There can be no assurance that any new drug will successfully proceed through this approval process or that it will be approved in any specific period of time. Depending upon marketing and distribution plans and arrangements for a particular product, the Company may require additional time before a proposed in vivo product is available for commercial sale. The steps required before biological products can be produced and marketed usually include pre-clinical non-human studies, the filing of an Investigational New Drug ("IND") application, human clinical trials and the filing and approval of a Product License Application ("PLA"). In addition to obtaining FDA approval for each product, an Establishment License Application ("ELA") must be filed and the FDA must approve any production facilities for the product. Similar steps are required before peptide products, which are not biological products, can be produced and marketed, except that a New Drug Application ("NDA") must be filed and approved, and no PLA or ELA is required. Pre-clinical studies are conducted in the laboratory and in animal model systems to gain preliminary information on the drug's effectiveness and to identify major safety problems. The results of these studies are submitted to the FDA as part of the IND application before approval can be obtained for the commencement of testing in humans. The human clinical testing program required for a new biological or pharmaceutical product involves several phases. The initial clinical evaluation, Phase I, consists of Page 12 administering the product and testing for safe and tolerable dosages while noting the effectiveness of the product at the various dose levels. Phase II involves a study to evaluate the effectiveness of the product for a particular indication and to refine optimal dosage and schedule of administration and identify possible side effects and risks in a larger patient group. For in vivo imaging agents, typically the smallest quantity of product producing satisfactory images will be employed. When a product is determined to be effective in Phase II trials, it is then evaluated in Phase III clinical trials. Phase III trials consist of additional testing for effectiveness and safety with a further expanded patient group, usually at multiple test sites. Therapeutic products must be compared to standard treatments, if such treatments exist, to determine its relative effectiveness in randomized trials. Human clinical trials of both peptide-based and monoclonal antibody-based in vivo imaging products may combine Phase I and Phase II trials. When Phase III studies are complete, the results of the pre-clinical and clinical studies, along with manufacturing information, are submitted to the FDA in the form of a PLA for monoclonal antibody-based products, and an NDA for peptide-based products. Both the PLA and NDA involves considerable data collection, verification and analysis, as well as the preparation of summaries of the production and testing processes, pre-clinical studies and clinical trials. The FDA must approve the PLA or NDA, as applicable, and in the case of monoclonal antibody-based products, an ELA, before the product may be marketed. The FDA may also require post-marketing testing, including extensive Phase IV studies, and surveillance to monitor the effects of the product in general use. Product approvals may be withdrawn if compliance with regulatory standards is not maintained or if problems occur following initial marketing. In addition, the FDA may in some circumstances impose restrictions on the use of the drug that may limit its market potential, and also make it difficult and expensive to administer, and usually requires prior approval of promotional materials. The Company has very limited experience in conducting clinical trials. The Company will either need to rely on third parties to design and conduct any required clinical trials or expend resources to hire additional personnel to administer such clinical trials. There can be no assurance that the Company will be able to find appropriate third parties to design and conduct clinical trials or that it will have the resources to hire personnel to administer clinical trials in-house. No compound or drug candidate being evaluated by the Company has been submitted for approval or approved by the FDA or any other regulatory authority for marketing, and there can be no assurance that any such product or compound will ever be approved for marketing or that the Company will be able to obtain the labeling claims desired for its products or compounds. The Company is and will continue to be dependent upon the laboratories and medical institutions conducting its pre-clinical studies and clinical trials to maintain both good laboratory and good clinical practices. Data obtained from pre-clinical studies and clinical trials are subject to varying interpretations which could delay, limit or prevent FDA regulatory approval. Delays or rejections may be encountered based upon changes in FDA policy for drug approval during the period of development and FDA regulatory review. Similar delays also may be encountered in foreign countries. There can be no assurance that FDA or other regulatory approval for any products developed by the Company will be granted on a timely basis, or at all. Delay in obtaining or failure to obtain such regulatory approvals will materially adversely affect the marketing of any products which may be developed by the Company as well as the Company's results of operations. Page 13 MANUFACTURING AND MARKETING To be successful, the Company's products must be manufactured in commercial quantities in accordance with good manufacturing practice ("GMP") requirements prescribed by the FDA and at acceptable costs. The Company has not yet manufactured any products in commercial quantities and currently does not have the facilities to manufacture any products in commercial quantities in accordance with GMP requirements. Therefore, the Company will need to develop its own GMP manufacturing facility and/or depend on its collaborators, licensees or contract manufacturers for the commercial manufacture of its products. In the event the Company determines to establish a manufacturing facility, it will require substantial additional funds, the hiring and retention of significant additional personnel and compliance with extensive regulations applicable to such a facility. The Company has no experience in such commercial manufacturing, and there can be no assurance that the Company will be able to successfully establish such a facility and, if established, that it will be able to manufacture products in commercial quantities for sale at competitive prices. If the Company determines to rely on collaborators, licensees or contract manufacturers for the commercial manufacture of its products, the Company will be dependent on such corporate partners or other entities for, and will have only limited control over, the commercial manufacturing of its products. There can be no assurance that the Company will be able to enter into any such manufacturing arrangements on acceptable terms, if at all. The Company's Leu-Tech product requires purified monoclonal antibody, made from a specific parent cell line. There are, on a global basis, a limited number of contract manufacturers capable of producing purified monoclonal antibodies, and there can be no assurance that the Company will be able to enter into such production and purification arrangements on acceptable terms, if at all. The Company's PT-2 product, and any products resulting from its MIDAS technology, are synthetic peptides. The peptides are synthesized from readily available amino acids, and the production process involves well-established technology. The Company currently contracts with third-party manufacturers for the production of peptides and anticipates doing so in the future. The Company's PT-2 product requires a source of radioactive rhenium in order to be commercialized (see "Direct Radiolabeling Technology -- PT-2 Cancer Therapeutic Product" in this Item 1). There can be no assurance that, regardless of the status of product development by the Company, any acceptable form of radioactive rhenium will ever be commercially available in the United States or other countries. The Company plans to package and ship its radiopharmaceutical products in the form of non-radioactive kits. Prior to patient administration, the product would be radiolabeled with the specified radioisotope, generally by a specialized radiopharmacy. The Company does not intend to sell or distribute any radioactive substance. The Company has limited experience in marketing, distributing or selling pharmaceutical products, and will have to develop a sales force and/or rely on its collaborators, licensees or arrangements with others to provide for the marketing, distribution and sales of its products. There can be no assurance that the Company will be able to establish marketing, distribution and sales capabilities or make arrangements with third parties to perform such activities on acceptable terms, if at all. Successful sales of the Company's products in the United States and other countries will depend on the availability of adequate reimbursement to the end-user of the Company's products from third-party payors such as governmental entities, managed care organizations and private insurance Page 14 plans. Reimbursement by a third-party payor may depend on a number of factors, including the payor's determination that use of a product is safe and effective, neither experimental nor investigational, medically necessary, appropriate for the specific patient and cost effective. Since reimbursement approval is required from each payor individually, seeking such approvals is a time-consuming and costly process. Third-party payors routinely limit reimbursement coverage and in many instances are exerting significant pressure on medical suppliers to lower their prices. There is significant uncertainty concerning third-party reimbursement for the use of any pharmaceutical product incorporating new technology, and there can be no assurance that third-party reimbursement will be available for the Company's products, or that such reimbursement, if obtained, will be adequate. Less than full reimbursement by governmental and other third-party payors for the Company's products would have a material adverse effect on the Company's business, financial condition and results of operations. Further, health care reimbursement systems vary from country to country, and there can be no assurance that third-party reimbursement will be made available for the Company's products under any other country's reimbursement system. PRODUCT LIABILITY AND INSURANCE The Company's business may be affected by potential product liability risks which are inherent in the testing, manufacturing and marketing of pharmaceutical and other products to be developed by the Company. There can be no assurance that product liability claims will not be asserted against the Company, its collaborators or licensees. The use of products developed by the Company in clinical trials and the subsequent sale of such products is likely to cause the Company to bear all or a portion of those risks. Such litigation claims could have a material adverse effect on the business or financial condition of the Company. The Company is seeking product liability insurance relating to clinical trials, and will seek to obtain liability insurance before the commercialization of its products. There can be no assurance, however, that insurance will be available to the Company on acceptable terms, if at all, or that such coverage once obtained would be adequate to protect the Company against future claims, or that a medical malpractice or other claim would not materially and adversely affect the business, prospects, financial condition or results of operations of the Company. Furthermore, there can be no assurance that any collaborators or licensees of the Company will agree to indemnify the Company, be sufficiently insured or have a net worth sufficient to satisfy any such product liability claims. EMPLOYEES As of June 30, 1996, the Company employed 16 persons full time and 1 part time, of whom 8 were engaged in research and development activities and 9 were engaged in administration and management. Of the Company's employees, 2 hold Ph.D. degrees and 6 hold other advanced degrees. The Company, from time to time, hires scientific consultants to work on certain of its research and development programs. The Company believes that it has been successful in attracting skilled and experienced scientific personnel; however, competition for such personnel is intense. None of the Company's employees is covered by a collective bargaining agreement. All of the Company's employees have executed confidentiality agreements. The Company considers relations with its employees to be good. The Company is highly dependent upon the efforts of its management. The loss of the services of one or more members of management could impede the achievement of development objectives. Due to the specialized scientific nature of the Company's business, the Company is also highly dependent Page 15 upon its ability to attract and retain qualified scientific, technical and key management personnel. There is intense competition for qualified personnel in the areas of the Company's activities and there can be no assurance that the Company can presently, or will be able to continue to, attract and retain the qualified personnel necessary for the development of its existing business and its expansion into areas and activities requiring additional expertise. In addition, the Company's intended or possible growth and expansion into areas requiring additional skill and expertise, such as sales and marketing, will require the addition of new management personnel and the development of additional expertise by existing management personnel. The loss of, or failure to recruit, scientific, technical, sales and marketing and managerial personnel could have a material adverse effect on the Company. ITEM 2. PROPERTY. The Company's headquarters are located at 214 Carnegie Center, Suite 100, Princeton, New Jersey, where it rents, on a month-to-month tenancy, approximately 3,500 square feet. The Company is currently negotiating a longer term lease of such facility, but there can be no assurance that a lease can be entered into on acceptable terms, if at all. The Company also leases approximately 14,000 square feet in Albuquerque, New Mexico, which serves as the Company's research and development facility, under a lease which expires December 31, 1996. The Company is currently negotiating a short-term lease, through August 31, 1997, for its Albuquerque facility, but there can be no assurance that a lease can be entered into on acceptable terms, if at all. The Company currently intends to relocate all of its facilities, including research and development, to the Princeton, New Jersey area. To date, no lease has been entered into for new research and development facilities in the Princeton, New Jersey area, and there can be no assurance that any lease can be entered into on acceptable terms, if at all. ITEM 3. LEGAL PROCEEDINGS. In April 1996, prior to the Merger, the Company and one of its subsidiaries, Interfilm Technologies, Inc. (collectively, "IT"), filed a complaint in the Supreme Court of the State of New York, County of New York, against Sony Corporation of America and certain of its affiliates and subsidiaries (collectively, "Sony"), for breach of contract and breach of duty of good faith and fair dealing (the "IT Litigation"), seeking contract damages of $18 million, punitive damages of $100 million and costs. The IT Litigation relates solely to the business activities of the Company prior to the Merger and, pursuant to the Merger, was included in certain assets and liabilities of IT transferred to an unaffiliated limited liability partnership solely for the benefit of the Company's stockholders as of June 21, 1996. Accordingly, the litigation is under the control of and at the expense of the limited liability partnership, and the Company will receive no financial benefit from the litigation, even if the litigation is successfully concluded. The assets of the limited liability partnership, including any proceeds from the IT Litigation, whether by judgment, settlement or otherwise, are available to indemnify the Company from certain liabilities arising out of the Merger. The causes of action in the IT Litigation relate to the actions or inactions of Sony under certain agreements entered into between IT and Sony in April 1993, and as amended in November 1993 and October 1994 (collectively, the "Sony-IT Agreement"). Pursuant to the original terms of the Sony-IT Page 16 Agreement, Sony was obligated, among other things, to develop, produce, market, distribute and exhibit three interactive motion pictures ("Cinematic Games"). Subsequently, at Sony's request, the Sony-IT Agreement was amended so that Sony's commitment to produce Cinematic Games was reduced to two Cinematic Games in exchange for, among other things, an increased financial marketing commitment by Sony. The first Sony-financed Cinematic Game was initially slated for release in the first half of 1994, which release was delayed until February 1995. Among other things, IT alleges that the delay in the opening of the first Cinematic Game, which delay IT alleges was primarily a result of Sony's failure to abide by the terms of the Sony-IT Agreement, seriously harmed IT. Under the terms of the amended Sony-IT Agreement, Sony was obligated to begin principal photography of the next Sony-financed Cinematic Game by May 15, 1995. Because Sony advised IT that Sony had no intention of producing, distributing and marketing additional Sony-financed Cinematic Games, litigation was initiated in May 1995 in the State of California by IT against Sony. In July 1995, a motion to dismiss or stay the action on grounds of Forum Non Conveniens, arguing that New York rather than California was the appropriate venue for the action, was filed by Sony. Following a ruling in favor of the Sony motion, IT elected to not pursue an appeal of the California court's ruling, and instead engaged counsel in New York to file the lawsuit and pursue its claims in New York. The Company is involved in various other claims and litigations arising in the normal course of business, primarily actions commenced against the Company prior to the Merger. Management believes that the outcome of such claims and litigation will not have a material adverse effect on the Company's financial position and results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Board of Directors approved, and a total of eight stockholders representing 2,278,148 shares (approximately 52.64%) of the 4,327,500 shares outstanding of the Common Stock as of the record date of June 21, 1996, consented in writing to, the Charter Amendment. Such approval and consent were sufficient under Section 228 of the Delaware General Corporation Law and the Company's By-Laws to approve the Charter Amendment. Accordingly, the Charter Amendment was not submitted to the other stockholders of the Company for a vote and an Information Statement was furnished to stockholders to provide them with certain information concerning the Charter Amendment in accordance with the requirements of the Securities Exchange Act of 1934, as amended and the regulations promulgated thereunder (the "Exchange Act"), including Regulation 14C. The Charter Amendment (1) increased the total number of shares of Common Stock which the Company has authority to issue from 10,000,000 to 25,000,000; (2) effected a 1-for-10 reverse split of the Common Stock; and (3) changed the name of the Company from Interfilm, Inc. to Palatin Technologies, Inc. The Charter Amendment was filed on July 19, 1996 with the Delaware Secretary of State and was effective upon filing. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Common Stock has been quoted on the OTC Electronic Bulletin Board (the "Bulletin Board") since October 1, 1995. Currently, the Common Stock trades under the symbol "PLTN." Prior to Page 17 July 22, 1996, the Common Stock traded under the symbol "IFLM." The Common Stock began trading publicly on the NASDAQ National Market System ("NMS") effective October 28, 1993 under the symbol "IFLM." Prior to October 28, 1993, there was no public market for the Common Stock. On September 30, 1995, the Common Stock was delisted from the NMS for failure to maintain certain net tangible assets requirements. The Common Stock is traded sporadically and no established liquid trading market currently exists therefor. The table below presents the high and low sales prices on the Bulletin Board for the Common Stock from June 26, 1996, the date subsequent to the date of the Merger, through June 30, 1996, the last day of the Company's fiscal period covered by this report. Such quotations reflect inter-dealer prices or transactions solely between market-makers without retail mark-up, mark-down or commissions, and may not necessarily represent actual transactions. PERIOD HIGH LOW ------ ---- --- June 26 through June 30, 1996 $ 5.00 $ 4.00 The above prices have been adjusted to give retroactive effect to the 1-for-10 reverse split of the outstanding Common Stock which became effective upon the filing of the Charter Amendment on July 19, 1996. On September 24, 1996, the approximate number of holders of record of Common Stock was 255 and the closing sales price of the Common Stock was $2.50 per share. DIVIDEND POLICY The Company has never declared or paid any cash dividends on its capital stock. The Company currently intends to retain earnings for use in its business and therefore does not anticipate paying cash dividends in the foreseeable future. Payment of future dividends, if any, will be at the discretion of the Company's Board of Directors after taking into account various factors, including the Company's financial condition, operating results, current and anticipated cash needs and plans for expansion. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. GENERAL The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto filed as part of this Form 10-KSB. Prior to May 10, 1995, Interfilm had been primarily engaged in the business of exploiting the rights related to its interactive motion picture process, including the production and distribution of interactive motion pictures for initial exhibition in theaters and subsequently in enhanced versions for distribution to the home market. On May 10, 1995, the Board of Directors of Interfilm decided to substantially curtail the operations of Interfilm and its subsidiaries. As a result of the Merger, which became effective on June 25, 1996, RhoMed became a wholly-owned subsidiary of the Company, with the holders of RhoMed preferred stock and RhoMed common stock (including the holders of options pursuant to RhoMed's qualified and nonqualified stock option plans and RhoMed common stock warrants) receiving Page 18 an aggregate of an approximately 96% interest in the equity securities of the Company on a fully-diluted basis. Since the former stockholders of RhoMed retained more than a 50% controlling interest in the Company, the Merger was treated as a reverse acquisition for accounting purposes. The historical financial statements of the Company presented prior to the Merger are those of RhoMed and the business of RhoMed represents the on-going business of the Company. RESULTS OF OPERATIONS Ten Month Period Ended June 30, 1996 Compared to Ten Month Period Ended June 30, 1995. License fees and royalties were zero for the ten months ended June 30, 1996, compared to $64,296 in the prior ten month period. The decrease in license fees and royalties is primarily attributable to the timing of when these fees are received. Sales of RhoChek, the sole product sold by the Company, decreased $6,090 to $24,457 in the current ten month period from $30,546 in the prior ten month period. Due to insufficient sales, the Company expects to discontinue the manufacture and sale of its RhoChek product in fiscal 1997. The Company expects sales to decrease in fiscal 1997 as product sales for RhoChek are discontinued. Research and development expenses increased by $391,983 to $869,896 for the ten months ended June 30, 1996, from $477,913 in the ten months ended June 30, 1995. The majority of the increase is attributable to the Company's Leu-Tech project, including increased consulting, clinical trial and manufacturing scale-up expenses. General and administrative expenses increased to $1,250,343 in the current ten month period from $598,560 for the ten months ended June 30, 1995. The majority of the increase is due to the hiring of a Chairman and CEO; Vice President of Finance and CFO; the leasing of general and administrative offices in New Jersey; and increased travel and consulting expenses. Other expenses increased to $1,802,097 for the ten months ended June 30, 1996 from $305,615 for the ten months ended June 30, 1995. The increase is attributable primarily to increased interest expense, commission and fees paid in connection with the Company's debt offerings ($168,970), costs and fees associated with the Merger ($475,000), costs and expenses associated with the relocation of the Company's research and general and administrative offices ($450,000), including primarily severance costs, facility closing expenses and recruiting fees, and the write down of certain patents not currently used in development projects ($259,334). Net loss increased to $3,897,879 in the ten months ended June 30, 1996, compared to $1,287,246 in the prior ten month period. Fiscal Year Ended August 31, 1995 Compared to Fiscal Year Ended August 31, 1994. Total revenues decreased by $49,946 to $97,902 for the fiscal year ended August 31, 1995, from $147,848 in the previous fiscal year. The decrease is attributable to no grant revenue during fiscal year 1995 compared to $50,289 for the previous fiscal year. Research and development expenses were $619,354 for the fiscal year ended August 31, 1995 compared to $584,941 for the previous fiscal year. General and administrative expenses decreased to $776,291 for the fiscal year ended August 31, 1995 from $939,155 in the previous fiscal year. Such decrease was primarily attributable to decreased offering expenses. Page 19 Other expenses increased to $341,121 for the fiscal year ended August 31, 1995 from $168,707 in the previous fiscal year. The increase is attributable to higher interest expense due to a higher average debt balance outstanding throughout the 1995 fiscal year. Net loss for the fiscal year ended August 31, 1995 increased to $1,638,864 from $1,544,955 in the previous fiscal year. LIQUIDITY AND CAPITAL RESOURCES Since its inception, the Company has incurred net operating losses and, as of June 30, 1996, had an accumulated deficit of approximately $8,100,000. The Company has financed its net operating losses through June 30, 1996 by a series of debt and equity financings. At June 30, 1996, the Company's cash position amounted to $6,791,300. For the ten months ended June 30, 1996, the net increase in cash amounted to $6,317,282. Cash provided by financing activities was $9,053,350, mainly comprised of net proceeds from common stock offerings of $9,143,303, which was offset by net cash used for operating activities of $2,709,491 and net cash used for investing activities of $26,577. The Company has $1,000,000 face amount senior bridge notes which mature, with accrued interest, in August and September of 1996. The current portion of long-term debt maturing in fiscal year 1997 totals $311,695. The Company's current cash position is sufficient to meet its debt obligations in fiscal year 1997, and fund its operations, at their current level, through fiscal year 1997. The Company has incurred negative cash flows from operations since its inception. The Company has expended, and will continue to expend in the future, if available, substantial funds to continue its research and development programs, including pre-clinical studies and clinical trials, to seek regulatory approval of its products and to develop manufacturing and distribution capabilities. Further, the Company has a significant portion of short-term debt coming due during the fiscal year ending June 30, 1997. The Company anticipates, based on projected expenditure levels, that its existing capital resources will be adequate to make scheduled debt payments and to fund its operations through fiscal year 1997. The Company's future capital requirements depend on numerous factors which cannot be quantified, including continued progress in its research and development activities, progress with pre-clinical studies and clinical trials, prosecuting and enforcing patent claims, technological and market developments, the ability of the Company to establish product development arrangements, the cost of manufacturing scale-up and effective marketing activities and arrangements. The Company will seek to obtain additional funds through equity or debt financing, collaborative or other arrangements with corporate partners and others, and from other sources. No assurance can be given that additional financing will be available when needed or on terms acceptable to the Company. If adequate additional funds are not available, the Company may be required to delay, scale back or eliminate certain of its research, drug discovery or development activities or certain other aspects of its business. If adequate funds are not available, the Company's business will be materially and adversely affected. The Company intends to relocate its research and development facility from Albuquerque, New Mexico to the Princeton, New Jersey area during fiscal year 1997. The Company may incur significant costs to build and equip research and development laboratory space, although an estimate of expenditure and lease costs for a new facility cannot be determined at this time. Page 20 The Company anticipates incurring additional losses over at least the next several years, and such losses are expected to increase as the Company expands its research and development activities relating to its metallopeptide technology and its radiolabeling technology. To achieve profitability, the Company, alone or with others, must successfully develop and commercialize its technologies and products, conduct pre-clinical studies and clinical trials, obtain required regulatory approvals and successfully manufacture, introduce and market such technologies and products. The time required to reach profitability is highly uncertain, and there can be no assurance that the Company will be able to achieve profitability on a sustained basis, if at all. ITEM 7. FINANCIAL STATEMENTS. The Company's consolidated financial statements appear following Item 13 of this Form 10-KSB. ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. As of July 9, 1996, in connection with the Merger, Deloitte & Touche LLP, the Company's independent accountant which was engaged as the principal accountant to audit the Company's financial statements, was dismissed. The Company, after consultation with Arthur Andersen LLP, engaged Arthur Andersen LLP as of July 9, 1996 as the principal accountant to audit the Company's consolidated financial statements. Arthur Andersen LLP also serves as RhoMed's independent accountant. RhoMed, prior to the Merger, consulted Arthur Andersen LLP regarding the application of accounting principles to the proposed Merger. The primary issue that was the subject of such consultations was the characterization of the proposed Merger for accounting purposes. RhoMed was orally advised by Arthur Andersen LLP that the Merger would be treated as a recapitalization of RhoMed with RhoMed as the acquirer (reverse acquisition), and that the proposed Merger would not constitute a business combination. The Company's former accountant, Deloitte & Touche LLP, was not consulted by the Company regarding such issue. The Company's decision to change accountants was recommended and approved by the Company's Board of Directors subsequent to the Merger based upon the Company's need for one independent accountant to be responsible for the consolidated financial statements of the Company following the Merger. During Interfilm's fiscal years ended December 31, 1995 and 1994, there were no disagreements between the Company and Deloitte & Touche LLP, the Company's former independent accountant, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. Further, during Interfilm's fiscal years ended December 31, 1995 and 1994, respectively, Deloitte & Touche LLP's opinion with respect to the Company's financial statements was qualified as to the Company's ability to continue as a going concern. Page 21 PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. DIRECTORS AND EXECUTIVE OFFICERS The names, ages and offices of the Company's current directors and executive officers are as follows:
NAME(1)(2) AGE OFFICE - -------------------- --- ------------------ Edward J. Quilty 45 Chairman, President, and Chief Executive Officer Michael S. Weiss 30 Director Carl Spana 34 Executive Vice President and Director James T. O'Brien 57 Director Richard J. Murphy 65 Director John K.A. Prendergast 41 Director John J. McDonough 32 Vice President and Chief Financial Officer Charles Putnam 43 Executive Vice President
- --------------------------------------- (1) Prior to the Merger, the Board of Directors consisted of Bob Bejan, William I. Franzblau, Lawrence L. Kuppin, Robert G. Rehme and Myron A. Hyman (collectively, the "Pre-Merger Board"). Effective upon and pursuant to the Merger, the Pre-Merger Board resigned and was replaced by the Board of Directors of RhoMed, consisting of Edward J. Quilty, Buck A. Rhodes, Carl Spana and Michael S. Weiss. Buck A. Rhodes resigned as a director effective June 30, 1996. The Board of Directors subsequently elected James T. O'Brien, Richard J. Murphy and John K.A. Prendergast as directors of the Company. (2) Prior to the Merger, the executive officers consisted of William I. Franzblau, Executive Vice President and Chief Executive Officer, and Brian T. Cooper, Vice President of Finance. Effective upon the Merger, both resigned as executive officers, and the Board of Directors appointed new officers of the Company. Directors of the Company hold office until the next annual meeting of the stockholders and until their successors have been duly elected and qualified. Messrs. Quilty, Rhodes, Spana and Weiss were elected as a condition of the Merger. Election of Edward J. Quilty as a director of RhoMed is a condition of RhoMed's employment agreement with Mr. Quilty (see Item 10, Executive Compensation). Otherwise, there are no arrangements or understandings between any directors and any other person pursuant to which any director was elected as a director of the Company. Executive officers do not serve a term of years but serve at the pleasure of the Board of Directors, except that Mr. Quilty holds his office pursuant to an employment agreement (see Item 10, Executive Compensation). Page 22 EDWARD J. QUILTY has been Chairman, President, Chief Executive Officer and a director of the Company since June 25, 1996, the effective date of the Merger, and has been Chief Executive Officer and a director of RhoMed since November 1995. From July 1994 through November 1995, Mr. Quilty was President, Chief Executive Officer and a director of MedChem Products, Inc., a publicly traded medical device company, which in September 1995 was merged into C.R. Bard, Inc. From March 1992 through July 1994, Mr. Quilty served as President and Chief Executive Officer of Life Medical Sciences, Inc., a publicly traded medical device company. From January 1987 through October 1991, Mr. Quilty served as Executive Vice President of McGaw Inc., a pharmaceutical company. Mr. Quilty is also Chairman of the Board and a director of Derma Sciences, Inc., a publicly traded medical device company. Mr. Quilty received his M.B.A. from Ohio University, and a B.S. from Southwest Missouri State University. MICHAEL S. WEISS, has been a director of the Company since June 25, 1996, the effective date of the Merger, and has been a director of RhoMed since July 1995. Since November 1993, Mr. Weiss has been Associate General Counsel and then General Counsel of The Castle Group, LLC, and a Vice President and Senior Managing Director of Paramount Capital, Inc. From 1991 to 1993, Mr. Weiss was an attorney with Cravath, Swaine & Moore. Mr. Weiss serves on the Board of Directors of Xytronyx, Inc., Avax Technologies, Inc., and as Secretary of Atlantic Pharmaceuticals, Inc., all publicly traded medical technology companies. Mr. Weiss received his J.D. from Columbia University School of Law and a B.S. in Finance from The State University of New York at Albany. CARL SPANA, Ph.D., has been a director of the Company since June 25, 1996, the effective date of the Merger, and has been a director of RhoMed since July 1995. Since June 1996, he has served as Executive Vice President and Chief Technology Officer of the Company and RhoMed. Dr. Spana was Vice President of The Castle Group, LLC from June 1993 to July 1996, and was most recently a Vice President of Paramount Capital Investments, LLC, where he was responsible for discovering, evaluating, and commercializing new biotechnologies. Through his work at The Castle Group, LLC, Dr. Spana was a co-founder of several private biotechnology firms. Prior to working at The Castle Group, LLC, Dr. Spana was a Research Associate at Bristol-Myers Squibb where he was involved in scientific research in the field of immunology. Dr. Spana is a director and was Interim President of Avax Technologies, Inc., a publicly traded medical technology company. Dr. Spana received his Ph.D. in Molecular Biology from The Johns Hopkins University and a B.S. in Biochemistry from Rutgers University. JAMES T. O'BRIEN has been a director of the Company since August 1, 1996. Since September 1991, Mr. O'Brien has been Chairman of the Board of Access Corporation, a provider of employment software and information. He is also President/CEO of O'Brien Marketing and Communications. Mr. O'Brien was President and Chief Operating Officer of Elan Corporation, PLC, a pharmaceutical company, from 1989 to 1991. From 1986 to 1989, he was President and Chief Executive Officer of O'Brien Pharmaceuticals, Inc. Prior to this, he held various management positions with Revlon Health Care Group, most notably President of USV Laboratories and the Armour Pharmaceutical Company; Lederle Laboratories; and Sandoz Pharmaceuticals, Inc. Mr. O'Brien is a director of Carrington Laboratories, Inc., a publicly traded pharmaceutical and medical devices company, and Theratech Inc., a publicly traded drug delivery company. RICHARD J. MURPHY has been a director of the Company since August 1, 1996. Mr. Murphy was, until his retirement in January, 1993, a Senior Vice President and director of Hoffmann LaRoche Inc., a pharmaceutical company, where he was responsible for two operating divisions, Roche Page 23 Diagnostics and Roche Vitamin and Fine Chemicals. Mr. Murphy had held various marketing and administrative positions with Hoffmann LaRoche Inc. since 1964. Mr. Murphy is a director of I.D. Biomedical Corp., a publicly traded Canadian biotechnology firm. JOHN K.A. PRENDERGAST, Ph.D. has been a director of the Company since August 28, 1996. Dr. Prendergast has served as a Managing Director of The Castle Group, Ltd. ("Castle"), a medical technology venture capital firm, since 1991. Dr. Prendergast is a co-founder and director of Avigen, Inc., a medical technology company, and, from December 1992 to March 1996, served as a Vice President and the Treasurer of Avigen, Inc. Dr. Prendergast is a co-founder and director of Xenometrix, Inc., Avax Technologies, Inc., and Atlantic Pharmaceuticals, Inc., all publicly traded medical technology companies. Dr. Prendergast received M.Sc. and Ph.D. degrees from the University of New South Wales, Sydney, Australia and a C.S.S. in Administration and Management from Harvard University. JOHN J. McDONOUGH has been Vice President and Chief Financial Officer of the Company since June 25, 1996, the effective date of the Merger, and has been Vice President and Chief Financial Officer of RhoMed since December 1995. From January 1992 through December 1995, Mr. McDonough was employed by MedChem Products, Inc., a publicly traded medical device company, which in September 1995 was merged into C.R. Bard, Inc., in various positions, his final position being Vice President and Chief Financial Officer. Previously, Mr. McDonough was a manager with KPMG Peat Marwick. CHARLES PUTNAM has been Executive Vice President of the Company since June 25, 1996, the effective date of the Merger, and is responsible for operations and product development. From July 1994 to May 1996, Mr. Putnam was Executive Vice President, R & D of MedChem Products, Inc., a publicly traded medical device company, which in September 1995 was merged into C.R. Bard, Inc. At MedChem, Mr. Putnam was responsible for product development, regulatory affairs, clinical research and quality control. From March 1993 to July 1994, Mr. Putnam was Vice President of Operations and Research and Development of Life Medical Sciences, Inc., a publicly traded medical device company, where he was responsible for all aspects of manufacturing, research and regulatory affairs for the company's only commercial product line. From March 1983 to March 1993, Mr. Putnam was employed by American Cyanamid Corporation, where he served as a project engineer (1983 to 1989), Director of Automation (February 1989 to March 1992), Director of Needle Development (R&D) (March 1992 to January 1993) and Director of Device Development (R&D) for the Davis and Geck division, where he was responsible for the design and development of surgical devices (December 1992 to March 1993). Mr. Putnam had previously worked in product development and engineering for Ford Motor Company, Raytheon Corporation and Burndy Corporation. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to the Company under Rule 16a-3(d) of the Exchange Act during its most recent fiscal year and Forms 5 and amendments thereto furnished to the Company with respect to the ten month period ended June 30, 1996, the following persons failed to file on a timely basis the required reports indicated: William I. Franzblau, former Executive Vice President and Chief Executive Officer of Interfilm, and Lawrence L. Kuppin, a former director of Interfilm, each failed to report transactions on Form 4 for the month of June 1996. In both cases, the transactions to be reported were the acquisition of shares of RhoMed common stock and common stock purchase warrants in connection with the Merger. Mr. Franzblau and Mr. Kuppin each subsequently reported the June 1996 transactions on timely filed Forms 5. The Company knows of no failure to file a required Form. Page 24 ITEM 10. EXECUTIVE COMPENSATION. The following table sets forth annual and long-term compensation paid to the Company's Chief Executive Officer and Interfilm's former Chief Executive Officer for the last three fiscal years (see note (1) below concerning the change in fiscal year end). Other than Edward J. Quilty, no officer of the Company or Interfilm received salary and bonus totalling over $100,000 during the ten month period ended June 30, 1996. With respect to the persons and periods covered in the following table, the Company and Interfilm made no restricted stock awards and had no long-term incentive plan payouts.
SUMMARY COMPENSATION TABLE LONG TERM COMPENSATION ----------------------------- ANNUAL COMPENSATION AWARDS PAYOUTS --------------------------------------------------------- ------------- Other Annual Securities All other Compen- Underlying Compen- Name and Salary Bonus sation Options/ sation Principal Position Year(1) ($) ($) ($) SARs (#)(2) ($) - ----------------------- -------- ---------- ------- --------- ----------- ------- Edward J. Quilty, 1996 $ 184,794 -- -- 712,297 -- Chief Executive Officer(3) 1995 N/A N/A N/A N/A N/A 1994 N/A N/A N/A N/A N/A Buck A. Rhodes, 1996 $ 52,041 -- -- 46,083 $71,523(5) Chief Executive Officer(4) 1995 $ 60,445 -- -- 737 -- 1994 $ 60,445 $ 1,060(6) -- -- -- William I. Franz- 1996 -- -- -- 50,691(8) $ 9,494(8) blau, Chief Exec- utive Officer(7) 1995 $ 105,000 -- -- 0 -- 1994 $ 160,000 -- $ 3,400(9) 0 --
- --------------- (1) Due to the change in the Company's fiscal year end, fiscal year 1996 covers the ten-month period ended June 30, 1996. Mr. Franzblau's compensation for 1995 and 1994 is reported for the fiscal years ended December 31, 1995 and 1994, Interfilm's former fiscal year end. Mr. Franzblau's compensation for 1996 therefore includes only amounts paid after December 31, 1995. Page 25 (2) Underlying security amounts are stated in terms of Common Stock. See the text accompanying the following table, entitled "Option/SAR Grants in the Ten Month Period Ended June 30, 1996," for specification of the class of those securities at the end of the ten month period ended June 30, 1996. (3) Mr. Quilty was employed as Chief Executive Officer of RhoMed beginning on November 16, 1995 and was employed as Chief Executive Officer of the Company beginning on June 25, 1996. The compensation paid and/or issued to Mr. Quilty, as reflected in this table, includes compensation paid and/or issued by both RhoMed and the Company. (4) Dr. Rhodes was employed as the Chief Executive Officer of RhoMed from January 28, 1986 through November 15, 1995. (5) Consists of $51,023 in salary accrued from 1990 to 1994 and paid on June 28, 1996, and $20,500 paid to Dr. Rhodes under a consulting agreement with RhoMed. (6) Stock bonus, originally issued as RhoMed common stock and shown here as converted to Common Stock, consisting of 279 shares of Common Stock valued at $3.80 per share. (7) Mr. Franzblau became Chief Executive Officer of Interfilm on August 9, 1995. During 1994 and up to August 9, 1995, he was Chief Operating Officer of Interfilm. He received no annual compensation after October 1995. He resigned as Chief Executive Officer effective upon the consummation of the Merger on June 25, 1996. (8) In connection with the Merger, Mr. Franzblau received 7,000 shares of Common Stock valued at $9,494 for services rendered to Interfilm, and Class C Warrants to purchase 50,691 shares of Common Stock at an exercise price of $2.17 per share. (9) 1994 Other Annual Compensation is a contribution made by Interfilm to Mr. Franzblau's account under Interfilm's 401(k) Plan. OPTION/SAR GRANTS IN THE TEN MONTH PERIOD ENDED JUNE 30, 1996 Except as noted below, options and warrants shown in the following table were originally exercisable for shares of RhoMed common stock. As a result of the Merger, at the end of the ten month period ended June 30, 1996, they were exercisable for shares of the Company's Series B Preferred Stock and became exercisable for shares of Common Stock on July 19, 1996, following the filing of the Charter Amendment. The number of shares and exercise prices are stated as if the options and warrants had been exercisable for shares of Common Stock at the end of the ten month period, and also give effect to the 1-for-10 reverse split of the Common Stock effected by the Charter Amendment.
Number of % of Total Securities Options/SARs Underlying Granted to Exercise Options/SARs Employees or Base Name Granted (#) in Fiscal Year Price ($/Sh) Expiration Date ---- ------------- -------------- ------------ --------------- Edward J. Quilty 431,266(1) 26.0% $0.05 12/4/05(2) 281,031(3) 16.9% $0.05 6/21/06(2)
Page 26
Number of % of Total Securities Options/SARs Underlying Granted to Exercise Options/SARs Employees or Base Name Granted (#) in Fiscal Year Price ($/Sh) Expiration Date ---- ------------- -------------- ------------ --------------- Buck A. Rhodes 46,083(4) 2.8% $1.36 4/16/06(5) William I. Franzblau 50,691(6) 3.1% $2.17 6/24/00
(1) Employee Incentive Stock Option. After the date of grant (December 4, 1995), during the employment period, options vest in 36 equal increments on the 16th of each month. (2) The expiration date shown is the latest expiration date. The option also provides for expiration 90 days after termination of employment. (3) Originally granted prior to the Merger as an Employee Incentive Stock Option and Nonqualified Stock Option under plans adopted by RhoMed, and subsequent to June 30, 1996, restated by the Company as anti-dilution options pursuant to the employment agreement between the Company and Mr. Quilty (see "Employment Agreements" in this Item 10). Commencing June 21, 1996, options vest in 36 equal increments on the 16th of each month during the employment period. (4) Nonqualified Stock Option. After the date of grant (April 16, 1996), during the period when Dr. Rhodes is serving as a consultant to RhoMed or the Company, options vest in two equal increments on August 1 of each year. (5) The expiration date shown is the latest expiration date. The option also provides for expiration 90 days after termination of consulting services. (6) Class C Warrant. Exercisable upon issuance on June 24, 1996. AGGREGATED OPTION/SAR EXERCISES IN TEN MONTH PERIOD ENDED JUNE 30, 1996 AND FY-END OPTION/SAR VALUES No options were exercised during the ten month period ended June 30, 1996. The Company has no outstanding stock appreciation rights ("SARs"). Except for an option granted to William I. Franzblau for 9,500 shares of Common Stock, all options and warrants shown in the following table were originally exercisable for shares of RhoMed common stock. As a result of the Merger, at June 30, 1996, the options and warrants had become exercisable for shares of the Company's Series B Preferred Stock. Upon the filing of the Charter Amendment on July 19, 1996, the options and warrants became exercisable for shares of Common Stock. Numbers of shares and values are stated as if the options and warrants had been exercisable for Common Stock (giving effect to the Charter Amendment) at the end of the ten month period ended June 30, 1996. Values are based on a last reported sale price for the Page 27 Common Stock, as reported on the Bulletin Board on June 28, 1996 (the last trading day of the ten month period ended June 30, 1996) of $5.00 per share giving effect to the reverse split.
Number of Value of Securities Underlying Unexercised Unexercised In-the-Money Options/SARs at Options/SARs at Ten-Month Period End (#) Ten-Month Period End ($) Name Exercisable/Unexercisable Exercisable/Unexercisable - ---- ------------------------- ------------------------- Edward J. Quilty 83,857/628,440 $415,092/$3,110,777 Buck A. Rhodes 737/46,083 $3,648/$167,742 William I. Franzblau 56,391/3,800 $143,456/$0
COMPENSATION OF DIRECTORS Under the Company's 1996 Stock Option Plan, which the Board of Directors adopted on August 28, 1996 (subject to stockholder approval), each director of the Company who is not an employee of the Company or of a parent or subsidiary of the Company (a "Non-Employee Director") will be granted, at the first meeting of the Board of Directors of the Company following each annual meeting of the stockholders of the Company, an option to purchase 10,000 shares of Common Stock at a per share exercise price equal to the fair market value of a share of Common Stock on the date of grant, which vests as to 25% per year starting one year after the date of grant (a "Non-Employee Director's Formula Option"). Any Non-Employee Director who is elected to the Board of Directors after August 28, 1996 and before the annual stockholders' meeting in any year will also receive a Non- Employee Director's Formula Option for that portion of 10,000 shares equal to the portion of a year (measured in full calendar months) remaining until the next scheduled annual stockholders' meeting. All Non-Employee Directors serving on the date the Board of Directors adopted the 1996 Stock Option Plan (August 28, 1996) received initial Non-Employee Director's Formula Options for 20,000 shares, with the same exercise price and vesting conditions as regular Non-Employee Director's Formula Options. The four Non-Employee Directors serving on August 28, 1996, each of whom received an initial Non-Employee Director's Formula Option for 20,000 shares at an exercise price subsequently set at $1.36 per share, were Richard J. Murphy, James T. O'Brien, John K.A. Prendergast and Michael S. Weiss. Effective August 28, 1996, non-employee directors will be paid $12,000 per year, plus expenses, for services as a director. The Company paid no compensation to any director for services as a director during the ten month period ended June 30, 1996. Employee directors are not separately compensated for services as a director, but are reimbursed for expenses. Service as a director is a condition of Edward J. Quilty's employment agreement (see "Employment Agreements" in this Item 10), but such service is not separately compensated. Page 28 In July 1996, the Company paid $36,000 to Buck A. Rhodes, a former director of the Company and RhoMed, as severance compensation for resigning from the board of RhoMed effective June 30, 1996. The resignation and severance pay were pursuant to the terms of a consulting agreement dated March 7, 1996, between RhoMed and Dr. Rhodes. EMPLOYMENT AGREEMENTS On November 16, 1995, RhoMed entered into an employment agreement with Edward J. Quilty pursuant to which Mr. Quilty is serving as President and Chief Executive Officer of RhoMed, which employment agreement the Company agreed to adopt, with amendments as required, subsequent to the Merger. The initial term of the agreement is one year and it is automatically renewed for successive twelve-month periods unless either party gives written notice to the contrary, or unless the agreement is otherwise terminated. Mr. Quilty's minimum base salary is $300,000 per year. The Company has agreed to reimburse Mr. Quilty for premiums and other payments to maintain a $1,000,000 term life insurance policy issued in 1992 for the benefit of Mr. Quilty and his designees. Mr. Quilty may also participate in any benefit plans available to other senior executives of the Company, and in any directors' and officers' liability insurance which the Company maintains. Pursuant to the agreement, RhoMed issued to Mr. Quilty an option to purchase common stock equal to a 10% fully diluted equity interest in RhoMed as of November 16, 1995, at a price of $0.01 per share, to vest in 36 equal increments monthly during the term of the agreement. That option has, by operation of the Merger and the Charter Amendment, become an option for 431,266 shares of Common Stock at an exercise price of $0.05 per share (rounded to the nearest cent). The agreement also provides for anti-dilution protections which, among other things, require the Company to issue additional options with the same exercise price as the original option, so that Mr. Quilty shall, at all times, have options in the aggregate to purchase the number of shares of the Company's Common Stock equal to not less than 3.75% of the Company's outstanding Common Stock on a fully diluted basis. For a period of five years after the first anniversary of the Company's initial post-Merger public offering, Mr. Quilty has piggy-back registration rights as to all Common Stock which he owns. If the Company terminates the employment agreement for "cause," or if Mr. Quilty terminates the agreement without "good reason," then the Company's payment obligation is limited to amounts earned through the termination date, and the option will be exercisable only to the extent vested. If Mr. Quilty elects to terminate the agreement following a change in control of the Company, then the Company's payment obligation is limited to amounts earned through the termination date, but the option will immediately become exercisable in full. If the Company terminates the agreement without cause, or in the event of Mr. Quilty's death or disability, or if Mr. Quilty terminates the agreement with good reason, then in addition to amounts earned through the termination date, the Company must pay Mr. Quilty one year's base salary. "Cause," as defined in the agreement, consists of fraud, felony conviction, refusal to carry out instructions of the Board of Directors, or governmental disqualification (all as defined in the agreement). "Good reason," as defined in the agreement, consists of breach by the Company of its obligations under the agreement. The agreement also includes non-competition, confidentiality and indemnification covenants. Until March 18, 1996, Interfilm had employed William I. Franzblau, former Chief Executive Officer of Interfilm, pursuant to an employment agreement dated October 28, 1993. Interfilm made no payments to Mr. Franzblau under the agreement after October 1995, due to Interfilm's financial condition at that time. As of March 18, 1996, Mr. Franzblau and Interfilm entered into a Settlement of Employment Agreement, which replaced the employment agreement. The settlement agreement fixed the amount due to Mr. Franzblau under the employment agreement at $280,200, and provided that Page 29 payment would be made only out of the proceeds of settlement or judgment in Interfilm's litigation against Sony Corporation of America, a cause of action which Interfilm assigned to an unaffiliated limited liability partnership, pursuant to the Merger. Mr. Franzblau released Interfilm from any further liability under the employment agreement, and continued to serve without pay as Interfilm's Chief Executive Officer until June 25, 1996, the date of the consummation of the Merger. As a condition of the Merger, Mr. Franzblau resigned as a director and officer of Interfilm effective on the closing of the Merger. Pursuant to the Merger, Mr. Franzblau received (i) shares of RhoMed common stock valued at $9,494 which, upon the filing of the Charter Amendment on July 19, 1996, were converted into 7,000 shares of Common Stock, and (ii) Class C Warrants to purchase RhoMed common stock, which, upon the filing of the Charter Amendment on July 19, 1996, were converted into warrants to purchase 50,691 shares of Common Stock at an exercise price of $2.17 per share. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The Common Stock is the Company's only outstanding class of voting securities. The following table sets forth beneficial ownership of Common Stock as of September 24,1996, by (i) each person known by the Company to be the beneficial owner of more than five percent of the Common Stock, (ii) each director of the Company, (iii) each of the executive officers included in the Summary Compensation Table (see Item 10, Executive Compensation) and (iv) all directors and officers of the Company as a group. Except as noted below, each person has sole voting and investment power with respect to the shares listed.
AMOUNT AND NATURE OF PERCENT OF NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS - -------------------------------------------------------------------------------------------------------------- Edward J. Quilty 182,787(1) 1.6% c/o Palatin Technologies, Inc. 214 Carnegie Center, Suite 100 Princeton, NJ 08540 Buck A. Rhodes, Ph.D. 560,657(2) 4.8% c/o Palatin Technologies, Inc. 4261 Balloon Park Road, NE Albuquerque, NM 87109 Michael S. Weiss 98,055(3) * c/o Paramount Capital, Inc. 375 Park Avenue, Suite 1501 New York, NY 10152 Carl Spana, Ph.D. 46,695 * c/o Palatin Technologies, Inc. 214 Carnegie Center, Suite 100 Princeton, NJ 08540 Page 30 AMOUNT AND NATURE OF PERCENT OF NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS - -------------------------------------------------------------------------------------------------------------- James T. O'Brien 0 - c/o Palatin Technologies, Inc. 214 Carnegie Center, Suite 100 Princeton, NJ 08540 Richard J. Murphy 0 - c/o Palatin Technologies, Inc. 214 Carnegie Center, Suite 100 Princeton, NJ 08540 John K.A. Prendergast 46,695 * The Castle Group, Ltd. 375 Park Avenue, Suite 1501 New York, NY 10152 Lindsay A. Rosenwald, M.D. 3,416,549(4) 28.5% 375 Park Avenue, Suite 1501 New York, NY 10152 RAQ, LLC 1,657,070(5) 14.4% c/o Lindsay A. Rosenwald, M.D. 375 Park Avenue, Suite 1501 New York, NY 10152 The Aries Trust 1,050,997(6) 9.0% c/o Aries Financial Services 375 Park Avenue, Suite 1501 New York, NY 10152 Lawrence L. Kuppin 495,378(7) 4.2% 9615 Brighton Way, Ste. 300 Beverly Hills, CA 90210 Bob Bejan 47,161(8) * 4015 South Court Street Seattle, WA 98144 William I. Franzblau 178,585(9) 1.5% The Soho Building 110 Greene St., Ste. 601 New York, NY 10012 Robert G. Rehme 113,434(10) * 12651 Promontory Road Los Angeles, CA 90049 Page 31 AMOUNT AND NATURE OF PERCENT OF NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS - -------------------------------------------------------------------------------------------------------------- Brian T. Cooper 11,290(11) * 15 West 11th Street, Apt. 9E New York, NY 10011 Myron A. Hyman(12) 0 - 501 Madison Avenue, 19th Floor New York, NY 10022 All directors and officers as a 374,232 3.2% group (eight persons)
- ------------------ *Less than one percent. (1) Consists of 182,787 shares which Mr. Quilty has options to purchase pursuant to RhoMed's 1995 Employee Incentive Stock Option Plan and anti-dilution options granted by the Company, of which 143,215 shares are currently purchasable and 39,572 shares will become purchasable within 60 days from the date of this report. (2) Includes 23,778 shares which Dr. Rhodes has options to purchase pursuant to RhoMed's 1995 Nonqualified Stock Option Plan. Also includes 983 shares owned by Dr. Rhodes' wife. Dr. Rhodes resigned as a director effective June 30, 1996. (3) Includes 46,353 shares which Mr. Weiss has warrants to purchase. (4) Includes 265,983 shares which Dr. Rosenwald has warrants to purchase. Also includes 1,657,070 shares owned by RAQ, LLC, of which Dr. Rosenwald is President. Also includes an aggregate of 1,290,696 shares of Common Stock owned by Aries Domestic Fund, L.P. and The Aries Trust, and an aggregate of 202,800 shares which Aries Domestic Fund, L.P. and The Aries Trust have warrants to purchase. Dr. Rosenwald is the President of Aries Financial Services, Inc., which is the General Partner of Aries Domestic Fund, L.P. and the Investment Manager of The Aries Trust, and as such may be deemed to be the beneficial owner of such shares, although he disclaims beneficial ownership except to the extent of his pecuniary interest, if any. Does not include any shares owned by employees of Paramount Capital, Inc., of which Dr. Rosenwald is the Chairman. (5) All of the shares owned or purchasable by RAQ, LLC are also included in the beneficial ownership of Lindsay A. Rosenwald, M.D., as explained in note (4) above. (6) Includes 129,058 shares which The Aries Trust has warrants to purchase. All of the shares owned or purchasable by The Aries Trust are also included in the beneficial ownership of Lindsay A. Rosenwald, M.D., as explained in note (4) above. (7) Includes 343,304 shares owned by Vivaldi Ltd. and 152,074 shares which Vivaldi Ltd. has warrants to purchase. Mr. Kuppin is the general partner of Vivaldi, Ltd. Pursuant to the Merger, Mr. Kuppin resigned as a director of Interfilm effective June 24, 1996. Page 32 (8) Includes 7,600 shares which Mr. Bejan has an option to purchase pursuant to Interfilm's 1993 Equity Incentive Plan, of which 5,700 shares are currently purchasable and 1,900 shares will become purchasable within 60 days from the date of this report. Mr. Bejan resigned as an officer of Interfilm on August 9, 1995. Pursuant to the Merger, Mr. Bejan resigned as a director of Interfilm effective June 21, 1996. (9) Includes 7,600 shares which Mr. Franzblau has an option to purchase pursuant to Interfilm's 1993 Equity Incentive Plan, of which 5,700 shares are currently purchasable and 1,900 shares will become purchasable within 60 days from the date of this report. Also includes 50,691 shares which Mr. Franzblau has warrants to purchase. Also includes 73,733 shares owned by Mr. Franzblau's wife. Pursuant to the Merger, Mr. Franzblau resigned as an officer and director of Interfilm effective June 25, 1996. (10) Includes 73,733 shares owned by Cinco De Mayo Ltd. and 18,433 shares which Cinco De Mayo Ltd. has warrants to purchase. Mr. Rehme is the President of Cinco De Mayo Ltd. Pursuant to the Merger, Mr. Rehme resigned as a director of Interfilm effective June 24, 1996. (11) Includes 1,900 shares which Mr. Cooper has an option to purchase pursuant to Interfilm's 1993 Equity Incentive Plan, of which 1,425 shares are currently purchasable and 475 shares will become purchasable within 60 days from the date of this report. Mr. Cooper resigned as an officer of Interfilm effective June 24, 1996. (12) Pursuant to the Merger, Mr. Hyman resigned as a director of Interfilm effective June 24, 1996. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. During the fiscal year ended August 31, 1995, RhoMed encountered serious liquidity and working capital deficiencies. As a result, effective April 1995, RhoMed entered into a letter of intent with The Castle Group Ltd. ("Castle") under which (i) Castle agreed to arrange for a line of credit of up to $300,000 to finance ongoing operations; (ii) Castle agreed to arrange for future financings; and (iii) RhoMed agreed to sell to Castle or its designees, for nominal consideration, 4,000,000 shares of RhoMed Series A Preferred Stock. This resulted, at the time of the investment, in Castle and affiliates of Castle obtaining majority ownership and control of RhoMed. Pursuant to the letter of intent, Castle provided a $300,000 line of credit to RhoMed, under which RhoMed borrowed up to the maximum amount, and paid off the line of credit in September 1995. The average interest rate for the line of credit was 10.90% and the total interest paid was $8,005. Castle is owned by Lindsay A. Rosenwald, M.D. ("Rosenwald"), and is under common control with Paramount Capital, Inc. ("Paramount"), which served as placement agent for RhoMed as set forth below. On July 24, 1995, Michael S. Weiss and Carl Spana (the "Interested Directors"), employees of Castle and Paramount or affiliates, were appointed to the Board of Directors of RhoMed. Mr. Weiss is an officer of Paramount and Castle and Dr. Spana was an employee of Castle at the time of his appointment to RhoMed's Board of Directors. On July 28, 1995, RhoMed's Board of Directors approved an offering of Senior Bridge Notes and Class A Warrants (the "Class A Offering"), for which Paramount served as placement agent. Because the Interested Directors could be deemed to have a direct or indirect interest in a transaction involving a potential conflict of interest with RhoMed (a "Conflict Of Interest Page 33 Transaction") contemplated under certain terms of the Class A Offering, the transaction was ratified by disinterested stockholders of RhoMed on August 15, 1995. On November 27, 1995, RhoMed's Board of Directors approved an offering of Senior Bridge Notes and Class B Warrants (the "Class B Offering"), for which Paramount served as placement agent. Because certain terms of the Class B Offering could also be deemed to be a Conflict of Interest Transaction, the Interested Directors recused themselves from voting on the matter, and the Class B Offering was approved by disinterested directors. On March 4, 1996, RhoMed's Board of Directors approved an offering of shares of RhoMed common stock (the "RhoMed Common Stock Offering"), and authorized an offering committee of RhoMed's Board of Directors, consisting of disinterested directors, to determine the placement agent for the RhoMed Common Stock Offering. The offering committee selected Paramount as placement agent for the RhoMed Common Stock Offering. On May 14, 1996, disinterested members of RhoMed's Board of Directors approved an increase in the RhoMed Common Stock Offering. In the Class A Offering, the Class B Offering and the RhoMed Common Stock Offering, RhoMed paid commissions and expenses to Paramount, and agreed to issue placement agent warrants to Paramount and/or its designees. The Interested Directors may have benefited, directly or indirectly, from the payment of commissions and expenses, and the issuance of warrants, to Paramount and affiliates of Paramount. In the Class A Offering, the Class B Offering and the RhoMed Common Stock Offering, RhoMed paid Paramount commissions and fees of $90,000, $110,500 and $1,253,902, respectively, and agreed to issue warrants to Paramount to purchase 82,949 shares of Common Stock at $0.05 per share; 7,834 shares of Common Stock at $1.63 per share; and 711,184 shares of Common Stock at $1.63 per share, respectively. The holders of warrants issued in connection with the Series A Offering and Series B Offering will, upon exercise of such warrants, have a one-time demand right to have their restricted shares of Common Stock registered, except that if, at such time, the Company is eligible to use a Registration Statement on Form S-3 to register its Common Stock, holders will have the right to demand up to two registrations per year until all of their restricted Common Stock is registered or otherwise freely tradable. Holders also have piggy-back registration rights on any Company registrations other than the Company's initial registered public offering or registrations on Forms S-4 or S-8 or other forms which do not include substantially the same information as would be required in a form for the general registration of securities. The piggy-back registration rights are subject to cutbacks in the discretion of the Company's underwriter. All registration rights under the warrants commence on the earlier of (a) one year after the Company's initial registered public offering, or (b) the first date on which the Common Stock trades on a national securities exchange or on NASDAQ, and end five years after they commence. All registrations pursuant to these rights will be at the Company's expense. With respect to warrants issued in connection with the RhoMed Common Stock Offering, the Company has an obligation to register, at the Company's expense, Common Stock issued or issuable upon exercise of the warrants prior to January 20, 1997 (subject to a delay of up to 60 days under certain circumstances). The Company intends to seek a waiver of such obligation from the holders of such warrants, but there can be no assurance that such an agreement can be entered into on acceptable terms, if at all. Page 34 As a result of the offerings described above, Lindsay A. Rosenwald, Michael S. Weiss, and Carl Spana received equity securities of the Company in the following amounts (stated in terms of Common Stock, giving effect to the Merger and Charter Amendment): RAQ, LLC, a company controlled by Dr. Rosenwald, received 1,657,070 shares of Common Stock (converted from RhoMed Series A Preferred Stock); Mr. Weiss received 51,702 shares of Common Stock (converted from RhoMed Series A Preferred Stock); Dr. Spana received 46,695 shares of Common Stock (converted from RhoMed Series A Preferred Stock); Dr. Rosenwald received warrants to purchase 60,319 shares of Common Stock at $0.05 per share (from the Class A Offering), warrants to purchase 2,477 shares of Common Stock at $1.63 per share (from the Class B Offering), and warrants to purchase 203,187 shares of Common Stock at $1.63 per share (from the RhoMed Common Stock Offering); and Mr. Weiss received warrants to purchase 5,858 shares of Common Stock at $0.05 per share (from the Class A Offering), warrants to purchase 475 shares of Common Stock at $1.63 per share (from the Class B Offering), and warrants to purchase 40,020 shares of Common Stock at $1.63 per share (from the RhoMed Common Stock Offering). Dr. Rosenwald may be deemed to be the beneficial owner of equity securities purchased by or assigned to The Aries Trust and Aries Domestic Fund, L.P. (together, the "Aries Entities") in the RhoMed offerings described above. Dr. Rosenwald is the president and sole shareholder of Aries Financial Services, Inc., the general partner of Aries Domestic Fund, L.P. and investment manager of The Aries Trust. Dr. Rosenwald disclaims beneficial ownership of these securities, except to the extent of his pecuniary interest, if any. The Aries Entities taken together purchased the following equity securities (stated in terms of Common Stock, giving effect to the Merger and Charter Amendment): warrants to purchase 55,299 shares of Common Stock at $0.05 per share (in the Class A Offering), warrants to purchase 18,433 shares of Common Stock at $0.68 per share (in the Class B Offering), and 1,290,696 shares of Common Stock (in the RhoMed Common Stock Offering). As placement agent, Paramount earned commissions, fees and placement agent warrants on sales to the Aries Entities. Following the RhoMed Common Stock Offering, Paramount assigned to the Aries Entities those portions of Paramount's placement agent warrants attributable to the Common Stock purchases of the Aries Entities, namely warrants to purchase 129,068 shares of Common Stock at $1.63 per share. Buck A. Rhodes, Ph.D., was a director of RhoMed from inception until June 30, 1996, was President of RhoMed from inception until March 7, 1996, and was a director of the Company from June 25, 1996 through June 30, 1996. Under a consulting agreement dated March 7, 1996 between Dr. Rhodes and RhoMed, Dr. Rhodes was paid $51,023 in accrued salary and $36,000 as severance compensation for resigning from the board of RhoMed, and is being paid $6,833 per month from April 1996 through March 1998 for consulting services. Carl Spana and Charles Putnam each entered into employment agreements with the Company dated September 27, 1996, pursuant to which each is serving as an Executive Vice President of the Company for a three-year period commencing June 21, 1996. The base salary for each is $150,000 per year. Each agreement allows either the Company or the employee to terminate the agreement on thirty days' notice, and contains other provisions for termination by the Company for "cause," or by the employee for "good reason" after a "change in control" (all as these terms are defined in the agreements). Early termination may, in some circumstances, result in accelerated vesting of stock options and/or severance pay for a nine-month period at the rate of base salary, cash bonus and benefits then in effect. Each agreement contains non-competition and confidentiality covenants. Page 35 ITEM 13. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K. (A)(1) FINANCIAL STATEMENTS The following financial statements of the Company are filed as part of this report:
PAGE Report of Independent Public Accountants, Arthur Andersen LLP................................................ F-1 Consolidated Balance Sheets as of June 30, 1996 and August 31, 1995.......................................... F-3 Consolidated Statements of Operations for the period from inception (January 28, 1986) through June 30, 1996 and for the ten months ended June 30, 1996 and the years ended August 31, 1995 and 1994................................................................... F-5 Consolidated Statements of Stockholders' Equity (Deficit) for the period from inception (January 28, 1986) through June 30, 1996................................................................... F-6 Consolidated Statements of Cash Flows for the period from inception (January 28, 1986) through June 30, 1996 and for the ten months ended June 30, 1996 and the years ended August 31, 1995 and 1994................................................................... F-8 Notes to Consolidated Financial Statements................................................................... F-10
(A)(2) EXHIBITS The following exhibits are filed as part of this report: 2.1 Agreement and Plan of Reorganization dated as of April 12, 1996 by and between Interfilm, Inc., Interfilm Acquisition Corp. and RhoMed Incorporated. (a) 2.2 Waiver and Consent dated as of June 24, 1996, between Interfilm, Inc., Interfilm Acquisition Corp. and RhoMed Incorporated. (b) 3.1 Restated Certificate of Incorporation of the Company, as filed with the Delaware Secretary of State on November 3, 1993. (c) 3.2 Amendment to the Restated Certificate of Incorporation of the Company, as filed with the Delaware Secretary of State on July 19, 1996. (d) Page 36 3.3 Bylaws of the Company. (e) 3.4 Amended Certificate of Designation of Series A Preferred Stock of the Company, filed on June 24, 1996. (f) 3.5 Amended Certificate of Designation of Series B Preferred Stock of the Company, filed on June 24, 1996. (g) 4.1 Specimen Certificate for Common Stock. (h) 4.2 Patent Assignment and License Agreement dated as of July 15, 1993, between RhoMed Incorporated and Aberlyn Capital Management Limited Partnership. (b) 4.3 Master Lease Agreement dated November 16, 1994, between RhoMed Incorporated and Aberlyn Capital Management Limited Partnership. (b) 4.4 Letter Agreement, dated as of April 28, 1995, between Aberlyn Capital Management Limited Partnership and RhoMed Incorporated. (b) 4.5 Stock Purchase and Modification Agreement, dated as of June 24, 1996, between Aberlyn Capital Management Limited Partnership, Aberlyn Holding Company, Inc. and RhoMed Incorporated. (b) 10.01 Lease between Charles C. and Ellen C. France Revocable Trust and RhoMed Incorpo rated dated December 18, 1992. (b) 10.02 Amendment, dated November 1, 1993, to Lease between Charles C. and Ellen C. France Revocable Trust and RhoMed Incorporated. (b) 10.03 Second Amendment, dated July 5, 1996, to Lease between Charles C. and Ellen C. France Revocable Trust and RhoMed Incorporated. (b) 10.04 RhoMed Incorporated 1995 Employee Incentive Stock Option Plan. (b)(i) 10.05 RhoMed Incorporated 1995 Nonqualified Stock Option Plan. (b)(i) 10.06 1996 Stock Option Plan of the Company. (b)(i) 10.07 Employment Agreement dated as of November 16, 1995, between RhoMed Incorporated and Edward J. Quilty. (b)(i) 10.08 Employment Agreement dated as of September 27, 1996, between Palatin Technology, Inc. and Carl Spana. (b)(i) 10.09 Employment Agreement dated as of September 27, 1996, between Palatin Technology, Inc. and Charles Putnam. (b)(i) 10.10 Class C Warrant for the Purchase of Shares of Common Stock issued to William I. Franzblau June 24, 1996. (b)(i) 10.11 License Agreement between Rougier Bio-Tech Limited and RhoMed Incorporated dated May 1, 1992. (b) 10.12 License Agreement between Sterling Winthrop Inc. and RhoMed Incorporated dated November 2, 1992. (b) Page 37 10.13 Assignment and Assumption dated January 21, 1994, between Sterling Winthrop, Inc. and Burroughs Wellcome Co. (b) 10.14 Option Agreement between RhoMed Incorporated and The Wistar Institute of Anatomy and Biology dated August 22, 1996. (b) 10.15 Consulting Agreement dated as of March 7, 1995, between RhoMed Incorporated and Buck A. Rhodes. (b) 10.16 Form of Class A Warrant. (b) 10.17 Form of Placement Agent Warrant for the Class A Offering. (b) 10.18 Form of Unit Purchase Agreement for the Class A Offering, including registration rights referred to in the Form of Class A Warrant and Form of Placement Agent Warrant for the Class A Offering. (b) 10.19 Form of Class B Warrant. (b) 10.20 Form of Placement Agent Warrant for the Class B Offering. (b) 10.21 Form of Unit Purchase Agreement for the Class B Offering, including registration rights referred to in the Form of Class B Warrant and Form of Placement Agent Warrant for the Class B Offering. (b) 10.22 Form of Placement Agent Warrant for the RhoMed Common Stock Offering. (b) 10.23 Form of Common Stock Purchase Agreement for the RhoMed Common Stock Offering, including registration rights referred to in the Form of Placement Agent Warrant for the RhoMed Common Stock Offering. (b) 16.1 Letter dated July 19, 1996 from Deloitte & Touche LLP. (j) 21.1 Current list of subsidiaries of the registrant. (b) 23.1 Consent of Arthur Andersen LLP. (b) 27.1 Financial Data Schedule. (b) 99.1 Certificate of Limited Partnership of "The Interfilm Stockholders Limited Partnership," as filed with the Delaware Secretary of State on June 17, 1996. (b) 99.2 Agreement of Limited Partnership of The Interfilm Stockholders Limited Partnership, dated June 11, 1996. (b) 99.3 The Interfilm Stockholders Trust, established by Interfilm, Inc. and Interfilm Technologies, Inc. on June 11, 1996. (b) 99.4 General Bill of Sale, Assignment and Assumption Agreement among, on the one hand, Interfilm, Inc. and Interfilm Technologies, Inc. and on the other hand, The Interfilm Stockholders Limited Partnership, dated June 25, 1996. (b) Page 38 NOTES TO EXHIBITS (a) Incorporated by reference to Exhibit 2.1 of the registrant's Form 8-K dated June 25, 1996, filed with the Commission on July, 10, 1996. (b) Filed as an exhibit to this Form 10-KSB Annual Report for the period ended June 30, 1996. (c) Incorporated by reference to Exhibit 3.1 of the registrant's Form 8-K dated July 19, 1996, filed with the Commission on August 9, 1996. (d) Incorporated by reference to Exhibit 3.2 of the registrant's Form 8-K dated July 19, 1996, filed with the Commission on August 9, 1996. (e) Incorporated by reference to Exhibit 3.2 of the registrant's Registration Statement. (f) Incorporated by reference to Exhibit 3.3 of the registrant's Form 8-K dated July 19, 1996, filed with the Commission on August 9, 1996. (g) Incorporated by reference to Exhibit 3.4 of the registrant's Form 8-K dated July 19, 1996, filed with the Commission on August 9, 1996. (h) Incorporated by reference to Exhibit 4.1 of the registrant's Form 8-K dated July 19, 1996, filed with the Commission on August 9, 1996. (i) A management contract or compensatory plan or arrangement. (j) Incorporated by reference to Exhibit 16.1 of the registrant's Form 8-K/A dated June 25, 1996, filed with the Commission on July 23, 1996. (B) REPORTS ON FORM 8-K No Current Reports on Form 8-K were filed by the Company during the three months ended June 30, 1996. Page 39 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PALATIN TECHNOLOGIES, INC. Date: September 27, 1996 By: /s/ Edward J. Quilty ------------------------------------ Edward J. Quilty Chairman of the Board, President and Chief Executive Officer Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLES DATE --------- ------ ---- /s/ Edward J. Quilty Chairman of the Board, President and Chief September 27, 1996 - -------------------------------------------- Executive Officer Edward J. Quilty /s/ Carl Spana Executive Vice President and Director September 27, 1996 - -------------------------------------------- Carl Spana /s/ John J. McDonough Vice President and Chief Financial Officer September 27, 1996 - -------------------------------------------- (Principal Financial and Accounting Officer) John J. McDonough /s/ Michael S. Weiss Director September 27, 1996 - -------------------------------------------- Michael S. Weiss /s/ James T. O'Brien Director September 27, 1996 - -------------------------------------------- James T. O'Brien /s/ Richard J. Murphy Director September 27, 1996 - -------------------------------------------- Richard J. Murphy /s/ John K.A. Prendergast Director September 27, 1996 - -------------------------------------------- John K.A. Prendergast
Page 40 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and Board of Directors of Palatin Technologies, Inc.: We have audited the accompanying consolidated balance sheets of PALATIN TECHNOLOGIES, INC. (a Delaware corporation in the development stage) AND SUBSIDIARIES as of June 30, 1996 (post-Merger, see Note 1) and August 31, 1995 (pre-Merger), and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for the period from September 1, 1995 through June 30, 1996 (post-Merger, consisting of the statement of operations and cash flows of RhoMed Incorporated, predecessor corporation in the continuing business of Palatin Technologies, Inc. and subsidiaries for the period from September 1, 1995 through June 25, 1996 (pre-Merger), audited by us, and the statements of operations and cash flows of Palatin Technologies, Inc. and subsidiaries for the period from June 26, 1996 through June 30, 1996 (post-Merger), also audited by us, and for the years ended August 31, 1995 and 1994 (pre- Merger). We have also audited the consolidated statements of operations and cash flows of Palatin Technologies, Inc. and subsidiaries for the period from inception (January 28, 1986) through June 30, 1996 (post-Merger, consisting of the statements of operations and cash flows of RhoMed Incorporated and Palatin Technologies, Inc. and subsidiaries as described above). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. F-1 In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Palatin Technologies, Inc. and subsidiaries as of June 30, 1996, and August 31, 1995, and the results of their operations and their cash flows for each of the periods indicated above in conformity with generally accepted accounting principles. /s/ ARTHUR ANDERSEN LLP --------------------------- ARTHUR ANDERSEN LLP Albuquerque, New Mexico July 31, 1996 F-2 PALATIN TECHNOLOGIES, INC. (RhoMed Incorporated prior to June 25, 1996 Reverse Merger) (A Development Stage Enterprise) Consolidated Balance Sheets June 30, 1996 and August 31, 1995
June 30, 1996 August 31, 1995 --------------------- --------------------- ASSETS Current assets: Cash $ 6,791,300 $ 474,018 Accounts receivable, including employee receivables of $113 and $1,121 as of June 30, 1996 and August 31, 1995, respectively 4,574 5,626 Prepaid expenses and other 66,430 19,752 -------------- ---------- Total current assets 6,862,304 499,396 Equipment, net (Notes 2 and 4) 96,354 134,368 Intangibles, net of accumulated amortization of $91,336 and $68,938 as of June 30, 1996 and August 31, 1995, respectively (Notes 5 and 6) 82,547 319,965 -------------- ---------- $ 7,041,205 $ 953,729 ============== ==========
The accompanying notes to consolidated financial statements are an integral part of these balance sheets. F-3 PALATIN TECHNOLOGIES, INC. (RhoMed Incorporated prior to June 25, 1996 Reverse Merger) (A Development Stage Enterprise) Consolidated Balance Sheets June 30, 1996 and August 31, 1995 - Continued -
June 30, 1996 August 31, 1995 --------------------- --------------------- LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable, including related party payables of $34,234 as of June 30, 1996 $ 214,424 $ 305,857 Accrued compensation owed to employees (Note 3) 78,084 171,290 Accrued expenses (Note 1) 655,197 112,747 Notes payable, related party (Note 3) -- 23,286 Current portion of long-term financing, including accrued interest of $38,912 (Note 6) 311,695 105,000 Senior bridge notes, including related party transaction of $110,000 and $100,000 as of June 30, 1996 and August 31, 1995, respectively (Note 7) 1,100,000 1,000,000 ------------ ------------ Total current liabilities 2,359,400 1,718,180 Long-term financing, including accrued interest of $273,339 and $285,614 as of June 30, 1996 and August 31, 1995, respectively (Note 6) 1,727,619 1,972,677 Notes payable to stockholders, including accrued interest of $35,979 and $29,312 as of June 30, 1996 and August 31, 1995, respectively (Note 8) 115,979 109,312 ------------ ------------ 4,202,998 3,800,169 ------------ ------------ Commitments and contingencies (Note 9) Stockholders' equity (deficit) (Notes 1, 3, 6, 7, 8, 9 and 10): Preferred stock, $.01 and zero par value, and 2,000,000 and 10,000,000 shares authorized, as of June 30, 1996 and August 31, 1995, respectively; no shares issued as of June 30, 1996 and August 31, 1995; 4,000,000 subscribed as of August 31, 1995 -- -- Preferred stock subscribed -- 4,000 Preferred stock receivable -- (4,000) Common stock, $.01 and zero par value, and 25,000,000 and 40,000,000 shares authorized, as of June 30, 1996 and August 31, 1995, respectively; 11,538,777 and 6,922,069 issued as of June 30, 1996 and August 31, 1995, respectively 115,388 1,177,786 Additional paid-in capital 10,804,394 -- Common stock earned but not issued 53,030 110,833 Paid-in capital from common stock warrants -- 100,000 Treasury stock, 1,229 shares (1,667) -- Deficit accumulated during development stage (8,132,938) (4,235,059) ------------ ------------ 2,838,207 (2,846,440) ------------ ------------ $ 7,041,205 $ 953,729 ============ ============
The accompanying notes to consolidated financial statements are an integral part of these balance sheets. F-4 PALATIN TECHNOLOGIES, INC. (RhoMed Incorporated prior to June 25, 1996 Reverse Merger) (A Development Stage Enterprise) Consolidated Statements of Operations for the Period from Inception (January 28, 1986) through June 30, 1996 and for the Ten Months Ended June 30, 1996 and the Years Ended August 31, 1995 and 1994
Inception Fiscal Year Ended (January 28, 1986) Ten Months August 31, through Ended ---------------------------------- June 30, 1996 June 30, 1996 1995 1994 ----------------- ---------------- ---------------- ---------------- REVENUES: Grants and contracts (Note 11) $ 2,860,512 $ - $ - $ 50,289 License fees and royalties (Note 12) 334,296 - 64,296 50,000 Sales 296,733 24,457 33,606 47,559 ----------------- ---------------- ---------------- ---------------- Total revenues 3,491,541 24,457 97,902 147,848 ----------------- ---------------- ---------------- ---------------- EXPENSES: Research and development 4,396,408 869,896 619,354 584,941 General and administrative 4,902,961 1,250,343 776,291 939,155 ----------------- ---------------- ---------------- ---------------- Total expenses 9,299,369 2,120,239 1,395,645 1,524,096 ----------------- ---------------- ---------------- ---------------- OTHER INCOME (EXPENSES): Other income 71,380 10,515 2,744 16,561 Interest expense (1,043,186) (459,308) (343,865) (185,268) Placement agent commissions and fees on debt offering (168,970) (168,970) - - Merger costs (475,000) (475,000) - - Restructuring charge (Note 9) (450,000) (450,000) - - Net intangibles write down (259,334) (259,334) - - ----------------- ---------------- ---------------- ---------------- Total other income (expenses) (2,325,110) (1,802,097) (341,121) (168,707) ----------------- ---------------- ---------------- ---------------- NET LOSS $ (8,132,938) $ (3,897,879) $ (1,638,864) $ (1,544,955) ================= ================ ================ ================ Weighted average number of common shares outstanding 1,173,525 2,144,131 1,238,192 1,205,617 ================= ================ ================ ================ Net loss per common share $ (6.93) $ (1.82) $ (1.32) $ (1.28) ================= ================ ================ ================
The accompanying notes to consolidated financial statements are an integral part of these statements. F-5 PALATIN TECHNOLOGIES, INC. (RhoMed Incorporated prior to June 25, 1996 Reverse Merger) (A Development Stage Enterprise) Consolidated Statements of Stockholders' Equity (Deficit) for the Period from Inception (January 28, 1986) Through June 30, 1996
Preferred Stock ------------------------------------------------------------------------------ Shares Amount Subscriptions Receivable ------------------ ------------------ ------------------ ------------------ Balance at inception -- $ -- $ -- $ -- Issuance of shares from inception -- -- -- -- Net loss from inception -- -- -- -- ------------------ ------------------ ------------------ ------------------ Balance, August 31, 1994 -- -- -- -- Issuance of shares -- -- -- -- Shares earned but not issued -- -- -- -- Issuance of options -- -- -- -- Paid-in capital from common stock warrants -- -- -- -- Preferred stock subscriptions -- -- 4,000 (4,000) Net loss -- -- -- -- ------------------ ------------------ ------------------ ------------------ Balance, August 31, 1995 -- -- 4,000 (4,000) Preferred stock subscriptions -- -- (4,000) 4,000 Issuance of preferred shares 4,000,000 4,000 -- -- Issuance of common shares on $10,395,400 private placement -- -- -- -- Shares earned but not issued -- -- -- -- Issuance of common shares -- -- -- -- Net loss -- -- -- -- ------------------ ------------------ ------------------ ------------------ Balance, June 25, 1996 4,000,000 4,000 -- -- Conversion to Palatin Technologies, Inc. (4,000,000) (4,000) -- -- ------------------ ------------------ ------------------ ------------------ Adjusted balance, June 25, 1996 -- -- -- -- Shares outstanding of Palatin Technologies, Inc. -- -- -- -- Issuance of common shares -- -- -- -- Purchase of treasury stock -- -- -- -- ------------------ ------------------ ------------------ ------------------ Balance, June 30, 1996 -- $ -- $ -- $ -- ================== ================== ================== ==================
The accompanying notes to consolidated financial statements are an integral part of these statements. F-6 PALATIN TECHNOLOGIES, INC. (RhoMed Incorporated prior to June 25, 1996 Reverse Merger) (A Development Stage Enterprise) Consolidated Statements of Stockholders' Equity (Deficit) for the Period from Inception (January 28, 1986) Through June 30, 1996 - Continued -
Common Stock ----------------------------------------------------------------------------- Paid-in Additional Earned but Capital from Shares Amount Paid-in Capital not Issued Warrants ------------ ------------ --------------- ------------ ------------- Balance at inception -- $ -- $ -- $ -- $ -- Issuance of shares from inception 6,562,467 1,158,883 -- -- -- Net loss from inception -- -- -- -- -- ------------ ------------ --------------- ------------ ------------- Balance, August 31, 1994 6,562,467 1,158,883 -- -- -- Issuance of shares 359,602 10,203 -- -- -- Shares earned but not issued -- -- -- 110,833 -- Issuance of options -- 8,700 -- -- -- Paid-in capital from common stock warrants -- -- -- -- 100,000 Preferred stock subscriptions -- -- -- -- -- Net loss -- -- -- -- -- ------------ ------------ --------------- ------------ ------------- Balance, August 31, 1995 6,922,069 1,177,786 -- 110,833 100,000 Preferred stock subscriptions -- -- -- -- -- Issuance of preferred shares -- -- -- -- -- Issuance of common shares on $10,395,400 private placement 41,581,600 9,139,303 -- -- -- Shares earned but not issued -- -- -- 266,743 -- Issuance of common shares 1,054,548 458,977 -- (324,546) (100,000) Net loss -- -- -- -- -- ------------ ------------ --------------- ------------ ------------- Balance, June 25, 1996 49,558,217 10,776,066 -- 53,030 -- Conversion to Palatin Technologies, Inc. (38,555,207) (10,666,035) 10,670,035 -- -- ------------ ------------ --------------- ------------ ------------- Adjusted balance, June 25, 1996 11,003,010 110,031 10,670,035 53,030 -- Shares outstanding of Palatin Technologies, Inc. 432,750 4,327 (4,327) -- -- Issuance of common shares 103,017 1,030 138,686 -- -- Purchase of treasury stock -- -- -- -- -- ------------ ------------ --------------- ------------ ------------- Balance, June 30, 1996 11,538,777 $ 115,388 $ 10,804,394 $ 53,030 $ -- ============ ============ =============== ============ =============
Deficit Accumulated During Treasury Development Stock Stage Total ------------ --------------- -------------- Balance at inception $ -- $ -- $ -- Issuance of shares from inception -- -- 1,158,883 Net loss from inception -- (2,596,195) (2,596,195) ------------ --------------- -------------- Balance, August 31, 1994 -- (2,596,195) (1,437,312) Issuance of shares -- -- 10,203 Shares earned but not issued -- -- 110,833 Issuance of options -- -- 8,700 Paid-in capital from common stock warrants -- -- 100,000 Preferred stock subscriptions -- -- -- Net loss -- (1,638,864) (1,638,864) ------------ --------------- -------------- Balance, August 31, 1995 -- (4,235,059) (2,846,440) Preferred stock subscriptions -- -- -- Issuance of preferred shares -- -- 4,000 Issuance of common shares on $10,395,400 private placement -- -- 9,139,303 Shares earned but not issued -- -- 266,743 Issuance of common shares -- -- 34,431 Net loss -- (3,897,879) (3,897,879) ------------ --------------- -------------- Balance, June 25, 1996 -- (8,132,938) 2,700,158 Conversion to Palatin Technologies, Inc. -- -- -- ------------ --------------- -------------- Adjusted balance, June 25, 1996 -- (8,132,938) 2,700,158 Shares outstanding of Palatin Technologies, Inc. -- -- -- Issuance of common shares -- -- 139,716 Purchase of treasury stock (1,667) -- (1,667) ------------ --------------- -------------- Balance, June 30, 1996 $ (1,667) $ (8,132,938) $ 2,838,207 ============ =============== ==============
The accompanying notes to consolidated financial statements are an integral part of these statements. F-7
PALATIN TECHNOLOGIES, INC. (RhoMed Incorporated prior to June 25, 1996 Reverse Merger) (A Development Stage Enterprise) Consolidated Statements of Cash Flows for the Period from Inception (January 28, 1986) through June 30, 1996 and for the Ten Months Ended June 30, 1996 and the Years Ended August 31, 1995 and 1994 Inception Fiscal Year Ended (January 28, 1986) Ten Months August 31, through Ended ---------------------------- June 30, 1996 June 30, 1996 1995 1994 ------------- ------------- ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (8,132,938) $ (3,897,879) $ (1,638,864) $ (1,544,955) Adjustments to reconcile net loss to net cash used for operating activities: Depreciation and amortization 308,574 68,005 85,947 80,523 Interest expense on related-party debt 53,387 6,667 8,000 8,000 Accrued interest on long-term financing 796,038 293,380 320,709 169,438 Accrued interest on short-term financing 107,936 100,000 7,936 -- Intangibles and equipment write down 278,318 278,318 -- -- Equity and notes payable issued for expenses 296,047 174,147 10,350 15,450 Settlement with consultant (28,731) -- -- -- Changes in certain operating assets and liabilities: Accounts receivable (4,574) 1,052 2,557 (1,198) Prepaid expenses and other (66,430) (46,678) (5,206) 13,257 Intangibles (427,337) (44,314) (66,152) (73,383) Accounts payable 213,524 (91,433) 164,744 67,269 Accrued compensation owed to employees 94,632 (93,206) 10,551 (4,444) Accrued expenses 683,928 542,450 39,961 9,825 ------------- ------------- ------------ ------------ Net cash used for operating activities (5,827,626) (2,709,491) (1,059,467) (1,260,218) ------------- ------------- ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (335,229) (26,577) (4,294) (133,714) ------------- ------------- ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable, related party 302,000 -- 302,000 -- Payments on notes payable, related party (309,936) (23,286) (286,650) -- Proceeds from senior bridge notes payable 1,850,000 850,000 1,000,000 -- Payments on senior bridge notes (850,000) (850,000) -- -- Proceeds from notes payable and long-term financing 1,951,327 -- 292,063 500,000 Payments on notes payable and long-term financing (190,061) (65,000) (92,384) (15,477) Proceeds from paid-in capital from common stock warrants 100,000 -- 100,000 -- Proceeds from common stock, stock option issuances and preferred stock, net 10,102,492 9,143,303 345 191,812 Purchase of treasury stock (1,667) (1,667) -- -- ------------- ------------- ------------ ------------ Net cash provided by financing activities 12,954,155 9,053,350 1,315,374 676,335 ------------- ------------- ------------ ------------ NET INCREASE (DECREASE) IN CASH 6,791,300 6,317,282 251,613 (717,597) CASH, beginning of period -- 474,018 222,405 940,002 ------------- ------------- ------------ ------------ CASH, end of period $ 6,791,300 $ 6,791,300 $ 474,018 $ 222,405 ============= ============ ============ ============
The accompanying notes to consolidated financial statements are an integral part of these statements. F-8
PALATIN TECHNOLOGIES, INC. (RhoMed Incorporated prior to June 25, 1996 Reverse Merger) (A Development Stage Enterprise) Consolidated Statements of Cash Flows for the Period from Inception (January 28, 1986) through June 30, 1996 and for the Ten Months Ended June 30, 1996 and the Years Ended August 31, 1995 and 1994 - Continued - Inception Fiscal Year Ended (January 28, 1986) Ten Months August 31, through Ended --------------------------- June 30, 1996 June 30, 1996 1995 1994 ---------------- ---------------- ------------- ------------ SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest $ 77,523 $ 49,494 $ 28,029 $ - ================ ================ ============= ============ NON-CASH TRANSACTION: Settlement of accounts payable with equipment $ 900 $ - $ - $ 900 ================ ================ ============= ============ NON-CASH STOCK ACTIVITY: Conversion of loans from employees to common stock $ 74,187 $ - $ - $ - ================ ================ ============= ============ Conversion of note payable to common stock $ 16,000 $ - $ - $ - ================ ================ ============= ============ Common stock issued for equipment $ 2,327 $ - $ - $ - ================ ================ ============= ============ Common stock issued for expenses (included above) $285,332 $174,147 $ 10,350 $ 15,450 ================ ================ ============= ============ Common stock issued for accrued salaries and bonuses $ 16,548 $ - $ 9,858 $ 3,390 ================ ================ ============= ============ Accrued interest payable in common stock $375,926 $266,743 $109,183 $ - ================ ================ ============= ============
The accompanying notes to consolidated financial statements are an integral part of these statements. F-9 PALATIN TECHNOLOGIES, INC. (RhoMed Incorporated prior to June 25, 1996 Reverse Merger) (A Development Stage Enterprise) Notes to Consolidated Financial Statements for the Period from Inception (January 28, 1986) through June 30, 1996 and for the Ten Months Ended June 30, 1996 and the Years Ended August 31, 1995 and 1994 (1) ORGANIZATION ACTIVITIES: Corporate Structure -- Palatin Technologies, Inc. ("Palatin"), formerly Interfilm, Inc., was incorporated under the laws of the State of Delaware on November 21, 1986. Since November 4, 1993, when Palatin acquired Interfilm Technologies, Inc., a New York corporation, it had been primarily engaged in the business of exploiting the rights related to its interactive motion picture process, including the production and distribution of interactive motion pictures for initial exhibition in theaters and subsequently in enhanced versions for distribution to the home market. Palatin's initial public offering was consummated on October 28, 1993. On May 10, 1995, the Board of Directors of Palatin decided to substantially curtail the operations of Palatin and its subsidiaries. Merger -- On June 25, 1996, a newly formed, wholly-owned subsidiary of Palatin, Interfilm Acquisition Corporation ("InSub"), a New Mexico corporation, merged with and into RhoMed Incorporated ("RhoMed"), a New Mexico corporation, with all outstanding shares of RhoMed equity securities ultimately being exchanged for Palatin's common stock (the "Merger"). As a result of the Merger, RhoMed became a wholly-owned subsidiary of Palatin, with the holders of RhoMed preferred stock and RhoMed common stock (including the holders of "RhoMed Derivative Securities" as hereafter defined) receiving an aggregate of approximately 96% interest in the equity securities of Palatin on a fully-diluted basis. Additionally, all warrants and options to purchase common stock of RhoMed outstanding immediately prior to the Merger (the "RhoMed Derivative Securities"), including without limitation, any rights underlying RhoMed's qualified or nonqualified stock option plans, were automatically converted into rights upon exercise to receive Palatin's common stock in the same manner in which the shares of RhoMed common stock were converted. Since the former stockholders of RhoMed retained more than a 50% controlling interest in the surviving company (Palatin), the Merger was accounted for as a reverse merger. Certain assets and liabilities of Palatin and a subsidiary existing prior to the Merger, consisting principally of certain intellectual property and litigation claims against Sony Corporation of America and related entities, were transferred to an unaffiliated limited liability partnership for the benefit of Palatin stockholders of record as of June 21, 1996, immediately prior to the Merger. Pro forma combined operating results of the merged companies are not presented since the reverse merger is not a business combination for accounting purposes. The historical financial statements prior to June 25, 1996, are those of RhoMed, except that the net loss per common share has been stated on an as if converted basis. In addition, the Merger costs of $450,000 have been charged to operations for the ten months ended June 30, 1996, and accrued expenses include $231,635 of this amount as of June 30, 1996. On July 19, 1996, an amendment to the Certificate of Incorporation of Palatin (the "Amendment") was filed, which (a) effected the change of name from Interfilm, Inc. to Palatin Technologies, Inc., (b) increased the total number of authorized shares of Palatin's common stock, par value $.01 per share (the "Common Stock"), from 10,000,000 to 25,000,000, and (c) effected a 1-for-10 reverse split of Common Stock. Upon the filing of the Amendment, each share of RhoMed preferred stock was F-10 converted into .46695404349 shares of Common Stock, and each share of RhoMed common stock was converted into .184332593 shares of Common Stock. The consolidated financial statements have been adjusted to reflect the Amendment as if it had been filed on June 30, 1996. Nature of Business -- Palatin, through its wholly-owned subsidiary, RhoMed, is a development stage enterprise dedicated to developing and commercializing products and technologies for diagnostic imaging, cancer therapy and ethical drug development based upon its proprietary monoclonal antibody, radiolabeling and enabling peptide platform technologies. Palatin had, prior to June 25, 1996, conducted no on-going business activities since May 10, 1995. The business of RhoMed, conducted by Palatin since June 25, 1996, when the Merger became effective, represents the on-going business of Palatin. Since its inception, RhoMed has devoted substantially all of its efforts and resources to the research and development of its technology. RhoMed has experienced operating losses in each year since its inception and, as of June 30, 1996, Palatin, including its wholly-owned subsidiary RhoMed, had a deficit accumulated during the development stage of $8,132,938. Palatin expects to incur additional operating losses over the next several years and expects cumulative losses to increase as Palatin's research and development and clinical testing efforts continue and expand. The ultimate completion of Palatin's development projects is contingent upon a number of factors, including the successful completion of technology and product development, obtaining required regulatory approvals and additional financing and, ultimately, achieving profitable operations. Change in Fiscal Year -- Effective June 30, 1996, Palatin and RhoMed each changed its fiscal year end to June 30. The fiscal year ends of Palatin and RhoMed prior to the Merger were December 31 and August 31, respectively. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Principles of Consolidation -- The consolidated financial statements include the accounts of Palatin and its wholly owned subsidiary, RhoMed. The remaining subsidiaries of Palatin - Interfilm Technologies, Inc., Ediflex Digital Systems, Inc. and Production Equipment Leasing Corp. LP - are inactive. All significant intercompany accounts and transactions have been eliminated in consolidation. Accounting Basis -- The financial books and records of Palatin are maintained on the accrual basis of accounting. As a development stage enterprise, cumulative results of operations from inception are presented. Cash -- For purposes of presenting cash flows, Palatin considers cash as amounts on hand, on deposit in financial institutions and highly liquid investments purchased with an original maturity of three months or less. Equipment -- Equipment and office furniture are stated at cost, net of accumulated depreciation. Depreciation is recognized using an accelerated method over the estimated useful lives of 5 years for equipment, 7 years for office furniture and over the term of the lease for leasehold improvements. Maintenance and repairs are expensed as incurred while expenditures that extend the useful life of an asset are capitalized. Patents -- Patents represent the costs capitalized to successfully obtain a patent registration. Internal costs to obtain and develop the patents have been expensed. Patents are included as intangible assets in the accompanying consolidated financial statements and are stated at cost, net of accumulated amortization. Amortization is recognized using the straight-line method over the estimated patent lives F-11 ranging up to 17 years. Unsuccessful patent costs and patents with no demonstrated future value are expensed when so determined by management. Research and Development Costs -- The costs of research and development activities are expensed as incurred. Stock Options and Warrants -- Warrants and most common stock options have been issued at exercise prices greater than, or equal to, their fair market value at the date granted. Accordingly, no value has been assigned to these instruments. However, certain stock options were issued in the fiscal years ended August 31, 1995 and 1994 under a nonqualified stock option plan at an exercise price below market value. The difference between the exercise price and the market value of these securities has been included in general and administrative expense in the fiscal years ended August 31, 1995 and 1994, and as an addition to equity. Income Taxes -- Palatin and its subsidiaries intend to file consolidated federal and combined state income tax returns. Palatin accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes." SFAS 109 requires, among other things, the use of the liability method in computing deferred income taxes. Palatin provides for deferred income taxes relating to timing differences in the recognition of income and expense items (primarily relating to depreciation, amortization and certain leases) for financial and tax reporting purposes. Such amounts are measured using current tax laws and regulations in accordance with the provisions of SFAS 109. In accordance with SFAS 109, Palatin has recorded valuation allowances against the realization of its deferred tax assets. The valuation allowance is based on management's estimates and analysis, which includes tax laws which may limit Palatin's ability to utilize its tax loss carryforwards. Net Loss per Common Share -- Net loss per common share is calculated based upon the weighted average number of shares of Common Stock, on an as if converted basis, outstanding during each period. All options and warrants were excluded in the calculation of weighted average shares outstanding since their inclusion would have had an anti-dilutive effect. Financial Statement Presentation -- Certain amounts in the accompanying consolidated financial statements and notes have been reclassified to conform to the 1996 presentation. Use of Estimates -- The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. New Pronouncements -- The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based Compensation." SFAS 123 recommends changes in accounting for employee stock-based compensation plans, and requires certain disclosures with respect to these plans. The dislcosures of SFAS 123 will be adopted by Palatin effective July 1, 1996. Fair Value of Financial Instruments -- Statement of Financial Accounting Standards No. 107 (SFAS 107), "Disclosures about Fair Value of Financial Instruments," requires disclosures of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is F-12 practicable to estimate the value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. These techniques are significantly affected by the assumptions used, including discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. SFAS 107 excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of Palatin. The following methods and assumptions were used by Palatin in estimating its fair value disclosures for financial instruments: the carrying amount reported on the balance sheet approximates the fair value for cash, short-term borrowings and current maturities of long-term debt; and the fair value for Palatin's fixed rate long-term debt is estimated based on the current rates offered to Palatin for debt of the same remaining maturities. Based on the above, the amount reported on the balance sheet approximates the fair value. (3) RELATED PARTY TRANSACTIONS: Castle Transaction -- During the fiscal year ended August 31, 1995, RhoMed encountered serious liquidity and working capital deficiencies. As a result, effective April 1995, RhoMed entered into a letter of intent with The Castle Group Ltd. ("Castle"), a company controlled by Lindsay A. Rosenwald, M.D. ("Dr. Rosenwald"), under which Castle agreed to arrange for a line of credit of up to $300,000 to finance ongoing operations; agreed to arrange for future financings; and RhoMed agreed to sell to Castle or its designees, for nominal consideration, 4,000,000 shares of RhoMed Series A Preferred Stock (equivalent to 1,867,809 shares of Common Stock). The issuance of RhoMed Series A Preferred Stock to designees of Castle was consummated on October 25, 1995. This resulted in Dr. Rosenwald and his designees obtaining majority ownership and control of RhoMed. Pursuant to the letter of intent, Castle provided a $300,000 line of credit. RhoMed borrowed up to the maximum under the line of credit and, at August 31, 1995, had $23,286 outstanding thereunder, which was paid in September, 1995. The average interest rate for the line of credit was 10.90%, and the average balance outstanding was $191,549. Dr. Rosenwald is the Chairman of Paramount Capital, Inc. ("Paramount"), which served as placement agent for RhoMed as set forth below. Commencing July 24, 1995, two of the then three members of the Board of Directors of RhoMed were employees of entities controlled by Dr. Rosenwald (the "Interested Directors"). These Interested Directors may have benefited, directly or indirectly, from the payment of commissions and expenses, and the issuance of warrants, to Paramount and affiliates. On July 28, 1995, RhoMed's Board of Directors approved an offering of Senior Bridge Notes and Class A Warrants (the "Class A Offering") (see Note 7), for which Paramount served as placement agent. Because the Interested Directors could be deemed to have a direct or indirect interest in a transaction involving a potential conflict of interest with RhoMed (a "Conflict Of Interest Transaction") contemplated under certain terms of the Class A Offering, the transaction was ratified by disinterested stockholders on August 15, 1995. In the Class A Offering, investment funds managed by a company of which Dr. Rosenwald is president purchased Senior Bridge Notes with a face value of $100,000, and Class A Warrants to purchase 300,000 shares of RhoMed common stock at $.01 per share (equivalent to 55,299 shares of Common Stock at $.05 per share). On November 27, 1995, RhoMed's Board of Directors approved an offering of Senior Bridge Notes and Class B Warrants (the "Class B Offering") (see Note 7), for which Paramount served as placement agent. Because certain terms of the Class B Offering could also be deemed to be a Conflict F-13 of Interest Transaction, the Interested Directors recused themselves from voting on the matter, and the Class B Offering was approved by the two disinterested directors. In the Class B Offering, investment funds managed by a company of which Dr. Rosenwald is president purchased Senior Bridge Notes with a face value of $100,000, and Class B Warrants to purchase 100,000 shares of RhoMed common stock at an adjusted exercise price of $.125 per share (equivalent to 18,433 shares of Common Stock at $.68 per share). On March 4, 1996, the Board of Directors approved an offering of common stock (the "Common Stock Offering") (see Note 10), and authorized an offering committee of the Board of Directors, consisting of the two disinterested directors, to determine the placement agent for the Common Stock Offering. The selection of Paramount as placement agent was approved by the disinterested directors. On May 14, 1996, the Board of Directors approved an increase in the Common Stock Offering, on which the Interested Directors recused themselves, and which was approved by the two disinterested directors. In the Common Stock Offering, investment funds managed by a company of which Dr. Rosenwald is president purchased 7,002,000 shares of RhoMed common stock at $.25 per share (equivalent to 1,290,696 shares of Common Stock at $1.36 per share). Accrued Compensation -- At June 30, 1996 and August 31, 1995, RhoMed owed employees approximately $78,000 and $171,000, respectively, for accrued and unpaid compensation and related benefits. These amounts do not accrue interest and are included in accrued compensation in the accompanying consolidated financial statements. All such amounts are expected to be paid in fiscal year 1997. Other Transactions -- There have been certain transactions between Palatin and certain related parties which have resulted in the exchange of assets or services for equity securities (see Note 10). Management of Palatin believes that the terms of the transactions and the agreements described above are on terms at least as favorable as those which it could otherwise have obtained from unrelated parties. (4) EQUIPMENT: Equipment consists of the following at June 30, 1996 and August 31, 1995: June 30, August 31, 1996 1995 ------------- ------------ Office equipment $ 202,960 $ 183,322 Laboratory equipment 76,929 69,989 Leasehold improvements - 57,668 ------------- ------------ Equipment at cost 279,889 310,979 Less: Accumulated depreciation 183,535 176,611 ------------- ------------ $ 96,354 $ 134,368 ============= ============ (5) INTANGIBLES: Palatin has obtained 11 United States (U.S.) patents and corresponding international applications have been issued or are pending in selected countries on a majority of issued U.S. patents. Palatin has F-14 applications pending for 17 additional U.S. patents, the majority of which have pending international counterparts in selected countries. Palatin has received Notices of Allowance, and has paid issue fees, on certain pending U.S. patent applications. Palatin has assigned its interest in several patents to secure long-term financing (see Note 6). (6) LONG-TERM FINANCING: Palatin has a long-term financing agreement with Aberlyn Holding Co., Inc., and its affiliates (collectively "Aberlyn"). Aberlyn has, in a series of transactions, loaned to Palatin approximately $1,800,000, secured by certain of Palatin's patents, intellectual property and equipment. Certain fees and costs related to the borrowings have been deferred as intangible assets and are being amortized over the remaining terms of the arrangement using the effective interest method. The agreement requires the accrual of certain interest as payable before it is earned; therefore, at any time before the scheduled payoff, the recorded long-term liability will be less than the total amount payable to settle the obligation. Palatin is obligated, at June 30, 1996, to make monthly payments to Aberlyn of $20,000 from June 1, 1996 through May 1, 1997, and payments of $91,695 from June 1, 1997 through May 1, 1999. Payments through May 1, 1997 will be applied to principal only; interest will be accrued during this period at an annual effective rate of 15% and paid in Palatin's Common Stock. On June 24, 1996, RhoMed issued 930,023 shares of RhoMed common stock (equivalent to 171,433 shares of Common Stock) in payment of accrued interest of $324,546 through April 30, 1996. In addition, certain warrants held by Aberlyn were terminated, and RhoMed agreed that Common Stock paid as interest through May 1, 1997, would contain certain registration rights, and would be valued at the rate of 75% of the per share offering price for RhoMed's common stock in any offering commencing after the consummation of the Common Stock Offering, in which the total offering proceeds exceeds $5,000,000, or in the event no such offering is completed before April 30, 1997, at the rate of 75% of the average per share closing price for the twenty trading days immediately preceding April 30, 1997. Scheduled principal payments on the long-term financing through fiscal year 1999 at June 30, 1996, are as follows: Years ending June 30, --------------------- 1997 $ 272,783 1998 697,317 1999 756,963 ------------- Total principal payments 1,727,063 Accrued interest 312,251 ------------- $ 2,039,314 ============= F-15 (7) SENIOR BRIDGE NOTES: The warrants set forth below were initially exercisable for RhoMed common stock and are so described. At Note 10 all outstanding warrants, including all RhoMed warrants, are shown as converted to Common Stock. Class A Offering -- On July 28, 1995, the Board of Directors of RhoMed authorized an offering of up to 40 units at $25,000 per unit, with each unit consisting of a $25,000 face amount Senior Bridge Note and a Class A Warrant to purchase 75,000 shares of RhoMed common stock at an exercise price of $.01 per share (the "Class A Offering") (see Note 3). The nominal exercise price for the warrants reflected the seriously troubled financial condition of RhoMed on the date of the transaction. The Senior Bridge Notes sold in the Class A Offering bear interest at 1% per month, and are payable, with accrued interest, one year from the date of issuance. Class A Warrants are exercisable at any time, terminate ten years from the date of issuance, have certain registration rights, and are subject to adjustment in certain circumstances, including a stock split of, stock dividend on, or a subdivision, combination or recapitalization of, the Common Stock. All Class A Offering units were purchased, with net proceeds to RhoMed of approximately $907,000 after payment of the placement agent's commissions and expenses ($90,000) and offering expenses (approximately $3,000). Paramount (see Note 3), served as placement agent for the offering and received (i) a cash commission equal to 6% of the gross proceeds from the sale of the units, (ii) a non-accountable expense allowance equal to 3% of gross proceeds and (iii) placement agent's warrants ("Class A Placement Agent Warrants"), on the same terms as the Class A Warrants, equal to 15% of the Common Stock underlying the Class A Warrants issued in the Class A Offering. Class B Offering -- On November 27, 1995, the Board of Directors of RhoMed authorized an offering of up to 7.5 units at $100,000 per unit, with each unit consisting of a $100,000 face amount Senior Bridge Note and a Class B Warrant to purchase 100,000 shares of RhoMed common stock at an exercise price of the lesser of (a) $.25 per share and (b) 50% of the price per share of common stock in a subsequent equity offering of RhoMed common stock in which gross proceeds exceed $2,500,000 (the "Class B Offering"). On January 25, 1996, the Board of Directors increased the Class B Offering from 7.5 units to 8.5 units. The Senior Bridge Notes sold in the Class B Offering bore interest at 1% per month, and were payable, with accrued interest, at the earlier of (a) 5 days following the closing of an equity offering of RhoMed's securities in which gross proceeds exceeded $2,500,000 and (b) 12 months from the date of issuance. The Class B Warrants are exercisable at any time, terminate 5 years from the date of issuance, have certain registration rights, contain a call provision and are subject to adjustment in certain circumstances, including a stock split of, stock dividend on, or a subdivision, combination or recapitalization of, the Common Stock. On February 15, 1996, the purchase of units was completed. Net proceeds to RhoMed were $739,500 after payment of the placement agent's commissions and expenses ($110,500). Paramount (see Note 3), served as placement agent for the Class B Offering and received (i) a cash commission equal to 9% of the gross proceeds from the sale of the units, (ii) a non-accountable expense allowance equal to 4% of gross proceeds and (iii) placement agent's warrants ("Class B Placement Agent Warrants"), at an exercise price of $.30 per share but otherwise on the same terms as the Class B Warrants, equal to 5% of the Common Stock underlying the Class B Warrants issued in the Class B Offering. On June 28, 1996, the Class B Offering Senior Bridge Notes with accrued interest were paid in full. F-16 (8) NOTES PAYABLE TO STOCKHOLDERS: At June 30, 1996 and August 31, 1995, notes payable to stockholders consisted of four ten year notes totaling $80,000 plus interest accrued thereon. These notes were issued as part of a combined stock and debt offering during the fiscal year ended August 31, 1992 (see Note 10). Each note is a promissory note from RhoMed to the purchaser in the face amount of $20,000, bearing interest at 10% per year, accruing annually. Principal and interest on the notes becomes due and payable on the earlier of (i) July 31, 2002, or (ii) 30 days after RhoMed, or its successor, receives net proceeds from a public offering of its common stock of at least $5,000,000 or (iii) 30 days after the end of a fiscal year in which, as reflected on the audited financial statements of RhoMed or its successor, RhoMed or its successor has net assets of at least $5,000,000 or net income of at least $5,000,000. The notes had a provision providing for conversion into common stock on the basis of one share of stock for each $1.50 of principal and accrued interest. As a result of the Merger, there is no longer a right to convert. (9) COMMITMENTS AND CONTINGENCIES: Leases -- Palatin leases certain of its facilities and equipment under noncancellable operating leases. The lease on the facility in Albuquerque, New Mexico expires on December 31, 1996. Minimum future annual lease payments at June 30, 1996, are approximately $55,000 in fiscal year 1997, and approximately $12,000 to $21,000 per year thereafter until fiscal year 2001. Certain leases have been personally guaranteed by one or more former officers of RhoMed. Product Liability -- The testing, marketing and sale of human health care products entails an inherent risk of allegations of product liability. Palatin does not currently have product liability insurance coverage. Restructuring Charge -- In conjunction with Palatin's decision to consolidate and relocate its research and development facilities and executive offices in the New Jersey area, Palatin established a restructuring charge of $450,000. The restructuring charge represents mainly severance costs, facility closing expenses and recruiting fees. Included in accrued expenses at June 30, 1996, is $257,152 of this restructuring charge. Commitments -- On November 27, 1995, the Board of Directors of RhoMed ratified an employment agreement (the "Employment Agreement") with Edward J. Quilty ("Mr. Quilty") to serve as President and Chief Executive Officer of RhoMed. Pursuant to the Agreement, RhoMed agreed to grant Mr. Quilty an option to acquire such number of shares of common stock as equal a 10% fully diluted equity interest in RhoMed at an exercise price of $.01 per share, which option vests in 36 equal increments on each of the first 36 monthly anniversaries of the commencement of Mr. Quilty's employment with RhoMed, and may be accelerated or terminated in part on the happening of certain events (the "Initial Option"). The Agreement further provides for anti-dilutive options, pursuant to which Mr. Quilty will be issued options to acquire the number of shares that, when aggregated with the shares issuable pursuant to the Initial Option, equal not less than 3.75% of the shares of common stock of RhoMed. The Agreement is for an initial period of one year, with automatic one year extensions, and provides that, on certain termination events, the portion of the options that would otherwise have terminated without vesting, vest and are exercisable upon termination, and also provides for specified termination pay. Palatin is obligated under two consulting agreements to make payments of $157,000 in fiscal year 1997 and $76,500 in fiscal year 1998. F-17 Legal Proceedings -- Palatin is subject to various claims and litigation in the ordinary course of its business, including patent proceedings. Management believes that the outcome of such legal proceedings will not have a material adverse effect on Palatin's financial position or future results of operation. (10) STOCKHOLDERS' EQUITY (DEFICIT): Palatin Authorized Shares -- The authorized capital stock of Palatin at the time of the Merger consisted of 10,000,000 Common Stock shares and 2,000,000 shares of preferred stock, $.01 par value per share. On July 19, 1996, Palatin's Certificate of Incorporation was amended to, among other things, increase the number of shares of authorized Common Stock to 25,000,000 and to effect a 1-for-10 reverse split of the Common Stock. The consolidated financial statements have been adjusted to reflect the amendment to the Certificate of Incorporation. RhoMed Authorized Shares -- By Articles of Amendment approved by RhoMed's stockholders on April 4, 1996 and filed April 10, 1996, RhoMed amended its Articles of Incorporation to increase its authorized common stock from 40,000,000 to 60,000,000 shares with no par value. By Articles of Amendment approved by RhoMed's stockholders on May 24, 1996 and filed June 7, 1996, RhoMed amended its Articles of Incorporation to increase its authorized common stock from 60,000,000 to 90,000,000 shares with no par value. RhoMed has 10,000,000 shares of authorized preferred stock, no par value. Stock Transactions -- On March 4, 1996, the Board of Directors of RhoMed authorized an offering of up to 40 units at $100,000 per unit, with each unit consisting of 400,000 shares of RhoMed common stock at a purchase price of $.25 per share (the "Common Stock Offering") (equivalent to 73,733 shares per unit at a purchase price of $1.36 per Palatin Common Stock share). On May 14, 1996, the Board of Directors authorized an increase in the Common Stock Offering of up to 100 units. Paramount served as placement agent for the Common Stock Offering and received (i) a cash commission equal to 9% of the gross proceeds from the sale of the units, (ii) a non-accountable expense allowance equal to 4% of gross proceeds and (iii) placement agent's warrants ("Stock Offering Placement Agent Warrant"), equal to 10% of the common stock issued in the Common Stock Offering, at an exercise price of $.30 per RhoMed common stock share (equivalent to $1.63 per Palatin Common Stock share), which are freely exercisable and terminate ten years from the date of issuance, have certain registration rights, and are subject to adjustment in certain circumstances. On June 24, 1996, RhoMed terminated the Common Stock Offering. RhoMed sold 96.454 units, realizing net proceeds of approximately $8,391,000, and issued 38,581,600 shares of RhoMed common stock (equivalent to 7,111,846 shares of Common Stock). On June 24, 1996, and pursuant to the Merger, certain stockholders of Interfilm prior to the Merger and third parties purchased 3,000,000 shares of RhoMed common stock at a purchase price of $.25 per share, with net proceeds to RhoMed of approximately $748,000 (equivalent to 552,997 shares of Common Stock at a purchase price of $1.36). Also, and pursuant to the Merger, warrants to purchase 1,500,000 shares of RhoMed common stock at an exercise price of $.40 were issued to certain stockholders of Interfilm prior to the Merger and third parties ("Merger Warrants") (equivalent to 276,499 shares of Common Stock at an exercise price of $2.17). The Merger Warrants are exercisable at any time, terminate four years from the date of issuance, have certain registration rights, contain a call provision and are subject to adjustment in certain circumstances. F-18 In the ten months ended June 30, 1996, RhoMed issued 124,525 shares of RhoMed common stock (equivalent to 22,954 shares of Common Stock) in exchange for services, and Palatin issued 103,017 shares of Common Stock in exchange for services. In addition, RhoMed has issued stock for accrued interest, and Palatin is obligated to issue additional stock in payment of accrued interest (see Note 6). RhoMed commenced a private offering of preferred stock in fiscal year 1994, and a private offering of units consisting of RhoMed common stock and common stock warrants in fiscal year 1995, both of which were terminated without having raised the minimum required for closing. Stock issuance costs incurred in connection with both offerings were expensed to operations in the fiscal year in which such costs were incurred. In February 1993, RhoMed issued a private offering memorandum for the sale of securities, consisting of units of 10,000 shares of RhoMed common stock for $10,000 per unit ($1.00 per share). RhoMed sold 58.4 units, realizing net proceeds of approximately $577,000. In September 1992, RhoMed issued a private offering memorandum for the sale of securities, consisting of units of 33,333 shares of RhoMed common stock for $25,000 per unit ($.75 per share). RhoMed sold 8 units, realizing net proceeds of approximately $191,000. In December 1991, RhoMed issued a private offering memorandum for the sale of units consisting of 26,289 shares of RhoMed common stock and a $20,000 note (see Note 8). Four units were sold for $25,000 per unit. Outstanding Stock Purchase Warrants -- At June 30, 1996, Palatin had the following warrants outstanding, all of which are currently exercisable except 11,111 warrants included in "Other Warrants." Each warrant is restated as Common Stock:
Palatin Common Exercise Price Latest Warrant Stock Shares per Share Termination Date - -------------------------- -------------- -------------- ---------------- Class A Offering 552,997 $ .05 9/13/05 Class A Placement Agent 82,949 .05 9/13/05 Class B Offering 156,683 .68 2/15/01 Class B Placement Agent 7,834 1.63 2/15/06 Stock Offering Placement Agent 711,184 1.63 6/25/06 Merger Warrants 276,499 2.17 6/24/00 Other Warrants 31,967 $2.71 - $70.50 10/20/99 ---------- -------------- -------- Total 1,820,113 $ .05 - $70.50 6/25/06 ========== ============== ========
The Class B Offering and Merger Warrants contain provisions providing for termination of the warrant if not exercised following notice of specified per share trading prices. Palatin Stock Option Plans -- Palatin had, prior to the Merger, adopted its 1993 Equity Incentive Plan, pursuant to which options for 26,750 Common Stock shares, calculated on a post-reverse stock F-19 split basis, were granted and outstanding at June 30, 1996. Palatin does not intend to issue any new options under the 1993 Equity Incentive Plan. RhoMed Stock Option Plans -- RhoMed has 4 stock option plans, with options granted thereunder constituting RhoMed Derivative Securities which, pursuant to the Merger, were automatically converted into rights upon exercise to receive Common Stock in the same manner in which the shares of RhoMed common stock were converted. Two RhoMed stock option plans are qualified "incentive stock option" plans under the Internal Revenue Code, for which 8,250,000 shares of RhoMed common stock were reserved. The other plans are nonqualified stock option plans, for which 3,250,000 shares of RhoMed common stock were reserved. Palatin does not intend to issue any new options under the RhoMed stock option plans. The table below presents options in RhoMed common stock, with conversion to Common Stock shown as "Restated to Palatin Options." The "Outstanding" and "Exercisable" as of June 30, 1996, are stated as Common Stock. Information related to stock option activity under these plans for the period from inception to June 30, 1996 is as follows:
Incentive Stock Options Nonqualified Stock Options --------------------------------- ------------------------------- Number Number of Shares Price per Share of Shares Price per Share ------------- --------------- --------- --------------- Balance at inception - $ - - $ - Granted 628,750 .50 - 1.00 1,053,179 .425 - 1.00 Terminated 37,000 1.00 2,500 1.00 ------------- ------------- ---------- ------------ Outstanding, August 31, 1994 591,750 .50 - 1.00 1,050,679 .425 - 1.00 Granted 99,000 .35 196,400 .30 - 1.00 Terminated 36,000 1.00 - - ------------- ------------- ---------- ------------ Outstanding, August 31, 1995 654,750 .35 - 1.00 1,247,079 .30 - 1.00 Granted 7,601,204 .01 - .25 1,718,123 .01 - .25 Terminated 193,750 .25 - 1.00 57,000 1.00 ------------- ------------- ---------- ------------ Outstanding, June 25, 1996 8,062,204 .01 - 1.00 2,908,202 .01 - 1.00 Conversion to Palatin Options (6,576,078) (2,372,126) ------------- ---------- Restated to Palatin Options 1,486,126 .05 - 5.42 536,076 .05 - 5.42 Palatin Options Outstanding, June 25, 1996 26,750 76.50 - 90.00 - - ------------- ------------- ----------- ------------ Outstanding, June 30, 1996 1,512,876 $.05 - $90.00 536,076 $.05 - $5.42 ============= ============= ========== ============ Exercisable, June 30, 1996 214,472 $.05 - $90.00 225,453 $.05 - $5.42 ============= ============= ========== ============
No options have been exercised since inception. F-20 (11) GRANTS, CONTRACTS AND ROYALTIES: Pursuant to contract with the New Mexico Research and Development Institute to develop products for medical research and diagnostic imaging, for which all work has now been completed, the State of New Mexico earns (i) a 2% royalty on gross revenues for products developed under the contract and manufactured in New Mexico and (ii) a 5% royalty on products manufactured outside New Mexico, subject to maximum repayment limits over specified time frames. RhoMed applies for and has received grants and contracts under the Small Business Innovative Research (SBIR) program and other federally funded grant and contract programs. Since inception, approximately $2,526,000 of RhoMed's revenues have been derived from federally or state funded grants and contracts. Under federal grants and contracts, there are no royalties or other forms of repayment; however, in certain limited circumstances the government can acquire rights to technology which is not being commercially exploited. Most contract costs, including indirect costs, are subject to audit and adjustment by negotiation with government representatives. RhoMed also engages in contract development work with private sector companies, both foreign and domestic. From inception to August 31, 1995, RhoMed's contract revenues from such private sector companies are approximately $335,000. RhoMed has solicited and performed cooperative research and development agreements with various national laboratories of the Department of Energy. (12) LICENSING AGREEMENTS: RhoMed entered into a license agreement, effective November 2, 1992, with Sterling Winthrop, Inc., a major pharmaceutical company ("Sterling"), under which RhoMed granted to Sterling (i) a non-exclusive license to certain patented radiolabeling technology for imaging uses and (ii) an option to acquire a license on similar terms for therapeutic uses. The license agreement is renewable annually and provides for certain license fee payments to RhoMed together with milestone payments on product development and percentage of sales production royalties. During the fiscal years ended August 31, 1995 and 1994, RhoMed received $50,000 in royalties and option payments under the license agreement. During the fiscal year ended August 31, 1994, the license agreement was assigned by Sterling to Burroughs Wellcome Co., a major pharmaceutical company, in conjunction with the purchase of certain assets of Sterling by Burroughs Wellcome Co. Concurrently with entering into the license agreement, RhoMed entered into a development agreement, which expired December 31, 1993, with Sterling, under which RhoMed performed specified product development services for $125,000, of which $25,000 is included in grant and contract revenue for the fiscal year ended August 31, 1994. RhoMed entered into a license agreement, effective May 1, 1992, with Rougier Bio-Tech Limited, a foreign biotechnology concern ("Rougier"), under which RhoMed granted Rougier an exclusive license to certain patented radiolabeling technology for a defined field-of-use. The agreement, which is for the life of the patents and is renewable annually, provides for license fee payments to RhoMed and percentage of sales production royalties with a minimum annual royalty. Under this agreement, $7,500 of royalties and fees were paid to RhoMed in the fiscal year ended August 31, 1995. (13) INCOME TAXES: Effective September 1, 1993, RhoMed adopted Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes." Prior to 1993, RhoMed accounted for income taxes following the provisions of Accounting Principles Board Opinion No. 11. F-21 RhoMed has had no income tax expense or benefit since inception because of operating losses. Deferred tax assets and liabilities are determined based on the estimated future tax effect of differences between the financial statements and tax reporting basis of assets and liabilities, given the provisions of the tax laws. A valuation allowance for the net deferred tax assets has been recorded at June 30, 1996, based on the weight of evidence that the deferred tax assets exceed the likely reversal of deferred tax liabilities and likely taxable income. The difference between the expected benefit of the federal tax rate of 34% and the actual benefit of zero is due to this valuation allowance. Significant components of deferred tax assets and liabilities are as follows:
June 30, 1996 August 31, 1995 --------------- ---------------- Deferred tax assets: Payroll compensation accruals $ 39,887 $ 84,088 Restructuring accrual 55,484 - Net operating losses 2,793,025 1,596,736 Other 43,710 32,766 ----------- ------------ Total gross deferred tax assets 2,932,106 1,713,584 Less: Valuation allowance (2,915,557) (1,603,744) ----------- ------------ Deferred tax assets, net 16,549 109,840 ----------- ------------ Deferred tax liabilities: Basis difference in intellectual and proprietary property (12,516) (109,291) Other (4,033) (549) ----------- ------------ Total gross deferred tax liabilities (16,549) (109,840) ----------- ------------ Deferred tax assets (liabilities), net $ - $ - =========== =============
The Tax Reform Act of 1986 imposes limitations on the use of net operating loss carryforwards if certain stock ownership changes occur. As a result of the change in majority ownership relating to the Castle transaction (see Note 3), the Common Stock Offering (see Note 10) and the Merger (see Note 1), under Internal Revenue Code Section 382, RhoMed most likely will not be able to utilize its net operating loss carryforwards after the dates of ownership change. Thus, Palatin most likely will not be able to realize the benefit of any or all of RhoMed's net operating loss carryforwards in the future. Furthermore, due to the Merger, Palatin applied to the Internal Revenue Service to change its year end to June 30 from December 31. Internal Revenue Service approval of this change is still pending. Income tax returns for RhoMed for the years ended August 31, 1995 and 1994 have not been filed; however, management believes that since there is no tax liability, there will be no material adverse effect on Palatin. (14) COMPARISON WITH TEN MONTHS ENDED JUNE 30, 1995: As noted above (see Note 1), Palatin changed its fiscal year end to June 30. Therefore, the following June 30, 1995, selected financial information, adjusted to reflect the amendment to the F-22 Certificate of Incorporation of Palatin as if it had been filed on June 30, 1995, and as if the Merger had been consummated on June 25, 1995, is presented for comparative purposes only (unaudited): Ten Months Ended June 30, ------------------------------------- 1996 1995 ------------ ------------- Revenues $ 24,457 $ 94,842 Expenses 2,120,239 1,076,473 Other income (expenses) (1,802,097) (305,615) ------------ ------------ Net loss $ (3,897,879) $ (1,287,246) ============ ============ Weighted average number of common shares outstanding 2,144,131 1,230,550 ============ ============ Net loss per common share $ (1.82) $ (1.05) ============ ============ EX-2.2 2 WAIVER AND CONSENT WAIVER AND CONSENT THIS WAIVER AND CONSENT (this "Waiver") is made and entered into as of June 24, 1996, by and among RhoMed Incorporated, a New Mexico corporation ("RhoMed"), Interfilm, Inc., a Delaware corporation ("Interfilm"), and Interfilm Acquisition Corp., A New Mexico corporation and a wholly-owned subsidiary of Interfilm ("InSub" and together with RhoMed and Interfilm collectively referred to herein as the "Parties"). For the purposes of this Waiver, except where the context otherwise requires, the term "Interfilm" shall include Interfilm and all of Interfilm's subsididaries, taken as a whole. Any capitalized term herein not otherwise defined shall have the meaning ascribed to such term in the Agreement and Plan of Reorganization, dated as of April 12, 1996, by and among the Parties (the "Agreement"). RECITALS WHEREAS, the Parties have entered into the Agreement, pursuant to which InSub will merge with and into RhoMed upon the Closing (as such term is defined in the Agreement); WHEREAS, Pursuant to Section 1.5(a) of the Agreement, InSub agreed to, on or prior to the Closing Date, make available to each RhoMed Shareholder a form of letter of transmittal and instructions for use in effecting the surrender of the Certificates for conversion thereof (the "Letters of Transmittal"); WHEREAS, pursuant to Section 1.5(b) of the Agreement, InSub agreed to deliver to each RhoMed Shareholder who delivered his Certificate, together with a fully executed Letter of Transmittal, a certificate for the number of shares of Interfilm Preferred to which such holder is entitled pursuant to Section 1.4 of the Agreement; WHEREAS, pursuant to Sections 2.1 and 2.4 of the Agreement, each of Interfilm and InSub represented and warranted that each of Interfilm and any of its subsididaries, including InSub, is duly organized, validly existing and in good standing under the laws of their respective jurisdictions of incorporation or organization and that each of Interfilm and any of its subsidiaries, including InSub, is qualified to do business, is in good standing and has all required licenses in each jurisdiction in which its failure to obtain or maintain such qualification, good standing or licensing (i) would, individually or in the aggregate, have or reasonably could be expected to have a Material Adverse Effect on Interfilm and InSub, or (ii) would result in a material breach of any of the other representations, warranties or covenants set forth in the Agreement; WHEREAS, pursuant to Section 2.2 of the Agreement, Interfilm was to issue Eighty Thousand (80,000) shares of Interfilm Common to Mr. William Franzblau and Fifty Thousand (50,000) shares of Interfilm Common to Mr. Joseph Merback; WHEREAS, pursuant to Section 3.5(d) of the Agreement, RhoMed agreed not to sell any shares of its capital stock or other securities or to become obligated to issue any shares of its capital stock or other securities after February 29, 1996; WHEREAS, pursuant to Section 3.5(h) of the Agreement, RhoMed agreed not to change or amend the Articles of Incorporation or Bylaws of RhoMed after February 29, 1996; WHEREAS, pursuant to Section 3.13 of the Agreement, RhoMed agreed to pay certain finders' fees or commissions immediately following the Closing; WHEREAS, pursuant to Section 4.11(a) of the Agreement, RhoMed agreed to sue its best efforts to effect the Private Placement up to an aggregate amount of Five Million Dollars ($5,000,000.00) of RhoMed Common; WHEREAS, pursuant to Section 4.11(b) of the Agreement, the individuals and entities set forth on Schedule 4.11 to the Agreement agreed to purchase an aggregate of Six Hundred Thousand Dollars ($600,000.00) of RhoMed Common; WHEREAS, pursuant to Section 4.12 of the Agreement, the holders of at least fifty-one percent (51%) of the total outstanding shares entitled to vote of each of RhoMed Common and the RhoMed preferred stock were to execute the RhoMed Voting Agreement; WHEREAS, pursuant to Section 5.12 of the Agreement, the holders of at least fifty-one percent (51%) of the total outstanding shares of Interfilm Common were to execute the Voting Agreement; WHEREAS, pursuant to Sections 5.14(a) and 5.14(b) of the Agreement the holders of the Interfilm Preferred would be entitled to cash in lieu of fractional shares upon the conversion of Interfilm Preferred into Interfilm Common. WHEREAS, pursuant to Section 5.18(b) of the Agreement, Interfilm agreed to transfer, prior to Closing, the Transferred Assets to an Irrevocable Escrow pending the Closing; WHEREAS, pursuant to Section 5.18(d) of the Agreement, 2 in the event that a subitable alternative to the Trust may be agreed to by the Parties prior to Closing, such alternative vehicle was to replace the Trust; WHEREAS, pursuant to Section 5.20 of the Agreement, the officers of Interfilm are to resign as of the Closing; WHEREAS, pursuant to Section 8.7 of the Agreement, each of the Parties desires to waive certain portions of the above-referenced provisions of the Agreement. NOW, THEREFORE, in consideration of the foregoing, the Parties hereby agree as follows: 1. The Parties hereby waive any objection to the failure of the Parties to comply with Section 1.5(a) of the Agreement and hereby consent to the mailing of such Letters of Transmittal following the Closing. 2. The Parties hereby waive any objection to the failure of the Parties to comply with Section 1.5(b) of the Agreement. 3. RhoMed hereby waives any objection to the failure of Interfilm and InSub to comply with Sections 2.1 and 2.4 of the Agreement solely with respect to (a) the requirement that Interfilm be qualified as a foreign corporation in the State of New York and (b) other than InSub and Interfilm Technologies, Inc., a New York corporation, the requirement that any of the subsidiaries of Interfilm be in good standing under the laws of their respective jurisdictions of incorporation or organization. 4. Each of the Parties hereby waive any objection to the failure to Interfilm to comply with Section 2.2 of the Agreement solely with respect to the issuance of Eighty Thousand (80,000) shares of Interfilm Common to Mr. William Franzblau and Fifty Thousand (50,000) shares of Interfilm Common to Mr. Joseph Merback immediately prior to the Closing and hereby consent to the issuance of 37,975 shares of RhoMed Common to Mr. William Franzblau, 27,125 shares of RhoMed Common to Mr. Joseph Merback and 5,425 shares of RhoMed Common to Mr. Brian Cooper by RhoMed immediately prior to the Closing in consideration of services performed to RhoMed in connection with the Transaction. 5. Each of Interfilm and InSub hereby waive any objection to the failure of RhoMed to comply with Section 3.5(d) of the Agreement solely with respect to the Financing. 6. Each of Interfilm and InSub hereby waive any objection to the failure of RhoMed to comply with Section 3.5(h) of the Agreement solely with respect to amending RhoMed's 3 Articles of Incorporation to increase the authorized capital stock of RhoMed to 100,000,000 shares. 7. Each of the Parties hereby waive any objection to the failure of RhoMed to comply with Section 3.13 of the Agreement and hereby consent to the payment of such finders' fees by Interfilm immediately following the Closing. 8. Each of Interfilm and InSub hereby consent to the increase of the Private Placement from Five Million Dollars ($5,000,000.00) to up to Ten Million Dollars ($10,000,000.00) and the increase of the IF Purchaser Financing from Six Hundred Thousand Dollars ($600,000.00) to Seven Hundred Fifty Thousand Dollars ($750,000.00) and the amount of warrants being sold to the individuals and entities set forth on Schedule 4.11 to the Agreement to One Million Five Hundred Thousand Dollars ($1,500,000). 9. Each of Interfilm and InSub hereby waive any objection to the failure of RhoMed to comply with Section 4.12 of the Agreement. 10. RhoMed hereby waives any objection to the failure of Interfilm to comply with Section 5.12 of the Agreement and hereby consents to the use of a written consent of stockholders in lieu of the Voting Agreement. 11. The Parties hereto waive any objection to the failure of the Parties to comply with Sections 5.14(a) and 5.14(b) solely with respect to the payment of cash in lieu of fractional shares upon the conversion of the Interfilm Preferred into Interfilm Common. 12. RhoMed hereby waives any objection to the failure of Interfilm to comply with Section 5.18(b) of the Agreement solely with respect to the transfer of the Transferred Assets to the Irrevocable Escrow pending the Closing and hereby consents to the transfer of the Transferred Assets to the limited partnership (the "Limited Partnership") immediataely following the Closing if, and only if, such transfer has been approved by the Board of Directors of Interfilm prior to the Closing and is effected by Mr. William I. Franzblau in his capacity as Executive Vice President and Chief Operating Officer of Interfilm immediately following the Closing. 13. The Parties hereby consent to the use of the Limited Partnership in lieu of the Trust pursuant Section 5.18(d) of the Agreement. 14. The Parties hereby consent to the resignation of the Interfilm officer immediately after the Closing pursuant to 4 Section 5.20 of the Agreement rather than as of the Closing. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 5 IN WITNESS WHEREOF, the parties hereto have executed this Waiver as of the date first above written. INTERFILM, INC. By: /s/ William Franzblau ----------------------------- Its: COO/EVP ----------------------------- INTERFILM ACQUISITION CORP. By: /s/ William Franzblau ----------------------------- Its: President ----------------------------- RHOMED INCORPORATED By: /s/ John J. McDonough ----------------------------- Its: VP & CFO ----------------------------- EX-4.2 3 PATENT ASSIGNMENT AND LICENSE AGREEMENT 1 PATENT ASSIGNMENT AND LICENSE AGREEMENT This PATENT ASSIGNMENT AND LICENSE AGREEMENT (the "Agreement") is entered into as of July 15, 1993 by and between Aberlyn Capital Management Limited Partnership, a limited partnership organized under the laws of the State of Delaware, with an office at 1000 Winter Street, Waltham, Massachusetts 02154 (hereinafter, together with its successors and assigns, the "Company"), and RHOMED INCORPORATED, a corporation organized under the laws of the State of NEW MEXICO and having its principal place of business at 4261 BALLOON PARK ROAD N.E., ALBUQUERQUE, NM 87109-5802 (hereinafter, together with its successors and assigns, the "Licensee"). RECITALS WHEREAS the Licensee is the owner of all rights, title and interest in and to certain issued patents that are described and enumerated in Schedule A attached hereto; WHEREAS the Company desires to enter into an agreement with the Licensee whereby the Company shall purchase from the Licensee and take by purchase assignment, grant, conveyance or otherwise all rights, title and interest in and to the Patents (as hereinafter defined); WHEREAS the Licensee desires to enter into an agreement whereby the Licensee shall enjoy an exclusive license to use, make, sub license and otherwise practice the inventions set forth in the Patents subject to the terms and conditions set forth in this Agreement supplemented by the terms and conditions set forth in the applicable Schedules; WITNESSETH NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS; RULES OF INTERPRETATION. (a) Terms shall have the meanings set forth in this Section 1 or elsewhere in this Agreement referred to below: "Agreement" shall mean this Patent Assignment and License Agreement, together with all Schedules hereto, as it and they may be amended or supplemented and in effect from time to time. "Assignment" shall mean the assignment of Patents and related Patent Rights by the Licensee to the Company pursuant to this Agreement. "Base Royalty" shall mean, for each Patent, the amount of money payable in every month as a royalty for the License of such Patent pursuant to this Agreement, as set forth on Schedule B hereto or otherwise on any supplemental Schedule hereto. "Collateral Documents" shall mean all Schedules, exhibits, charts, appendices and other documents that may be part of this Agreement or incorporated into this Agreement by reference, or required by the terms of this Agreement or by any competent governmental authority to be executed and delivered by either party hereto. "Company" shall mean the party named as the Company in the preamble preceding the Recitals of this Agreement and its successors and assigns. "Default" shall mean any event which, upon the passage of time or giving of notice, or both, will become an Event of Default. 2 "Effective Date" shall mean the date when the rights and obligations of this Agreement takes effect, as as set forth on Schedule B hereto or otherwise on any supplemental Schedule hereto. "Event of Default" shall mean the occurrence of any of the following acts of the Licensee or events affecting the Licensee: (1) failure by Licensee to pay any Base Royalty, Supplemental Royalty, or other sums when due hereunder; (2) failure by Licensee to perform any other covenant herein and continuation of such failure for twenty (20) days after written notice to Licensee by the Company specifying such failure and demanding that same be remedied; (3) default of Licensee in the payment of any other obligation now or hereafter owed by Licensee to the Company or any affiliate of the Company under any other agreement or instrument; (4) filing by Licensee of a petition in bankruptcy, or of reorganization, or for an arrangement pursuant to the U.S. Bankruptcy Code, or any similar federal or state or foreign law, or an adjudication by a court or tribunal of competent jurisdiction that Licensee is bankrupt or insolvent, or an assignment by the Licensee for the benefit of creditors, or an admission in writing by the Licensee of its inability to pay its debts generally as they become due, or the dissolution or the Licensee, whether voluntary or otherwise, or the suspension by the Licensee of the payment of any of its obligations, or any corporate action taken by the Licensee in furtherance of any of the foregoing; (5) a petition or answer proposing the adjudication of Licensee as a bankrupt, or its reorganization under the U.S. Bankruptcy Code, or any similar federal or state or foreign law, is filed in any court, and (i) Licensee shall consent to such filing, or (ii) such petition or answer is not discharged or denied within thirty (30) days after such filing; (6) a receiver, trustee or liquidator (or other similar official) is appointed for or takes possession or charge of Licensee or substantially all of Licensee's assets; (7) any representation or warranty made by Licensee herein or in any document or certificate furnished by Licensee in connection herewith or pursuant hereto shall prove to have been incorrect in any material respect at the time made; or (8) the occurrence of any event described in (4), (5), (6) or (7) with respect to any guarantor or other party liable for the payment or performance of this Agreement or the termination or adverse modification of any instrument, agreement or document by which such guarantor or other party is liable for the obligations of Licensee hereunder. "License" shall have the meaning given to such term in Section 3(a) of this Agreement. "Licensee" shall mean the person named as the Licensee in the preamble preceding the Recitals to this Agreement . "Lien" shall mean any lien, right of a third party, mortgage, deed of trust, pledge, charge, claim, security interest, or other encumbrance of any kind. "PTO" shall mean the United States Patent and Trademark Office. "Patent License Rights" shall mean any and all past, present or future rights and interests of the Licensee pursuant to any and all past, present and future licensing agreements in favor of the Licensee, or to which the Licensee is or shall be a party, pertaining to any Patents used by third parties in the past, present or future, including the right in the name of the Licensee to enforce, sue and recover for, any past, present or future breach or 3 violation of any such agreement. Such agreements shall include but not be limited to those set forth in Schedule C hereto or in any other applicable Schedule. "Patent Rights" shall mean (i) any and all past, present or future rights in, to and associated with the Patents throughout the world, whether arising under common law or statutory law, and whether arising under federal law, state law, foreign law, or otherwise, including but not limited to the following: all such rights arising out of or associated with the Patents; the right (but not the obligation) to sue or bring opposition, interference, and/or cancellation proceedings in the name of the Company for any and all past, present and future infringements of, or any other damages or injury to, the Patents or the Patent Rights, and the rights to damages or profits due or accrued arising out of or in connection with any such past, present or future infringement, damage or injury; and (ii) the Patent License Rights. "Patents" shall mean all of the following items: (1) all letters patent issued by the PTO or the patent office of any other country or any intergovernmental authority, and all registrations and recordings thereof, that are identified in Schedule A hereto or in any other Schedule that may be executed from time to time by the parties hereto and identified as a Schedule to this Agreement; (2) all reissues, continuations, divisions, continuations-in - -part, renewals or extensions thereof; and (3) the inventions disclosed or claimed therein, including the right to make, use, practice, sell, license, or otherwise transfer the inventions disclosed or claimed therein. "Proceeds" shall mean any value received as a consequence of the ownership, possession, use, practice or enforcement of any of the Patents or Patent Rights, and any payment received from any insurer or other person or entity as a result of the invalidity of any Patent or any casualty to, destruction of, or loss, theft, misappropriation, or conversion of whatever nature of any right, interest, asset or property which constitutes the Patents or the Patent Rights. "Purchase Price" shall mean, the amount of consideration set forth in Schedule B paid in exchange for the assignment of such Patent(s) pursuant to this Agreement. "Royalty Payment Commencement Date" shall mean, for each Patent, the date set forth in Schedule B on which the Licensee shall be required to pay the Base Royalty. "Schedules" shall include all attachments to this Agreement that are executed and delivered by the parties hereto and that contain detailed information concerning the Patents and, if applicable, certain supplemental terms and conditions upon which the Patents identified on such Schedule shall be assigned and licensed pursuant to this Agreement. Schedules may be executed and delivered by the parties to this Agreement at any time during the term of this Agreement. "Supplemental Royalty" shall mean, for each Patent, all accrued but unpaid amounts due for royalties and for other fees and charges established by or required under this Agreement, other than Base Royalty. "Taxes or Other Impositions" shall mean all federal, state, local and foreign taxes, fees, withholdings, levies, imposts, duties, assessments and charges of any kind and nature whatsoever, together with any penalties, fines or interest thereon. (b) UCC Terms. Unless otherwise defined herein, terms used in Article 9 of the Uniform Commercial Code as enacted and in force from time to time in the Commonwealth of Massachusetts are used herein as therein defined. (c) Rules Of Interpretation. All definitions (whether set forth herein or by reference) shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include 4 the corresponding masculine, feminine and neuter forms. Except where the context otherwise requires, the words "include," "includes" and "including" shall be deemed to be followed by the phrase "without limitation" or the phrase "but not limited to". All references herein to Sections, Exhibits and Schedules shall be deemed to be references to Sections of and Exhibits and Schedules to this Agreement unless the context otherwise requires. Any reference to a Schedule or Exhibit to this Agreement shall be deemed to refer to other Schedules that may be executed from time to time by the parties hereto and that provide information equivalent to the information provided in the reference Schedules or Exhibits with respect to additional Patents. 2. ASSIGNMENT OF PATENTS. (a) Agreement of Licensee to Assign Patents. The Licensee hereby sells, grants, assigns, transfers and conveys to the Company the Licensee's entire right, title and interest in and to the Patents and the Patent Rights upon the terms and conditions set forth in this Agreement. (b) Agreement of Company to Pay. The Company hereby agrees to pay to Licensee in consideration for the Assignment of each of the Patents and Patent Rights the Purchase Price provided for in Schedule A hereto or in any other applicable Schedule. The Company agrees to pay the Purchase Price to Licensee by delivering a bank check in such amount payable to the Licensee simultaneously with the execution and delivery of this Agreement. (c) Agreement of Company to Reassign Patents. Subject to earlier termination of the License under this Agreement as provided under Section 5 hereof, the Company hereby agrees that upon the completion of the full term of the License for each Patent granted pursuant to Section 3 of this Agreement, and upon the payment by Licensee of the sum of One Dollar ($1.00) and other good and valuable consideration, the receipt and sufficiency of which the Company hereby acknowledges, the Company shall grant, assign, transfer and convey to the Licensee the Company's entire right, title and interest in and to the corresponding Patent and Patent Rights related thereto (subject to any disposition of any of such Patent and Patent Rights which may have been made by the Company pursuant to this Agreement) without the requirement of any further demand, request or additional consideration to be paid or made by the Licensee, provided, however, that the Company's obligation to reassign any Patent and the Patent Rights related thereto shall automatically expire upon the earlier of (a) the date fixed by the PTO or any similar office or agency of any foreign country or of any intergovernmental organization for the expiration of the exclusive rights in the Patent corresponding to said License, or (b) the date of issuance by the highest court or tribunal of competent jurisdiction from which no appeal or other revision may be had, of a final judgment, order or decree of the invalidity of the Patent corresponding to such License. Upon any such completion of the full term of the License for any Patent, the Company shall, at the Licensee's expense, execute and deliver to the Licensee such deeds, instruments of assignment and other documents, and shall take such other actions as Licensee may reasonably request to evidence or record such completion of the full term of such License, and to reassign and reconvey to and revest in the Licensee the entire right, title and interest in and to the corresponding Patent previously granted, assigned, transferred and conveyed to the Company by the Licensee pursuant to this Agreement (subject to any disposition of such Patent or related Patent Rights which may have been made by the Company pursuant to this Agreement), as fully as if this Agreement had not been made. 3. LICENSE-BACK OF PATENTS (a) Agreement of Company to Grant License. As a condition to Licensee's assignment to the Company of each Patent, the Company hereby grants to Licensee, subject to the terms and conditions set forth herein and for as long as there shall be no uncured and continuing Event of Default under this Agreement, the sole and exclusive worldwide right and license under such Patent to make, have made for it, use, sell and otherwise practice such Patent, for Licensee's own benefit and account (the "License"); provided, however, that the foregoing License shall be no greater in scope than, and limited by, the rights assigned to the Company by the Licensee pursuant to Section 2 of this Agreement. Licensee agrees not to sell, assign, transfer, or sub license any of its rights or interests in the license granted to Licensee in this Section 3(a) , without the prior written consent of the Company, which consent shall not be unreasonably withheld. Any such sub licenses granted on or after the date hereof shall be terminable by the Company, at the option of the Company, upon termination of the Licensee's license hereunder. (b) Term and Commencement of License. The term of the License for each Patent pursuant to this Agreement shall be as provided in Schedule B hereto or in any other applicable Schedule. The commencement date 5 of such License shall be the commencement date set forth in Schedule B or in any other applicable Schedule. Unless earlier terminated pursuant to the terms hereof, the term of the License pursuant to this Agreement shall terminate at the termination date set forth in Schedule B or in any other applicable Schedule; provided, however, that the term of the License for any Patent shall in no event extend beyond (a) the date fixed by the PTO or any similar office or agency of any foreign country or of any intergovernmental organization for the expiration of the exclusive rights in such Patent corresponding to said License, or (b) the date of issuance by the highest court or tribunal of competent jurisdiction from which no appeal or other revision may be had, of a final judgment, order or decree of the invalidity of such Patent corresponding to such License. (c) Agreement of Licensee to Pay Base Royalty. Licensee hereby agrees to pay to the Company, in exchange for the exclusive License of each Patent, the Base Royalty for such Patent as provided in Schedule B hereto or in any other applicable Schedule; payments in the amount of the Base Royalty shall be due and payable monthly during the term of the License of such Patent. The first Base Royalty payment shall be due and payable on the Royalty Payment Commencement Date as provided in Schedule B hereto or in any other applicable Schedule; subsequent Base Royalty payments shall be due and payable each succeeding month during the term of the License. (d) Late Payments: Supplemental Royalty. (i.) In addition to each payment of Base Royalty that shall become due and payable hereunder from the Licensee to the Company, on the due date thereof Licensee shall be liable for and shall pay to the Company Late Payments (as defined below): provided, however to the extent such payment of Base Royalty shall be received by the Company in good collected indefeasible funds on the due date thereof, Licensee shall be relieved of its obligation to pay the Late Payments attributable to such Base Royalty payment. With respect to each payment of Base Royalty, the compensation for Late Payment shall be chargeable on the amount in arrears for each month during the period such amount remains unpaid or an appropriate pro-rated portion thereof. Such compensation shall be calculated by reference to the average return generated by the transaction during the period preceding the defaults, provided that if such compensation exceeds the highest charges of such type permitted by Applicable Law, then the said compensation shall be the highest such as permitted by Applicable Law. (ii) All sums due or to be due hereunder in addition to Base Royalty, shall be payable by Licensee as Supplemental Royalty hereunder. Supplemental Royalty shall include all sums due or to become due hereunder in addition to the Base Royalty, including the Purchase Price and payments constituting indemnities, reimbursements, expenses and other charges payable pursuant to the terms thereof. (e) The Licensee shall pay all royalties and other sums due hereunder to the Company at the address first set forth above, or to such other person or place as the Company may from time to time designate in writing. All payments made hereunder shall be applied first to any charges and expenses due hereunder, and then to any Supplemental Royalty amounts due hereunder, and the remaining balance shall be applied to any Base Royalty amount then due. (f) Prepayment: The Licensee may prepay at any time without penalty all royalties and other sums due hereunder to the Company, as shown on Schedule B. If Licensee does prepay, then the full term of the License for each Patent will be deemed to have terminated and the Company will reassign the Patents as provided in Section 2(c). 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE LICENSEE. The Licensee represents and warrants to the Company, and covenants and agrees with the Company, as follows: (a) Ownership and Rights in Assigned and Licensed Patents. (i) Validity and Enforceability. Except as set forth in Schedule C hereto or any other applicable Schedule, the Patents and Patent Rights related thereto are currently subsisting and have not been adjudged invalid or unenforceable by any court or tribunal; all of the Patents and Patent Rights related thereto are valid and enforceable; Licensee is not aware of any claim by any third party that any of the Patents and Patent Rights related thereto are invalid or unenforceable. (ii) Title. Licensee is the sole and exclusive owner of the entire legal and beneficial rights, title and interest in and to the Patents and Patent Rights, free and clear of any Liens. Licensee will defend its rights, 6 title and interests in and to the Patents and Patent Rights against any and all claims of any third parties. No mortgage, deed of trust or other Lien which now covers or affects any property of the Licensee other than the Patents or Patent Rights or any interest of the Licensee therein, now attaches or hereafter will attach to the Patents or Patent Rights, or in any manner affects or will affect adversely the Company's rights, title and interest therein. (iii) Patent Licenses. All licenses and other agreements applicable to the Patents are the valid and binding obligations of all of the parties thereto and are enforceable against each of such parties in accordance with their respective terms; provided that, with respect to any such parties other than the Licensee and its affiliates, such representation and warranty is made to the best of the Licensee's knowledge and belief. The Licensee has not entered into, and will not enter into, any currently subsisting or future license agreements with respect to any of the Patents or Patent Rights that are conditioned on the other party's also taking unwanted licenses under other patents or other forms of intellectual property, or that require the payment of royalties after expiration of the Patents subject to such license agreement, or that require or otherwise provide for the payment of patent royalties based on the sale of unpatented products. (iv) Exclusive Right to Use. Licensee has and shall continue to have the exclusive right to make, sell, practice and use all the inventions set forth in the Patents (other than uses by others pursuant to agreements set forth in Schedule C hereto or any other applicable Schedule) throughout the countries of issue, free and clear of any and all Liens (except as set forth on Schedule C hereto or any other applicable Schedule), or other restrictions on Licensee's right to protect or enforce any of its Patent Rights against any third party. (v) No Financing Statements, Etc. No effective financing statement, security agreement, assignment, license or transfer or notice of any of the foregoing or of any Lien (other than those that have been filed in favor of the Company) covering any of the Patents is on file or record in the PTO, or any similar office or agency of any foreign country or any intergovernmental organization, or any other governmental or regulatory authority, agency or recording office, and Licensee is not aware of any such filing, other than those for which duly executed termination statements have been delivered to the Company. So long as this Agreement shall be in effect, Licensee shall neither execute nor permit to be on file in any such authority, office or agency any such financing statement or other document or instrument (except financing statements or other documents or instruments filed or to be filed in favor of the Company). (vi) No Claims or Proceedings. Except as set forth in Schedule C hereto or any other applicable Schedule, no claim has been made that either the Patents or the Licensee's use, sale or practice thereof does or may violate the rights of any third party. Except as set forth in Schedule C hereto or any other applicable Schedule, there has been no decision adverse to Licensee's claim of exclusive ownership rights in the Patents or exclusive rights to use, sell and practice the Patents in any country or to keep and maintain the Patents in full force and effect, and no proceeding involving said rights is threatened or pending in the PTO or any similar office or agency of the United States, of any state or foreign country, or of any intergovernmental organization, or in any court or tribunal. (vii) Notice Adverse Development. Upon obtaining knowledge thereof, the Licensee shall promptly notify the Company in writing of any event which does or reasonably could materially adversely affect the value of any of the Patents, the Licensee's or the Company's ability to dispose of any of the Patents, or the rights and remedies of the Company in relation to any of the Patents. Without limiting the generality of the foregoing, the Licensee shall promptly notify the Company in writing of the institution of, and of any adverse decision in, any proceeding in the PTO or any similar office or agency of the United States, of any state or foreign country, or of any intergovernmental organization, or in any court or other tribunal, regarding the Licensee's claim of exclusive ownership of or rights in any of the Patents or related Patent Rights, or regarding the Licensee's right to patent any of the same, or to keep and maintain any such Patent. (viii) Maintenance of Patents. Licensee shall take any and all actions that may be necessary or appropriate to properly maintain, protect, preserve, care for, and enforce the Patents. Without limiting the generality of the foregoing, the Licensee shall pay when due all fees, premiums, annuities, taxes and other expenses which shall be incurred or which shall accrue with respect to any of the Patents and shall diligently institute, maintain and defend against suits, proceedings or actions, whether at law, in equity or before any administrative tribunal. 7 (ix) Patent Symbols and Notices. Licensee has at all times in the past used, and shall in the future use, all statutory and other appropriate symbols, notices or legends of ownership of the Patents in such a manner and to such an extent as shall be sufficient to preserve the Licensee's maximum rights under all applicable patent laws. (x) No Conflicting Agreement. Licensee shall not, without the prior written consent of the Company (which consent, in the case of sublicense agreements only, shall not be unreasonably withheld), take any actions or enter into any agreements that are inconsistent with or that could impair in any, way the Licensee's representations, warranties and covenants herein contained; provided, however, that so long as no Event of Default shall have occurred and be continuing, the Licensee may sublicense the Patents in any lawful manner that is in the ordinary course of its business and is in accordance with Section 3(a) hereof and otherwise not inconsistent with this Agreement. Without limiting the generality of the foregoing, the Licensee shall not agree to take or take any action that would permit the assignment, sale, transfer, license, disposition, or grant of any interest in or encumbrance of any of the Patents or the Patent Rights or that would otherwise have the effect of creating a Lien on any of the Patents or the Patent Rights. (xi) No Abandonment. Licensee shall not abandon or dedicate to the public any of the Patents, or do any act of a character that tends to cause or contribute to the abandonment or dedication to the public of any Patent or related Patent Right or to the loss of or any other adverse effect on any Patent or related Patent Right, or omit to do any act of a character that tends to negate, hinder, prevent, restrain or retard such abandonment, dedication to the public, loss, or other adverse effect. (xii) Enforcement of Licenses. Licensee shall do all things which may be necessary or appropriate to insure that each sublicensee of any Patent shall, in its use of any Patents, (a) comply fully with all applicable sublicense and other agreements, and (b) satisfy and perform all the same obligations set forth herein (with respect to Licensee's use of the Patents) as fully as though such obligations were set forth with respect to such sublicensee's use of the Patents. (xiii) No Infringement. There is at present no material infringement or unauthorized or other improper use of the Patents or related Patent Rights inconsistent with the Licensee's exclusive rights in the Patents except as set forth in Schedule D hereto or any other applicable Schedule. Licensee shall use its best efforts to detect any such infringement or unauthorized or improper use. In the event of any such infringement or unauthorized or improper use by any third party, the Licensee shall promptly notify the Company of such infringement or unauthorized or improper use and shall have the first opportunity to sue and recover judgment therefor and to retain any and all damages so recovered or obtained. In the event that the Licensee fails so to sue or to bring legal action, within sixty (60) days after the date of original notice by the Licensee to the Company of such infringement or unauthorized or improper use, the Company shall thereafter have the right (but not the obligation) to sue and recover judgment therefor at Licensee's expense (including the Company's reasonable attorneys' fees), and in either the Company's or the Licensee's name (in the sole discretion of the Company), and to retain any and all damages so recovered and obtained. Licensee shall have the right to participate in any such action or proceeding at the Licensee's sole expense. The Licensee shall indemnify the Company for all legal fees and other costs and expenses that the Company may incur in connection with such actions or proceedings. (xiv) As long as no Event of Default shall be continuing and uncured, and notwithstanding Section 2(a) of this Agreement, the Licensee shall have the right and the obligation to commence and to prosecute in its own name, as the real party in interest, for its own benefit and at its own expense, such suits, proceedings or other actions to restrain, prevent, or recover damages for infringement, misuse, unfair competition, or other injury as are in its reasonable business judgment necessary or appropriate to acquire, establish, maintain, protect and enforce the Patents and Patent Rights. The Company shall cooperate with Licensee, at Licensee's expense, as may be reasonably necessary or appropriate in connection with any such suit, proceeding or action, including joining as a necessary party, so long as the Company is completely satisfied that such joinder will not subject the Company to any risk of liability. The Licensee shall indemnify and hold harmless the Company its Partners, employees agents, and each person who controls the Company from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, judgments, suits, costs, expenses or disbursements (including reasonable attorneys' fees) of any kind whatsoever which may be imposed on, incurred or suffered by or asserted against the Company in connection with or in any way arising out of any suits, proceedings or actions. 8 (b) Maintenance and Condition of Patents (i) Maintenance of Patents. Licensee, with counsel of its own choosing reasonably acceptable to the Company and at its own expense, shall take all necessary and appropriate actions to preserve and maintain in full force and effect all Patents and Patent Rights, including filing and diligently prosecuting appropriate applications for reissues, continuations, continuations-in-part, divisions, renewals and extensions, and paying all maintenance fees, premiums, and annuities when due. (ii) Certificates of Issued Patents. Upon demand by the Company at any time, Licensee shall deliver to the Company the original or a true copy of all current official certificates of Patents issued for any country or other jurisdiction. (iii) NO WARRANTIES; WAIVER OF RIGHT TO MAKE CLAIMS. THE LICENSEE AGREES THAT THE COMPANY LICENSES AND THE LICENSEE TAKES THE PATENTS "AS IS" AND THAT THE COMPANY HAS NOT MADE, DOES NOT MAKE AND SHALL NOT BE DEEMED TO MAKE ANY REPRESENTATION OR WARRANTY OF ANY KIND WHATSOEVER, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO THE PATENTS, INCLUDING THE TITLE, VALUE, CONDITION, ABSENCE OF ANY INFRINGEMENT OF ANY RIGHTS OF ANY THIRD PARTY, OR THE ABSENCE OF ANY VIOLATION OR CONFLICT WITH ANY LAW, GOVERNMENTAL REGULATION, CONTRACT OR SPECIFICATION. THE LICENSEE SPECIFICALLY WAIVES ALL RIGHTS TO MAKE CLAIM AGAINST THE COMPANY HEREIN FOR BREACH OF ANY WARRANTY OF ANY KIND WHATSOEVER. THE COMPANY SHALL NOT BE LIABLE TO THE LICENSEE FOR (A) ANY LOSS, DAMAGE OR EXPENSE OF ANY KIND OR NATURE CAUSED DIRECTLY OR INDIRECTLY BY ANY PATENT OR FOR THE FAILURE OF OPERATIONS OF ANY MACHINE, EQUIPMENT, OR DEVICE INCORPORATING ANY PATENT, (B) ANY REPAIRS, SERVICE, OR ADJUSTMENT OF OR TO ANY MACHINE, EQUIPMENT, OR DEVICE INCORPORATING ANY PATENT, OR (C) ANY DELAY OR FAILURE TO PROVIDE ANY SUCH REPAIRS, SERVICE, OR ADJUSTMENTS, OR ANY INTERRUPTION OF SERVICE PROVIDED BY, OR LOSS OF USE OF, ANY SUCH MACHINE, EQUIPMENT, OR DEVICE, OR (D) ANY LOSS OF ANY BUSINESS TO ANY PERSON OR ANY OTHER DAMAGE WHATSOEVER AND HOWSOEVER CAUSED. NO DEFECT OR OTHER LACK OF FITNESS OF THE PATENTS (OTHER THAN INVALIDITY OF ANY PATENT) OR OF ANY MACHINE, EQUIPMENT OR DEVICE INCORPORATING THE PATENTS SHALL RELIEVE THE LICENSEE OF THE OBLIGATION TO PAY THE BASE ROYALTY WITH RESPECT TO SUCH PATENT, OR TO SATISFY ANY OTHER OBLIGATION TO THE COMPANY UNDER THIS AGREEMENT. (c) General (i) Power and Authority; Non-Contravention. The Licensee is duly organized and validly existing in good standing under the laws of the state of its jurisdiction of its organization. The Licensee has full power and authority to execute and deliver this Agreement and all Collateral Documents, to perform its obligations hereunder, and to subject the Patents and the Patent Rights to the terms hereof. The execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of the Licensee and do not and will not conflict with or contravene any contractual provision binding on the Company with respect to the Patents (including but not limited to any license agreement relating to the Patents or any of them) and do not and will not contravene any valid statute, law, regulation, governmental rule or other order binding on the Licensee or contravene the articles of incorporation, by-laws, partnership certificate or agreement, or other constituting documents of the Licensee or contravene the provisions of, or constitute a Default under, or result in the creation of any Lien or other encumbrance upon the property of the Licensee under, any indenture, mortgage, contract or other agreement to which the Licensee is a party or by which it or any of its property may be bound. Neither the execution and delivery by the Licensee of this Agreement nor the consummation by the Licensee of any of the transactions contemplated hereby require the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any governmental authority or agency. This Agreement and all Collateral Documents have been duly executed and delivered by the Licensee and constitute legal, valid and binding obligations of the Licensee enforceable against the Licensee in accordance with their terms. (ii) No Suits Affecting Patents, Business; Financial Information. There are no pending or threatened actions or proceedings before any court, governmental authority, administrative body or tribunal which, if adjudicated against the Licensee, would materially adversely affect the Patent(s), The Patents Rights, the business 9 operations or financial condition of the Licensee or the ability of the Licensee to perform its obligations hereunder. Any information including financial information furnished to the Company or its assignees by the Licensee in connection herewith is or shall be true and correct as of the date on which such information is or shall be furnished and any balance sheet or statement of income of the Licensee furnished to the Company by the Licensee in connection herewith shall fairly present the financial position of the Licensee as at the date of such balance sheet and the results of operations of the Licensee for the period covered by such statement of income, all in accordance with generally accepted accounting principles applied on a consistent basis. (iii) Records. Licensee has kept and will diligently keep complete and accurate records respecting the Patents and Patent Rights (including accounting records with respect to the Patents and Patent Rights and further including a record of all payments and Proceeds received) and will at all times keep at least one set of such records at its address first set forth above or at such other address as the Licensee may from time to time notify the Company in writing. Licensee shall, upon reasonable prior notice by the Company and at reasonable times, permit the Company (or the Company's designee) from time to time to review, inspect, examine, and make and remove from the Licensee's premises extracts and copies of such records. (iv) Filings for Perfection of Interest. Except for the filings of financing statements with the Secretaries of State of the several states pursuant to the Uniform Commercial Code as enacted and in effect in such states, and except for filings with the PTO pursuant to the United States Patent Act with respect to the Patents, no authorization, approval or other action by, or notice to, or filing with, any governmental or regulatory authority, agency or office is or shall be required for (a) the grant by the Licensee or the effectiveness of the Assignments granted by this Agreement, (b) the execution, delivery and performance of this Agreement by the Licensee, or (c) the perfection of or the exercise by the Company of its rights and remedies under this Agreement; provided, however, that the foregoing representation and warranty shall not apply to foreign Patents or foreign Patent Rights. The Licensee acknowledges that the Company shall, within three (3) months of the date first above written, file and record a copy of this Agreement (or instruments executed and delivered pursuant hereto) with the PTO with respect to the Patents issued by the PTO. (v) Disclosure Complete and Accurate. All information with respect to the Patents and Patent Rights set forth herein or in any schedule, certificate or other writing at any time heretofore or hereafter furnished by the Licensee to the Company, is and will be true, correct and complete in all material respects as of the date furnished. (vi) Risk of Unenforceability or Invalidity. Licensee assumes and bears all risk that any of the Patents may be declared invalid or unenforceable by any court, tribunal or governmental office or agency for any reason or that the enforcement of any Patent may constitute or contribute to a violation of law in any country or other jurisdiction, or that the value of the License or any Patent to the Licensee may be adversely affected for any reason. No such adverse affect shall relieve the Licensee of its obligations under this Agreement, including the obligation to make all payments to the Company when due as required by this Agreement. 5. CONSEQUENCES OF AND REMEDIES UPON LICENSEE'S DEFAULT. (a) Termination of License. If an Event of Default shall have occurred and be continuing, then, forthwith upon notice by the Company to the Licensee, and in addition to all other rights and remedies of the Company, whether under law or otherwise, the Company's rights and remedies with respect to the Patents shall include but not be limited to the following, without payment of royalty or compensation of any kind to the Licensee except as expressly provided otherwise herein: (i) All accrued but unpaid Base Royalty amounts, including for the month in which such notice is given to the Licensee, together with all accrued but unpaid Supplemental Royalty amounts, shall become immediately due and payable. (ii) The Company may proceed by appropriate action, either at law or in equity, to enforce performance by the Licensee of the applicable covenants of this Agreement or to recover damages for breach thereof. (iii) Licensee's License with respect to each Patent shall terminate, and Licensee shall 10 immediately cease and desist from the practice, manufacture, use and sale (or license or other transfer) of each such Patent. (iv) The Company's obligation to reassign the Patents and Patent Rights to the Licensee shall immediately terminate, and the Licensee shall have no right to seek or to demand reassignment of any of the Patents or Patent Rights. (v) The Company may, to the same extent that the Licensee had the right to do so immediately prior to notice of the occurrence and continuation of an Event of Default, license or sublicense any of the Patents anywhere in the world on an exclusive basis or otherwise or a general or special basis or otherwise, for such term or terms, on such conditions, and in such manner, as the Company shall in its sole discretion determine. (vi) The Company may (at its sole option and without assuming any obligations or liability thereunder), at any time, enforce (and shall have the exclusive right but not the obligation to enforce) against any licensor, licensee or sublicensee all Patents and Patent Rights of Licensee. (vii) The Company may, at any such time or times as the Company deems reasonable, either with or without legal process, and either with or without any previous notice or demand for performance, take possession of all tangible manifestations or embodiments of the Patents and Patent Rights and documentation relating thereto and of all business records, documents and files with respect to the Patents and Patent Rights, and may, without liability for trespass to enter any premises where such tangible manifestations or embodiments, business records, documents and files with respect to the Patents and Patent Rights may be located for the purpose of taking possession of or removing such tangible manifestations or embodiments, business records, documents and files, provided, however, that the Company shall use reasonable efforts to mitigate the Licensee's damages, such as by attempting to sell or relicense (the choice being reserved to the Company's reasonable discretion) the Patents in a public or private transaction at which the Company may be the purchaser. Notwithstanding any other provision of this Agreement, if notice of such sale or other disposition is required by law, such notice in writing given not less than ten (10) days prior to the date thereof shall constitute reasonable notice to the Licensee thereof. The proceeds of such sale or license, if any, shall be applied first: (a) To all of the Company's costs, charges and expenses incurred in taking, removing, holding, selling or licensing the Patents or Patent Rights; then (b) to the extent not previously paid by the Licensee, to pay the Company any amounts or damages then remaining unpaid hereunder; then (c) to reimburse the Licensee any such sums previously paid by Licensee to Company as damages hereunder; and then (d) any surplus shall be retained by the Company. (viii) Licensee shall, upon written demand of the Company, deliver to the Company (or the Company's designee) all unused, unsold or undelivered goods incorporating, including, using or produced or manufactured under any of the Patents. (ix) Without limiting the generality of the foregoing provisions, the Company may, with or without legal process and with or without previous notice or demand for performance, all of which the Licensee hereby expressly waives, but subject nonetheless to the requirements of current law or the requirements specified below, assign, sell, license, sublicense, or otherwise transfer or dispose of any of the Patents or Patent Rights, either with or without special or other conditions or stipulations, with power to purchase any of the Patents or Patent Rights, in one or more portions at public or private sale, at any of the Company's offices or elsewhere, at such time or times and at such price or prices and upon such other terms as the Company may deem commercially reasonable, irrespective of the impact of any such sales on the market price of any of the Patents or Patent Rights. Each purchaser at any such sale shall, as appropriate hold absolute title to the Patents or (to the extent that the Patent Rights may be separately assigned, sold, or otherwise conveyed) the related Patent Rights sold, free from any claim or right on the 11 part of the Licensee or any party claiming by or through the Licensee, and the Licensee hereby waives (to the extent permitted by law) all rights of redemption, stay and/or appraisal, which it now has or may have at any time in the future under any rule of law or statute now existing or hereafter enacted. Licensee agrees that, to the extent that notice of sale shall be required by law, at least ten (10) days notice to Licensee of the time and place of any public sale or of the time after which any private sale is to be made shall constitute reasonable notification. At any sale of the Patents or related Patent Rights, the Company may, to the fullest extent permitted by law, bid for the purchase of the Patents or related Patent Rights or any portion thereof for the account of the Company. The Company shall not be obligated to make any sale of the Patents or related Patent Rights regardless of notice of sale having been given. The Company may adjourn any public or private sale from time to time by announcement of the time and place fixed therefor, and such sale may be made without further notice at the time and place to which it was adjourned. Licensee acknowledges that the Company may elect in its sole discretion to sell all or part of the Patents or related Patent Rights to one or more purchasers in privately negotiated transactions. Licensee hereby waives any and all claims against the Company arising by reason of the fact that the price at which any Patents or related Patent Rights may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if the Company accepts the first offer received and does not offer such Patents or related Patent Rights to more than one offeree. The Company shall also have the power to execute assurances and do all other acts and things that the Company, in its sole discretion, deems necessary in order to complete the assignment, sale, license, sublicense, transfer or disposition. (x) In case any sale of all or any of the Patents or Patent Rights is made on credit or for future delivery, the Patents or Patent Rights so sold may be retained by the Company until the sale price is paid by the purchaser or purchasers thereof, but the Company shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Patents or Patent Rights so sold and, in case of any such failure, such Patents may be sold again upon like notice to Licensee. At any public sale made pursuant to this Section 5, the Company may bid for or purchase, free from any right of redemption, stay, valuation or appraisal on the part of the Licensee (all said rights being hereby waived and released to the fullest extent permitted by law), the Patents or Patent Rights then offered for sale and may make payment on account thereof by using any claim then due and payable to the Company from the Licensee as a credit against the purchase price for such Patents or Patent Rights, and the Company may, upon compliance with the terms of sale, hold, retain and dispose of such Patents or related Patent Rights without further accountability therefor to the Licensee. For purposes hereof, a written agreement to purchase any Patents or Patent Rights, or any portion thereof, shall be treated as a sale thereof; the Company shall be free to carry out such sale pursuant to such agreement, and the Licensee shall not be entitled to the return of any of the Patents or Patent Rights subject to such agreement, notwithstanding the fact that after the Company shall have entered into such an agreement all Events of Default shall have been remedied. As an alternative to exercising the power of sale herein conferred upon it, the Company may proceed by a suit or suits at law or in equity to foreclose this Agreement and to sell, assign, convey, or otherwise dispose of the Patents or related Patent Rights or any of them pursuant to a judgment or decree of any court having competent jurisdiction or acting pursuant to a proceeding instituted by a court-appointed receiver. (xi) In order to implement the assignment, sale, license, sublicense, transfer or other disposition of any of the Patents or Patent Rights pursuant to this Section 5(a), the Company may, pursuant to the authority granted in the power of attorney provided in Section 8 hereof, execute and deliver on behalf of the Licensee one or more instruments of assignment or other transfer of the Patents or Patent Rights in form suitable for filing, recording or registration in any jurisdiction or country. (xii) In the event of any license, assignment, sale, transfer or other disposition of any of the Patents or Patent Rights by the Company in accordance with the provisions of this Section 5(a) hereof, the Licensee shall supply to the Company or the Company's designee the Licensee's know-how and expertise relating to the products and services sold and provided which use or practice or incorporate any of the Patents or Patent Rights, and other records relating to the Patents or Patent Rights and to the production, marketing, delivery, sale and transfer of said products and services. Without limiting the generality of the foregoing, within five (5) business days of written notice thereof from the Company, Licensee shall make available to the Company, to the extent that it is within Licensee's power and authority to do so, such personnel in Licensee's employ on the date of the Event of Default as the Company may reasonably designate by name, title or job responsibility, to permit the Company (or if the Company so elects, the Company's designee) to continue, directly or indirectly, to manufacture, produce, supply, advertise, provide, license, sell and deliver such products or services, such persons to be available to 12 perform their prior functions on the Company's behalf and, if the Company so elects to utilize their services, to be compensated by the Company on a per diem, pro rata basis consistent with the wage and salary structure applicable to each as of the date of such Event of Default. (b) Enforcement of Rights. (i) If an Event of Default shall have occurred and be continuing, the Company shall have the right, but not the obligation, to commence or maintain any suit, proceedings or action, in the name of either the Licensee or the Company (in the sole discretion of the Company), to protect, maintain, or enforce any of the Company's rights or interests in, to or under the Patents or Patent Rights, in which event the Licensee shall, at the request of the Company and at the Licensee's sole expense, do any and all lawful acts and things and execute any and all documents and instruments requested by the Company in furtherance of such protection, maintenance or enforcement of the Company's rights or interests in, to or under the Patents or Patent Rights or any part thereof; and the Licensee shall promptly upon demand, and notwithstanding any other section of this Agreement, indemnify and reimburse the Company for all liabilities, obligations, costs, expenses or disbursements imposed on, incurred or suffered by or asserted against the Company in the exercise of its rights under this Section 5 (b) ( i) . In the event that the Company shall elect not to bring any suit, proceeding or action or protect, maintain or enforce any such rights or interests of the Company in the Patents or Patent Rights or any part thereof, the Licensee shall use all reasonable measures, whether by action, suit, proceeding or otherwise, to protect, maintain, and enforce the Company's and the Licensee's rights and interests in, to or under the Patents and Patent Rights, and for that purpose the Licensee shall diligently maintain any such action, suit or proceeding that it believes, in the exercise of its reasonable business judgment, to be necessary or appropriate for such protection, maintenance or enforcement. (ii) Upon the occurrence of an Event of Default hereunder, the Licensee shall pay to the Company all costs and expenses (including reasonable attorneys' fees) incurred by the Company in connection with collecting any amounts due hereunder or enforcing any right or remedy of the Company hereunder. (c) Other Rights Upon Termination. (i) If any Event of Default shall have occurred and be continuing, the Company shall have the right, as the Licensee's true and lawful agent with power of substitution for the Licensee and in the Licensee's name, the Company's name or otherwise (in the sole discretion of the Company), and for the use and benefit of the Company, (a) to notify all sublicensees of the Patents, and all parties to any other agreements with respect to any of the Patents or Patent Rights, of such Event of Default and of the rights of the Company as the Licensee's designee under this Section 5; (b) upon notice from the Company to all sublicensees, obligors, vendors, clients and customers of the Licensee with respect to the Patents or related Patent Rights, to receive, endorse, assign and/or deliver any and all notices, acceptances, checks, drafts, money orders or other evidences of payment relating to the Patents or Patent Rights or any part thereof; (c) for its own use and account to demand, collect, sue for and receive payment of, and give receipt for and give discharges and releases of, all or any of the Patents and Patent Rights and all amounts due or to become due in respect of the Patents and Patent Rights; (d) to sign the Licensee's name on any invoice relating to any of the Patents or Patent Rights; (e) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court or tribunal of competent jurisdiction to collect or otherwise realize on all or any of the Patents or Patent Rights or to enforce any rights or remedies in respect of any Patents or Patent Rights; (f) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to or pertaining to all or any of the Patents or Patent Rights; (g) to license, or to the extent permitted by any applicable law, sublicense, whether generally, specially or otherwise, and whether on an exclusive or non-exclusive basis, any of the Patents or Patent Rights throughout the world for such term or terms, and on such conditions, and in such manner, as the Company shall determine (other than in violation of any then existing licensing arrangements to the extent that waivers or other adequate provision cannot be secured therefor); and (h) generally to make, use, practice, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Patents or Patent Rights, and to do all other acts and things necessary to carry out the purposes of this Agreement and the Collateral Documents, as the absolute owner of the Patents and Patent Rights for all purposes; provided, however, that except as provided by the Uniform Commercial Code as in effect from time to time in the Commonwealth of Massachusetts, or by its equivalent in other jurisdictions, or by any other law, nothing herein contained shall be construed in such a way as to require or oblige the Company to make any commitment or to make any inquiry with respect to the nature or sufficiency of any payment or other consideration received by the Company, or to present or 13 file any claim or notice, or to take any action with respect to the Patents or Patent Rights or any part thereof, or the moneys due or to become due in respect thereof, or any property covered thereby, and no action taken by the Company or omitted to be taken with respect to the Patents or Patent Rights or any part thereof shall give rise to any defense, counterclaim or offset in favor of the Licensee or to any claim or action against the Company. Whether or not the Company shall have so notified any sublicensees, obligors, vendors, clients and customers of the Licensee with respect to the Patents or related Patent Rights, the Licensee shall at its expense cooperate with the Company and render all reasonable assistance to the Company in enforcing claims against such sublicensees, obligors, vendors, clients and customers of the Licensee with respect to the Patents or related Patent Rights. It is understood and agreed that the appointment of the Company or its designee as the Licensee's agent for the purposes set forth above in this Section 5(c) is coupled with an interest and is irrevocable. This Section 5(c)(i) shall in no event relieve the Licensee of any of its obligations hereunder or any other related agreement with respect to the Patents or Patent Rights or any part thereof or impose any obligation on the Company to proceed in any particular manner with respect to any of the Patents or Patent Rights, or in any way limit the exercise by the Company of any other or further rights which it may have on the date of this Agreement or hereafter, whether pursuant to this Agreement, or by law, or otherwise. (ii) Except as otherwise provided in this Section 5, the Licensee shall continue to collect, at its own expense, all amounts due or to become due to the Licensee in respect of the Patents or Patent Rights or any part thereof. (iii) The Licensee hereby ratifies any and all actions which the Company or the Company's designee may lawfully take to enforce the Company's rights hereunder. (d) No Obligation of the Company. Nothing herein contained shall be construed in such a way as to require the Company to take any of the foregoing actions at any time. (e) Costs and Application of Proceeds. (i) the Licensee agrees to pay when due all reasonable costs incurred in any license, assignment, sale, transfer or other disposition of any of the Patents or Patent Rights to or by the Company, including any taxes or other impositions, fees, and reasonable attorneys' fees. The Company may apply the proceeds actually received from any such license, assignment, sale, transfer or other disposition, and may apply the proceeds from any other collection or realization, to the reasonable out-of-pocket costs and expenses thereof, including without limitation all reasonable attorneys' fees and all reasonable legal, travel and other expenses which may be incurred or paid by the Company in protecting or enforcing its rights upon or under this Agreement. (f) Remedies Cumulative; Delay No Waiver. All rights and remedies of the Company provided for under this Section 5 are cumulative, not exclusive, and are enforceable and may be exercised alternatively, successively or concurrently and without notice to or consent by the Licensee except as and to the extent expressly provided otherwise herein. The exercise of one remedy shall not be deemed to be an exclusive election of such remedy or to preclude the exercise of any other remedy. No failure or delay on the part of the Company in exercising any right or remedy provided hereunder shall operate as a waiver thereof. Waiver of Default shall not be a waiver of any other or subsequent Default. The Licensee shall pay any deficiency remaining after application of Sections 5(a), 5(b) and 5(c) hereof to the Company within ten (10) days of written request for such payment. The Company's remedies provided for this Section 5 shall be in addition to any and all other remedies provided, existing or available in its favor under any other agreement or under any statute or other law. The Licensee waives demand of performance and notice of sale or license. The Licensee waives notice of place of sale or license and manner and place of any advertising. 6. FURTHER ASSURANCES. (a) Consents of Third Parties. Upon the request of the Company, the Licensee will use its best efforts to obtain any necessary consents of third parties to the grant to and perfection of the Company's interest in the Patents and Patent Rights, and/or to the grant or effectiveness of the Assignment, as provided for herein. (b) Further Instruments and Acts. The Licensee shall from time to time as necessary, and at its sole expense make, execute, acknowledge and deliver, and file and record with all appropriate governmental or regulatory authorities, agencies or offices such agreements, assignments, documents and instruments, and do such other and further acts and things as the Company may request or as may be necessary or appropriate in order to implement 14 and effect fully the intent of the parties hereto and the purposes and provisions of this Agreement, or to assure and confirm to the Company the right to the complete enjoyment and exercise of the Company's rights hereunder. (c) Company's Right To Perform Licensee's Obligations. If the Licensee shall fail to make any payment or perform any act or obligation required of the Licensee under this Agreement, the Company, in its own name or that of the Licensee (in the sole discretion of the Company), may, (but need not) at any time thereafter make such payment, perform such act, or remedy such breach (or cause such act to be done or such breach to be remedied). Any cost or expense incurred by the Company in so doing shall constitute a Supplemental Royalty due hereunder and shall be payable by the Licensee to the Company on demand. Such demand shall not be deemed to be a cure or waiver of any Default of the Licensee under this Agreement. Licensee shall cooperate with the Company in any such act or remedy. (d) NO ABATEMENT. THE LICENSEE SHALL NOT BE ENTITLED TO ANY ABATEMENT OF BASE ROYALTY OR SUPPLEMENTAL ROYALTY OR OTHER PAYMENTS DUE HEREUNDER OR ANY REDUCTION THEREOF UNDER ANY CIRCUMSTANCES OR FOR ANY REASON WHATSOEVER. THE LICENSEE HEREBY WAIVES ANY AND ALL EXISTING AND FUTURE CLAIMS FOR OFFSETS AGAINST ANY BASE ROYALTY OR SUPPLEMENTAL ROYALTY AMOUNT OR OTHER PAYMENTS DUE HEREUNDER AND AGREES TO PAY THE BASE ROYALTY AMOUNT AND OTHER AMOUNTS DUE HEREUNDER AS AND WHEN DUE REGARDLESS OF ANY OFFSET OR CLAIM WHICH MAY BE ASSERTED BY THE LICENSEE OR ON THE LICENSEE'S BEHALF. THIS AGREEMENT SHALL NOT TERMINATE, NOR SHALL THE RESPECTIVE OBLIGATIONS OF THE COMPANY OR THE LICENSEE BE OTHERWISE AFFECTED, NOR SHALL THE COMPANY HAVE ANY LIABILITY WHATSOEVER TO THE LICENSEE, BY REASON OF ANY CHALLENGE TO THE VALIDITY OF OR ANY OTHER EVENT HAVING AN ADVERSE EFFECT UPON THE PATENTS OR ANY OF THEM, OR BY REASON OF ANY FAILURE OR DELAY IN DELIVERY OF ANY MACHINE, DEVICE OR OTHER EQUIPMENT OR ITEM INCORPORATING OR USING THE PATENTS OR ANY OF THEM, ANY DEFECT IN, DAMAGE TO, OR LOSS OR DESTRUCTION FROM WHATEVER CAUSE OF ANY MACHINE, DEVICE OR OTHER EQUIPMENT OR ITEM INCORPORATING OR USING THE PATENTS OR ANY OF THEM, THE PROHIBITION OR DENIAL BY ANY COURT, TRIBUNAL, OR OTHER GOVERNMENT AS AGENCY OR AUTHORITY OR OWING TO ANY ACT OF GOD OR OF PUBLIC ENEMY OF THE EXCLUSIVE RIGHT TO USE ANY OF THE PATENTS, THE INTERFERENCE WITH SUCH USE BY ANY GOVERNMENTAL AUTHORITY, PERSON OR CORPORATION, THE INVALIDITY OR UNENFORCEABILITY, LACK OF DUE AUTHORIZATION OR OTHER INFIRMITY OF THIS AGREEMENT, ANY WANT OF RIGHT, POWER OR AUTHORITY OF EITHER THE COMPANY OR THE LICENSEE TO ENTER INTO THIS AGREEMENT, OR ANY OTHER CAUSE WHETHER SIMILAR OR DISSIMILAR TO THE FOREGOING. (e) Financial Statements. The Licensee will, within one-hundred twenty (120) days of the close of each fiscal year of the Company, deliver to the Company the Licensee's and each guarantor's balance sheet and statement of income certified by a recognized firm of certified public accountants and by the chief financial officer of the Licensee or such guarantor, as appropriate. Upon request, the Licensee will deliver to the Company, within forty-five (45) days of the end of each quarter, copies of the Licensee's and each guarantor's financial reports for such quarter certified by the chief financial officer of the Licensee or such guarantor, as appropriate. (f) Collateral Documents; Further Assurances. The Licensee further agrees to execute or to use its best efforts to obtain and deliver to the Company, at the Company's request, such Collateral Documents as the Company may reasonably deem necessary to protect the Company's interest in the Patents or Patent Rights or any of them or in this Agreement, including, without limitation, financial statements, mortgagee's waivers, and releases from security interests or other Liens. The Licensee shall pay to the Company upon demand as a Supplemental Royalty any filing fees or expenses incurred in connection with such Collateral Documents. The execution or filing of financial statements shall be for information purposes only and shall not be construed in such a way as to reflect or provide evidence of an intention by the parties that any of the Patents is being sold, granted, transferred, conveyed, assigned, or otherwise conveyed under this Agreement. 7. LIABILITIES, INDEMNITY AND COSTS. (a) Liability for Uses of Patents. Licensee shall be liable for any and all uses or misuses of the Patents and Patent Rights and for the practice, use, making or sale of products incorporating the inventions (or other transfer or disposition) of any of the Patents and Patent Rights by the Licensee and its affiliates and for any failure to take reasonable measures to avoid and prevent the improper use, practice, making or sale of products incorporating 15 the inventions, (or other transfer or disposition) of the Patents or Patent Rights by any other party, any failure to use, practice, make or transfer the Patents or Patent Rights in accordance with this Agreement, or any other claim, suit, loss, damage, expense or liability of any kind or nature (except those resulting from the gross negligence or willful misconduct of the Company) arising out of or in connection with either the Patents or Patent Rights or the production, marketing, delivery, sale, license or other transfer or disposition of the goods and services provided under or in connection with or which use, practice or incorporate any of the Patents or Patent Rights. Licensee shall be liable also for any claim, suit, loss, damage, expense or liability arising out of or in connection with the Licensee's fault, negligence, acts or omissions. (b) License Agreement Obligations. Nothing in this Agreement shall relieve the Licensee from any performance of any covenant, agreement or obligation of Licensee under any license agreement now or hereafter in effect licensing any part of the Patents or Patent Rights, or from any liability to any (sub)licensee under any such license agreement or to any other party, or shall impose any liability on the Company for any act or omission of Licensee in connection with any such license agreement. (c) Indemnification. Notwithstanding any other section of this Agreement, the Licensee shall indemnify and hold harmless the Company and its partners, employees, agents, incorporators, stockholders, employees, officers, directors, and the heirs, successors and assigns of each of them, from and against, and shall on demand of the Company reimburse the Company or such persons for, any and all claims, actions, suits, judgments, penalties, losses, damages, costs, disbursements, expenses, obligations or liabilities of any kind or nature (except those resulting from the Company's gross negligence, or willful misconduct), including actions brought under any legal theories (including negligence and other torts, strict liability, infringement of intellectual property rights, violation of antitrust law, or breach of contract or warranty) , and arising in any way out of or in connection with this Agreement, the Patents, the Patent Rights, the custody, preservation, use, practice, operation, sale, of the products incorporating inventions or license (or other transfer or disposition) of the Patents or the Patent Rights or any machine, equipment, or device using or incorporating any of the Patents or Patent Rights, any alleged infringement of the intellectual property rights of any third party, the production, marketing, provision, delivery and sale of goods and services provided under or in connection with or using or practicing any of the Patents or Patent Rights, the sale of, collection from, or other realization upon any of the Patents or Patent Rights, the Licensee's failure to perform or observe any of the provisions hereof, or matters relating to any of the foregoing. Licensee shall also indemnify and hold harmless the Company and its incorporators, stockholders, employees, officers, directors, and the heirs, successors and assigns of each of them, from and against any and all claims, actions, suits, judgments, penalties, losses, damages, costs, disbursements, expenses, obligations or liabilities arising out of or in connection with any fault, negligence act or omission of the Licensee. The Licensee shall make no claim against the Company for or in connection with the exercise or enforcement by the Company of any right or remedy granted to it hereunder, or any action taken or omitted to be taken by the Company hereunder (except for the gross negligence or willful misconduct of the Company). (d) General Tax Indemnity. Licensee agrees to pay, and indemnify and hold the Company harmless on an after-tax basis from, any and all Taxes or Other Impositions howsoever imposed, whether levied or imposed upon or asserted against the Company, the Licensee, the Patents, or any part thereof, by any federal, state or local government or taxing authority in the United States, or by any taxing authority or governmental subdivision of a foreign country, upon or with respect to (i) the Proceeds, and all other earnings, receipts, and revenue arising from the Patents and Patent Rights, (ii) this Agreement, any Schedules hereto, the Base Royalty and Supplemental Royalty, and other payments paid or payable by Licensee hereunder, or (iii) any of the Collateral Documents, and any payment made pursuant thereto or pursuant to or in connection with any other transaction contemplated herein or therein; provided, however, that the foregoing indemnity shall not apply to any Taxes or Other Impositions based upon or measured solely by the Company's net income, and which are imposed or levied by any federal, state or local taxing authority in the United States or any taxing authority of a foreign country. The Company shall furnish Licensee with copies of any requests for information received by the Company from any taxing authority relating to any Tax or Other Imposition with respect to which the Licensee is required to indemnify hereunder, and if claim is made against the Company for any such Taxes or Other Impositions, with respect to which the Licensee is liable for payment or indemnity hereunder, the Company shall give notice in writing of such claim to the Licensee. Licensee may, at its sole cost and expense, either in its own name or in the name of the Company, contest the validity, applicability or amount of any such Tax or Other Imposition by (i) resisting payment thereof if practicable and lawful, (ii) not paying the same except under protest, if protest is necessary or advisable and proper, or (iii) if the payment is made by Licensee, 16 using reasonable efforts to obtain a refund thereof in appropriate administrative and judicial proceedings; provided, however, that such contest shall be permitted only if no Event of Default has occurred and is continuing, and only if and to the extent that such contest is being conducted in good faith, is being diligently prosecuted by Licensee by means of appropriate legal proceedings, and the Company shall have determined in its sole judgment that the action to be taken in connection with such contest will not result in the sale, forfeiture or loss of, or the creation of a Lien on the title to any of the Patents or Patent Rights or on any interest of the Company therein. If the Company shall obtain a refund of any amount paid by Licensee pursuant to this Section 7(d), the Company shall pay to Licensee the amount of such refund, together with the amount of any interest actually received by the Company on account of such refund. Licensee will promptly notify the Company of all reports or returns required to be made with respect to any Tax or Other Imposition with respect to which Licensee is required to indemnify hereunder, and will promptly provide the Company with all information necessary for the making and timely filing of such reports or returns by the Company. If the Company requests that any such reports or returns be prepared and filed by Licensee, Licensee will prepare and file the same if permitted by applicable law to file the same, and if not so permitted, Licensee shall prepare such reports or returns for signature by the Company (whichever is applicable), and shall forward the same, together with immediately available funds for payment of any Tax or Other Imposition due to the Company, at least ten (10) business days in advance of the date such payment is to be made. Upon written request, Licensee shall furnish the Company with copies of all paid receipts or other appropriate evidence of payment for all Taxes or Other Impositions paid by Licensee pursuant to this Section 7(d). (e) Federal Tax . It is hereby agreed between Licensee and the Company, its successors and assigns that for Federal income tax purposes (i) this Patent Assignment and Licensee Agreement is, and will be consistently treated as, a financing transaction rather than a sale ; (ii) Licensee will be the owner of the Patent to be delivered under this Agreement ; (iii) Licensee will not claim any Royalty deduction for amounts paid to The Company under the Agreement; (iv) The Company will not claim amortization or depreciation deductions with respect to the Patent delivered under this Agreement ; (v) neither Company nor Licensee will at any time take any action, directly or indirectly, or file any returns or other documents inconsistent with the foregoing; and (vi)Company and Licensee will file such returns, take such actions and execute such documents as may be reasonable and necessary to facilitate accomplishment of the intent expressed in subparagraphs (i) through (v) of this section 7(e). (f) Expenses. The Licensee shall bear responsibility for and shall pay any and all fees, costs and expenses, of whatever kind or nature, including but not limited to fees and disbursements of counsel and of any experts and agents, incurred by the Company in connection with the preparation of this Agreement, all Collateral Documents and other documents relating hereto and the consummation of all transactions contemplated hereby, the filing or recording of any documents in public offices, the payment or discharge of any taxes, counsel fees, maintenance fees or encumbrances, or otherwise protecting, maintaining or preserving the Patents, or in defending or prosecuting any actions or proceedings arising out of or related to the Patents or Patent Rights, or in exercising or enforcing any right or remedy granted to the Company hereunder, and all such fees, expenses, charges, etc. shall constitute a Supplemental Royalty due hereunder and shall be payable by the Licensee to the Company on demand. (g) Survival. All of the indemnities, indemnifications, obligations to pay costs, and other obligations contained in this Section 7 shall continue in full force and effect notwithstanding the expiration or earlier termination of this Agreement and are expressly made for the benefit of, and shall be enforceable by the Company. All payments made by the Licensee under this Section 7 shall be made directly to the party entitled thereto. 8. POWER OF ATTORNEY. (a) Grant. Licensee hereby grants to the Company and to any officer or agent of the Company as the Company may in its sole discretion designate, an irrevocable power of attorney coupled with an interest, thereby constituting and appointing the Company (and the Company's designee) its true and lawful attorney-in-law and attorney-in-fact for the following purposes and subject to the following conditions: (i) upon any failure by Licensee to meet its obligations pursuant to Section 6(b), or upon any exercise by the Company of its rights pursuant to Section 6(c), the Company (and the Company's designee) shall be authorized, empowered, and entitled, pursuant to this Power of Attorney to execute and deliver any and all agreements, documents, instruments of assignment, licenses or transfers of the Patents and Patent Rights, and to do all other acts which Licensee is obligated to perform or do under any provision of this Agreement, and to execute any and all documents, statements, certificates or other documents necessary or advisable to effect any of the purposes set forth herein as the Company (or the Company's 17 designee) may in its sole discretion determine, and (ii) upon the occurrence of and during the continuation of an Event of Default, the Company (and the Company's designee) shall be authorized, empowered, and entitled pursuant to this Power of Attorney to assign, sell, license or otherwise transfer or dispose of all of the Licensee's right, title and interest in and to any of the Patents and Patent Rights. (b) Irrevocable. The foregoing power of attorney, which is coupled with an interest, shall be irrevocable until such time as the Licensee shall have paid (c) Release. Licensee hereby releases the Company from any claims, causes of action and demands at any time arising out of or in connection with any actions taken or omitted to be taken by the Company under the power of attorney created pursuant to this Section 8 of this Agreement (except those arising from the gross negligence or willful misconduct of the Company). (d) Ratification. Licensee hereby ratifies all that the Company or the Company's designee may lawfully do or cause to be done as attorney-in-law and attorney-in-fact by virtue of the power of attorney contained within this Section and contained within other Sections of this Agreement. 9. SPECIFIC ENFORCEMENT. Owing to the unique nature of the Patents and Patent Rights, and in order to preserve their value, Licensee agrees that Licensee's agreements, duties and obligations under this Agreement shall be subject to specific enforcement and other appropriate equitable orders and remedies, without the necessity of posting any bond or surety with respect thereto. 10. PROVISIONS OF GENERAL APPLICATION. (a) Severability. In the event that any term or provision of this Agreement shall for any reason be held to be invalid, illegal or unenforceable to any extent or in any respect, or otherwise determined to be of no effect in any application, in any country, such invalidity, illegality, unenforceability or determination shall affect only such term or provision, or part thereof, in only such country and in only such case. The parties agree they will negotiate in good faith to replace any provision so held invalid, illegal or unenforceable, or so determined to be of no effect, with a valid, enforceable and effective provision which is as similar as possible in substance and effect to the provision which is invalid, illegal, unenforceable or of no effect. (b) Amendments, Etc. Except as provided in Section 5 hereof, neither this Agreement nor any term hereof may be amended, changed, waived, discharged or terminated except by a written instrument expressly referring to this Agreement and to the provisions so amended, modified, waived or terminated, and executed by Licensee and the Company. (c) No Waivers. No course of dealing between Licensee and the Company, and no failure to exercise, nor any delay by the Company in exercising, any right, power or privilege hereunder shall operate as or be construed in any way as a waiver of the Company's rights pursuant to this Agreement; nor shall any single or partial exercise of any right, power or privilege hereunder by either party hereto preclude any other or further exercise thereof or the exercise of any other right, power or privilege to such party. (d) Assignment. Licensee shall not assign this Agreement or any rights, duties or obligations hereunder without the prior written consent of the Company. The Company shall have the right to sell, assign or otherwise transfer, in whole or in part, its rights and obligations under this Agreement. This Agreement and all obligations of Licensee shall be binding upon the successors and permitted assigns of Licensee, and shall together with the rights and remedies of the Company hereunder inure to the benefit of the Company and it successors and assigns. (e) Notices. Except as otherwise expressly provided elsewhere in this Agreement, all notices required hereunder shall be in writing and shall be deemed to have been given (i) if mailed, when received or five (5) days after mailing with proper postage, whichever is earlier; (ii) if delivered in hand, when delivered, and (iii) if telecopied, when transmitted by confirmed telecopy, addressed to the Company or the Licensee, as the case may be, at their respective addresses as set forth herein or at such other address as either shall from time to time designate in 18 writing. (f) Entire Agreement. This Agreement constitutes and represents the entire agreement and understanding between the parties. All prior negotiations between the parties, whether written or oral, are merged with and contained within this Agreement and may not be admitted to modify, alter or disprove any part of this Agreement. No term or provision of this Agreement may be changed, waived amended, or terminated except by written agreement signed by the parties. (g) Counterparts. This Agreement, and any amendments, waivers, consents, supplements or Collateral Documents hereto or hereunder, may be executed in any number of counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original but all of which together shall constitute one instrument. In providing this Agreement, or any such amendment, waiver, consent, supplement or Collateral Document, it shall not be necessary to produce or account for more than one such counterpart executed by the party against which enforcement is sought. (h) Schedules Incorporated by Reference. The Schedules shall be incorporated by reference herein, and this Agreement and all Schedules which are or shall be annexed hereto shall constitute a single Agreement. (i) Headings. The captions in this Agreement are for convenience of reference only and shall not define, limit or affect the provisions hereof. (j) Time or the Essence. Time is of the essence of this Agreement and of all of its provisions. (k) Governing Law. Except as otherwise required by the laws of any country in which any of the Patents have been issued, this Agreement and all rights and obligations hereunder, including matters of construction, validity and performance, shall be governed by and construed and enforced in accordance with the internal laws of the Commonwealth of Massachusetts (without reference to its conflicts of laws rules or principles). The Licensee hereby consents to the jurisdiction of any court of record of the Commonwealth of Massachusetts sitting in the County of Suffolk or of the United States District Court for the District of Massachusetts sitting in Boston, Massachusetts over the person of the Licensee, and agrees that service of process in any action or suit brought by the Company may be made in any action or suit brought by the Company may be made upon the Licensee by mailing a copy or the summons to the Licensee at its address, as set forth herein or at the last address of the Licensee appearing in the Company's records. The Licensee also waives (i) the right to trial by jury in any litigation to which the Company and the Licensee are parties that is commenced with respect to this Agreement, regardless of whether any other person is also a party thereto; (ii) any claim that the Commonwealth of Massachusetts or the District of Massachusetts is an inconvenient forum for the trial of any litigation to which the Company and the Licensee are parties that is commenced with respect to or in connection with this Agreement or the transactions contemplated hereby, regardless of whether any other person is a party thereto; and (iii) any claim against the Company for incidental, consequential, special, exemplary or punitive damages. The Company and the Licensee further agree that, in the event that their mutual rights and obligations under this Agreement shall be the subject of litigation, neither shall contest the venue of any court of record of the Commonwealth of Massachusetts sitting in the County of Suffolk or of the United States District Court for the District of Massachusetts sitting in Boston, Massachusetts in the Commonwealth of Massachusetts. IN WITNESS WHEREOF, the Licensee and the Company, each by its duly authorized officer, have duly executed this Agreement, as an instrument under seal, as the date first set forth above. LICENSEE: RHOMED INCORPORATED ABERLYN CAPITAL MANAGEMENT LIMITED PARTNERSHIP, a Delaware Limited Partnership By: Its General Partner Aberlyn Capital Management Company, Inc. By: /s/ Buck A. Rhodes By: /s/ Douglas R. Brian ----------------------------- ----------------------------- Title: President Title: Senior Vice President ----------------------------- ---------------------------- 19 State of New Mexico ) County of Bernalillo ) Personally appeared before me, the undersigned, a Notary Public in and for said County, Buck A. Rhodes personally known to me, who, being by me first duly sworn, declared that he is the President of RhoMed Incorporated, that being duly authorized he did sign and seal said instrument as such officer of and on behalf of such corporation, and that the same is such corporation's free act and deed. IN WITNESS WHEREOF, I have hereunto set my hand and official seal at this 14th day of July, 1993. /s/ Connie J. Jefferson __________________________ Notary Public My commission expires: September 6, 1998 20 REGISTERED PATENT ASSIGNMENT AND LICENSE AGREEMENT -------------------------------------------------- THIS ASSIGNMENT AND LICENSE AGREEMENT IS A REGISTERED PATENT ASSIGNMENT AND LICENSE AGREEMENT . BOOKS FOR THE REGISTRY OF THIS PATENT ASSIGNMENT AND LICENSE AGREEMENT ARE KEPT AT THE OFFICE OF THE LICENSEE . NO TRANSFER OF THIS ASSIGNMENT AND LICENSE AGREEMENT SHALL BE VALID UNLESS MADE ON THE LICENSEE'S BOOKS AT THE OFFICE OF THE LICENSEE, BY THE REGISTERED HOLDER OF THIS ASSIGNMENT AND LICENSE AGREEMENT IN PERSON OR BY OFFICER OF THE REGISTERED HOLDER IN WRITING , AND SIMILARLY NOTED ON THIS ASSIGNMENT AND LICENSE AGREEMENT FORM BELOW. DATE OF IN WHOSE ADDRESS SIGNING REGISTRATION NAME REGISTERED OF HOLDER OFFICER - ------------ --------------- --------- ------- Aberlyn Capital 1000 Winter Street Management Limited Suite 1100 7-15-93 Partnership Waltham, MA 02154 /s/ Douglas R. Brian - --------------- ----------------- ----------------- ----------------- - --------------- ----------------- ----------------- ----------------- - --------------- ----------------- ----------------- ----------------- - --------------- ----------------- ----------------- ----------------- 21 SCHEDULE A TO PATENT ASSIGNMENT AND LICENSE AGREEMENT U.S. PATENT PURCHASE PRICE ----------- -------------- #4,940,670 $1,150,000.00 22 SCHEDULE B TO PATENT ASSIGNMENT AND LICENSE AGREEMENT LICENSE TERMS AND BASE ROYALTIES TERM: The Term is THIRTY-SIX (36) MONTHS , commencing on July 15, 1993 (the "Effective Date"). BASE ROYALTY: Licensee shall pay Licensor THIRTY-SIX (36) Royalty payments, in ADVANCE, in the following amounts, commencing August 1, 1993 (the "Royalty Payment Commencement Date") and on the same day of each month thereafter for the entire Term: ROYALTY PAYMENT NOS.: ROYALTY PAYMENT AMOUNT : 1 $150,000.00 EACH 2 - 12 $ 0.00 EACH 13 - 36 $ 55,600.00 EACH If a Royalty payment date shall fall on a day that is not a business day, the Royalty due and payable on such day shall be made on the business day next succeeding such Royalty payment date. PURCHASE OPTION: Notwithstanding any provision contained in the Agreement to the contrary, Licensee shall have the option to purchase from the Company all of the Company's rights, title and interest in and to all but not less than all the Patents on the date of the last Royalty payment date with respect thereto, or upon prepayment of all Royalties and other amounts due to Licensor, provided that Licensee is not in default hereunder, for the amount of $1.00. 23 SCHEDULE C TO PATENT ASSIGNMENT AND LICENSE AGREEMENT LIENS, CHARGES, ENCUMBRANCES, CLAIMS AND RIGHTS OF THIRD PARTIES 24 SCHEDULE D TO PATENT ASSIGNMENT AND LICENSE AGREEMENT INFRINGEMENTS, CLAIMS, PROCEEDINGS, EXCEPTIONS EX-4.3 4 MASTER LEASE AGREEMENT MASTER LEASE AGREEMENT ---------------------- No: 0013E Date: NOVEMBER 16, 1994 THIS MASTER LEASE AGREEMENT which, together with all Lease Schedules, Acceptance Certificates, riders, exhibits, amendments and other documents now or hereafter attached hereto and made a part hereof (the "Lease") is entered into as of NOVEMBER 16, 1994 by and between Aberlyn Capital Management Limited Partnership, a Delaware limited partnership, with an office at 1000 Winter Street, Waltham, MA 02154, (hereinafter called "Lessor"), and RHOMED INCORPORATED, a corporation organized under the laws of the State of NEW MEXICO with its executive office at 4261 BALLOON PARK ROAD, N.E., ALBUQUERQUE, NM 87109-5802 (hereinafter with its successors and assigns called "Lessee"). I. LEASING: Subject to the terms and conditions set forth below, Lessor agrees to lease to Lessee and Lessee agrees to lease from Lessor the equipment and other personal property described in any Lease Schedule or Lease Schedules which may be executed from time to time by the parties hereto and identified as a schedule of this Lease (individually a "Schedule" and collectively the "Schedules") (which property, together with any replacement parts, replacements, substitutions, additions, repairs and accessories incorporated therein and/or affixed thereto, is hereafter referred to individually as an "Item of Equipment" and collectively as the "Equipment") upon the terms and conditions set forth in this Lease supplemented by the terms and conditions set forth in the applicable Schedules. All Schedules shall be incorporated by reference herein and this Lease and all Schedules which may be executed pursuant hereto shall constitute a single lease of equipment. II. LEASE TERM: The Lease term for any Item of Equipment shall commence the date on which such Item of Equipment is accepted by Lessee as evidenced by an Acceptance Certificate. Unless sooner terminated pursuant to the terms hereof, the Lease term for any Item of Equipment for which an Acceptance Certificate has been executed pursuant to Section V below shall terminate on the date set forth in the applicable Schedule. Lessor may terminate this Lease with respect to any Item of Equipment for which an Acceptance Certificate has not been executed on or at any time subsequent to the date on which Lessor's commitment to Lessee expires, as provided in a written notice to Lessee if, prior to the execution of such Acceptance Certificate, any event or condition exists which, with notice or the passage of time or both, would constitute a default hereunder or under any agreement between the parties. In the event Lessor elects to terminate its obligations hereunder with respect to such Item of Equipment not covered by an Acceptance Certificate, Lessee shall promptly purchase from Lessor all of Lessor's rights, title and interest in such Item of Equipment for the amount Lessor has paid or become obligated to pay on account thereof, plus all other amounts owed by Lessor in respect thereof. Lessee agrees to indemnify and defend Lessor and Lessor's assignees (including any Lender who from time to time may hold a security interest in this Lease) from any claims including any demand for payment of the purchase price of such Item of Equipment by the manufacturer or seller of such Item of Equipment. III. RENT; COMMENCEMENT DATE: Rent for each Item of Equipment shall be as provided in the applicable Schedule. Throughout this Lease, "Rent" shall mean the periodic charge set forth in such Schedule (whether denominated Rent, Rental, Rental Payment, or otherwise), and "Supplemental Rent" shall mean all other amounts due and payable hereunder. Lessee shall pay all Rent and Supplemental Rent to Lessor at the address set forth above, or to such other person or place as Lessor from time to time may designate in writing. The first Rent payment shall be due on the Rental Payment Commencement Date as defined in the Schedule. Interim rent, if any, specified in such Schedule shall commence on the date Lessor advances any funds to manufacturers, suppliers, vendors or others in connection with the acquisition of any Item of Equipment, shall be payable monthly in ADVANCE on the first day of each month thereafter, and shall accrue on the entire amount so advanced outstanding from time to time through and including the Lease Term Commencement Date. The Lease Term Commencement Date with respect to any schedule shall be the first day of the calendar month following the signing of the Acceptance Certificate. IV. DISCLAIMER OF WARRANTIES; REPRESENTATIONS AND WARRANTIES: Lessee acknowledges that Lessor is not the manufacturer of the Equipment, nor manufacturer's agent, and Lessee represents that Lessee has selected the Equipment leased hereunder based upon Lessee's judgment prior to having requested Lessor to purchase the same for leasing to Lessee, and Lessee agrees that the Equipment leased hereunder is of a design, size, fitness and capacity selected by Lessee and that Lessee is satisfied that the capacity of the same is suitable 1 and fit for its intended purposes. THE EQUIPMENT IS NOT TO BE USED, AND IS NOT BEING ACQUIRED HEREBY, FOR USE IN ANY RESPECT FOR LESSEE'S OR ANY OTHER PARTY'S PERSONAL OR FAMILY PURPOSES AND, AS SUCH, THE EQUIPMENT DOES NOT CONSTITUTE "CONSUMER GOODS" AS SUCH TERM IS DEFINED UNDER APPLICABLE LAW. LESSEE FURTHER AGREES THAT LESSOR LEASES AND LESSEE TAKES THE EQUIPMENT "AS IS" AND "WHERE IS" AND WITHOUT ANY RECOURSE TO LESSOR AND THAT LESSOR HAS NOT MADE, DOES NOT MAKE AND SHALL NOT BE DEEMED TO MAKE ANY REPRESENTATION OR WARRANTY, EITHER EXPRESSED OR IMPLIED OR ARISING BY APPLICABLE LAW OR OTHERWISE, OF ANY KIND WHATSOEVER WITH RESPECT TO THE EQUIPMENT, INCLUDING BUT NOT LIMITED TO, THE TITLE, VALUE, CONDITION, WORKMANSHIP, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE OF THE EQUIPMENT, THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, THE ABSENCE OF ANY VIOLATION OR CONFLICT WITH ANY LAW, GOVERNMENTAL REGULATION, CONTRACT OR SPECIFICATION. Lessee specifically waives all rights to make claim against Lessor herein for breach of any warranty of any kind whatsoever and Lessor hereby assigns to Lessee all warranties, if any, received by Lessor by virtue of its interest in the Equipment. Lessor shall not be liable to Lessee for any loss, damage or expense of any kind or nature caused directly or indirectly by any Equipment leased hereunder or for the use or maintenance thereof, or for the failure of operations thereof, or for the repairs, service, or adjustment thereto, or by any delay or failure to provide any thereof, or by any interruption of service or loss of use thereof or for any loss of business or any other damage whatsoever and howsoever caused. No defect in, non-conformity or unfitness of the Equipment shall relieve Lessee of the obligation to pay Rent with respect to such Equipment, or any other obligation under this Lease to Lessor. Lessor's agreement to enter into this Lease is in reliance upon the freedom from liability or responsibility for the matters waived and disclaimed herein, and the provisions of this section have been negotiated by the Lessor and the Lessee. Lessee hereby represents and warrants that (a) if it is an entity other than an individual or sole proprietorship, it is duly organized and validly existing in good standing under the laws of the jurisdiction of its organization, (b) the execution, delivery and performance of this Lease and all related documents have been duly authorized by all necessary action on the part of Lessee and do not and will not contravene any law, governmental rule, regulation or order binding on Lessee or, if Lessee is a corporation, trust or partnership, contravene the articles of incorporation, by-laws or other constituting documents of the Lessee or contravene the provisions of, or constitute a default under, or result in the creation of any lien, security interest or other encumbrance upon the property of Lessee under, any indenture, mortgage, contract or other agreement to which Lessee is a party or by which it or any of its property may be bound, (c) neither the execution and delivery by the Lessee of this Lease nor the consummation by the Lessee of any of the transactions contemplated hereby require the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any governmental authority or agency, (d) this Lease and all related documents have been duly executed and delivered by Lessee and constitute legal, valid and binding obligations of Lessee enforceable against Lessee in accordance with their terms, (e) there are no pending or threatened actions or proceedings before any court, governmental authority, administrative body or tribunal which, if adjudicated against Lessee, would materially adversely affect the business operations or financial condition of Lessee or the ability of Lessee to perform its obligations hereunder, (f) any information including financial information furnished to Lessor or its assignees by Lessee in connection herewith is true and correct and any balance sheet or statement of income of Lessee furnished to Lessor or its assignees by Lessee in connection herewith fairly presents the financial position of Lessee as at the date of such balance sheet and the results of operations of Lessee for the period covered by such statement of income, all in accordance with generally accepted accounting principles applied on a consistent basis, and (g) no mortgage, deed of trust or other Lien which now covers or affects any property or interest therein of Lessee now attaches or hereafter will attach to the Equipment or any Item of the Equipment, or in any manner affects or will affect adversely Lessor's right, title and interest therein, or assignee's security interest therein, (h) for purposes of Federal, state or local income tax laws, Lessee, rather than Lessor or any assignee of Lessor, will be treated as the owner of the Equipment and all payments made by Lessee to Lessor or any assignee of Lessor will constitute returns of capital and/or payments for the use or forbearance of money and (i) if requested by Lessor, Lessee will provide an opinion of counsel and other supporting documents to the foregoing effect and with respect to such other legal matter as Lessor may request. 2 V. ACCEPTANCE OF EQUIPMENT; NONCANCELLABLE: Lessee's acceptance of any Item of Equipment shall be conclusively and irrevocably evidenced by Lessee signing the Acceptance Certificate in form approved or provided by Lessor covering such Item of Equipment and upon such acceptance, this Agreement shall be noncancellable by Lessee with respect to such Item of Equipment. If Lessee cancels or terminates this agreement prior to delivery of an Item of Equipment or fails or refuses to sign the Acceptance Certificate as to all or any part of such Item of Equipment within a reasonable time, not to exceed sixty (60) days, after such Item of Equipment has been delivered, tested and ready for use, then in such event Lessee will be deemed to have cancelled this Lease with respect to such Item of Equipment and Lessee shall automatically assume all of the Lessor's purchase obligations for such Item of Equipment and Lessee agrees to indemnify and defend Lessor and Lessor's assignees from any claims, including any demand for payment of the purchase price for such Item of Equipment by the manufacturer or seller of such Item of Equipment. In addition thereto, Lessee shall pay Lessor all of Lessor's out-of-pocket expenses relating to such Item of Equipment. Lessor may apply any advance Rent payments to sums due from Lessee under the above. NOTHING CONTAINED IN THIS PARAGRAPH SHALL BE CONSTRUED AS INCONSISTENT WITH OR DIMINISHING THE EFFECT OF THE DISCLAIMER OF WARRANTIES CONTAINED IN PARAGRAPH IV OF THIS LEASE. VI. SURRENDER: Unless Lessee has acquired the Equipment pursuant to paragraph VIII or XVII below, Lessee, at its expense but at Lessor's option, shall at the expiration or earlier termination of this Lease with respect to any Item of Equipment, return such Item of Equipment, properly packed and crated with freight prepaid to Lessor, or its' designated agent, at such place and by such reasonable means as may be designated by Lessor in the same repair, condition and working order as at the commencement of the term hereof with respect thereto, except for reasonable wear and tear resulting from permitted use. If requested by Lessor, Lessee, prior to returning any Equipment to Lessor, shall provide suitable and adequate storage space for a period not to exceed ninety (90) days at the Equipment location shown in the applicable Schedule or such location to which such Equipment may have been moved with the written consent of Lessor, during which time Lessee shall insure that Lessor will be allowed reasonable access thereto. VII. POSSESSION; USE; LOCATION; MAINTENANCE; INSPECTION: Lessor covenants to Lessee that as long as Lessee shall not be in default hereunder, Lessee may possess and use the Equipment in accordance with this Lease free from persons lawfully claiming by, through, or under Lessor. Lessee warrants that the Equipment will not be used or operated in violation of any law, ordinance or governmental regulation. Lessee will not make or suffer any changes, alterations, improvements or remove any parts, accessories or attachments to or from the Equipment other than in the course of routine maintenance. Lessee shall, at its sole cost, maintain the Equipment in good operating order, repair and condition, excepting normal wear and tear resulting from permitted use. Lessee shall perform maintenance on the Equipment in the manner recommended by the manufacturers of the Equipment and shall, if appropriate, maintain a service contract with the Equipment manufacturer or other company approved by Lessor, with respect to the Equipment. Lessee shall not move the Equipment from the location specified on the applicable Schedule without Lessor's prior written consent. Lessor, or its designated agent or assignee, may during normal business hours with prior notice to Lessee inspect the Equipment and the maintenance records pertaining thereto. At its expense, Lessee shall make all modifications to the Equipment which are required by law, governmental rule or regulation. Lessee will not, without the prior written consent of Lessor, affix or install any accessory, equipment, or device on any Equipment if such addition will impair the originally intended function or use of such Equipment or diminish its value or utility. All additions, repairs, parts, accessories, equipment and devices furnished or affixed to any Equipment shall become the property of Lessor except such as may be removed and which are in fact removed, without in any way damaging the Equipment or without in any way affecting or impairing the originally intended function or use of such Equipment. Lessee, without the prior consent of Lessor, shall not affix any Equipment to any real property. Lessee agrees not to abandon the Equipment to any party. VIII. CASUALTY OCCURRENCE: Lessee hereby assumes and shall bear all risk of any loss, theft or destruction of, or damage to, the Equipment from any cause whatsoever ("Casualty Occurrence"). No Casualty Occurrence shall relieve Lessee from its obligations under this Lease; however, the Lessee's obligation to pay Rent with respect to any item of Equipment that has suffered a Casualty Occurrence may be discharged by compliance with the terms of this Section VIII. 3 In the event of a Casualty Occurrence to any Item of Equipment, Lessee shall give Lessor prompt notice thereof and thereafter shall, at Lessee's cost and expense, place such Item of Equipment in good repair, condition and working order to the satisfaction of Lessor; provided that, if Lessor reasonably determines such Item of Equipment to be lost, stolen, destroyed or damaged beyond repair, then Lessee, at Lessor's option, if not in default, shall either (a) replace such Item of Equipment with like equipment in the condition required by Section VII hereof which has a fair market value at least equal to that of the replaced Item of Equipment immediately prior to the Casualty Occurrence and which will be subject to the terms and conditions hereof, and give clear title thereto by appropriate instrument to Lessor, or (b) pay to the Lessor not later than sixty (60) days after notification by Lessor, the "Casualty Value" of such Item of Equipment as such term is defined herein. The Casualty Value of any Item of Equipment shall be equal to a total of (i) all matured but unpaid Rent and other amounts, if any, due at the time of such payment, plus (ii) the sum of unmatured Rent payments with respect to such Item of Equipment, plus (iii) the Purchase Option, if any, of said Item of Equipment less the net amount of the recovery, if any, actually received by Lessor from insurance or otherwise for such loss, theft, damage or destruction. [In the event of the condemnation, confiscation, requisition, seizure, forfeiture or other taking of title to or use of an Item of Equipment, or the prohibition of the use of an Item of Equipment by Lessee by any governmental authority for a period in excess of 30 days, Lessee shall inform Lessor within 5 days of such event and shall pay to Lessor, in cash, the Casualty Value.] Upon payment of the Casualty Value, this Lease shall terminate with, and only with, respect to the Item of Equipment or portion thereof so paid for and Lessee shall become entitled to such paid for Item of Equipment or portion thereof AS-IS, WHERE-IS. IX. INSURANCE: During the Lease term of any Equipment, Lessee shall, at its expense, keep in effect an "all risk" property insurance policy covering the Equipment in an amount not less than the full replacement cost of the Equipment. In addition, Lessee shall also carry a public liability insurance policy (comprehensive general liability or other similar form of third party liability coverage acceptable to Lessor) in an amount not less than $1,000,000 combined single limit per occurrence, unless Lessor specifies otherwise. All insurance policies shall be in form and amount and with insurers reasonably acceptable to Lessor. The all risk property insurance policy shall name the Lessor and its assigns as loss payee, and the public liability insurance policy shall name the Lessor and its assigns as an additional insured. Each policy shall provide (i) for no less than thirty (30) days prior written notice of modification, cancellation or non-renewal to Lessor, (ii) that such policy shall not be invalidated as against Lessor or its assigns for any violation of any term of the policy, and (iii) that such insurance is primary insurance and any other insurance covering Lessor or its assigns shall be secondary and excess of such policy. Lessee shall pay the premiums there for and deliver to Lessor at the commencement of the Lease term of any Item of Equipment, a Certificate of Insurance, or other evidence satisfactory to Lessor, stating that coverage is in effect, provided, however, Lessor shall be under no duty either to ascertain the existence of or to examine such insurance policy or to advise Lessee in the event such insurance shall not comply with the requirements hereof. Proceeds from any public liability insurance policy, relating to the equipment coverage, shall be made payable first on behalf of the Lessor and its assigns to the extent of their liability, if any. Lessee shall promptly notify any appropriate insurer and Lessor of each and every occurrence which may become the basis of a claim or cause of action against the insureds and provide Lessor with all data pertinent to such occurrence. The proceeds of casualty insurance, at the option of Lessor and its assigns, shall be applied toward (a) the repair or replacement of the appropriate Equipment, (b) payment of the Casualty Value thereof, or (c) the payment of any other accrued obligation of Lessee hereunder. Any excess of such proceeds remaining shall belong to Lessee. X. GENERAL TAX INDEMNITY: Lessee agrees to pay, and indemnify and hold Lessor, Lessor's assignees, and their respective permitted successors and assigns, harmless on an after-tax basis from, any and all Federal, state, local and foreign taxes, fees, withholdings, levies, imposts, duties assessments and charges of any kind and nature whatsoever, together with any penalties, fines or interest thereon (herein called "taxes or other impositions") howsoever imposed, whether levied or imposed upon or asserted against Lessor, assignee, Lessee, the Equipment, any Item of Equipment, or any part thereof, by any Federal, state or local government or taxing authority in the United States, or by any taxing authority or governmental subdivision of a foreign country, upon or with respect to (a) the Equipment, or any Item of Equipment or any part thereof, (b) the manufacture, construction, ordering, purchase, ownership, delivery, financing, leasing, releasing, possession, operation, use, maintenance, registration, titling, licensing, documentation, return, sale or other application or disposition of the Equipment, or any Item of Equipment or any part thereof, (c) the rentals, receipts or earnings arising from the Equipment or any Item of Equipment of any part thereof, (d) this Lease, any supplemental lease schedules, the Rent and/or Supplemental Rent and other payments payable by Lessee hereunder, or (e) any of the other documents executed as part of this Lease, 4 and any payment made pursuant thereto or any other transaction contemplated therein; provided, however, that the foregoing indemnity shall not apply to any taxes or other impositions based upon or measured solely by Lessor's or assignee's net income which are imposed or levied by any Federal, state or local taxing authority in the United States or any taxing authority of a foreign country. Lessor or assignee (whichever is applicable) shall furnish Lessee with copies of any requests for information received by Lessor or assignee from any taxing authority relating to any tax or other imposition with respect to which the Lessee is required to indemnify hereunder, and if claim is made against Lessor or assignee for any such taxes or other impositions, with respect to which Lessee is liable for a payment or indemnity hereunder, Lessor or assignee shall give Lessee notice in writing of such claim. Lessee may, at its sole cost and expense, either in its own name or in the name of Lessor or assignee, contest the validity, applicability or amount of such tax or other imposition by (i) resisting payment thereof if practicable in the sole discretion of Lessor, (ii) not paying the same except under protest, if protest is necessary or advisable and proper, or (iii) if the payment is made by Lessee, using reasonable efforts to obtain a refund thereof in appropriate administrative and judicial proceedings; provided, however, that such contest shall be permitted only if (A) no Event of Default has occurred and is continuing hereunder (B) only if and to the extent that such contest is being conducted in good faith, is being diligently prosecuted by Lessee by appropriate legal proceedings, and Lessor and assignee shall have determined in their sole judgment that the action to be taken in connection with such contest will not result in the sale, forfeiture or loss of, or the creation of a Lien (other than a Lessor Lien) on, the Equipment or any part thereof or title thereto or any interest of Lessor or assignee therein, (C) the amount being contested exceeds $100,000, (D) Lessee furnishes to Lessor, at Lessee's expense, a written opinion of outside tax counsel satisfactory to Lessor that there is substantial authority for such contest, and (E) Lessee agrees there shall be no appeal of any judicial decision resulting from such counsel. If Lessor or assignee shall obtain a refund of any amount paid by Lessee pursuant to this Section X, Lessor or assignee (whichever is applicable) shall pay to Lessee the amount of such refund, together with the amount of any interest actually received by Lessor or assignee on account of such refund. Lessee will promptly notify Lessor or assignee of all reports or returns required to be made with respect to any tax or other imposition with respect to which Lessee is required to indemnify hereunder, and will promptly provide Lessor or assignee with all information necessary for the making and timely filing of such reports or returns by Lessor or assignee. If Lessor or assignee requests that any such reports or returns be prepared and filed by Lessee, Lessee will prepare and file the same if permitted by applicable law to file the same, and if not so permitted, Lessee shall prepare such reports or returns for signature by Lessor or assignee (whichever is applicable), and shall forward the same, together with immediately available funds for payment of any tax or other imposition due, to Lessor or assignee, at least ten (10) business days in advance of the date such payment is to be made. Upon written request, Lessee shall furnish Lessor or assignee (whichever is applicable) with copies of all paid receipts or other appropriate evidence of payment of all taxes or other impositions paid by Lessee pursuant to this Section X. All of the indemnities contained in this Section X shall continue in full force and effect notwithstanding the expiration or earlier termination of this Lease in whole or in part, including the expiration or termination of the lease term with respect to any Item (or all) of the Equipment, and are expressly made for the benefit of, and shall be enforceable by, Lessor and assignee and their respective permitted successors and assigns. All payments made by the Lessee under this Section X shall be made directly to the party entitled thereto. As used herein, the term "Lien" shall mean any lien, mortgage, encumbrance, pledge, charge and security interest of any kind, and the term "Lessor Lien" shall mean a Lien arising as a result of an independent act of or claim against Lessor which (i) does not result from, or arise out of, the manufacture, purchase, ownership, financing, leasing, operation or management of the Equipment and (ii) is not a Lien that Lessee is required to remove or indemnify against. XI. PERFORMANCE OF OBLIGATIONS BY LESSOR: If Lessee shall fail to make any payment or perform any act or obligation required of Lessee hereunder, Lessor may, but need not, at any time thereafter make such payment or perform such act or obligation at the expense of Lessee. Any expense so incurred by Lessor shall constitute "Supplemental Rent" due hereunder and shall be payable by Lessee to Lessor upon demand. Such demand by Lessor shall not be deemed a cure or waiver of any default or release of any obligation of Lessee. XII. INDEMNIFICATION: Lessee agrees to indemnify, defend and hold Lessor, and its employees, officers, directors, successors and assigns (including any other Lender who from time to time may hold a security interest in this Lease) harmless from and against any and all liabilities, damages, claims, injuries, death, actions, suits, proceedings, penalties, costs and expense, including reasonable attorney's fees and costs, of whatsoever kind and nature (hereinafter "Claims") arising out of the use, condition (including, but not limited to, latent or other defects and whether or not discoverable by Lessee or Lessor), operation, acquisition, ownership or leasing of any Item of Equipment, including without limitation the manufacture, selection, purchase, delivery, acceptance, rejection, possession, return or disposition of any Item of Equipment, and including without limitation claims arising by contract 5 or tort including negligence, strict liability or otherwise, regardless of where, how and by whom the Equipment was operated or any failure on the part of Lessee to perform or comply with any of its obligations under this Lease. If any Claim is made against Lessee, Lessor or any other indemnified party, the party receiving notice of such Claim shall promptly notify the other, but the failure of such person receiving notice so to notify the other shall not relieve Lessee of any obligation hereunder. This indemnity shall survive the expiration or other termination of this Lease. XIII. ASSIGNMENT: Without Lessor's prior written consent, Lessee shall not transfer, assign, sublease, sell or otherwise dispose of any of Lessee's interest in any Equipment or this Lease, and any attempt by Lessee to accomplish the same without Lessor's consent shall be void. Lessor, and any assignee of, or successor in interest to Lessor, may, at any time, without notice to Lessee, mortgage, grant security interests in or otherwise transfer, sell or assign all or any part of its interest in this Lease or any Equipment or any Rent or other sums due or to become due hereunder, except that the interest of any such mortgagee, transferee or assignee shall be subject to Lessee's rights of use and possession, renewal rights and purchase options, if any, hereunder so long as no Event of Default has occurred and is continuing hereunder. No assignment, sale or transfer by either party shall relieve Lessee of its obligations hereunder, for which Lessee shall at all times remain primarily liable. Lessee acknowledges that this Lease and all Rent and Supplemental Rent (except for the indemnity payments which by their terms are explicitly due to and reserved for the Lessor under this Lease and any proceeds of public liability insurance payable to Lessor hereunder) due and to become due hereunder may be assigned by Lessor to an assignee, and Lessor may grant a security interest in this Lease, the Rent and all Supplemental Rent (except for such indemnity payments which are explicitly reserved for the benefit of the Lessor) due and to become due hereunder and in the Equipment, to assignee, under a separate agreement. Lessee and Lessor agree that the Rent and all Supplemental Rent (other than such indemnity payments) payable by Lessee hereunder shall be paid directly to assignee or upon its written order. Lessee further acknowledges and agrees that (i) the rights of assignee in and to the sums payable by the Lessee under any provision of this Lease shall not be subject to any abatement, defense, set-off, counterclaim or recoupment in Lessor's title, or for any cause whatsoever, it being the intent hereof that Lessee shall be unconditionally and absolutely obligated to pay directly to assignee all of the Rent and all Supplemental Rent (except indemnity payments to Lessor, which, unless Lessor notifies Lessee to the contrary, shall remain payable directly to Lessor) payable by Lessee; (ii) Lessee's representations and warranties in this Lease shall be deemed to be made to and for the benefit of assignee as well as Lessor; and (iii) assignee shall be entitled to the benefit of all covenants and obligations to be performed by Lessee under this Lease, except Lessee's covenants and obligations relating to indemnifying Lessor. LESSEE HEREBY WAIVES AS AGAINST ANY ASSIGNEE OF LESSOR, ITS SUCCESSORS AND ASSIGNS, ANY CLAIM OR DEFENSE THAT LESSEE MAY NOW OR HEREAFTER HAVE AS AGAINST LESSOR, WHETHER FOR BREACH OF THIS LEASE, BREACH OF WARRANTY OR OTHERWISE. Lessee and Lessor acknowledges that all obligations of Lessor to Lessee under this Lease shall be and remain enforceable by the Lessee against, and only against, Lessor. XIV. COMPENSATION FOR LATE PAYMENTS : SUPPLEMENTAL RENT : (a) In addition to each payment of Rent that shall become due and payable hereunder or under with respect to any Equipment Schedule, on the due date thereof Lessee shall be liable for and shall pay to Lessor compensation for late payment (as defined below): provided, however to the extent such payment of Rent shall be received by Lessor in good collected indefeasible funds on the due date thereof, Lessee shall be relieved of its obligation to pay the compensation for late payment attributable to such Rent payment. With respect to each payment of Rent, the compensation for late payment shall be chargeable on the amount in arrears for each month during the period such amount remains unpaid or an appropriate pro-rated portion thereof. Such compensation shall be calculated by reference to the average return generated by the transaction during the period preceding the defaults, provided that if such compensation exceeds the highest charges of such type permitted by applicable law, then the said compensation shall be the highest such as permitted by applicable law. (b) All sums due or to be due hereunder in addition to Rent provided for on the Schedules, shall be payable by Lessee as Supplemental Rent hereunder. Supplemental Rent shall include all sums due or to become due hereunder in addition to the Rent, including the Acquisition Cost, Casualty Value, and payments constituting indemnities, reimbursements, expenses and other charges payable pursuant to the terms thereof. XV. DEFAULT: The occurrence of any of the following shall constitute an Event of Default under this Lease: (a) Lessee fails to pay any Rent or other sums when due hereunder; (b) Lessee fails to maintain the required insurance with respect to any Equipment; (c) Lessee fails to perform any other covenant herein and such failure continues for twenty (20) days after written notice to Lessee specifying such failure and demanding that same be remedied; (d) Lessee shall be in default in the payment of any other indebtedness or with respect to any obligation 6 now or hereafter owed by Lessee to Lessor, an affiliate of Lessor or any assignee of Lessor under any other agreement or instrument; (e) Lessee files a petition in bankruptcy, or for reorganization, or for an arrangement pursuant to the U.S. Bankruptcy Code, or any similar federal or state or foreign law, or it is adjudicated bankrupt or insolvent, or makes an assignment for the benefit of creditors, or admits in writing to its inability to pay its debts generally as they become due, or is dissolved, or suspends payment of any of its obligations, or takes any corporate action in furtherance of any of the foregoing; (f) a petition or answer proposing the adjudication of Lessee as a bankrupt, or its reorganization under the U.S. Bankruptcy Code, or any similar federal or state or foreign law is filed in any court, and (i) Lessee shall consent to such filing, or (ii) such petition or answer is not discharged or denied within thirty (30) days after such filing; (g) a receiver, trustee or liquidator (or other similar official) is appointed for or takes possession or charge of Lessee, substantially all of its assets, or any Equipment; (h) Lessee's interest in any Equipment is levied upon or attached in any proceeding, and such process is not vacated or discharged within thirty (30) days thereafter; (i) Lessee attempts to sell, transfer, mortgage, pledge, or otherwise encumber, sublet or part with possession of any Equipment; (j) if Lessee is an individual, the death or judicial incompetence of Lessee; (k) any representation or warranty made by Lessee herein or in any document or certificate furnished by Lessee in connection herewith or pursuant hereto shall prove to have been incorrect in any material respect at the time made; or (l) the occurrence of any event described in (d), (e), (f), (g), (j), or (k) with respect to any guarantor or other party liable for the payment or performance of this Lease or the termination or adverse modification of any instrument, agreement or document by which such guarantor or other party is liable for the obligations of Lessee hereunder. XVI. REMEDIES: Upon occurrence of any Event of Default, or at any time thereafter, Lessor or its assignees may exercise one or more of the following remedies: (i) declare all accrued and unpaid Rent immediately due and payable; (ii) terminate this Lease as to any or all Items of Equipment upon written notice to Lessee, without prejudice to any other remedies hereunder; (iii) enter at any time any premises where the Equipment may be located with or without legal process and take possession thereof; (iv) proceed by appropriate action either at law or in equity to enforce performance by Lessee of the applicable covenants of this Lease or to recover damages for breach thereof; and (v) exercise any and all rights available to Lessor under applicable law upon a default by Lessee. Lessee, upon default hereunder, shall pay to Lessor (a) as liquidated damages for the loss of the bargain and not as a penalty an amount equal to the Casualty Value of the Equipment, as defined in Section VIII above, as of the date of occurrence of the Event of Default, and (b) all costs and expenses (including reasonable attorney's fees) incurred by Lessor in connection with collecting any amounts due hereunder or enforcing any right or remedy of Lessor hereunder. If Lessor repossesses the Equipment, Lessor shall attempt to mitigate Lessee's damages as hereinafter provided. Lessor shall be entitled to attempt to sell or release (the choice being reserved to Lessor's reasonable discretion) the Equipment in a public or private transaction at which Lessor may be the purchaser and Lessor may use Lessee's premises for the foregoing without liability for Rents, cost, damages, or otherwise and if notice thereof is required by law, any notice in writing of any such sale or lease by Lessor not less than ten (10) days prior to the date thereof shall constitute reasonable notice thereof to Lessee. The proceeds of such sale or lease, if any, shall be applied first (i) to all of Lessor's costs, charges and expenses incurred in taking, removing, holding, repairing and selling or leasing the Equipment; then (ii) to the extent not previously paid by Lessee, to pay Lessor any amounts or damages (including any Casualty Value) then remaining unpaid hereunder; then (iii) to reimburse Lessee any such sums previously paid by Lessee to Lessor as damages hereunder; and (iv) any surplus shall be retained by Lessee. Lessee shall pay Lessor any deficiency retained by Lessor. Lessee shall pay Lessor any deficiency in (i) and (ii) within ten (10) days of written request for same. Lessor's remedies provided for herein shall be cumulative and in addition to any and all other remedies provided, existing or available in its favor under any other provisions of this Lease or any other agreement, at law, in equity or under statute. Lessor's remedies may be exercised concurrently or separately, and the exercise of one remedy shall not be deemed to be an election of such remedy or to preclude the exercise of any other remedy. No failure or delay on the part of Lessor in exercising any right or remedy provided hereunder shall operate as a waiver thereof. Waiver of default shall not be a waiver of any other or subsequent default. Lessee waives demand of performance and notice of sale or lease. Lessee waives notice of place of sale or lease and manner and place of any advertising. XVII. RETURN OF EQUIPMENT; END OF LEASE PURCHASE OPTION: Upon expiration of the term of the Lease or each Item of Equipment, as specified in the applicable Lease Schedule, or upon demand of Lessor as provided in Section XVI, Lessee, at its own expense, shall immediately return the Equipment described in such Lease Schedule in the same condition as when delivered to Lessee, ordinary wear and tear excepted, to such location as Lessor shall designate. The Equipment shall be returned free and clear of all liens, encumbrances and rights of others. The risk of loss of the Equipment shall remain with Lessee until the returned Equipment is accepted by Lessor or such other entity to whom the Equipment is returned, and Lessee shall maintain insurance on the 7 Equipment in accordance with Section IX until such acceptance occurs. Unless and until the Equipment is returned and accepted as herein provided, or otherwise disposed of by written agreement of Lessor and Lessee, the term of this Lease with respect to such Equipment shall continue on a month-to-month basis terminable by Lessor upon thirty (30) days advance written notice at a Rent per month equal to the highest monthly Rent for the Equipment payable during the Lease Term. If a purchase option is set forth in any Schedule, such option shall apply to all of Lessor's rights, title and interest in and to all but not less than all the Equipment covered by such Schedule on the Purchase Option Date designated as such on the Schedule provided that Lessee is not then in default hereunder. Lessee may exercise such option by giving Lessor written notice of same no sooner than one hundred eighty (180) days or later than ninety (90) days prior to the Purchase Option Date. When applicable, Lessee shall take title to the Equipment "AS IS, WHERE IS." XVIII. NOTICES: All notices required hereunder shall be in writing and shall be deemed to have been given (i) if mailed, when received or five (5) days after mailing with proper postage, whichever is earlier; (ii) if delivered, when delivered, and (iii) if telecopied, when transmitted, addressed to Lessor or Lessee, as the case may be, at their respective addresses as set forth herein or at such other address as either shall from time to time designate in writing. XIX. TITLE TO EQUIPMENT; LIENS: Title to all Equipment leased hereunder shall at all times remain in Lessor, and Lessee shall have no right, title or interest in the Equipment except as expressly set forth herein. Lessee, at its sole expense, will protect and defend Lessor's title to the Equipment and will keep the Equipment free from any and all claims, liens, encumbrances and legal processes of Lessee's creditors and other persons other than those claiming by and through Lessor. Lessee shall notify Lessor immediately in writing upon receipt of notice of any Lien affecting the Equipment in whole or in part. Lessor shall have the right to display notice of its ownership of the Equipment by affixing, or by requesting Lessee to affix, in which case Lessee hereby agrees to affix, an appropriate notice to each Item of Equipment in a conspicuous place and Lessee shall not obscure, deface or remove such notice. The Equipment is, and shall at all times during the term hereof remain, personal property notwithstanding that any such Equipment may now or hereinafter be affixed to realty, with or without the consent of Lessor. Lessee and Lessor acknowledge that the transactions documented hereunder shall not constitute a "Lease" or a "true lease" and instead shall constitute a "lease intended as security" or "security interest" as the case may be for purposes of applicable law (including Section 1-201 (37) of the Uniform Commercial Code.) Without limiting any provision of the Lease, (i) to secure Lessee's obligations to Lessor hereunder and under the other lease documents (both now existing and hereafter arising), Lessee hereby grants to Lessor a first priority security interest in the Equipment described in each Lease Schedule and in all Rent and Supplemental Rent due thereunder, including all proceeds of said Equipment, Rent and Supplemental Rent, and (ii) the security interest granted to Lessor in clause (i) will be throughout the Lease Term a valid, perfected first priority security interest in such Equipment pursuant to the Uniform Commercial Code and other applicable law beginning upon the earlier to occur of (1) Lessor's payment to Lessee or any supplier, as the case may be, of the total invoice cost (or any portion thereof) of such Equipment, or (2) the filing of UCCs and/or fixture filings in the office of the appropriate State and/or County recording office, naming Lessee as debtor, and Lessor as secured party, and describing the Equipment. XX. NET LEASE; OFFSET; SURVIVAL: This Lease is a net lease, and Lessee's obligation to pay Rent, Supplemental Rent and other sums payable by Lessee hereunder and the rights of Lessor in and to such payments shall be absolute and unconditional. Lessee shall not be entitled to any abatement or recoupment of Rent or Supplemental Rent or other payments due hereunder or any reduction thereof under any circumstances or for any reason whatsoever. Lessee hereby waives any and all existing and future claims as offsets, defenses or counterclaims against any Rent, Supplemental Rent, or other payments due hereunder and agrees to pay the Rent, Supplemental Rent, and other amounts due hereunder as and when due regardless of any offset or claim which may be asserted by Lessee or on its behalf. This Lease shall not terminate, nor the respective obligations of Lessor or Lessee be otherwise affected, nor shall Lessor have any liability whatsoever to Lessee, by reason of any failure or delay in delivery of any or all of the Equipment, any defect in or damage to or loss or destruction of any of the Equipment from whatever cause, the prohibition of Lessee's use of the Equipment, the interference with such use by any government, person or corporation, the invalidity or unenforceability or lack of due authorization or other infirmity of this Lease, any lack of right, power or authority of Lessor or Lessee to enter into this Lease or any other cause whether similar or dissimilar to the foregoing. 8 XXI. FINANCIAL STATEMENTS: Lessee will, within thirty (30) days of the close of each fiscal year of Lessee, deliver to Lessor, Lessee's, and each guarantor's, preliminary balance sheets and statements of income certified by the chief financial officer of Lessee, and within one hundred twenty (120) days of the close of each fiscal year of Lessee, deliver to Lessor audited balance sheet and audited statement of income certified to by a recognized firm of certified public accountants and by the chief financial officer of Lessee, or such guarantor, as appropriate. Lessee will deliver to Lessor, upon Lessor's request, within sixty (60) days of the close of each fiscal quarter of Lessee, copies of Lessee's and each guarantor's quarterly financial report certified to by the chief financial officer of Lessee or such guarantor, as appropriate. Lessee will deliver to the Lessor, within ten (10) days of the close of each calendar month, copies of Lessee's and each guarantor's monthly financial reports certified by the chief financial officer of Lessee or such guarantor, as appropriate. XXII. ADDITIONAL DOCUMENTS; FURTHER ASSURANCES: Lessee further agrees to execute or to use best efforts to obtain and deliver to Lessor, at Lessor's request, such additional documents as Lessor may reasonably deem necessary to protect Lessor's interest in the Equipment or in this Lease, including, without limitation, financing statements, landlord's waivers, and mortgagee's waivers. Lessee shall pay to Lessor upon demand as Supplemental Rent any filing fees or expenses incurred in connection with such additional documents. Further, Lessor's obligations under each Equipment Schedule, including Lessor's obligation to purchase and participate in the financing of any Equipment to be leased thereunder, are conditioned upon Lessor having received: (i) evidence as to due compliance with the insurance provisions hereof; (ii) UCCs and all other filings and recordings with respect to the transactions contemplated thereunder which are necessary or appropriate to establish, protect, perfect or give first priority to Lessor's title in the Equipment leased thereunder and (iii) the absence of any adverse material change in the financial condition of Lessee. XXIII. MISCELLANEOUS: This Lease executed by and between Lessor and Lessee and the applicable Schedules shall constitute the entire agreement between the parties with respect to the Equipment and the subject matter of this Lease. No term or provision of this Lease may be changed, waived, amended or terminated except by a written agreement signed by the parties, except that Lessor may insert the serial number of any Item of Equipment and the Commencement Date on the appropriate Schedule. No express or implied waiver by Lessor of any Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Event of Default whether similar in kind or otherwise. The titles of the section of this Lease are for convenience only and shall not define or limit any of the terms or provisions hereof. Time is of the essence in this Lease and all of its provisions. Except as expressly provided herein and in the applicable Schedules, no options to purchase any of the Equipment or extend the term of this Lease with respect to any Equipment have been granted or agreed to by Lessor. No information, exhibit or report furnished or to be furnished by the Lessee to the Lessor in connection with the negotiation of this Lease and the transactions contemplated hereby contains or will contain any material misstatement of fact or omits or will omit a fact necessary to make the statement contained therein not misleading when made. The Lessee is not aware of any material facts or circumstances not disclosed to the Lessor which might, if disclosed, be of material consequence in the credit evaluation of the Lessee by the Lessor. If this Lease is signed by more than one Lessee, then each Lessee shall be jointly and severally liable for all the obligations to be performed by Lessee hereunder. XXIV. GOVERNING LAW; JURISDICTION: THIS LEASE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS. Lessee hereby consents to the jurisdiction of any court of record of The Commonwealth of Massachusetts or of the United States District Court for the District of Massachusetts over the person of Lessee, and service of process in any action or suit brought by Lessor may be made upon Lessee by mailing a copy of the summons to the Lessee at its address indicated above or at the last address of Lessee appearing in Lessor's records. Lessee also waives (i) right to trial by jury in the event of any litigation to which Lessor and Lessee are parties commenced in respect of this Lease and whether or not other person are also parties thereto, (ii) any claim that Massachusetts or the District of Massachusetts is an inconvenient forum, and (iii) any claim against Lessor for consequential or special damages. 9 IN WITNESS WHEREOF, the parties hereto have executed these presents to be effective as of the day and year first above written. LESSOR: LESSEE: Aberlyn Capital Management RHOMED INCORPORATED Limited Partnership By Its: General Partner Aberlyn Capital Management Company, Inc. By: /s/ Douglas R. Brian By: /s/ Stephen A. Slusher ---------------------------- ---------------------------- Name: Douglas R. Brian Name: Stephen A. Slusher ---------------------------- ---------------------------- Title: President Title: Vice President ---------------------------- ---------------------------- State of New Mexico County of Bornalillo On this 16 day of November, 1994, before me personally appeared Stephen A. Slusher, to me known, who, being duly sworn did depose and say that he is the Vice President of RhoMed Incorporated, the corporation described in and which executed the foregoing instrument. Notary Public /s/ Connie J. Jefferson SEAL 10 REGISTERED MASTER LEASE THIS LEASE IS A REGISTERED MASTER LEASE. BOOKS FOR THE REGISTRY OF THIS MASTER LEASE AGREEMENT ARE KEPT AT THE OFFICE OF THE LESSEE. NO TRANSFER OF THIS MASTER LEASE AGREEMENT SHALL BE VALID UNLESS MADE ON THE LESSEE'S BOOKS AT THE OFFICE OF THE LESSEE, BY THE REGISTERED HOLDER OF THIS MASTER LEASE AGREEMENT IN PERSON OR BY OFFICER OF THE REGISTERED HOLDER IN WRITING, AND SIMILARLY NOTED ON THIS MASTER LEASE AGREEMENT FORM BELOW. DATE OF IN WHOSE ADDRESS SIGNING REGISTRATION NAME REGISTERED OF HOLDER OFFICER - ------------ --------------- --------- ------- Aberlyn Capital 1000 Winter Street Management Limited Suite 1100 11/13/94 Partnership Waltham, MA 02154 /s/ Douglas R. Brian - ----------------- ----------------- - ----------------- ----------------- ----------------- ----------------- - ----------------- ----------------- ----------------- ----------------- - ----------------- ----------------- ----------------- ----------------- EX-4.4 5 LETTER AGREEMENT LETTER AGREEMENT ---------------- This Letter Agreement (the "Letter Agreement") is entered into as of April 28, 1995 by and between Aberlyn Capital Management Limited Partnership ("Aberlyn"), a Delaware limited partnership and RhoMed Incorporated ("RhoMed"), a New Mexico corporation. RhoMed has entered into various financing agreements with Aberlyn whereby Aberlyn and RhoMed entered into a certain Patent Assignment and License Agreement No. 0013P dated July 15, 1993 and Patent Schedule Nos. 002, 003, 004 and 005 thereunder and a Financial Covenant Rider, dated as of November 16, 1994 and Amendment thereto dated December 29, 1994 and a certain Master Lease Agreement No. 0013E dated November 16, 1994 and Lease Schedule No. 001 thereunder and a Financial Covenant Rider, dated as of November 16, 1994 and Amendment thereto dated December 29, 1994 (collectively referred to as the "Agreements"). Aberlyn and RhoMed hereby agree to modify the terms of the Agreements as follows: 1. a.) RhoMed agrees to remit to Aberlyn beginning May 1, 1995, the following amounts (the "Revised Payment Amounts") that will be applied on a pro-rated basis against each Patent Schedule and Lease Schedule for the term of 48 months commencing May 1, 1995: (Aberlyn will issue a Modification Agreement amending the original Royalty Payment and original Rental amounts (the "Original Payment Amounts") for each Patent Schedule and Lease Schedule within 20 days of the date hereof.) Month No.: Revised Payment Amount: Months 01 - 12: $ 5,000.00 Months 13 - 24: $ 20,000.00 Months 25 - 48: $ 91,695.00 b.) Payments for months 1 - 24 will be applied toward principal only and interest shall accrue on the outstanding principal during this period (the "Accrued Interest"). Such Accrued Interest, however, shall not be payable in cash but shall be converted into shares of RhoMed's Common Stock (the "Stock"). The number of shares of Stock will be determined at the date of issuance (the "Issue Date") and will be equal to the cumulative Accrued Interest (as calculated in Exhibit A attached hereto ) at the Issue Date divided by an amount to be negotiated at a future date. c.) The Issue Date will be either the end of month 24 as referred to in paragraph 1(b) above (April 30, 1997) or, in the event RhoMed redeems Aberlyn's debt during months 1 - 24, at the end of the month following such redemption. d.) Contingent upon the agreement of the underwriter of an IPO, the Stock will be free and tradable by Aberlyn within 180 days of Aberlyn receiving the Stock. The Stock will be subject to piggy-back registration rights. e.) The total outstanding principal as of the end of month 24 will be amortized over the 24 month period beginning May 1, 1997, along with interest which shall begin to accrue on May 1, 1997. 2. RhoMed further agrees to issue to Aberlyn upon the signing of this Letter Agreement a warrant to purchase a minimum of 200,000 shares of RhoMed's Common Stock, at an exercise price to be negotiated at a future date. 3. RhoMed shall have an option to redeem any or all of Aberlyn's outstanding principal and accrued interest, subject to paragraph 1 above, at any time, without penalty. 10 4. RhoMed will redeem up to one-hundred percent (100%) of the outstanding Aberlyn debt upon completion of an IPO raising net proceeds of more than $5 million, the final percent to be agreed upon by Aberlyn, The Castle Group Ltd. ("Castle") and the IPO underwriter. 5. Aberlyn will receive Board of Director's observation rights for the term of the Agreements. 6. Aberlyn hereby waives any default under the Agreements and waives any recourse it may have with regard to such default based on any occurrence happening on or prior to May 1, 1995, including but not limited to the following: a.) With regard to the Patent Assignment and License Agreement dated July 15, 1993, all Events of Default occurring on or prior to May 1, 1995 as such are defined in Section 1(a) of such Patent Assignment and License Agreement, are waived; and all rights and remedies, whether provided in Section 5 of such Patent Assignment and License Agreement or otherwise are waived; b.) With regard to the Master Lease Agreement dated November 16, 1994, all Events of default occurring on or prior to May 1, 1995 as such are defined in Section XV of such Master Lease Agreement are waived; and all rights and remedies whether provided in Section XVI of such Master Lease Agreement or otherwise are waived. 7. Aberlyn hereby waives all future defaults relating to the Original Payment Amounts referred to in paragraph 1 of this Letter Agreement and specifically waives all Events of Default as such are defined in Section 1(a) of such Patent Assignment and License Agreement or Section XV of such Master Lease Agreement, relating to any admission by RhoMed of its inability to pay its debts as they become due. The Revised Payment Amounts shall be subject to all default provisions contained within the Agreements. 8. The Agreements are amended by deleting, from the Financial Covenant Rider dated as of November 16, 1994 and the Amendment to the Financial Covenant Rider dated as of December 29, 1994, the provisions of paragraphs 3, 4, and 5 inclusive, of both the Financial Covenant Rider and the Amendment thereto. 9. Aberlyn hereby expressly recognizes that Castle is arranging for a $300,000 line of credit to RhoMed in reliance upon the Agreements set forth herein, and Aberlyn recognizes Castle as a third-party beneficiary of this Letter Agreement. This Letter Agreement, and any term hereof, may not be changed, waived, discharged or terminated unless amended in writing signed by both parties. RHOMED INCORPORATED ABERLYN CAPITAL MANAGEMENT LIMITED PARTNERSHIP BY ITS: GENERAL PARTNER ABERLYN CAPITAL MANAGEMENT COMPANY, INC. By: /s/ Buck A. Rhodes By: /s/ Douglas R. Brian ----------------------------- ------------------------------ Name: Buck A. Rhodes Name: Douglas R. Brian ----------------------------- ------------------------------ Title: President Title: President ----------------------------- ------------------------------ Date: June 19, 1995 Date: June 19, 1995 ----------------------------- ------------------------------ EX-4.5 6 STOCK PURCHASE AND MODIFICATION AGREEMENT STOCK PURCHASE AND MODIFICATION AGREEMENT RhoMed Incorporated, a New Mexico corporation ("RhoMed"), Aberlyn Capital Management Limited Partnership, a Delaware limited partnership ("ACM"), and Aberlyn Holding Company, Inc., a Delaware corporation ("AHC") (ACM and AHC together called "Aberlyn"), agree: 1. Recitals. RhoMed has entered into five agreements to issue warrants to ACM and two agreements to issue warrants to AHC. Exhibit A to this Stock Purchase and Modification Agreement (this "Agreement") lists these seven agreements to issue warrants (collectively, the "Warrant Agreements"). RhoMed and ACM have also entered into a Letter Agreement effective as of April 28, 1995 (the "Letter Agreement"), which restructured various financing arrangements between RhoMed and ACM, and granted certain rights to ACM, including the right in paragraph number 2 therein to purchase a minimum of 200,000 shares of RhoMed common stock at an exercise price to be negotiated at a future date. The parties wish to enter into a stock transaction, terminate the Warrant Agreements and modify certain terms of the Letter Agreement. 2. Stock purchase and consideration. Upon execution of this Agreement, ACM will purchase from RhoMed and RhoMed will issue to ACM or its designees nine hundred thirty thousand and twenty-three (930,023) shares (the "Stock") of RhoMed's common stock. The consideration for this transaction is as follows: a. Payment of accrued interest. RhoMed will issue the Stock to ACM as payment of the three hundred twenty-four thousand five hundred and forty-six dollars ($324,546) which RhoMed owes ACM as accrued interest through April 30, 1996, under the financing agreements named in the Letter Agreement, as calculated on the Page 1 amortization schedule set forth as Exhibit A to the Letter Agreement. RhoMed's issuance of the Stock will satisfy RhoMed's obligation under paragraph 1(b) of the Letter Agreement to issue its common stock in payment of accrued interest for months 01-12. b. Termination of Warrant Agreements and Letter Agreement Warrant. The Warrant Agreements will terminate upon issuance of the Stock, and RhoMed will have no further obligation to issue warrants or stock under the Warrant Agreements or pursuant to paragraph 2 of the Letter Agreement. 3. Conversion of accrued interest for months 13-24. RhoMed will continue to be obligated to issue common stock to ACM in payment of accrued interest as required under paragraph 1(b) of the Letter Agreement, but only for months 13-24. The per share price for determining the number of shares of common stock to be issued (the "Accrued Interest Conversion Price") will be three quarters (3/4) of the per share offering price for RhoMed's common stock (or securities received in exchange for RhoMed's common stock) in any offering commencing after April 30, 1996, in which the total offering proceeds exceed five million dollars ($5,000,000). In the event that RhoMed does not complete such an offering before April 30, 1997, the Accrued Interest Conversion Price will be three quarters (3/4) of the average closing per share price for the twenty trading days immediately preceding April 30, 1997, provided that RhoMed common stock (or securities received in exchange for RhoMed's common stock) trades on a national securi ties exchange, on the National Association of Security Dealers, Inc. Automated Quotations System ("NASDAQ"), or on the OTC Electronic Bulletin Board or in "pink sheets." Any shares of common stock issued pursuant to this Article 3 will have registration rights as provided for the Stock in Article 4 of this Agreement. Page 2 4. Registration rights. RhoMed agrees that no later than 180 days after the later of (x) issuance of the Stock or (y) the first date on which RhoMed's common stock (or securities received in exchange for RhoMed's common stock) trades on a national securi ties exchange, on the National Association of Security Dealers, Inc. Automated Quotations System ("NASDAQ"), or on the OTC Electronic Bulletin Board or in "pink sheets," RhoMed will use its reasonable best efforts to file a registration statement (the "Registration Statement") registering the Stock for public sale under the Securities Act of 1933 (the "Act"), and use its reasonable best efforts to effect the registration of the Stock and maintain the effectiveness of the Registration Statement until the completion of the distribution of the Stock as contemplated in the Registration Statement; provided, however, that the obligation to file, effect and maintain a Registration Statement shall obtain if and only for so long as the Stock (i) has not been disposed of pursuant to a registration statement declared effective by the Commission, (ii) has not been sold in a transaction exempt from the registration and prospectus delivery requirements of the Act so that all transfer restrictions and restrictive legends with respect thereto are removed upon the consummation of such sale, or (iii) is not saleable as exempt securities pursuant to Section 3(a)(10) of the Act. Notwithstanding the foregoing, RhoMed (i) will not be obligated to enter into any underwriting agreement for the sale of any of the Stock and (ii) may delay the filing for a period not to exceed sixty (60) days if RhoMed determines in good faith that such filing would have an adverse effect on RhoMed or would otherwise be inadvisable. a. Expenses. All Registration Expenses ("Registration Expenses" means all expenses incurred by RhoMed in complying with Article 4 hereof, including, without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and expenses of counsel for RhoMed, blue sky fees and expenses for a reasonable number of states and the expense of any special audits incident to or required Page 3 by any such registration, but excluding the fees of legal counsel for any holder of Stock) incurred in connection with any registration, qualification or compliance pursuant to Article 4 shall be borne by RhoMed. All Selling Expenses ("Selling Expenses" means all underwriting discounts and selling commissions applicable to the sale of Stock and all fees and expenses of legal counsel for any holder of Stock) relating to the sale of securities registered by or on behalf of holders of Stock shall be borne by such holders pro rata on the basis of the number of securities so registered. b. Assignment of registration rights. The rights to cause RhoMed to register Stock under this Article 4 may be assigned in full by a holder of Stock, provided, that: (i) such transfer may otherwise be effected in accordance with applicable securities laws; (ii) such transfer involves not less than the lesser of all of such holder's shares of Stock or 100,000 shares of Stock; (iii) such holder gives prior written notice to RhoMed; and (iv) such transferee agrees to comply with the terms and provisions of this Agreement, and such transfer is otherwise in compliance with this Agreement. Except as specifically permitted by this Section 4 (b), the rights of a holder with respect to Stock as set out herein shall not be transferable to any other person, and any attempted transfer shall cause all rights of such holder therein to be forfeited. c. Holdback agreement. If RhoMed files a registration statement with the Securities and Exchange Commission in connection with a public offering of RhoMed's securities, the holder of any Stock, by accepting this Agreement, agrees, if so requested by RhoMed, that such holder will not directly or indirectly sell, make any short sale of, grant any option for the purchase of, or otherwise dispose of any capital stock of RhoMed during the 30-day period ending, and the 180-day period beginning (or any such other period as is required by the underwriter of such offering) on the first date of the Page 4 effectiveness of such registration statement. Upon request, the holder will sign an agreement in reasonable form to such effect with the underwriter of such an offering. d. Indemnification. RhoMed will indemnify the holders of Stock which is included in each registration statement under this Article 4 substantially to the same extent as is customary for indemnification and contribution provisions in favor of underwriters and selling shareholders of similar offerings, and such holders of Stock will indemnify RhoMed with respect to information furnished by them in writing to RhoMed for inclusion therein substantially to the same extent as is customary for indemnification and contribution provisions is favor of companies by underwriters in similar offerings. e. Amendment of registration rights. With the written consent of RhoMed and the holders holding at least a majority of the Stock that is then outstanding, any provision of this Article 4 may be waived (either generally or in a particular instance, either retroactively or prospectively and either for a specified period of time or indefinitely) or amended. Upon the effectuation of each such waiver or amendment, RhoMed shall promptly give written notice thereof to the holders of Stock, if any, who have not previously received notice thereof or consented thereto in writing. 5. Representations and warranties of Aberlyn. Aberlyn acknowledges, represents and warrants to RhoMed that: a. Authorization and enforceability. ACM is a partnership and AHC is a corporation, both duly organized under the laws of the jurisdiction of their organization, and have the power to execute, deliver and perform this Agreement and have taken all necessary action to authorize them to execute, deliver and perform this Agreement. Aberlyn's execution, delivery and performance of this Agreement does not and will not Page 5 violate any provision of their organizational documents, or any law, regulation, order, or judgment of any governmental authority to which they are subject. ACM and AHC have duly executed and delivered this Agreement. When RhoMed accepts and executes this Agreement, it will constitute the legal, valid and binding obligation of each, enforceable against each in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally, by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law), and by statutory rescission rights under any applicable state securities laws. Aberlyn does not need to obtain the consent, authorization or order of, or make any filing or registration with, any governmental authority or other person, in order to execute, deliver and perform this Agreement. b. Private placement; Regulation D; legends. Aberlyn understands that (i) RhoMed intends for the sale and issuance of Stock under this Agreement to be exempt from the registration and prospectus delivery requirements of the Act, and (ii) there is no existing public or other market for the Stock. Aberlyn is acquiring the Stock for their own account, or the account of one or more institutional Accredited Investors (as the term "Accredited Investor" is defined under Regulation D of the Act) for which Aberlyn is acting as a duly authorized fiduciary or agent, and not with a view to or for sale in connection with any distribution of Stock in violation of the Act or any other applicable securities laws. Aberlyn has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of Aberlyn's investment in the Stock and Aberlyn is capable of bearing the economic risks of investment in the Stock, including a complete loss of that investment. ACM and AHC are Accredited Investors because each is an organization or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of Page 6 $5,000,000, and each is further an entity in which all of the equity owners are Accredited Investors. Aberlyn recognizes purchasing the Stock involves a high degree of risk, including, but not limited to, the risk of economic losses from operations of RhoMed. Aberlyn understands that (i) the Stock is not registered under the Act or any other applicable securities laws, and Aberlyn may resell shares of the Stock only if RhoMed registers the Stock under the Act or if an exemption from registration requirements is available; and (ii) except as set forth in Article 4 of this Agreement (concerning registration rights), RhoMed does not currently anticipate taking any action, including the filing of any reports or other information with the Securities and Exchange Commission, in order to enable Aberlyn to take advantage of the rules promulgated under the Act that are designed to facilitate the sale of restricted securities. Aberlyn agrees to comply with all applicable federal and state securities laws in connection with any subsequent resale of the Stock. Aberlyn is aware that the Act restricts the transferability in the United States of securities issued in reliance on the exemption from the registration requirements of the Act provided by Regulation D thereunder and that each certificate representing the Stock will bear a restrictive legend limiting transferability, which will be binding on each holder of Stock. 6. Corporate restructuring. If, before RhoMed issues the Stock or any common stock due on account of accrued interest pursuant to Article 3, RhoMed amends its articles of incorporation or enters into any agreement which results in shares of RhoMed's common stock being replaced by a different number or class of securities or securities of another corporation (a "Corporate Restructuring"), then RhoMed or its successor will issue securities in the kind and number which ACM would have received, had RhoMed issued the Stock or shares of common stock to ACM before the Corporate Restructuring. Page 7 7. Termination of observation right. ACM's right to observe meetings of RhoMed's directors, granted under paragraph 5 of the Letter Agreement, is terminated. 8. Miscellaneous. This Agreement benefits and is binding on the parties, their successors and assigns, represents the entire agreement of the parties as to its subject matter, may be modified only in writing signed by the parties, and is governed by the laws of the state of New Mexico. Dated as of June 24 , 1996. RHOMED INCORPORATED By: s/ John J. McDonough Date: 6/24/96 -------------------- John J. McDonough CFO and Vice President ABERLYN CAPITAL MANAGEMENT LIMITED PARTNERSHIP By: Aberlyn Capital Management Co., Inc. Its: General Partner By: s/ Douglas R. Brian Date: 6/18/96 ---------------------- Name: Douglas R. Brian ----------------- Title:President ---------------- ABERLYN HOLDING COMPANY, INC. By: s/ Douglas R. Brian Date: 6/18/96 ---------------------- Name: Douglas R. Brian ----------------- Title:President ---------------- Page 8 EXHIBIT A WARRANT AGREEMENTS W-1. Agreement to Issue Warrant, dated as of July 15, 1993, between Aberlyn Capital Management Limited Partnership and RhoMed, as to 57,500 shares. W-2. Agreement to Issue Warrant, dated as of July 15, 1993, between Aberlyn Holding Company and RhoMed, as to 57,500 shares. W-3. Agreement to Issue Warrant, dated as of August 1, 1994, between Aberlyn Capital Management Limited Partnership and RhoMed, as to 115,000. W-4. Agreement to Issue Warrant, dated as of July 22, 1994, between Aberlyn Capital Management Limited Partnership and RhoMed, as to 40,000 shares. W-5. Agreement to Issue Warrant, dated as of July 22, 1994, between Aberlyn Holding Company and RhoMed, as to 40,000 shares. W-6. Agreement to Issue Warrant, undated (but entered into pursuant to an agreement dated as of August 1, 1994) between Aberlyn Capital Management Limited Partnership and RhoMed, as to 20,023 shares. W-7. Agreement to Issue Warrant, dated as of November 16, 1994, between Aberlyn Capital Management Limited Partnership and RhoMed, as to 400,000 shares. Page 9 EX-10.01 7 LEASE ================================================================================ LEASE THIS INDENTURE, made this 18th day of DECEMBER, 1992, by and between CHARLES C. AND ELLEN C. FRANCE REVOCABLE TRUST, hereinafter, whether singular or plural, masculine, feminine, or neuter, designated as "Lessor," which expression shall include Lessor's heirs, personal representatives, assigns, and successors in interest, and RHOMED INCORPORATED, a New Mexico Corporation, hereinafter, whether singular or plural, masculine, feminine, or neuter, designated as "Lessee," which expression shall include all Lessees, jointly and severally, and shall include Lessee's heirs, personal representatives, assigns, and successors in interest, WITNESSETH: I. DEMISE OF PREMISES. Lessor, for and in consideration of the covenants and agreements herein contained to be kept and performed by Lessee, Lessee's heirs, personal representatives, assigns, and successors in interest, and upon the terms and conditions herein contained, does hereby let, lease, and demise to Lessee the following-described premises situated in Albuquerque in the County of Bernalillo, State of New Mexico, to wit: 4255 and 4261 Balloon Park Road, N.E. II. TERM OF LEASE. The term of this Lease shall be for a period of three (3) years, beginning on the 1st day of July, 1993, and ending on the 30th day of June, 1996. III. RENT. Lessee, for and in consideration of this Lease and the demise of the said premises by Lessor to Lessee, hereby agrees and covenants with Lessor to pay as rent for the said premises, without notice or demand, the sum of One Hundred Thirty Three Thousand Fifty Six and no/100 Dollars ($133,056.00) in the following manner, to wit: $3,696.00 per month payable on the first of every month without demand or offset. In the event that said rent is not received on or before the 15th day of the month, a 2% late charge shall be assessed on the outstanding balance. All of the rent shall be paid by Lessee to Lessor or Lessor's order in lawful money of the United States at 6204 Osuna, NE, Albuquerque, NM 87109 or at such other place as Lessor may designate from time to time for this purpose. IV. USE OF PREMISES. Lessee, for and in consideration of this Lease and the demise of the said premises by Lessor to Lessee, hereby agrees and covenants with Lessor to use and occupy the said premises for the purpose of maintaining Lessee's current bio-medical research business and related items, and for no other purpose without first obtaining the written consent of Lessor therefor; the Lessee shall not use or occupy or permit the demised premises to be used or occupied, or do or permit anything to be done in or on the demised premises, in a manner which will make void or voidable any insurance then in force with respect thereto, or which will make it impossible to obtain fire or other insurance required to be furnished hereunder, or which will cause or be likely to cause structural damage to the demised premises or any portion thereof, or which will constitute a public or private nuisance. Further, the Lessee shall not use or occupy or permit the demised premises to be used or occupied for any business, purpose, or use deemed disreputable or extra-hazardous, or for any purpose or in any manner which is in violation of any present or future municipal, state and federal ordinances, laws, rules and regulations. ================================================================================ ================================================================================ V. CONDITION OF PREMISES AND REPAIRS. Lessee, for and in consideration of this Lease and the demise of the said premises, hereby agrees and covenants with Lessor that Lessee has examined the said premises prior to the execution hereof, knows the condition thereof, and acknowledges that Lessee has received the said demised premises in good order and condition, and that no representation or warranty as to the condition or repair of the said premises has been made by Lessor, and, at the expiration of the term of this Lease, or any renewal or extension thereof, Lessee will yield up peaceably the said premises to Lessor in as good order and condition as when the same were entered upon by Lessee, loss by fire or inevitable accident, damage by the elements, and reasonable use and wear expected; that Lessee will keep, at Lessee's own expense, the said premises in good order and repair during the term of this Lease, or any extension or renewal thereof, and will repair and replace promptly, at Lessee's own expense, any and all damage, including, but not limited to, damage to roof, walls, floors and foundations, heating and cooling units, plumbing, glass, sidewalks, and all other appurtenances, that may occur from time to time; that Lessee hereby waives any and all right to have such repairs or replacements made by Lessor or at Lessor's expense; and that, if Lessee fails to make such repairs and replacements promptly, or, if such repairs and replacements have not been made within fifteen (15) days after the occurence of damage, Lessor may, at Lessor's option, make such repairs and replacements, and Lessee hereby agrees and covenants to repay the cost thereof to Lessor on demand. VI. LIABILITY OF LESSOR. Lessee, for and in consideration of this Lease and the demise of the said premises, hereby agrees and covenants with Lessor that Lessor shall not be liable for any damage to persons or property arising from any cause whatsoever, which shall occur in any manner in or about the said premises, and Lessee hereby agrees to indemnify and save harmless Lessor form any and all claims and liability for damage to persons or property arising from any cause whatsoever, which shall occur in any manner in or about the said premises. Further, Lessee hereby agrees and covenants with Lessor that Lessor shall not be liable for any damage to the said demised premises, or to any part thereof, or to any property or effects therein or thereon, caused by leakage from the roof of said premises or by bursting, leakage, or overflowing of any waste pipes, water pipes, tanks drains, or stationary washstands, or by reason of any damage whatsoever caused by water from any source whatsoever, and Lessee hereby agrees and covenants to indemnify and save harmless Lessor from any and all claims and liability for any damage to the said demised premises, or to any part thereof, or to any property or effects therein or thereon. VII. REQUIREMENTS OF PUBLIC AUTHORITY Lessee, for and in consideration of this Lease and the demise of the said premises, hereby agrees and covenants with Lessor that during the term of this Lease, lessee shall, at its own cost and expense, promptly observe and comply with all present and future municipal, state, and federal ordinances, laws, rules, and regulations affecting the demised premises or appurtenances thereto, or any part thereof, whether the same are in force and effect at the time of the commencement of the term of this Lease or may in the future be passed, enacted, or directed, and lessee shall pay all costs, expenses, liabilities, losses, damages, fines, penalties, claims, and demands, including reasonable attorney's fees, that may in any manner arise out of or be imposed because of the failure of Lessee to comply with the covenants and agreements of this paragraph VII. Further, Lessee hereby agrees and covenants with Lessor that if Lessee fails to comply promptly with any present or future municipal, state, and federal ordinances, laws, rules, and regulations, or fails to comply by such time that compliance may be required by law, Lessor may, at Lessor's option, take such actions as may be necessary to comply with all present and future municipal, state, and federal ordinances, laws, rules, and regulations, and Lessee hereby agrees and covenants to repay the cost incurred by Lessor in taking such action to Lessor on demand. VIII. ALTERATIONS, ADDITIONS, AND IMPROVEMENTS. Lessee, for and in consideration of this Lease and the demise of the said premises, hereby agrees and covenants with Lessor that Lessee shall not make, or suffer or permit to be made, any alterations, additions, or improvements whatsoever in or about the said demised premises without first obtaining the written consent of Lessor therefor; provided, however, that such consent, if given, shall be subject to the express condition that any and all alterations, additions, and improvements shall be done at Lessee's own expense and in accordance and compliance with all applicable municipal, state, and federal ordinances, laws, rules, and regulations, and that Lessee hereby covenants and agrees with Lessor that in doing and performing such work Lessee shall do and perform the same at Lessee's own expense, in conformity and compliance with all applicable municipal, state, and federal ordinances, laws, rules, and regulations, and that no liens of mechanics, materialmen, laborers, architects, artisans, contractors, sub-contractors, or any other lien of any kind whatsoever shall be created against or imposed upon the said demised premises, or any part thereof, and that Lessee shall indemnify and save harmless Lessor from any and all liability and claims for damages of every kind and nature which might be made, or from judgments rendered against Lessor or against said demised premises on account of or arising out of such alterations, additions, or improvements. IX. OWNERSHIP OF ALTERATIONS, ADDITIONS, AND IMPROVEMENTS. Lessee, for and in consideration of this Lease and the demise of the said premises, hereby agrees and covenants with Lessor that any and all alterations, additions, and improvements, except signs, shelving, movable furniture and equipment not affixed to the roof, walls, or floors, made at Lessee's own expense after having first obtained the written consent of Lessor therefor, in accordance with the provisions contained in Paragraph VII hereof, whether or not attached to the roof, walls, floors, foundations, or the premises in any manner whatsoever, shall immediately merge and become a permanent part of the realty, and any and all interest of the Lessee therein shall immediately vest in Lessor, and all such alterations, additions, and improvements shall remain on the said premises and shall not be removed by Lessee at the termination of this Lease. The signs, shelving, moveable furniture and equipment not affixed to the roof, walls, or floors, shall be removed by Lessee at Lessee's expense on or before the termination of the Lease, and Lessee shall repair any damage caused thereby at Lessee's own expense, such that the premises shall be in as good order and condition as when the same were entered upon by Lessee. X. ASSIGNMENT AND SUBLETTING. Lessee, for and in consideration of this Lease and the demise of the said premises, hereby agrees and covenants with Lessor that neither Lesser nor Lessee's heirs, personal representatives, assigns, or successors in interest shall assign this Lease or sublet the said demised premises, in whole or in part, without first obtaining the written consent of Lessor therefor: that no assignment of this Lease or any subletting of the said demised premises, in whole or in part, shall be valid, except by and with the written consent of Lessor first obtained; that the consent of Lessor to any such assignment or subletting shall not operate to discharge Lessee or Lessee's heirs, personal representatives, assigns, or successors in interest from their liability upon the agreements and covenants of this Lease, and Lessee, Lessee's personal representatives, assigns, and successors in interest shall remain liable for the full and complete performance of all of the terms, conditions, covenants, and agreements herein contained as principals and not as guarantors or sureties, to the same extent as though no assignment or sublease had been made; that any consent of Lessor to any such assignment or subletting shall not operate as a consent to further assignment or subletting or as a waiver of this covenant and agreement against assignment and subletting; and that following any such assignment or subletting, the assignee and/or sublettee shall be bound by all of the terms, conditions, covenants, and agreements herein contained including the covenant against assignment and subletting. XI. UTILITY AND OTHER CHARGES. Lessee, for and in consideration of this Lease and the demise of the said premises, hereby agrees and covenants with Lessor to pay promptly all utility and other charges of whatsoever kind and nature, including charges for electrical, gas, garbage, sewage, telephone, and other services, which may be incurred in connection with Lessee's use of the said premises, and to indemnify and save harmless Lessor therefrom. XII. LESSOR'S RIGHT OF ENTRY AND TO MAKE ALTERATIONS, ADDITIONS, AND IMPROVEMENTS. Leasee, for and in consideration of this Lease and the demise of the said premises, hereby agrees and covenants with Lessor that Lessor, Lessor's heirs, personal representatives, assigns, agents, attorneys, and successors in interest shall have the right at any time, upon reasonable notice to Lessee, to enter upon the said premises to inspect the same and to make any and all improvements, alterations, and additions of any kind whatsover upon the said premises, providing such improvements, alterations, and additions are reasonably necessary or convenient to the use to which the said premises are being put at the time, but at no time shall Lessor be compelled or required to make any improvements, alterations, or additions. XIII. TAXES, OTHER ASSESSMENTS, AND INSURANCE. Lessee and Lessor hereby covenant and agree that all taxes and special and general assessments of whatsover kind and nature, extraordinary as well as ordinary, which have been or may be levied upon the said demised premises and upon any alterations, additions, and improvements thereon, shall be paid by Lessee at the time when the same become due and payable, and that all taxes and special and general assessments of whatsoever kind and nature, extraordinary as well as ordinary, which have been or may be levied upon the personal property located upon the said demised premises shall be paid by Lessee at the time when the same shall become due and payable. Lessee, for and in consideration of this Lease and the demise of the said premises, hereby agrees and covenants with Lessor to carry and maintain in full force and effect during the term of this Lease, and any extension or renewal thereof, at Lessee's expense, public liability insurance covering bodily injury and property damage liability, in a form and with an insurance company acceptable to Lessor, with limits of coverage of not less than $1,000,000 for each person and $1,000,000 in the aggregate for bodily injury or death liability for each accident, and $1,000,000 for property damage liability for each accident, for the benefit of both Lessor and Lessee as protection against all liability claims arising from the premises. Lessee hereby agrees and covenants with Lessor to deliver ================================================================================ ================================================================================ a copy of the insurance policy or policies to Lessor at the beginning of the term of this Lease, or as soon thereafter as practicable, and to give Lessor not less than ten (10) days' written notice informing Lessor of the expiration of any such policy. Fire and extended coverage insurance upon all buildings, alterations, and improvements upon the said premises shall be provided for as follows: Lessee, and fire and extended coverage insurance upon all of the contents and other personal property situated upon the said premises shall be provided for as follows: Lessee. It is understood and agreed by and between the parties that a copy of each policy of fire and extended coverage insurance shall be provided to the parties hereto at the beginning of the term of this Lease, or as soon thereafter as practicable, and that the party who is responsible for paying the premiums on each policy of fire and extended coverage insurance shall give the other party not less than ten (10) days' written notice informing the other party of the expiration of any such policy. XIV. HOLDING OVER. Lessee, for and in consideration of this Lease and the demise of the said premises, agrees and covenants with Lessors that no holding over by Lessee after the expiration of this Lease, or any renewal or extension thereof, whether with or without the consent of Lessor, shall operate to extend or renew this Lease, and that any such holding over shall be construed as a tenancy from month to month at the monthly rental which shall have been payable at the time immediately prior to when such holding over shall have commenced, and such tenancy shall be subject to all the terms, conditions, covenants, and agreements of this Lease. XV. BANKRUPTCY AND CONDEMNATION. Lessee, for and in consideration of this Lease and the demise of the said premises, hereby agrees and covenants with Lessor that should Lessee make an assignment for the benefit of creditors or should be adjudged a bankrupt, either by voluntary or involuntary proceedings, or if otherwise a receiver or trustee should be appointed by any court of competent jurisdiction for Lessee because of any insolvency, or any execution, attachment, replevin, or other court order should be issued against the Lessee or any of Lessee's property, whereby the demised premises or any building or buildings, or alterations, additions, or improvements thereon, shall be taken or occupied or attempted to be taken or occupied by someone other than the Lessee, the occurrence of any such event shall be deemed a breach of this Lease, and, in such event, Lessor shall have the option to forthwith terminate this Lease to re-enter the said demised premises and take possession thereof, whereupon Lessee shall quit and surrender peaceably the said demised premises to Lessor. In no event shall this Lease be deemed an asset of lessee after the assignment for the benefit of creditors, the adjudication in bankruptcy, the appointment of a receiver or trustee, or the issuance of a Writ of Execution, a Writ of Attachment, a Writ of Replevin, or other court order against Lessee or Lessee's property whereby the demised premises or any building or buildings, or alterations, additions, or improvements thereon, shall be taken or occupied or attempted to be taken or occupied by someone other than the Lessee. Further, Lessee hereby covenants and agrees with Lessor that in the event the said demised premises, or any part thereof, shall be taken for any public or quasi-public use under any statute or by right of eminent domain, this Lease shall automatically terminate, as to the part so taken, as of the date possession shall have been taken, and the rent reserved shall be adjusted so that Lessee shall be required to pay for the remainder of the term that portion of the rent reserved in the proportion that the said demised premises remaining after the taking for public or quasi-public use bears to the whole of the said demised premises before the taking for public or quasi-public use. All damages and payments resulting from the taking for public or quasi-public use of the said demised premises shall accrue to and belong to Lessor, and Lessee shall have no right to any part thereof. XVI. DESTRUCTION. Lessee, for and in consideration of this Lease and the demise of the said premises, agrees and covenants with Lessor that if at any time during the term of this Lease, or any extension or renewal thereof, the said demised premises shall be totally or partially destroyed by fire, flood, earthquake, or other calamity, then Lessor shall have the option to rebuild or repair the building or buildings, and any alterations, additions, or improvements on the demised premises, in as good condition as they were immediately prior to such calamity; provided, however, that such rebuilding or repair shall be commenced within a period of thirty days after notice in writing to Lessor of such destruction or damage. In such case, a just and proportionate part of the rental herein specified shall be abated until such demised premises shall have been rebuilt and repaired. In case, however, Lessor shall within thirty days following notice in writing to him of such damage elect not to rebuild or repair said premises, Lessor shall so notify Lessee and, thereupon, this Lease shall terminate and become null and void. Moreover, in no event, shall Lessor have any duty or obligation to rebuild or repair any signs, shelving, moveable furniture, equipment not affixed to the roof, walls, or floors as a permanent part of the realty, or any other personal property owned or leased by the Lessee and used to carry out the purpose for which Lessee is leasing the demised premises. XVII. SIGNS. Lessor and Lessee covenant and agree that Lessee may at Lessee's own expense erect and maintain a sign or signs to carry out the purpose for which Lessee is leasing the said demised premises; provided, however, the location, type and design of all exterior signs shall be first approved in writing by Lessor. Upon the expiration of this Lease, or any renewal or extension thereof, Lessee shall remove such sign or signs and shall repair any damage to the premises caused thereby at Lessee's own expense. Further, at any time within thirty days prior to the termination of this Lease, or any renewal or extension thereof, Lessor shall have the right to place upon any part of said demised premises any "For Rent" or "For Lease" signs that Lessor may select. XVIII. TERMINATION AND REMEDIES. It is expressly understood and agreed between the parties hereto, that if the rent above reserved, or any part thereof, shall be in arrears or unpaid on the day of payment thereon the same ought to be paid as aforesaid, or if default shall be made in any of the covenants or agreements herein contained to be kept by Lessee, Lessee's heirs, personal representatives, assigns, and successors in interest, it shall and may be lawful for the Lessor, Lessor's heirs, personal representatives, agents, attorneys, assigns, or successors in interest, at Lessor's election, to declare said term ended and to re-enter the said premises, or any part thereof, either with or without process of law, and to expel, remove, and put out the Lessee, or any other person or persons occupying the demised premises, using such force as may be necessary in so doing, and to repossess and enjoy the same premises again as in its first and former state, and to distrain for any rent that may be due thereon any property belonging to Lessee, whether or not the same be exempt from execution and distress by law, and Lessee in that case hereby waives any and all legal rights which Lessee now has or may have, to hold or retain any such property under any exemption laws now or hereafter in force in the State of New Mexico, or in any other way. It is the intent of the parties hereto to hereby recognize in Lessor, Lessor's heirs, personal representatives, assigns, or successors in interest, a valid first lien as provided by the laws of New Mexico, upon any and all goods, chattels, and other property belonging to Lessee and located in said premises, as security for the payment of said rent and fulfillment of the faithful performance of the agreements, covenants, terms, and conditions hereof as herein provided, anything hereinbefore mentioned to the contrary notwithstanding. And if at any time said term shall be ended at such election of Lessor, Lessor's heirs, pesonal representatives, assigns, or successors in interest, as aforesaid, or in any other way, Lessee, Lessee's heirs, personal representatives, assigns, or successors in interest, do hereby covenant and agree to surrender and deliver up the above-described premises and property peaceably to Lessor, Lessor's heirs, personal representatives, assigns, or successors in interest, immediately upon the termination of said term as aforesaid, and if Lessee shall remain in possession of the same ten (10) days after notice of such default, or after the termination of the Lease in any of the ways above named, Lessee shall be deemed guilty of a forcible detainer of said premises under the laws of New Mexico and shall be subject to all the conditions and provisions above named, and shall also be subject to eviction and removal forcible or otherwise, with or without process of law as above stated. Further, it is covenanted and agreed by and between the parties hereto that at any time after any such termination, the Lessor may relet the demised premises, or any part thereof, in the name of the Lessor or otherwise, for such term and on such conditions as the Lessor, in Lessor's sole and absolute discretion, may determine, and may collect and receive the rent therefor. Moreover, in the event Lessor relets the demised premises, or any part thereof, it is explicitly understood and agreed by and between the parties hereto that the term may be greater of lesser than the period which would otherwise have constituted the balance of the term of this Lease, and the conditions may include free rent or other concessions which may be reasonably required to induce another party to lease the demised premises. Notwithstanding anything herein to the contrary, the Lessor shall have no obligation hereunder to relet the demised premises, or any part thereof, and shall in no way be responsible or liable for any failure to collect any rent due upon such reletting. It is also covenanted and agreed by and between the parties hereto that no such termination of this Lease shall relieve the Lessee of its liabilities and obligations under this Lease, and such liabilities and obligations shall survive any such termination. In the event of any such termination, whether or not the demised premises, or any part thereof, shall have been relet, the total remaining balance of the rent which would be due and payable for the remainder of the term of this Lease, if this Lease were still in effect, less the net proceeds of any reletting effected pursuant to the Lessor's sole discretion, after deducting from the net proceeds all of the Lessor's expenses in connection with such reletting, including, without limitation, all repossession costs, brokerage commissions, legal expenses, reasonable attorney's fees, alteration costs, and expenses of preparation for such reletting, shall become immediately due and payable, as and for liquidated damages of the Lessee's default. Nothing herein contained, however, shall limit or prejudice the right of Lessor to prove for and obtain as liquidated damages by reason of such termination, an amount equal to the maximum allowed by statute or rule of law in effect at the time when, and governing the proceedings in which, such damages are to be proved, whether or not such amount be greater than, equal to, or less than, the amount of the difference referred to above, and whether or not such amount shall be immediately or otherwise due and payable. Further, it is covenanted and agreed to by and between the parties hereto, that in addition to other remedies provided for in this Lease, the Lessor shall be entitled to restraint by injunction of the violation, or attempted or threatened violation, of any agreement or covenant of this Lease, or to a decree specifically ================================================================================ ================================================================================ compelling performance of any such agreement or covenant. The Lessee, the Lessee's heirs, personal representatives, assigns, and successors in interest, hereby expressly waives, so far as permitted by law, the service of any notice of intention to re-enter provided for in any statute, or of the institution of legal proceedings to that end. Lessee, the Lessee's heirs, personal representatives, assigns, and successors in interest, also hereby expressly waives any right of redemption or re-entry or repossession or to restore the operation of this Lease in case the Lessee shall be dispossessed by a judgment or by warrant of any court or judge or in case of re-entry or repossession by the Lessor. It is further covenanted and agreed by and between the parties hereto, that the Lessee shall pay and discharge all costs, reasonable attorney's fees, and expenses incurred by Lessor, Lessor's heirs, personal representatives, assigns, or successors in interest, in enforcing the covenants of this Lease, or incurred by Lessor in pursuing any or all remedies which are or may be available hereunder or allowed at law or in equity, or incurred by Lessor in connection with reletting the demised premises. XIX. LESSOR'S REMEDIES ARE CUMULATIVE. The specified remedies to which the Lessor may resort under the terms of this Lease are cumulative and and are not intended to be exclusive of any other remedies or means of redress to which the Lessor may be lawfully entitled in case of any breach or threatened breach by the Lessee of any of the agreements and covenants herein contained. XX. WAIVERS. Lessee, for and in consideration of this Lease and the demise of the said premises, agrees and covenants with Lessor that the delay or omission in the enforcement of any of the agreements and covenants herein contained, or in the exercise of any of Lessor's rights hereunder, shall not affect the duty of the Lessee to thereafter faithfully fulfill and perform all of the agreements and covenants herein contained, and that the failure, neglect, or omission of Lessor to terminate this Lease for any one or more breaches of any agreements and covenants hereof, shall not be deemed a consent by Lessor of such breach and shall not impede, impair, estop, bar or prevent Lessor from thereafter terminating this Lease, either for such violation, or for prior or subsequent violations of any covenant or agreement hereof. XXI. BINDING ON HEIRS, PERSONAL REPRESENTATIVES, ASSIGNS, AND SUCCESSORS IN INTEREST. It is understood and agreed by and between the parties hereto that the agreements, covenants, terms, conditions, provisions, and undertakings in this Lease, or in any extension or renewal thereof, shall extend to and be binding upon the heirs, personal representatives, assigns, and successors in interest of the respective parties hereto, as if they were in every case named and expressed, and shall be construed as covenants running with the land; and wherever reference is made to either of the parties hereto, it shall be held to and include and apply also to the heirs, personal representatives, successors, and assigns of such party, as if in each and every case so expressed. XXII. ADDRESSES FOR NOTICES. Any and all notices required or permitted to be given hereunder shall be considered to have been given if in writing and delivered to the respective party designated below upon the date of such personal delivery, or upon a date three (3) days following the mailing of any such notice by certified or registered mail, return receipt requested, addressed to the respective party at the respective address set forth below, or at such other address as either party may furnish the other for this purpose by written notification delivered or mailed to the other as herein provided: NOTICES TO LESSOR: NOTICES TO LESSEE: 6204 Osuna, N.E. 4261 Balloon Park Road, N.E. Albuquerque, NM 87109 Albuquerque, NM 87109 XXIII. DECLARATION OF CONTRACTUAL LIABILITY. If there is more than one party Lessee, the covenants and agreements of the Lessee shall be joint and several obligations of each such party. XXIV. GRAMMATICAL USAGE. In construing this Lease, feminine or neuter pronouns shall be substituted for those masculine in form and vice versa, and plural terms shall be substituted for singular and singular for plural in any place in which the context so requires. XXV. COVENANT TO EXECUTE ADDITIONAL INSTRUMENTS. The parties hereto hereby agree to execute and deliver any instruments in writing necessary to carry out any agreement, covenant, term, condition, or assurance in this Lease whenever an occasion shall arise and request for such instrument shall be made. XXVI. SEVERABILITY. If any provision of this Lease, or any application thereof, shall be declared invalid or unenforceable by any court of competent jurisdiction, the remainder of this Lease, and any other application of such provision, shall continue in full force and effect. XXVII. CAPTIONS. The section headings are for convenience of reference only and shall not otherwise affect the meaning hereof. XXVIII. GOVERNING LAW. The Lease shall be governed by and construed in accordance with the laws of the State of New Mexico. XXIX. AMENDMENTS. It is understood and agreed by and between the parties hereto that this Lease shall not be altered, changed, or amended except by instrument in writing executed by the parties hereto. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the day and year first above written. CHARLES C. AND ELLEN C. FRANCE REVOCABLE TRUST RHOMED INCORPORATED, a NM Corporation - ------------------------------------ ---------------------------------------- /s/ Charles C. France /s/ Stephen A. Slusher - ------------------------------------ ---------------------------------------- By: Charles C. France, Trustee By: Stephen A. Slusher, Vice President ACKNOWLEDGEMENTS A. FOR A NATURAL PERSON ACTING IN HIS OWN RIGHT. STATE OF NEW MEXICO COUNTY OF BERNALILLO The foregoing instrument was acknowledged before me this 18th day of December, 1992, by Charles C. France, Trustee on behalf of the Charles C. and Ellen C. France Revocable Trust ------------------------------------------------------ (Names or Name of Person or Persons Acknowledging) /s/ --------------------------------------- NOTARY PUBLIC My commission expires: 1-6-95 - ------------------------------------ E. FOR A CORPORATION OR INCORPORATED ASSOCIATION: STATE OF NEW MEXICO COUNTY OF BERNALILLO -------------- The foregoing instrument was acknowledged before me this 18th day of December, 1992, by Stephen A. Slusher, Vice President, of RhoMed Incorporated, a ------------------ -------------- ------------------- (Name of officer) (Title of officer) (Name of corporation acknowledging) New Mexico corporation, on behalf of the corporation. - ---------------------------------- (State or County of incorporation) /s/ ---------------------------------------- NOTARY PUBLIC My commission expires: 1-6-95 - ---------------------------------- ================================================================================ IMPORTANT NOTICE: IF THIS INSTRUMENTS BEING EXECUTED BY AN ATTORNEY-IN FACT FOR A NATURAL PERSON AS PRINCIPAL, OR BY A GENERAL PARTNERSHIP ACTING BY ONE OR MORE PARTNERS, OR BY A LIMITED PARTNERSHIP ACTING BY ONE OR MORE GENERAL PARTNERS, IT WILL BE NECESSARY TO APPEND THE PROPER STATUTORY FORM OF ACKNOWLEDGMENT. ADDENDUM This is an Addendum dated this 18th day of December, 1992, to the Lease, dated this same day by and between CHARLES C. AND ELLEN C. FRANCE REVOCABLE TRUST ("LESSOR") RHOMED INCORPORATED, a New Mexico Corporation ("Lessee"). The parties hereby agree as follows: 1. Paragraph II, titled "TERM OF LEASE". This new paragraph shall be added to the end of this paragraph to read as follows: "In the event that the leased premises become completely available before July 1, 1993, Lessee may, at its election, begin the lease term before July 1, 1993 on the same terms and conditions herein. In such case, all dates in the lease shall be adjusted by way of an Amendment to this lease." Lessor hereby grants an option to renew this lease under the same terms and conditions herein, providing that Lessee is in no way in default of any of the terms of this lease, for a term of three (3) years. The CPI increase clause shall remain in full force in the event of Lessee's election to exercise said option. 2. Paragraph III, titled "RENT". This new paragraph shall be added to the end of this paragraph to read as follows: "Lessee's rent shall be increased by the same percentage as the CPI-U.S. All Goods and Services increases annually beginning on July 1, 1994. Said increases shall also occur during the option period described herein in the event that Lessee elects to exercise its option to renew this lease. The base month for said CPI increase shall be June, 1993." 3. Paragraph VIII, titled "ALTERATIONS, ADDITIONS, AND IMPROVEMENTS". This new paragraph shall be added to the end of this paragraph to read as follows: "Lessor agrees to pay for tenant improvements for Lessee's use up to an amount of $35,000.00. Lessee shall pay a monthly amount along with their base rent to Lessor equal to Lessor's monthly payment on a loan to provide said improvement money to Lessee. In the event that Lessee should vacate the premises before said loan is paid in full, Lessee shall pay the entire outstanding amount due on the loan, including principal and interest, prior to vacating the premises to Lessor. When the exact amount of improvement money is determined to be provided by Lessor, an Amendment shall be prepared to this lease stating the amount of Lessee's monthly payment to Lessor." 4. Paragraph IV, titled "USE OF PREMISES". This paragraph is amended to provide that the premises may be used and occupied by subsidiaries and affiliates of Lessee, including HuMAb Corporation, an affiliate of Lessee. 5. Paragraph X, titled "ASSIGNMENT AND SUBLETTING". This paragraph Page 1 shall be amended to provide that this Lease may be assumed by any successor to all or substantially all of the business of Lessee, including any successor in the event Lessee agrees to consolidate or merge with any corporation, or sell all or substantially all of its assets. 6. Paragraph XVII, titled "SIGNS". This new sentence shall be amended to read as follows: "The exterior sign currently being used by Lessee, is approved by Lessor." 7. On or before July 1, 1993, the effective date of Term of Lease, as set forth in Paragraph II, Lessor shall, at its expense, reroof the premises with Rapid Roof II Metal Roofing System as bid by Techwest, Inc., or equivalent. Upon completion of the reroofing and acceptance of work by Lessee, Lessee shall thereafter be responsible for repair of and damages to the roof, as set forth in Paragraph V, Condition of Premises and Repairs. 8. On the effective date of the Term of Lease, as set forth in Paragraph II, the Lease by and between CHARLES C. AND ELLEN C. FRANCE REVOCABLE TRUST, Lessor, and RHOMED INCORPORATED, Lessee, dated January 10, 1992 and covering the premises at 4216 Balloon Park Road, NE consisting of approximately 6,366 square feet, is terminated. All other terms and conditions outlined in the Lease shall remain the same. In witness whereof, the parties hereto have hereunto set their hands the day and year first above written. CHARLES C. AND ELLEN C. FRANCE RhoMed Incorporated REVOCABLE TRUST By: /s/ Charles C. France By: /s/ Stephen A. Slusher --------------------------------- ---------------------------- Charles C. France Stephen A. Slusher Trustee Vice President Page 2 EX-10.02 8 AMENDMENT TO LEASE AMENDMENT TO LEASE This First Amendment to the Lease dated the 18th day of December, 1992, entered into by and between Charles C. and Ellen C. France Revocable Trust ("Lessor") and RhoMed Incorporated ("Lessee"), is made this 1st day of November, 1993, and forms a part of that lease. 1. Paragraph XIII, TAXES, OTHER ASSESSMENTS, AND INSURANCE. Notwithstanding the provisions of this Section, Lessee shall pay to Lessor each month a prorated amount for all taxes and special and general assessments which have or may be levied upon the said demised premises and upon any alterations, additions, and improvements thereon, and for fire and extended coverage insurance upon all buildings, alterations, and improvements upon the said premises. Lessor shall pay all taxes and special and general assessments, and shall pay for and maintain fire and extended coverage insurance. Lessor and Lessee may adjust, annually on the anniversary of the lease, the amounts to be paid monthly to Lessor for such taxes and special and general assessments, and for fire and extended coverage insurance. For the first year of the lease, Lessee shall pay to Lessor $429.09 each month, representing taxes pro rated over a twelve month period, and $171.75, representing insurance pro rated over a twelve month period. 2. Paragraph VIII, ALTERATIONS, ADDITIONS, AND IMPROVEMENTS. The total amount Lessor has provided for tenant improvements is $35,000.00, which Lessor has obtained through the proceeds of a five year promissory note from United New Mexico Bank for $35,000.00 at 9.0% interest, for which the monthly payments are $726.68. Commencing on August 15, 1993, and on or before the 15th of each succeeding month, Lessee shall pay to United Mexico Bank, on and for the account of Lessor in payment of the promissory note, the amount of $726.68. IN WITNESS WHEREOF, the parites hereto have hereunto set their hands the day and year first above written. RhoMed Incorporated Charles C. and Ellen C. France Revocable Trust By: /s/ Stephen A. Slusher By: /s/ Charles C. France ----------------------- ---------------------- Stephen A. Slusher Charles C. France Vice President Trustee Page 1 EX-10.03 9 SECOND AMENDMENT TO LEASE SECOND AMENDMENT TO LEASE Dated the 18th day of December 1992, entered into by and between: Charles C. And Ellen C. France, Revocable Trust, ("Lessor"), and RhoMed Incorporated ("Lessee"), is made this 5th day of July, 1996, and forms a part of that lease. IT IS AGREED BETWEEN THE PARTIES: 1. Paragraph II, titled "Term of Lease", is amended to provide that the term of the Lease shall be extended until December 31, 1996. 2. It is agreed that Lessee shall pay off the balance due on the Promissory Note executed on July 15, 1993, prior to July 15, 1996. Failure to do so shall constitute a default under the lease. 3. Lessee agrees to deposit with Lessor a security deposit equal to one month's rent, ($4,554.45) upon execution of this amendment, as security for Lessee's faithful performance of its obligation under this Lease. Lessor and Lessee agree that the Security Deposit may be commingled with funds of Lessor and lessor shall have no obligation or liability for payment of interest on such deposit. Lessee shall not mortgage, assign, transfer or encumber the Security Deposit without the prior written consent of Lessor and any attempt by Lessee to do so shall be void, without force or effect and shall not be binding upon Lessor. Within (15) days after the Term (or any extension thereof) has expired or Lessee has vacated the Premises, whichever shall last occur, and provided Lessee is not then in default on any of its obligations hereunder, Landlord shall return the Security Deposit to Lessee, or, if Lessee has assigned its interest under this lease, to the last assignee of Lessee. If Lessor sells its interest in the Premises, Lessor may deliver this deposit to the purchaser of Lessor's interest and thereupon be relieved of any further liability or obligation to the Security Deposit. ALL OTHER TERMS AND CONDITIONS OF THE LEASE SHALL REMAIN IN FULL FORCE AND EFFECT. /s/ Charles C. France Jr. /s/ John J. McDonough - --------------------------- ----------------------------- Lessor: Trustee Lessee: John J. McDonough Vice President & CFO RhoMed Incorporated /s/ Charles C. France Jr. - --------------------------- Lessor: EX-10.04 10 1995 EMPLOYEE INCENTIVE STOCK OPTION PLAN RHOMED INCORPORATED 1995 EMPLOYEE INCENTIVE STOCK OPTION PLAN 1. Purpose. The 1995 Employee Incentive Stock Option Plan (the "Plan") is intended to advance the interests of RhoMed Incorporated (the "Company") and its shareholders by providing an employment incentive, in order to retain employees of the Company with training, experience, and ability, to attract new employees whose services are considered unusually valuable, to encourage the sense of proprietorship of employees, and to stimulate the active interest of employees in the development and financial success of the Company. 2. Definitions. As used in the Plan, the following capitalized terms have the following meanings: "Board" means the Board of Directors of the Company. "Code" means the Internal Revenue Code of 1986, as amended, and regulations promulgated under the Internal Revenue Code of 1986, as amended, or any successor legislation and regulations. "Committee" means the body administering the Plan, which is the Compensation Committee of the Board, or if the Board has not established a Compensation Committee, then it is the Board meeting as the Committee. "Company" means RhoMed Incorporated. "Eligible Employee" means an Employee of the Company to whom the Committee determines to grant an Option in order to carry out the purpose of the Plan stated above. "Employee" means an employee, as determined in accordance with the withholding tax rules under Code section 3401(c), of the Company, its parent, as defined in Code section 424(e), or subsidiary, as defined in Code section 424(f). "Option" means an option to purchase Stock granted under the Plan. "Option Agreement" means a written agreement between the Company and an Optionee for the purchase of Stock pursuant to an Option. "Option Stock" means Stock which is or may become purchasable under an Option. "Option Price" means the price per share of Option Stock. "Optionee" means an Employee to whom the Company has granted an Option. "Over Ten Percent Shareholder" means an Eligible Employee who, at the time of grant of an Option, owns stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company or of its parent or subsidiary corporation. For purposes of this definition, ownership is determined according to the attribution rules set forth in Code section 424(d). Page 1 "Plan" means this 1995 Employee Incentive Stock Option Plan. "Stock" means the Common Stock of the Company, or any other stock issuable upon exercise of an Option as adjusted pursuant to section 8.7 of the Plan, or as substituted or assumed as permitted pursuant to Code section 424(a). 3. Effective dates of the Plan; shareholder approval required. The Plan will be in effect from July 28, 1995 until July 28, 2005, unless the Board terminates the Plan earlier. If the Company's shareholders do not approve the Plan before July 28, 1996, the Plan will terminate on July 28, 1996 and any Options granted under the Plan will be void. No Option will be exercisable before the Company's shareholders approve the Plan. 4. Administration of the Plan. The Committee will administer the Plan. The Committee will report its actions to the Board at the first meeting of the Board which follows each action of the Committee. By majority vote of its members, the Committee will: determine Eligible Employees, amounts of Option Stock, Option Prices, dates of grant, periods of exercise, methods of exercise and all other terms of Options which the Plan does not specify; construe and interpret the Plan; determine the terms of Option Agreements, which need not be identical; and make all other determinations and take all other actions which the Committee deems necessary or advisable for administration of the Plan, except that the Committee may not amend or terminate the Plan. All actions and determinations of the Committee will be binding on the Company and its Employees. 5. Authority to grant Options. On behalf of the Company, the Committee may, by majority vote of its members, grant Options from time to time to any one or more Eligible Employees of the Company. The Company's executive officers will prepare, execute on behalf of the Company, and deliver, Option Agreements according to the Committee's instructions. 6. Amount of Stock available and reserved. The Company may grant Options to purchase up to an aggregate of seven million five hundred thousand (7,500,000) shares of Stock. While any Option is outstanding, the Company will keep reserved, for issuance upon exercise of Options, the amount of Option Stock which is or may become purchasable under all outstanding Options. 7. Limitation on amount of Option Stock. The Company will not grant an Option if, as a result of granting the Option, the aggregate fair market value of stock with respect to which incentive stock options, as defined in Code section 422(b), are exercisable for the first time by that Optionee during any calendar year (under all Page 2 plans of the Company and its parent and subsidiary corporations) would exceed one hundred thousand dollars ($100,000). For purposes of this limitation, the fair market value of any stock is determined as of the time the option with respect to such stock is granted. 8. Terms and conditions of Options. All Options will be evidenced by an Option Agreement and will be subject to the following terms and conditions: 8.1 Nontransferability. An Option is, by its terms, not transferable by the Optionee otherwise than by will or the laws of descent and distribution, and is exercisable, during the Optionee's lifetime, only by the Optionee. 8.2 Option Price. The Option Price under Options granted to Employees other than Over Ten Percent Shareholders will be not less than the fair market value of the Stock at the time the Option is granted. The Option Price under Options granted to Over Ten Percent Shareholders will be at least one hundred ten percent (110%) of the fair market value of the Stock at the time the Option is granted. The Committee will determine fair market value at the time of grant. 8.3 Period for exercise of Option. Options granted to Employees other than Over Ten Percent Shareholders will, by their terms, not be exercisable after the expiration of ten (10) years from the date the Option is granted. Options granted to Over Ten Percent Shareholders will, by their terms, not be exercisable after the expiration of five (5) years from the date the Option is granted. Within these limits, the Committee may set any period during which all or any portion of an Option will be exercisable. 8.4 Shareholder rights. Neither an Optionee nor the Optionee's successor has any of the rights of a shareholder of the Company, with respect to any Option Stock, until the Company has received payment in full of the Option Price for that Option Stock upon exercise. 8.5 Termination of employment. The granting of an Option does not grant any right to the Optionee to continue as an Employee. On the date when an Optionee ceases to be an Employee for any reason, the amount of Option Stock which the Optionee may purchase under each Option which that Optionee holds automatically becomes limited to only that amount of Option Stock as to which the Option was already exercisable on the date the Optionee ceased to be an Employee. The Committee may, at the time it grants an Option, set a time limit on the exercisability of an Option after the Optionee ceases to be an Employee. Page 3 8.6 Accelerated exercisability and early expiration of Options in certain corporate transactions. If the Company enters into an agreement to engage in a transaction to which Code section 424(a) would apply if the requirements of Code sections 424(a)(1) and 424(a)(2) were met, and no corporation either substitutes a new option for or assumes an outstanding Option, as permitted pursuant to Code section 424(a), or agrees in writing to do so upon consummation of the transaction, then thirty days before the agreed date of consummation of the transaction, that Option will become exercisable as to the entire amount of Option Stock (other than Option Stock as to which the Option has already expired) purchasable at any time under that Option, and will expire on the earlier of (i) consummation of the transaction or (ii) that Option's original expiration date. The Committee will give the Optionee written notice of the accelerated exercisability and potential early expiration of that Option at least thirty days before its potential early expiration date. 8.7 Changes in Stock. If the Company's shareholders approve an amendment to the Company's articles of incorporation which effects a change in shares or rights of shareholders, or an exchange, reclassification or cancellation of shares or rights of shareholders, then the Committee will immediately adjust the amount and/or class of Option Stock purchasable and/or the Option Price under all outstanding Options as the Committee deems appropriate, provided that such adjustment does not constitute a modification as defined in Code section 424(h). 8.8 Restriction on exercise of Options and issuance of Option Stock. If the Company determines that exercise of an Option or issuance of Option Stock will violate any tax, securities or other law or regulation, then the Optionee may not exercise the Option until the Company determines that the exercise or issuance will comply with that law or regulation. The Option Stock as issued may be restricted under the Securities Act of 1933, as amended, or other securities laws. 8.9 Other terms and conditions. The Committee may establish any other terms and conditions for Options consistent with those specified in the Plan, and consistent with the definition of incentive stock option under Code section 422(b). 9. Amendment, Suspension, or Termination of Plan. The Board may at any time amend, suspend or terminate the Plan. 10. Code references. In the event that a Code section referred to in the Plan is amended or repealed, the Committee will interpret the Plan in accordance with any successor provision or the remainder of the Code, in such a way that Options will Page 4 continue to be treated, if possible, as incentive stock options under Code section 422(a) or any successor provision. I certify that the foregoing is a true and accurate copy of the 1995 Employee Incentive Stock Option Plan: -as adopted by the Board by unanimous written consent dated July 28, 1995, and approved by the shareholders of the Company at the regular annual meeting held on August 15, 1995; and -as amended by the Board by unanimous written consent dated March 20, 1996 and approved by the shareholders of the Company at the regular annual meeting held on April 4, 1996; and -as amended by the Board by unanimous written consent dated April 15, 1996 and approved by the shareholders of the Company at the special meeting held on May 24, 1996. s/ Stephen A. Slusher --------------------- Stephen A. Slusher Assistant Secretary Page 5 EX-10.05 11 1995 NONQUALIFIED STOCK OPTION PLAN RHOMED INCORPORATED 1995 NONQUALIFIED STOCK OPTION PLAN 1. Purpose. The 1995 Nonqualified Stock Option Plan (the "Plan") is intended to advance the interests of RhoMed Incorporated (the "Company") and its shareholders by encouraging and enabling selected officers and key independent contractors, including consultants, directors and members of the scientific advisory board, upon whose judgment, initiative and effort the Company is largely dependent for the successful conduct of its business, to acquire and retain a proprietary interest in the Company by ownership of its stock. The Company does not intend for options granted under the Plan to be options which meet the requirements of section 422 of the Internal Revenue Code of 1986. 2. Definitions. As used in the Plan, the following capitalized terms have the following meanings: "Board" means the Board of Directors of the Company. "Code" means the Internal Revenue Code of 1986, as amended, and regulations promulgated under the Internal Revenue Code of 1986, as amended, or any successor legislation and regulations. "Committee" means the body administering the Plan, which is the Compensation Committee of the Board, or if the Board has not established a Compensation Committee, then it is the Board meeting as the Committee. "Company" means RhoMed Incorporated. "Option" means an option to purchase Stock granted under the Plan. "Option Agreement" means a written agreement between the Company and an Optionee for the purchase of Stock pursuant to an Option. "Option Stock" means Stock which is or may become purchasable under an Option. "Option Price" means the price per share of Option Stock. "Optionee" means a person to whom the Company has granted an Option. "Plan" means this 1995 Nonqualified Stock Option Plan. "Stock" means the Common Stock of the Company, or any other stock issuable upon exercise of an Option as adjusted pursuant to section 7.4 of the Plan, or as substituted or assumed in connection with a corporate merger, consolidation, acquisition of property or stock, separation, reorganization, or liquidation. 3. Effective dates of the Plan; shareholder approval required. The Plan will be in effect from July 28, 1995 until July 28, 2005, unless the Board terminates the Plan earlier. If the Company's shareholders do not approve the Plan before July 28, 1996, Page 1 the Plan will terminate on July 28, 1996 and any Options granted under the Plan will be void. No Option will be exercisable before the Company's shareholders approve the Plan. 4. Administration of the Plan. The Committee will administer the Plan. The Committee will report its actions to the Board at the first meeting of the Board which follows each action of the Committee. By majority vote of its members, the Committee will: determine persons who receive Options, amounts of Option Stock, Option Prices, dates of grant, periods of exercise, methods of exercise and all other terms of Options which the Plan does not specify; construe and interpret the Plan; determine the terms of Option Agreements, which need not be identical; and make all other determinations and take all other actions which the Committee deems necessary or advisable for administration of the Plan, except that the Committee may not amend or terminate the Plan. All actions and determinations of the Committee will be binding on the Company and its Employees. 5. Authority to grant Options. On behalf of the Company, the Committee may, by majority vote of its members, grant Options from time to time to any one or more persons. The Company's executive officers will prepare, execute on behalf of the Company, and deliver, Option Agreements according to the Committee's instructions. 6. Amount of Stock available and reserved. The Company may grant Options to purchase up to an aggregate of two million (2,000,000) shares of Stock. While any Option is outstanding, the Company will keep reserved, for issuance upon exercise of Options, the amount of Option Stock which is or may become purchasable under all outstanding Options. 7. Terms and conditions of Options. All Options will be evidenced by an Option Agreement and will be subject to the following terms and conditions: 7.1 Nontransferability. An Option is, by its terms, not transferable by the Optionee otherwise than by will or the laws of descent and distribution, and is exercisable, during the Optionee's lifetime, only by the Optionee. 7.2 Shareholder rights. Neither an Optionee nor the Optionee's successor has any of the rights of a shareholder of the Company, with respect to any Option Stock, until the Company has received payment in full of the Option Price for that Option Stock upon exercise. Page 2 7.3 Accelerated exercisability and early expiration of Options in certain corporate transactions. If the Company enters into an agreement to engage in a transaction to which Code section 424(a) would apply (if an Option were an incentive stock option as defined in Code section 422 and the requirements of Code sections 424(a)(1) and 424(a)(2) were met), and no corporation either substitutes a new option for or assumes an outstanding Option, or agrees in writing to do so upon consummation of the transaction, then thirty days before the agreed date of consummation of the transaction, that Option will become exercisable as to the entire amount of Option Stock (other than Option Stock as to which the Option has already expired) purchasable at any time under that Option, and will expire on the earlier of (i) consummation of the transaction or (ii) that Option's original expiration date. The Committee will give the Optionee written notice of the accelerated exercisability and potential early expiration of that Option at least thirty days before its potential early expiration date. 7.4 Changes in Stock. If the Company's shareholders approve an amendment to the Company's articles of incorporation which effects a change in shares or rights of shareholders, or an exchange, reclassification or cancellation of shares or rights of shareholders, then the Committee will immediately adjust the amount and/or class of Option Stock purchasable and/or the Option Price under all outstanding Options as the Committee deems appropriate. 7.5 Restriction on exercise of Options and issuance of Option Stock. If the Company determines that exercise of an Option or issuance of Option Stock will violate any tax, securities or other law or regulation, then the Optionee may not exercise the Option until the Company determines that the exercise or issuance will comply with that law or regulation. The Option Stock as issued may be restricted under the Securities Act of 1933, as amended, or other securities laws. 7.6 Other terms and conditions. The Committee may establish any other terms and conditions for Options consistent with those specified in the Plan. 8. Amendment, Suspension, or Termination of Plan. The Board may at any time amend, suspend or terminate the Plan. 9. Code references. In the event that a Code section referred to in the Plan is amended or repealed, the Committee will interpret the Plan in accordance with any successor provision or the remainder of the Code. Page 3 I certify that the foregoing is a true and accurate copy of the 1995 Employee Incentive Stock Option Plan adopted by the Board of Directors of RhoMed Incorporated by unanimous written consent dated July 28, 1995, and approved by the Shareholders of RhoMed Incorporated at the regular Annual Meeting held on August 15, 1995. s/ Stephen A. Slusher --------------------- Assistant Secretary Page 4 EX-10.06 12 PALATIN TECHNOLOGIES, INC. 1996 STOCK OPTION PLAN PALATIN TECHNOLOGIES, INC. 1996 STOCK OPTION PLAN 1. Purpose. The purposes of the 1996 Stock Option Plan (the "Plan") are to induce certain employees, consultants and directors to remain in the employ or service, or to continue to serve as directors, of Palatin Technologies, Inc. (the "Company") and its present and future subsidiary corporations (each a "Subsidiary"), as defined in Section 424(f) of the Internal Revenue Code of 1986, as amended (the "Code"), to attract new individuals to enter into such employment or service and to encourage such individuals to secure or increase on reasonable terms their stock ownership in the Company. The Board of Directors of the Company (the "Board") believes that the granting of stock options (the "Options") under the Plan will promote continuity of management and increased incentive and personal interest in the welfare of the Company by those who are or may become primarily responsible for shaping and carrying out the long range plans of the Company and securing its continued growth and financial success. Options granted hereunder are intended to be either (a) "incentive stock options" (which term, when used herein, shall have the meaning ascribed thereto by the provisions of Section 422(b) of the Code) or (b) options which are not incentive stock options ("non-incentive stock options") or (c) a combination thereof, as determined by the Committee (the "Committee") referred to in Section 4 hereof at the time of the grant thereof. 2. Effective Date of the Plan. The Plan became effective on August 28, 1996, by action of the Board, subject to ratification by stockholders of the Company. 3. Stock Subject to Plan. 1,000,000 of the authorized but unissued shares of the Common Stock, $0.01 par value, of the Company (the "Common Stock") are hereby reserved for issue upon the exercise of Options granted under the Plan; provided, however, that the number of shares so reserved may from time to time be reduced to the extent that a corresponding number of issued and outstanding shares of the Common Stock are purchased by the Company and set aside for issue upon the exercise of Options. If any Options expire or terminate for any reason without having been exercised in full, the unpurchased shares subject thereto shall again be available for the purposes of the Plan. 4. Committee. The Committee shall consist of two or more members of the Board both or all of whom shall be "non-employee directors" within the meaning of Rule 16b-3(b)(3)(i) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and "outside directors" within the contemplation of Section 162(m)(4)(C)(i) of the Code. The President of the Company shall also be a member of the Committee, ex-officio, whether or not he or she is otherwise eligible to be a member of the Committee. The Committee shall be appointed annually by the Board, which may at any time and from time to time remove any members of the Committee, with or without cause, appoint additional members to the Committee and fill vacancies, however caused, in the Committee. In the event that no Committee shall have been appointed, the Board shall serve as the Committee. A majority of the members of the Committee shall constitute a quorum. All determinations of the Committee shall be made by a majority of its members present at a meeting duly called and held. Any decision or determination of the Committee reduced to writing and signed by all of the members of the Committee shall be fully as effective as if it had been made at a meeting duly called and held. 5. Administration. Subject to the express provisions of the Plan, the Committee shall have complete authority, in its discretion, to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it, to determine the terms and provisions of the respective option agreements or certificates (which need not be identical), to determine the individuals (each a "Participant") to whom and the times and the prices at which Options shall be granted, the periods during which each Option shall be exercisable, the number of shares of the Common Stock to be subject to each Option and whether such Option shall be an incentive stock option or a non-incentive stock option and to make all other determinations necessary or advisable for the administration of the Plan. In making such determinations, the Committee may take into account the nature of the services rendered by the respective employees and consultants, their present and potential contributions to the success of the Company and the Subsidiaries and such other factors as the Committee in its discretion shall deem relevant. The Committee's determination on the matters referred to in this Section 5 shall be conclusive. Any dispute or disagreement which may arise under or as a result of or with respect to any Option shall be determined by the Committee, in its sole discretion, and any interpretations by the Committee of the terms of any Option shall be final, binding and conclusive. 6. Eligibility. A. An Option may be granted only to (i) an employee or consultant of the Company or a Subsidiary, (ii) a director of the Company who is not employed by the Company or any of the Subsidiaries (a "Non-Employee Director") and (iii) employees of a corporation or other business enterprise which has been acquired by the Company or a Subsidiary, whether by exchange or purchase of stock, purchase of assets, merger or reverse merger or otherwise, who hold options with respect to the stock of such corporation which the Company has agreed to assume or for which the Company has agreed to provide substitute options. 2 B. (i) On August 28, 1996, each Non-Employee Director shall be granted an Option (a "Non-Employee Director's Formula Option") to purchase 20,000 shares of the Common Stock at the initial per share option price equal to the fair market value of a share of the Common Stock on the date of grant. (ii) At the first meeting of the Board immediately following the annual meeting of the Stockholders of the Company held in 1997, and at the first meeting of the Board immediately following each subsequent annual meeting of the Stockholders of the Company, each Non- Employee Director shall be granted an Option (a "Non-Employee Director's Formula Option") to purchase 10,000 shares of the Common Stock at the initial per share option price equal to the fair market value of a share of the Common Stock on the date of grant. (iii) Each Non-Employee Director who becomes a director subsequent to the adoption date of the Plan, and prior to the date of any annual meeting of the Shareholders of the Company, shall be granted, on the date he or she becomes a director, an Option (a "Non-Employee Director's Formula Option") to purchase the number of shares of the Common Stock equal to the product of (i) 10,000 and (ii) a fraction, the numerator of which is the number of full calendar months prior to the next scheduled annual meeting of Shareholders and the denominator of which is 12, at the initial per share option price equal to the fair market value of a share of the Common Stock on the date of grant. (iv) A Non-Employee Director may not exercise a Non-Employee Director's Formula Option during the period commencing on the date of the granting of such Option to him or her and ending on the day next preceding the first anniversary of such date. A Non-Employee Director may (i) during the period commencing on the first anniversary of the date of the granting of a Non-Employee Director's Formula Option to him or her and ending on the day next preceding the second anniversary of such date, exercise such Option with respect to one-fourth of the shares granted thereby, (ii) during the period commencing on such second anniversary and ending on the day next preceding the third anniversary of the date of the granting of such Option, exercise such Option with respect to one-half of the shares granted thereby, (iii) during the period commencing on such third anniversary and ending on the date next preceding the fourth anniversary of the date of the granting of such Option, exercise such Option with respect to three-fourths of the shares granted thereby and (iv) during the period commencing on such fourth anniversary and ending on the date of the expiration of such Option, exercise such Option with respect to all of the shares granted thereby. 7. Option Prices. A. Except as otherwise provided in Section 17, the initial per share option price of any Option shall be the price determined by the Committee, but not less than the fair market value of a share of the Common Stock on the date of grant; provided, however, that, in the case of a Participant who owns (within the meaning of Section 424(d) of the Code) more than 10% of the 3 total combined voting power of the Common Stock at the time an Option which is an incentive stock option is granted to him or her, the initial per share option price shall not be less than 110% of the fair market value of a share of the Common Stock on the date of grant. B. For all purposes of the Plan, the fair market value of a share of the Common Stock on any date shall be determined by the Committee as follows: (i) If the Common Stock is listed on the OTC Electronic Bulletin Board, its fair market value shall be the closing selling price on such date for the Common Stock as reported on the OTC Electronic Bulletin Board. If there are no sales of the Common Stock on that date, then the reported closing selling price for the Common Stock on the next preceding date for which such closing selling price is quoted shall be determinative of fair market value; or, (ii) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation, the Nasdaq National Market System or the Nasdaq SmallCap Market System, its fair market value shall be the reported closing selling price for the Common Stock on the principal securities exchange or national market system on which the Common Stock is at such date listed for trading. If there are no sales of Common Stock on that date, then the reported closing selling price for the Common Stock on the next preceding day for which such closing selling price is quoted shall be determinative of fair market value; or, (iii) If the Common Stock is not traded on the OTC Electronic Bulletin Board, an exchange, or a national market system, its fair market value shall be determined in good faith by the Committee, and such determination shall be conclusive and binding on all persons. 8. Option Term. Participants shall be granted Options for such term as the Committee shall determine, not in excess of ten years from the date of the granting thereof; provided, however, that, except as otherwise provided in Section 17, in the case of a Participant who owns (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of the Common Stock of the Company at the time an Option which is an incentive stock option is granted to him or her, the term with respect to such Option shall not be in excess of five years from the date of the granting thereof; provided, further, however, that the term of each Non-Employee Director's Formula Option shall be ten years from the date of the granting thereof. 9. Limitations on Amount of Options Granted. A. Except as otherwise provided in Section 17, the aggregate fair market value of the shares of the Common Stock for which any Participant may be granted incentive stock options 4 which are exercisable for the first time in any calendar year (whether under the terms of the Plan or any other stock option plan of the Company) shall not exceed $100,000. B. Except as otherwise provided in Section 17, no Participant shall, during any fiscal year of the Company, be granted Options to purchase more than 500,000 shares of the Common Stock. 10. Exercise of Options. A. Except as otherwise provided in Section 17 and except as otherwise determined by the Committee at the time of the grant of an Option other than a Non-Employee Director's Formula Option, a Participant may not exercise an Option during the period commencing on the date of the granting of such Option to him or her and ending on the day next preceding the first anniversary of such date. Except as otherwise set forth in Sections 9A and 17 and in the preceding sentence, a Participant may (i) during the period commencing on the first anniversary of the date of the granting of an Option to him or her and ending on the day next preceding the second anniversary of such date, exercise such Option with respect to one-fourth of the shares granted thereby, (ii) during the period commencing on such second anniversary and ending on the day next preceding the third anniversary of the date of the granting of such Option, exercise such Option with respect to one-half of the shares granted thereby, (iii) during the period commencing on such third anniversary and ending on the date next preceding the fourth anniversary of the date of the granting of such Option, exercise such Option with respect to three-fourths of the shares granted thereby and (iv) during the period commencing on such fourth anniversary and ending on the date of the expiration of such Option, exercise such Option with respect to all of the shares granted thereby. B. Except as hereinbefore otherwise set forth, an Option may be exercised either in whole at any time or in part from time to time. C. An Option may be exercised only by a written notice of intent to exercise such Option with respect to a specific number of shares of the Common Stock and payment to the Company of the amount of the option price for the number of shares of the Common Stock so specified. D. Except in the case of a Non-Employee Director's Formula Option, the Board may, in its discretion, permit any Option to be exercised, in whole or in part, prior to the time when it would otherwise be exercisable. E. Notwithstanding any other provision of the Plan to the contrary, including, but not limited to, the provisions of Section 10D, if any Participant shall have effected a "Hardship Withdrawal" from a "401(k) Plan" maintained by the Company and/or one or more of the Subsidiaries, then, during the period of one year commencing on the date of such Hardship Withdrawal, such Participant may not exercise any Option. For the purpose of this paragraph E, a 5 Hardship Withdrawal shall mean a distribution to a Participant provided for in Reg. ss. 1.401(k)- 1(d)(1)(ii) promulgated under Section 401(k)(2)(B)(i)(iv) of the Code and a 401(k) Plan shall mean a plan which is a "qualified plan" within the contemplation of section 401(a) of the Code which contains a "qualified cash or deferred arrangement" within the contemplation of section 401(k)(2) of the Code. 11. Transferability. No Option shall be assignable or transferable except by will and/or by the laws of descent and distribution and, during the life of any Participant, each Option granted to him or her may be exercised only by him or her. 12. Termination of Employment. A. In the event a Participant leaves the employ of the Company and the Subsidiaries or ceases to serve as a consultant to the Company and/or as a Non-Employee Director of the Company, whether voluntarily or otherwise, each Option theretofore granted to him or her which shall not have theretofore expired or otherwise been cancelled shall, to the extent not theretofore exercised, terminate upon the earlier to occur of the expiration of 90 days after the date of such Participant's termination of employment or service and the date of termination specified in such Option. Notwithstanding the foregoing, if a Participant's employment by the Company and the Subsidiaries or service as a consultant and/or as a Non-Employee Director of the Company is terminated for "cause" (as defined herein), each Option theretofore granted to him or her which shall not have theretofore expired or otherwise been cancelled shall, to the extent not theretofore exercised, terminate forthwith. B. For purposes of the foregoing, the term "cause" shall mean: (i) the commission by a Participant of any act or omission that would constitute a crime under federal, state or equivalent foreign law, (ii) the commission by a Participant of any act of moral turpitude, (iii) fraud, dishonesty or other acts or omissions that result in a breach of any fiduciary or other material duty to the Company and/or the Subsidiaries or (iv) continued alcohol or other substance abuse that renders a Participant incapable of performing his or her material duties to the satisfaction of the Company and/or the Subsidiaries. 13. Adjustment of Number of Shares. A. In the event that a dividend shall be declared upon the Common Stock payable in shares of the Common Stock, the number of shares of the Common Stock then subject to any Option and the number of shares of the Common Stock reserved for issuance in accordance with the provisions of the Plan but not yet covered by an Option and the number of shares set forth in 6 Sections 6B and 9B shall be adjusted by adding to each share the number of shares which would be distributable thereon if such shares had been outstanding on the date fixed for determining the stockholders entitled to receive such stock dividend. In the event that the outstanding shares of the Common Stock shall be changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation, whether through reorganization, recapitalization, stock split-up, combination of shares, sale of assets, merger or consolidation in which the Company is the surviving corporation, then, there shall be substituted for each share of the Common Stock then subject to any Option and for each share of the Common Stock reserved for issuance in accordance with the provisions of the Plan but not yet covered by an Option and for each share of the Common Stock referred to in Sections 6B and 9B, the number and kind of shares of stock or other securities into which each outstanding share of the Common Stock shall be so changed or for which each such share shall be exchanged. B. In the event that there shall be any change, other than as specified in Section 13, in the number or kind of outstanding shares of the Common Stock, or of any stock or other securities into which the Common Stock shall have been changed, or for which it shall have been exchanged, then, if the Committee shall, in its sole discretion, determine that such change equitably requires an adjustment in the number or kind of shares then subject to any Option and the number or kind of shares reserved for issuance in accordance with the provisions of the Plan but not yet covered by an Option and the number or kind of shares referred to in Sections 6B and 9B, such adjustment shall be made by the Committee and shall be effective and binding for all purposes of the Plan and of each stock option agreement or certificate entered into in accordance with the provisions of the Plan. C. In the case of any substitution or adjustment in accordance with the provisions of this Section 13, the option price in each stock option agreement or certificate for each share covered thereby prior to such substitution or adjustment shall be the option price for all shares of stock or other securities which shall have been substituted for such share or to which such share shall have been adjusted in accordance with the provisions of this Section 13. D. No adjustment or substitution provided for in this Section 13 shall require the Company to sell a fractional share under any stock option agreement or certificate. E. In the event of the dissolution or liquidation of the Company, or a merger, reorganization or consolidation in which the Company is not the surviving corporation, then, except as otherwise provided in the second sentence of Section 13A, each Option, to the extent not theretofore exercised, shall terminate forthwith. 14. Purchase for Investment, Withholding and Waivers. A. Unless the shares to be issued upon the exercise of an Option by a Participant shall be registered prior to the issuance thereof under the Securities Act of 1933, as amended, such Par- 7 ticipant will, as a condition of the Company's obligation to issue such shares, be required to give a representation in writing that he or she is acquiring such shares for his or her own account as an investment and not with a view to, or for sale in connection with, the distribution of any thereof. B. In the event of the death of a Participant, a condition of exercising any Option shall be the delivery to the Company of such tax waivers and other documents as the Committee shall determine. C. In the case of each non-incentive stock option, a condition of exercising the same shall be the entry by the person exercising the same into such arrangements with the Company with respect to withholding as the Committee may determine. 15. No Stockholder Status. Neither any Participant nor his or her legal representatives, legatees or distributees shall be or be deemed to be the holder of any share of the Common Stock covered by an Option unless and until a certificate for such share has been issued. Upon payment of the purchase price thereof, a share issued upon exercise of an Option shall be fully paid and non-assessable. 16. No Restrictions on Corporate Acts. Neither the existence of the Plan nor any Option shall in any way affect the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Stock or the rights thereof, or dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding whether of a similar character or otherwise. 17. Options Granted in Connection With Acquisitions. In the event that the Committee determines that, in connection with the acquisition by the Company or a Subsidiary of another corporation which will become a Subsidiary or division of the Company or a Subsidiary (such corporation being hereafter referred to as an "Acquired Subsidiary"), Options may be granted hereunder to employees and other personnel of an Acquired Subsidiary in exchange for then outstanding options to purchase securities of the Acquired Subsidiary. Such Options may be granted at such option prices, may be exercisable immediately or at any time or times either in whole or in part, and may contain such other provisions not inconsistent with the Plan, or the requirements set forth in Section 19 that certain amendments to 8 the Plan be approved by the stockholders of the Company, as the Committee, in its discretion, shall deem appropriate at the time of the granting of such Options. 18. No Employment or Service Right. Neither the existence of the Plan nor the grant of any Option shall require the Company or any Subsidiary to continue any Participant in the employ of the Company or such Subsidiary or require the Company to continue any Participant as a director of the Company. 19. Termination and Amendment of the Plan. The Board may at any time terminate the Plan or make such modifications of the Plan as it shall deem advisable; provided, however, that the Board may not without further approval of the holders of a majority of the shares of the Common Stock present in person or by proxy at any special or annual meeting of the stockholders, increase the number of shares as to which Options may be granted under the Plan (as adjusted in accordance with the provisions of Section 13), or change the manner of determining the option prices, or extend the period during which an Option may be granted or exercised; provided, however, the provisions of the Plan governing the grant of Non-Employee Director's Formula Options may not be amended except by the vote of a majority of the members of the Board and by the vote of a majority of the members of the Board who are employees of the Company or a Subsidiary and shall not be amended more than once every six months, other than to comport with changes in the Code, the Employee Retirement Income Security Act of 1974 or the Rules of the Securities and Exchange Commission promulgated under Section 16 of the Exchange Act. Except as otherwise provided in Section 13, no termination or amendment of the Plan may, without the consent of the Participant to whom any Option shall theretofore have been granted, adversely affect the rights of such Participant under such Option. 20. Expiration and Termination of the Plan. The Plan shall terminate on August 27, 2006 or at such earlier time as the Board may determine. Options may be granted under the Plan at any time and from time to time prior to its termination. Any Option outstanding under the Plan at the time of the termination of the Plan shall remain in effect until such Option shall have been exercised or shall have expired in accordance with its terms. 9 EX-10.07 13 EMPLOYMENT AGREEMENT EXECUTION COPY EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT, dated as of November 16, 1995, between RHOMED INCORPORATED (the "Corporation"), a Delaware corporation, and EDWARD J. QUILTY, an individual residing at 620 Grindan Drive, Yardly, Pennsylvania 19067 (the "Executive"). W I T N E S S E T H: WHEREAS, the Corporation desires to employ the Executive, and the Executive desires to be employed by the Corporation, upon the terms and subject to the conditions hereinafter provided. NOW, THEREFORE, the parties hereto hereby agree as follows: FIRST: Employment. The Corporation hereby employs the Executive, and the Executive hereby enters into the employ of the Corporation, for a term (the "Employment Period") of one year commencing as of the date of this Employment Agreement, which term shall thereafter be automatically extended for successive twelve-month periods (the "Renewal Periods") unless either party shall give the other written notice to the contrary no less than three months prior to the commencement of any such twelve-month period, and which term is subject to earlier termination as hereinafter provided. SECOND: Duties, Powers and Authority. During the Employment Period the Executive shall be employed by the Corporation in the capacity of President and Chief Executive Officer of the Corporation, with all such duties, powers and authority as appertain to such office in accordance with the Corporation's by-laws, subject to overall direction consistent with the legal authority of the Board of Directors of the Corporation (the "Board"), and such duties, powers and authority shall not be limited or materially changed by the Corporation during the Employment Period. As President and Chief Executive Officer, the Executive shall supervise, control and be responsible for the general management and operations of the Corporation and have such other executive powers and duties as may from time to time be prescribed by the Board. The Executive shall report solely to the Board and there shall be no employee of the Corporation who shall have authority equal or superior to the authority of the Executive. The Corporation shall cause the Executive to be elected to the Board at all times during the Employment Period, and the Executive shall serve as a member of the Board at all times during the Employment Period. The Executive shall devote all of his business time and efforts to the business of the Corporation. THIRD: Compensation. A. The Corporation shall pay the Executive, and the Executive shall accept from the Corporation, for the Executive's services during the Employment Period, payable in accordance with 2 the Corporation's customary payroll policy as in effect from time to time, but in no event less frequently than semi-monthly, a base salary at the rate of no less than $300,000 per annum (the "Base Salary"), subject to increase pursuant to part B of this Article THIRD. B. The Base Salary of the Executive shall be reviewed by the Board at least semi-annually during the Employment Period, commencing on the six-month anniversary of the date of this Agreement and such Base Salary may be increased or maintained (but not decreased), in the sole and absolute discretion of the Board. Any increase in Base Salary or other compensation shall in no way reduce any other obligation of the Corporation hereunder. C. At the sole and absolute discretion of the Board, the Executive may be awarded an annual incentive bonus equal to one year's Base Salary, or such other amount as the Board deems appropriate. D. The Corporation shall reimburse the Executive for all reasonable and necessary expenses incurred by him in connection with the performance of his duties hereunder, including, without limitation, expenses for entertainment and travel (including lodging). The Executive shall account to the Corporation for all such expenses. E. During the Employment Period, the Executive and his dependents shall be entitled to participate in all employee benefit plans and arrangements now in effect or which may hereafter be established which are generally applicable to other 3 senior executives of the Corporation and their dependents, including, without limitation, all medical, hospital, dental, other health benefits, disability insurance, retirement, pension, bonus, profit sharing, management incentive, stock option and other related fringe benefit plans and policies, so long as such plans and policies remain in effect with respect to senior executives of the Corporation. In addition, during the Employment Period the Corporation shall reimburse the Executive for any premiums, co-payments, deductibles and other expenses incurred by the Executive to maintain the $1,000,000 term life insurance policy issued in 1992, procured by the Executive from New England Life Insurance Company for his benefit and the benefit of his designees. The Executive shall also be entitled to the same amount of vacation time as is generally available to other senior executives of the Corporation, but in no event less than three weeks of paid vacation per year. F. During the Employment Period, the Executive shall be an insured under all director's and officer's insurance policies now in effect or which may hereafter be established which are generally applicable to other senior executives of the Corporation. FIFTH: Termination. A. The Employment Period, and the Executive's employment hereunder, shall terminate as a result of any of the following events: (i) the Executive's death; 4 (ii) in the event the Executive shall have been unable substantially to perform his duties hereunder by reason of illness, accident or other physical or mental disability for a continuous period of 180 days or an aggregate period of 270 days during any continuous twelve-month period (a "Disability"), upon the election of the Board; (iii) upon the election of the Board based on its determination that the Executive's employment should be terminated by the Corporation for "Cause" (as hereinafter defined), provided that the Corporation shall have given the Executive proper notice thereof, and the Executive shall have had at least a 30 day period in order to cure such "Cause"; (iv) upon the election of the Executive based on his determination that he has "Good Reason" (as hereinafter defined) for such termination, provided that the Executive shall have given the Corporation proper notice thereof, and the Corporation shall have had at least a 30 day period in order to cure such "Good Reason"; (v) upon the election of the Executive following a "Change in Control" (as hereinafter defined); (vi) upon the mutual agreement of the Executive and the Corporation; or (vii) upon the decision of the Board without Cause. B. The party terminating the Employment Period pursuant to clause (ii), (iii), (iv), (v) or (vii) of part A of this Article FIFTH shall provide the other with a written notice (a "Termination Notice") of such termination, which notice shall 5 indicate the specific provision being relied upon and set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination. The date on which termination is deemed to be effective is hereinafter referred to as the "Termination Date." C. For purposes of this Agreement, (i) the Corporation shall have "Cause" to terminate the Executive's employment hereunder only if (a) the Executive shall engage in fraudulent activities materially injurious to the Corporation, (b) the Executive shall be convicted of a felony, (c) the Executive shall willfully refuse to carry out the reasonable instructions, consistent with the terms of this Agreement, of the Board, which willful refusal shall materially adversely affect the Corporation, or (d) a determination shall be made by any federal or state governmental agency, self regulatory organization or other regulatory administrative agency having jurisdiction over the business conducted by the Corporation that the Executive should be removed or disqualified from acting as an officer of the Corporation; (ii) "Good Reason" shall mean a breach by the Corporation of any of its obligations under this Agreement; and (iii) a "Change in Control" shall be deemed to occur upon (a) the sale by the Corporation of all or substantially all of its assets to any person (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934), the consolidation of the Corporation with any person, or the merger of the Corporation with any person as a result of which merger the Corporation is not the surviving entity, or if the survivor, the Corporation is 6 owned by a parent company; or (b) the sale or transfer by one or more of the Corporation's shareholders, in one or more transactions, related or unrelated, to one or more persons under circumstances whereby any person and its "affiliates" (as hereafter defined) shall own, as a result of such sale or transfer and thereafter, at least one-half of the outstanding shares of the Corporation. Nothing contained in the definition of Change in Control shall limit or restrict the right of the Executive, in his capacity as a member of the Board, from participating in any discussions or voting on any matter referred to in said definition at any meeting of the Board. An "affiliate" shall mean any person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, any other person. SIXTH: Options. A. The Corporation shall give to the Executive an Option (the "Initial Option") to acquire such number of shares as will equal a 10% fully diluted equity interest in the Corporation (the "Optioned Shares") at an exercise price of $0.01 per share (the "Exercise Price"), which Option shall vest and become exercisable solely during the Employment Period in 36 equal increments on each of the first 36 monthly anniversaries of the commencement of the Executive's employment with the Corporation, unless this Agreement is terminated by the Executive because there is a Change in Control of the Corporation in which case the Initial Option shall vest and be exercisable in full immediately upon 7 such event. If the Executive's employment is terminated by the Corporation other than for Cause or is terminated by the Executive for Good Reason, any shares that shall be issued upon the exercise of the portion of the Initial Option that has theretofore vested and become exercisable shall be subject to any lock up agreement between the Corporation and any underwriter in effect upon such event, and the portion of the Initial Option that would have vested and become exercisable in the twelve-month period occurring immediately after the Termination Date shall vest and be exercisable upon such event, but any shares that shall be issued upon the exercise of such portion of the Initial Option shall be subject to any lock up agreement between the Corporation and any underwriter in effect upon such event. If the Corporation effects an Initial Public Offering, any shares that shall be issued upon the exercise of the portion of the Initial Option that has vested and become exercisable prior to such Initial Public Offering shall be subject to any lock up agreement between the Corporation and any underwriter in connection therewith. If the Executive's employment is terminated because of his death, any shares that shall be issued to the executors and administrators of the Executive's estate upon the exercise of the portion of the Initial Option that has vested and become exercisable before his death shall be subject to any lock up agreement between the Corporation and any underwriter in effect at such time. In addition to the foregoing, the Board in its sole discretion may from time to time issue additional stock options to the Executive. 8 B. The Exercise Price in effect from time to time and the number of shares represented by the Initial Option shall be subject to adjustment, as follows: (i) In the event that a dividend shall be declared on the Common Stock payable in shares of the Common Stock, the Optioned Shares shall be adjusted by adding to each Optioned Share the number of shares which would be distributable thereon if such Optioned Share had been outstanding on the date fixed for determining the stockholders entitled to receive such stock dividend. In the event that the outstanding shares of the Common Stock shall be changed into or exchanged for a different number or kind of shares of stock or other securities of the Corporation or of another corporation, whether through reorganization, recapitalization, stock split-up, combination of shares, sale of assets, merger or consolidation in which the Corporation is the surviving corporation, then, there shall be substituted for each Optioned Share the number and kind of shares of stock or other securities into which each outstanding share of the Common Stock shall be so changed or for which each such share shall be exchanged. (ii) In the event that any sale of shares of Common Stock (except any such sale made pursuant to any right, option, warrant or convertible security outstanding prior to the date of this Agreement), or the issuance of any rights, options, or warrants to subscribe for or purchase Common Stock (or securities convertible into or exchangeable for Common Stock) occurs after the date of this Agreement and during the Employment Period, 9 then, upon each such sale or issuance, the Executive shall be issued an additional Option (an "Anti-Dilution Option") to acquire the number of shares that, when aggregated with the Optioned Shares, equals not less than 3.75% of the outstanding (fully diluted) shares of the outstanding Common Stock of the Corporation, at an exercise price equal to the Exercise Price, and shall vest and be exercisable solely during the Employment Period in equal increments during the period commencing with the date of the issuance of such Anti-Dilution Option and ending on the third anniversary of the commencement of the Executive's employment with the Corporation, unless this Agreement is terminated by the Executive because there is a Change in Control of the Corporation in which case each Anti-Dilution Option shall vest and be exercisable in full immediately upon such event. If the Executive's employment is terminated by the Corporation other than for Cause or the Executive terminates for Good Reason, any shares that shall be issued upon the exercise of the portion of the Anti-Dilution Option that has theretofore vested and become exercisable shall be subject to any lock up agreement between the Corporation and any underwriter in effect upon such event, and the portion of the Anti-Dilution Option that would have vested and become exercisable in the twelve-month period occurring immediately after the Termination Date shall vest and be exercisable upon such event, but any shares that shall be issued upon the exercise of such portion of the Anti-Dilution Option shall be subject to any lock up agreement between the Corporation and any underwriter in effect upon such event. If the Corporation effects an Initial 10 APITAL PRINTING SYSTEMS] Public Offering, any shares that shall be issued upon the exercise of the portion of the Anti-Dilution Option that has vested and become exercisable prior to such Initial Public Offering shall be subject to any lock up agreement between the Corporation and any underwriter in connection therewith. If the Executive's employment is terminated because of his death, any shares that shall be issued to the executors and administrators of the Executive's estate upon the exercise of the portion of the Anti-Dilution Option that has vested and become exercisable before his death shall be subject to any lock up agreement between the Corporation and any underwriter in effect at such time. Each Anti-Dilution Option shall be entitled to the full anti-dilution protection in clause (i) of this paragraph B. Hereinafter the Initial Option and the Anti-dilution Option are referred to as the "Options". (iii) Neither the Executive nor the Executive's legal representatives nor the executors or administrators of his estate shall be or be deemed to be the holder of any share of the Common Stock covered by an Option unless and until a certificate for such share shall have been issued. Upon payment of the Exercise Price therefore, a share issued upon exercise of the Option shall be fully paid and nonassessable. (iv) In order to exercise an Option, the Executive shall give written notice of intent to exercise the Option to the Chief Financial Officer of the Corporation or his delegate, in form and substance reasonably satisfactory to the Board, specifying the number of shares of Common Stock with respect to 11 which the Option is being exercised, and accompanied by payment to the Corporation of the amount of the Exercise Price for the number of shares of Common Stock so specified. (v) Unless the shares of Common Stock to be issued upon the exercise of an Option shall be registered prior to the issuance thereof under the Securities Act of 1933, as amended, the Executive (or, in the event of his death, the executors or administrators of his estate) shall, as a condition of the Corporation's obligation to issue such shares, give a representation in writing that he is (or they are) acquiring such shares for his (or their) own account as an investment and not with a view to, or for sale in connection with, the distribution of any thereof and the certificate representing such shares shall bear such legend, if any, as counsel for the Corporation may deem to be necessary or desirable in order to comply with the provisions of said Act. (vi) In the event that the Corporation shall register shares under the Securities Act of 1933, as amended, subsequent to the Initial Public Offering, then, the Corporation shall at any time during the period commencing with the first anniversary of such Initial Public Offering and ending on the fifth anniversary of such Initial Public Offering, upon the request of the Executive (or, in the event of his death, of the executors or administrators of his estate), include in such first mentioned registration the number of shares of the Common Stock owned by the Executive (or his executors or administrators) on the date of such request, for re-sale by him or his executors or 12 administrators. Notwithstanding the foregoing, the Corporation's obligations under clause (vi) of this paragraph B shall be reduced to the extent that the lead underwriter in such first mentioned registration requests in good faith, in a letter addressed to the Executive, such reduction. (vii) If a holding company shall register shares under the Securities Act of 1933, as amended, and the only material assets of such holding company are shares of stock of the Corporation, and the holding company has no material liabilities, the Corporation shall arrange, at the timely request of the Executive (or, in the event of his death, at the timely request of the executors or administrators of his estate), to convert the Common Stock, and Options of the Corporation owned by the Executive into shares of stock of the holding company and options to acquire shares of stock of the holding company so that after such conversion the Executive will own the same percentage of the shares of stock of the holding company that he owned in the Corporation and have options exercisable into the same percentage of the shares of stock of the holding company that he was entitled to acquire in the Corporation. If the holding company has material assets other than shares of stock of the Corporation, or if the holding company has material liabilities, the Executive and the Corporation agree to negotiate in good faith an appropriate exchange ratio between shares and options of the Corporation and shares and options of the holding company. 13 SEVENTH: Payments on Termination. A. If prior to the first anniversary of the date of this Agreement the Executive's employment is terminated by the Corporation other than for Cause (but including by reason of death or Disability), or by the Executive for Good Reason, then the Corporation shall pay to the Executive, (i) the Executive's full Base Salary through the Termination Date, together with all benefits, bonuses and incentive and other compensation earned or accrued through such date and (ii) an amount equal to one year's Base Salary. All payments provided in the foregoing clause (ii) shall be made at the time when the same would have become due if such termination had not occurred, unless the Executive's employment is terminated by reason of his death or Disability, in which case such payments shall be made on the fifth business day following the Termination Date. B. If during any Renewal Period the Executive's employment is terminated by the Corporation other than for Cause, (but including death and Disability), or terminated by the Executive for Good Reason, then, the Corporation shall pay to the Executive, (i) the Executive's full Base Salary through the Termination Date, together with all benefits, bonuses and incentive and other compensation through such date and (ii) an amount equal to one year's Base Salary. All payments provided in the foregoing clause (ii) shall be made at the time when the same would have become due if such termination had not occurred, unless the Executive's employment is terminated by reason of his death or Disability, in which case such payments shall be made on 14 the fifth business day following the Termination Date. C. The Executive shall not be required to mitigate the amount of any payment provided for in parts A or B of this Article SEVENTH by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for therein be reduced by any compensation or retirement benefits heretofore or hereafter earned by the Executive as the result of employment by any other person, firm or corporation. D. If during the Employment Period the Executive's employment is terminated by the Corporation for Cause, or terminated by the Executive other than for Good Reason, the Corporation shall pay to the Executive the Executive's full Base Salary through the Termination Date, together with all benefits, bonuses and incentive and other compensation through such date, on the fifth day following the Termination Date. EIGHTH: Confidentiality; Non-Solicitation. A. The Executive acknowledges that by virtue of his employment hereunder he will have access to "Confidential Information" (as hereinafter defined) of the Corporation and that the communication of such Confidential Information to third parties could irreparably injure the business of the Corporation. Accordingly, the Executive agrees that he will treat and safeguard as confidential and secret all Confidential Information received by him at any time and that without the prior written consent of the Corporation, except as required by law, he will not disclose or reveal any of the Confidential Information to any 15 third party whatsoever or use the same in any manner, except in connection with the business of the Corporation. For purposes of this Agreement, "Confidential Information" means any information not generally known to the public or recognized as standard industry practice, including, without limitation, customer lists, trade secrets, inventions, formulas, methods or processes, whether or not patented or patentable, pricing policies and records of the Corporation and such other information normally understood to be confidential or otherwise designated as such in writing by the Corporation, all of which the Executive expressly acknowledges and agrees shall be confidential and proprietary information belonging to the Corporation. Upon termination of his employment with the Corporation, the Executive shall return to the Corporation all documents and papers belonging to the Corporation, including any Confidential Information, together with any copies, abstracts or summaries thereof. B. The Executive acknowledges and agrees that, because of the unique and extraordinary nature of his services and in view of the nature and business of the Corporation, any breach of any provisions of this Article EIGHTH will cause irreparable injury and incalculable harm to the Corporation and that the Corporation shall, accordingly, in addition to damages and reasonable attorney's fees and expenses, be entitled to preliminary and permanent injunctive or other equitable relief, without the necessity of proving actual damages. C. During the Employment Period and for a period of one year thereafter, the Executive will not directly or indirectly 16 employ, solicit for employment, or advise or recommend to any other person that they employ or solicit for employment, any person whom he knows to be an employee of the Corporation or any parent, subsidiary or affiliate of the Corporation. NINTH: Non-Compete. A. The Executive agrees that, during the Employment Period and, to the extent applicable, for the period specified in paragraph B of this Article NINTH, the Executive shall not, without the prior written approval of the Board, for any reason whatsoever, directly or indirectly: (i) Own, manage, operate, join or control, or participate in the ownership, management, operation or control of, or be a director, officer or employee of, or a consultant to, any business enterprise which reasonably may be deemed "competitive" (as hereinafter defined) with any business engaged in by the Corporation. Nothing in this paragraph shall preclude the Executive from holding an interest or investment of less than 5% of a publicly owned company or business entity. B. The provisions of paragraph A of this Article NINTH shall be applicable, in the event of (a) the termination of the Executive's employment hereunder by the Corporation for Cause, (b) the termination of the Executive's employment by reason of the Executive's Disability, (c) the termination of the Executive's employment by the Executive without Good Reason, or (d) the termination of the Executive's employment by the Executive following a Change in Control, for a period of twelve 17 months after the Termination Date. In the event of the termination of the Executive's employment hereunder by the Corporation other than for Cause and other than by reason of the Executive's Disability, or by the Executive for Good Reason, the provisions of paragraph A of this Article NINTH shall not be applicable after the Termination Date. C. A business shall be considered "competitive" with the business of the Corporation only if it is located in the United States and is engaged in the development, manufacture, production, distribution or marketing of radiopharmaceutical or peptide drugs intended to diagnose or treat diseases such as infection, cancer and blood clots. D. In the event a court of competent jurisdiction should find any provision in this Article NINTH to be unfair or unreasonable, such finding shall not render such provision unenforceable, but, rather, this provision shall be modified as to subject matter, time and geographic area so as to render the entire paragraph valid and enforceable. TENTH: Indemnification. The Corporation shall indemnify the Executive to the fullest extent permitted by the General Corporation Law of the State of Delaware, as amended from time to time, for all amounts (including, without limitation, judgements, fines, settlement payments, expenses and attorney's fees) incurred or paid by the Executive in connection with any action, suit, investigation or proceeding arising out of or relating to the performance by the Executive of services for, or acting by 18 the Executive as a director, officer or employee of, the Corporation or any other person or enterprise at the Corporation's request, and shall to the fullest extent permitted by the General Corporation Law of the State of Delaware, as amended from time to time, advance all expenses incurred or paid by the Executive in connection with, and until disposition of any action, suit, investigation or proceeding arising out of or relating to the performance by the Executive of services for, or acting by the Executive as a director, officer or employee of, the Corporation or any other person or enterprise at the Corporation's request. ELEVENTH: Insurance. If requested by the Corporation, the Executive agrees to cooperate with the Corporation in obtaining for the Corporation's benefit, at the Corporation's expense, life insurance on his life. Such cooperation shall include completing and signing such forms or applications, undergoing physical examinations, and such other acts as may be required in order to obtain such insurance. TWELFTH: Notices. All notices hereunder shall be in writing and personally delivered or sent by registered or certified mail, return receipt requested, or by overnight courier service, and shall be deemed given when so delivered or when deposited in the mail, postage prepaid, or delivered to such service and addressed to a party at its address set forth below 19 (or at such other address as each party may from time to time designate): If to the Corporation, to: RhoMed Incorporated __________________________ __________________________ with a copy to: The Castle Group Ltd. 375 Park Avenue New York, New York 10152 Attention: Michael S. Weiss, Esq. If to the Executive, to: Edward J. Quilty 620 Grindan Drive Yardly, Pennsylvania 19067 with a copy to: Rosenman & Colin LLP 575 Madison Ave. New York, New York 10022 Attention: Eric J. Wallach, Esq. Any change in address shall be sent by notice as set forth above but shall be deemed given only upon its receipt. THIRTEENTH: Entire Agreement; Waivers; Merger. This Agreement constitutes the entire understanding between the parties with respect to the subject matter hereof and no waiver, amendment or revision of, or addition to, the terms hereof shall be valid unless in writing signed by the parties hereto and only to the extent therein set forth. The failure of a party to insist upon strict adherence to any term of this Agreement on any 20 occasion shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. All prior and contemporaneous agreements and understandings with respect to the subject matter hereof, whether written or oral, are hereby terminated and superseded by this Agreement. FOURTEENTH: Severability. If any provision of this Agreement is invalid, illegal or unenforceable, the balance of this Agreement shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. FIFTEENTH: Binding Effect. This Agreement shall inure to the benefit of and shall bind the parties hereto and their respective heirs, administrators, executors, successors, legal representatives and permitted assigns. SIXTEENTH: Law. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, without regard to its principles of conflict of laws. SEVENTEENTH: Survival. The provisions of Articles EIGHTH and NINTH shall survive the expiration or termination of this Agreement. 21 EIGHTEENTH: Section Headings. The section headings herein have been inserted for convenience of reference only and shall in no way modify, define or restrict any of the terms or provisions hereof. IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the day and year first above written. RhoMed Incorporated By: /s/ Carl Spana ----------------------------- Carl Spana ( TITLE ) /s/ Edward J. Quilty ----------------------------- Edward J. Quilty 22 EX-10.08 14 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement"), made this 27th day of September, 1996, is entered into by Palatin Technologies, Inc., a Delaware corporation with its principal place of business at 214 Carnegie Center, Suite 100, Princeton, New Jersey 08540 (the "Company"), and Carl Spana, residing at 117 Winnebago Road, Yonkers, New York 10710 (the "Employee"). The Company desires to employ the Employee, and the Employee desires to be employed by the Company. In consideration of the mutual covenants and promises contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the parties agree as follows: 1. Term of Employment. The Company hereby agrees to employ the Employee, and the Employee hereby accepts employment with the Company, upon the terms set forth in this Agreement, for the period commencing on June 21, 1996 (the "Commencement Date") and ending on June 21, 1999 (such period, as it may be extended, the "Employment Period"), unless sooner terminated in accordance with the provisions of Section 4. 2. Title; Capacity. The Employee shall serve as Executive Vice President and Chief Technology Officer or in such other position as the Company or its Board of Directors (the "Board") may determine from time to time. The Employee shall be based at the Company's headquarters in Princeton, New Jersey. The Employee shall be subject to the supervision of, and shall have such authority as is delegated to him by, the Board or such officer of the Company as may be designated by the Board. The Employee hereby accepts such employment and agrees to undertake the duties and responsibilities inherent in such position and such other duties and responsibilities as the Board or its designee shall from time to time reasonably assign to him. The Employee agrees to devote his entire business time, attention and energies to the business and interests of the Company during the Employment Period. The Employee agrees to abide by the rules, regulations, instructions, personnel practices and policies of the Company and any changes therein which may be adopted from time to time by the Company. The Employee acknowledges receipt of copies of all such rules and policies committed to writing as of the date of this Agreement. 3. Compensation and Benefits. 3.1 Salary. The Company shall pay the Employee, in equal semi-monthly installments or otherwise in accordance with the Company's standard payroll policies as such policies may exist from time to time (after withholding and other required deductions), an annual base salary of $150,000 for the one-year period commencing on the Commencement Date. Such salary shall be subject to adjustment upward thereafter, as determined by the Board, on an annual basis each year on the anniversary date of the Employee's original date of employment by the Company (i.e., June 21) (the "Anniversary Date"), but the Board shall not decrease the Employee's annual base salary at any annual review. 2 3.2 Fringe-Benefits. The Employee shall be entitled to participate in all bonus and benefit programs that the Company establishes and makes available to its employees, if any, to the extent that Employee's position, tenure, salary, age, health and other qualifications make him eligible to participate. The Employee shall also be entitled to holidays and annual vacation leave in accordance with the Company's policy as it exists from time to time. 3.3 Reimbursement of Expenses. The Company shall reimburse the Employee for all reasonable travel, entertainment and other expenses incurred or paid by the Employee in connection with, or related to, the performance of his duties, responsibilities or services under this Agreement, upon presentation by the Employee of documentation, expense statements, vouchers and/or such other supporting information as the Company may request, provided, however, that the amount available for such travel, entertainment and other expenses may be fixed in advance by the Board. 4. Employment Termination. The employment of the Employee by the Company pursuant to this Agreement shall terminate upon the occurrence of any of the following: 4.1 Expiration of the Employment Period in accordance with Section 1; 4.2 At the election of the Company, for cause, immediately upon written notice by the Company to the Employee. For the purposes of this Section 4.2, cause for termination shall be deemed to exist upon (a) a good faith finding by the Company 3 of failure of the Employee to perform his assigned duties for the Company (which failure continues for thirty (30) days following written notice thereof to the Employee), dishonesty, negligence or misconduct, (b) the breach by the Employee of Section 7 of this Agreement or any provision of any confidentiality, invention and non-disclosure, non-competition or similar agreement between the Employee and the Company, or (c) the conviction of the Employee of, or the entry of a pleading of guilty or nolo contendere by the Employee to, any crime involving moral turpitude or any felony; 4.3 Thirty days after the death or disability of the Employee. As used in this Agreement, the term "disability" shall mean the inability of the Employee, due to a physical or mental disability, for a period of 90 days, whether or not consecutive, during any 360-day period, to perform the services contemplated under this Agreement. A determination of disability shall be made by a physician satisfactory to both the Employee and the Company; provided, however, that if the Employee and the Company do not agree on a physician, the Employee and the Company shall each select a physician and these two together shall select a third physician, whose determination as to disability shall be binding on all parties; 4.4 At the election of either party, upon not less than thirty days' prior written notice of termination (the "Notice of Termination"). 4 5. Effect of Termination. 5.1 Termination for Cause or at Election of Either Party. In the event the Employee's employment is terminated for cause pursuant to Section 4.2, or at the election of the Employee pursuant to Section 4.4, the Company shall pay to the Employee the compensation and benefits otherwise payable to him under Section 3 through the last day of his actual employment by the Company (the "Date of Termination"). In the event the Employee's employment is terminated at the election of the Company pursuant to Section 4.4, (a) the Company shall pay the Employee the compensation that would otherwise have been payable to the Employee, after withholding and other required deductions and in accordance with standard Company payroll policies and procedures, for a period of nine months after the Date of Termination and (b) all options to purchase shares of capital stock of the Company previously granted to the Employee pursuant to any stock option plan or other employee benefit plan with the Company which have not vested at such time but which would have vested on and prior to the next Anniversary Date shall vest and become fully exercisable to the extent of the Applicable Percentage. As used in this Agreement, the Applicable Percentage shall be the amount (expressed as a percentage) obtained by dividing the number of months elapsed from the June of the prior Anniversary Date to and including the month of such termination by twelve. 5.2 Termination for Death or Disability. If the Employee's employment is terminated by death or because of disability pursuant to Section 4.3, (a) the Company shall pay to 5 the estate of the Employee or to the Employee, as the case may be, the compensation which would otherwise be payable to the Employee up to the end of the month in which the termination of his employment because of death or disability occurs and (b) all options to purchase shares of capital stock of the Company previously granted to the Employee pursuant to any stock option plan or other employee benefit plan with the Company which have not vested at such time but which would have vested on and prior to the next Anniversary Date shall vest and become fully exercisable to the extent of the Applicable Percentage. 5.3 Survival. The provisions of Sections 5, 6, 7 and 8 shall survive the termination of this Agreement. 6. Change in Control. 6.1 Notwithstanding the foregoing, in the event that the Employee's employment is terminated (i) by the Company pursuant to Section 4.2 or (ii) by the Employee pursuant to Section 4.4 for Good Reason (as defined in Section 6.4), in either case within 12 months following a Change in Control (as defined in Section 6.3) of the Company, the Company shall not be required to pay the Employee the compensation and benefits set forth in Section 5.1, but instead shall provide the Employee with the following benefits: (i) the Company shall pay to the Employee (A) the Employee's full base salary and all other compensation through the Date of Termination at the rate in effect at the time the Notice of Termination is given, no later than the fifth full day following the Date of Termination, plus all other amounts to 6 which the Employee is entitled under any compensation plan of the Company at the time such payments are due and (B) if the Employee so elects, in lieu of his right to continue to receive deferred compensation under any deferred compensation plan of the Company then in effect, no later than the fifth full day following the Date of Termination, a lump-sum amount, in cash, equal to the deferred amounts together with any earnings credited on such amounts under such plan; (ii) for a nine-month period after termination, the Company will pay as severance pay to the Employee an amount equal to the sum of (A) the higher of (x) the Employee's annual base salary in effect on the Date of Termination or (y) the Employee's annual base salary in effect immediately prior to the Change in Control of the Company, plus (B) the higher of (x) the amount of the cash performance bonuses paid or awarded to the Employee with respect to the Company's most recent full fiscal year for which such a bonus was paid or awarded to the Employee or (y) the amount of cash performance bonuses paid or awarded to the Employee with respect to the Company's last full fiscal year prior to the Change in Control of the Company for which such a bonus was paid or awarded to the Employee, in each case after withholding and other required deductions and in accordance with standard Company payroll policies and procedures; (iii) for a nine-month period after termination, the Company shall arrange to provide the Employee with life, disability, dental, accident, travel and group health insurance benefits substantially similar to those which the Employee was 7 receiving immediately prior to the Notice of Termination. Notwithstanding the foregoing, the Company shall not provide any benefit otherwise receivable by the Employee pursuant to this paragraph (iv) if an equivalent benefit is actually received by the Employee during the 9-month period following his termination and any such benefit actually received by the Employee shall be reported to the Company; and (iv) for a six-month period after termination, the Company shall reimburse the Employee for reasonable fees and expenses incurred by him for the purpose of locating employment, including the fees and expenses of consultants and other persons retained by him for such purpose, promptly upon receipt by the Company of satisfactory evidence of payment of such fees and expenses. 6.2 In the event a Change in Control of the Company occurs during the Employment Period, all options to purchase shares of capital stock of the Company previously granted to the Employee pursuant to any stock option plan or other employee benefit arrangement of the Company shall immediately vest and become fully exercisable in accordance with their terms. 6.3 A "Change in Control" of the Company shall occur or be deemed to have occurred only if any of the following events occurs: (i) any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of 8 the Company, or any corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportion as their ownership of stock of the Company) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 40% or more of the combined voting power of the Company's then outstanding securities; (ii) individuals who, as of the date hereof, constitute the Board (as of the date hereof, the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 80% of the combined voting power of the voting 9 securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined) acquires more than 50% of the combined voting power of the Company's then outstanding securities; or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. 6.4 "Good Reason" means the occurrence after a Change in Control of the Company of any of the following circumstances: (i) any significant diminution in the Employee's position, duties, responsibilities, title or office as in effect immediately prior to a Change in Control; (ii) any reduction in the Employee's annual compensation as in effect on the date hereof or as the same may be increased from time to time; (iii) the failure of the Company to continue in effect any material compensation or benefit plan in which the Employee participates immediately prior to the Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Employee's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of the 10 Employee's participation relative to other participants, as existed at the time of the Change in Control or the failure by the Company to award cash bonuses to its executives in amounts substantially consistent with past practice in light of the Company's financial performance; (iv) the failure by the Company to continue to provide the Employee with benefits substantially similar to those enjoyed by the Employee under any of the Company's insurance, medical, health and accident, or disability plans in which the Employee was participating at the time of the Change in Control, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits, or the failure by the Company to provide the Employee with the number of paid vacation days to which he is entitled in accordance with the Company's normal vacation policy in effect at the time of the Change in Control or in accordance with any agreement between the Employee and the company existing at the time of the Change in Control; (v) any requirement by the Company or of any person in control of the Company that the location at which the Employee performs his principal duties for the Company at the time of the Change in Control (the "Prior Location") be changed to a new location outside a radius of 50 miles from such Prior Location; (vi) any request by the Company or of any person in control of the Company that the Employee travel on an overnight basis to an extent not substantially consistent with 11 his business travel obligations immediately prior to a Change in Control of the Company; (vii) the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement; or (viii) any purported termination of the Employee's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 9, which purported termination shall not be effective for purposes of this Agreement. 7. Non-Compete. (a) For the purposes of this Agreement: (i) "Proprietary Information" means all information and know-how, whether or not in writing, of a private, secret or confidential nature concerning the Company's business or financial affairs, including, without limitation, inventions, products, processes, methods, techniques, formulas, compositions, compounds, projects, developments, plans, research data, clinical data, financial data, personnel data, computer programs and customer and supplier lists. (ii) "Competing Products" means any products or processes of any person or organization other than the Company in existence or under development, which are substantially the same, may be substituted for, or applied to substantially the same end use as the products or processes that the Company has plans to develop, is developing or has developed or commercialized during the time of the Employee's employment with the Company. 12 (iii) "Competing Organization" means any person or organization engaged in, or about to become engaged in, research or development, production, distribution, marketing or selling of a Competing Product. (b) The Employee understands that information regarding the Company and its affiliates including, without limitation, Proprietary Information, is considered confidential to the Company and is of substantial commercial value to the Company. Any entrusting of such confidential information to the Employee by the Company is done so in reliance upon the confidential relationship arising from the terms of his employment with the Company. Therefore, in consideration of his employment with the Company, the Employee agrees that he will not render services of any nature, directly or indirectly, to any Competing Organization in connection with any Competing Product within such geographical territory as the Company and such Competing Organization are or would be in actual competition, for a period of nine months, commencing on the date of termination of his employment. The Employee understands that services rendered to such Competing Organization may have the effect of supporting actual competition in various geographic areas, and may be prohibited by this Agreement regardless of the geographic area in which such services are physically rendered. The Company may, in its sole discretion, elect to waive, in whole or in part, the obligation set forth in the previous sentence, such waiver to be effective only if given in writing by the Company. 13 8. Confidentiality and Assignment of Inventions. The Employee acknowledges that he has, on or prior to the date of this Agreement, executed and delivered to the Company a Non- Disclosure Agreement (the "Confidentiality Agreement"). The Employee hereby affirms and ratifies his obligations thereunder. 9. Notices. All notices required or permitted under this Agreement shall be in writing and shall be deemed effective upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail, postage prepaid, addressed to the other party at the address shown above, or at such other address or addresses as either party shall designate to the other in accordance with this Section 9. 10. Pronouns. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular forms of nouns and pronouns shall include the plural, and vice versa. 11. Entire Agreement. This Agreement, together with the Confidentiality Agreement, constitutes the entire agreement between the parties and supersedes all prior agreements and understandings, whether written or oral, relating to the subject matter of this Agreement. 12. Amendment. This Agreement may be amended or modified only by a written instrument executed by both the Company and the Employee. 13. Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with the laws of New Jersey. 14 14. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and assigns, including any corporation with which or into which the Company may be merged or which may succeed to its assets or business; provided, however, that the obligations of the Employee are personal and shall not be assigned by him. 15. Miscellaneous. 15.1 No delay or omission by the Company in exercising any right under this Agreement shall operate as a waiver of that or any other right. A waiver or consent given by the Company on any one occasion shall be effective only in that instance and shall not be construed as a bar or waiver of any right on any other occasion. 15.2 The captions of the sections of this Agreement are for convenience of reference only and in no way define, limit or affect the scope or substance of any section of this Agreement. 15.3 In case any provision of this Agreement shall be invalid, illegal or otherwise unenforceable, the validity, legality and enforceability of the remaining provisions shall in no way be affected or impaired thereby. 15 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as an instrument under seal as of the day and year set forth above. PALATIN TECHNOLOGIES, INC. By: /s/ Edward J. Quilty ---------------------------------------- Name: Edward J. Quilty Title: Chief Executive Officer EMPLOYEE /s/ Carl Spana ------------------------------------------- Carl Spana 16 EX-10.09 15 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement"), made this 27th day of September, 1996, is entered into by Palatin Technologies, Inc., a Delaware corporation with its principal place of business at 214 Carnegie Center, Suite 100, Princeton, New Jersey 08540 (the "Company"), and Charles Putnam, residing at 11 Woodview Drive, Belle Mead, New Jersey 08502 (the "Employee"). The Company desires to employ the Employee, and the Employee desires to be employed by the Company. In consideration of the mutual covenants and promises contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the parties agree as follows: 1. Term of Employment. The Company hereby agrees to employ the Employee, and the Employee hereby accepts employment with the Company, upon the terms set forth in this Agreement, for the period commencing on June 21, 1996 (the "Commencement Date") and ending on June 21, 1999 (such period, as it may be extended, the "Employment Period"), unless sooner terminated in accordance with the provisions of Section 4. 2. Title; Capacity. The Employee shall serve as Executive Vice President or in such other position as the Company or its Board of Directors (the "Board") may determine from time to time. The Employee shall be based at the Company's headquarters in Princeton, New Jersey. The Employee shall be subject to the supervision of, and shall have such authority as is delegated to him by, the Board or such officer of the Company as may be designated by the Board. The Employee hereby accepts such employment and agrees to undertake the duties and responsibilities inherent in such position and such other duties and responsibilities as the Board or its designee shall from time to time reasonably assign to him. The Employee agrees to devote his entire business time, attention and energies to the business and interests of the Company during the Employment Period. The Employee agrees to abide by the rules, regulations, instructions, personnel practices and policies of the Company and any changes therein which may be adopted from time to time by the Company. The Employee acknowledges receipt of copies of all such rules and policies committed to writing as of the date of this Agreement. 3. Compensation and Benefits. 3.1 Salary. The Company shall pay the Employee, in equal semi-monthly installments or otherwise in accordance with the Company's standard payroll policies as such policies may exist from time to time (after withholding and other required deductions), an annual base salary of $150,000 for the one-year period commencing on the Commencement Date. Such salary shall be subject to adjustment upward thereafter, as determined by the Board, on an annual basis each year on the anniversary date of the Employee's original date of employment by the Company (i.e., June 21) (the "Anniversary Date"), but the Board shall not decrease the Employee's annual base salary at any annual review. 2 3.2 Fringe-Benefits. The Employee shall be entitled to participate in all bonus and benefit programs that the Company establishes and makes available to its employees, if any, to the extent that Employee's position, tenure, salary, age, health and other qualifications make him eligible to participate. The Employee shall also be entitled to holidays and annual vacation leave in accordance with the Company's policy as it exists from time to time. 3.3 Reimbursement of Expenses. The Company shall reimburse the Employee for all reasonable travel, entertainment and other expenses incurred or paid by the Employee in connection with, or related to, the performance of his duties, responsibilities or services under this Agreement, upon presentation by the Employee of documentation, expense statements, vouchers and/or such other supporting information as the Company may request, provided, however, that the amount available for such travel, entertainment and other expenses may be fixed in advance by the Board. 4. Employment Termination. The employment of the Employee by the Company pursuant to this Agreement shall terminate upon the occurrence of any of the following: 4.1 Expiration of the Employment Period in accordance with Section 1; 4.2 At the election of the Company, for cause, immediately upon written notice by the Company to the Employee. For the purposes of this Section 4.2, cause for termination shall be deemed to exist upon (a) a good faith finding by the Company 3 of failure of the Employee to perform his assigned duties for the Company (which failure continues for thirty (30) days following written notice thereof to the Employee), dishonesty, negligence or misconduct, (b) the breach by the Employee of Section 7 of this Agreement or any provision of any confidentiality, invention and non-disclosure, non-competition or similar agreement between the Employee and the Company, or (c) the conviction of the Employee of, or the entry of a pleading of guilty or nolo contendere by the Employee to, any crime involving moral turpitude or any felony; 4.3 Thirty days after the death or disability of the Employee. As used in this Agreement, the term "disability" shall mean the inability of the Employee, due to a physical or mental disability, for a period of 90 days, whether or not consecutive, during any 360-day period, to perform the services contemplated under this Agreement. A determination of disability shall be made by a physician satisfactory to both the Employee and the Company; provided, however, that if the Employee and the Company do not agree on a physician, the Employee and the Company shall each select a physician and these two together shall select a third physician, whose determination as to disability shall be binding on all parties; 4.4 At the election of either party, upon not less than thirty days' prior written notice of termination (the "Notice of Termination"). 4 5. Effect of Termination. 5.1 Termination for Cause or at Election of Either Party. In the event the Employee's employment is terminated for cause pursuant to Section 4.2, or at the election of the Employee pursuant to Section 4.4, the Company shall pay to the Employee the compensation and benefits otherwise payable to him under Section 3 through the last day of his actual employment by the Company (the "Date of Termination"). In the event the Employee's employment is terminated at the election of the Company pursuant to Section 4.4, (a) the Company shall pay the Employee the compensation that would otherwise have been payable to the Employee, after withholding and other required deductions and in accordance with standard Company payroll policies and procedures, for a period of nine months after the Date of Termination and (b) all options to purchase shares of capital stock of the Company previously granted to the Employee pursuant to any stock option plan or other employee benefit plan with the Company which have not vested at such time but which would have vested on and prior to the next Anniversary Date shall vest and become fully exercisable to the extent of the Applicable Percentage. As used in this Agreement, the Applicable Percentage shall be the amount (expressed as a percentage) obtained by dividing the number of months elapsed from the June of the prior Anniversary Date to and including the month of such termination by twelve. 5.2 Termination for Death or Disability. If the Employee's employment is terminated by death or because of disability pursuant to Section 4.3, (a) the Company shall pay to 5 the estate of the Employee or to the Employee, as the case may be, the compensation which would otherwise be payable to the Employee up to the end of the month in which the termination of his employment because of death or disability occurs and (b) all options to purchase shares of capital stock of the Company previously granted to the Employee pursuant to any stock option plan or other employee benefit plan with the Company which have not vested at such time but which would have vested on and prior to the next Anniversary Date shall vest and become fully exercisable to the extent of the Applicable Percentage. 5.3 Survival. The provisions of Sections 5, 6, 7 and 8 shall survive the termination of this Agreement. 6. Change in Control. 6.1 Notwithstanding the foregoing, in the event that the Employee's employment is terminated (i) by the Company pursuant to Section 4.2 or (ii) by the Employee pursuant to Section 4.4 for Good Reason (as defined in Section 6.4), in either case within 12 months following a Change in Control (as defined in Section 6.3) of the Company, the Company shall not be required to pay the Employee the compensation and benefits set forth in Section 5.1, but instead shall provide the Employee with the following benefits: (i) the Company shall pay to the Employee (A) the Employee's full base salary and all other compensation through the Date of Termination at the rate in effect at the time the Notice of Termination is given, no later than the fifth full day following the Date of Termination, plus all other amounts to 6 which the Employee is entitled under any compensation plan of the Company at the time such payments are due and (B) if the Employee so elects, in lieu of his right to continue to receive deferred compensation under any deferred compensation plan of the Company then in effect, no later than the fifth full day following the Date of Termination, a lump-sum amount, in cash, equal to the deferred amounts together with any earnings credited on such amounts under such plan; (ii) for a nine-month period after termination, the Company will pay as severance pay to the Employee an amount equal to the sum of (A) the higher of (x) the Employee's annual base salary in effect on the Date of Termination or (y) the Employee's annual base salary in effect immediately prior to the Change in Control of the Company, plus (B) the higher of (x) the amount of the cash performance bonuses paid or awarded to the Employee with respect to the Company's most recent full fiscal year for which such a bonus was paid or awarded to the Employee or (y) the amount of cash performance bonuses paid or awarded to the Employee with respect to the Company's last full fiscal year prior to the Change in Control of the Company for which such a bonus was paid or awarded to the Employee, in each case after withholding and other required deductions and in accordance with standard Company payroll policies and procedures; (iii) for a nine-month period after termination, the Company shall arrange to provide the Employee with life, disability, dental, accident, travel and group health insurance benefits substantially similar to those which the Employee was 7 receiving immediately prior to the Notice of Termination. Notwithstanding the foregoing, the Company shall not provide any benefit otherwise receivable by the Employee pursuant to this paragraph (iv) if an equivalent benefit is actually received by the Employee during the 9-month period following his termination and any such benefit actually received by the Employee shall be reported to the Company; and (iv) for a six-month period after termination, the Company shall reimburse the Employee for reasonable fees and expenses incurred by him for the purpose of locating employment, including the fees and expenses of consultants and other persons retained by him for such purpose, promptly upon receipt by the Company of satisfactory evidence of payment of such fees and expenses. 6.2 In the event a Change in Control of the Company occurs during the Employment Period, all options to purchase shares of capital stock of the Company previously granted to the Employee pursuant to any stock option plan or other employee benefit arrangement of the Company shall immediately vest and become fully exercisable in accordance with their terms. 6.3 A "Change in Control" of the Company shall occur or be deemed to have occurred only if any of the following events occurs: (i) any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of 8 the Company, or any corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportion as their ownership of stock of the Company) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 40% or more of the combined voting power of the Company's then outstanding securities; (ii) individuals who, as of the date hereof, constitute the Board (as of the date hereof, the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 80% of the combined voting power of the voting 9 securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined) acquires more than 50% of the combined voting power of the Company's then outstanding securities; or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. 6.4 "Good Reason" means the occurrence after a Change in Control of the Company of any of the following circumstances: (i) any significant diminution in the Employee's position, duties, responsibilities, title or office as in effect immediately prior to a Change in Control; (ii) any reduction in the Employee's annual compensation as in effect on the date hereof or as the same may be increased from time to time; (iii) the failure of the Company to continue in effect any material compensation or benefit plan in which the Employee participates immediately prior to the Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Employee's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of the 10 Employee's participation relative to other participants, as existed at the time of the Change in Control or the failure by the Company to award cash bonuses to its executives in amounts substantially consistent with past practice in light of the Company's financial performance; (iv) the failure by the Company to continue to provide the Employee with benefits substantially similar to those enjoyed by the Employee under any of the Company's insurance, medical, health and accident, or disability plans in which the Employee was participating at the time of the Change in Control, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits, or the failure by the Company to provide the Employee with the number of paid vacation days to which he is entitled in accordance with the Company's normal vacation policy in effect at the time of the Change in Control or in accordance with any agreement between the Employee and the company existing at the time of the Change in Control; (v) any requirement by the Company or of any person in control of the Company that the location at which the Employee performs his principal duties for the Company at the time of the Change in Control (the "Prior Location") be changed to a new location outside a radius of 50 miles from such Prior Location; (vi) any request by the Company or of any person in control of the Company that the Employee travel on an overnight basis to an extent not substantially consistent with 11 his business travel obligations immediately prior to a Change in Control of the Company; (vii) the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement; or (viii) any purported termination of the Employee's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 9, which purported termination shall not be effective for purposes of this Agreement. 7. Non-Compete. (a) For the purposes of this Agreement: (i) "Proprietary Information" means all information and know-how, whether or not in writing, of a private, secret or confidential nature concerning the Company's business or financial affairs, including, without limitation, inventions, products, processes, methods, techniques, formulas, compositions, compounds, projects, developments, plans, research data, clinical data, financial data, personnel data, computer programs and customer and supplier lists. (ii) "Competing Products" means any products or processes of any person or organization other than the Company in existence or under development, which are substantially the same, may be substituted for, or applied to substantially the same end use as the products or processes that the Company plans to 12 develop, is developing, or has developed or commercialized during the time of the Employee's employment with the Company. (iii) "Competing Organization" means any person or organization engaged in, or about to become engaged in, research or development, production, distribution, marketing or selling of a Competing Product. (b) The Employee understands that information regarding the Company and its affiliates including, without limitation, Proprietary Information, is considered confidential to the Company and is of substantial commercial value to the Company. Any entrusting of such confidential information to the Employee by the Company is done so in reliance upon the confidential relationship arising from the terms of his employment with the Company. Therefore, in consideration of his employment with the Company, the Employee agrees that he will not render services of any nature, directly or indirectly, to any Competing Organization in connection with any Competing Product within such geographical territory as the Company and such Competing Organization are or would be in actual competition, for a period of nine months, commencing on the date of termination of his employment. The Employee understands that services rendered to such Competing Organization may have the effect of supporting actual competition in various geographic areas, and may be prohibited by this Agreement regardless of the geographic area in which such services are physically rendered. The Company may, in its sole discretion, elect to waive, in whole or in part, the obligation set forth in 13 the previous sentence, such waiver to be effective only if given in writing by the Company. 8. Confidentiality and Assignment of Inventions. The Employee acknowledges that he has, on or prior to the date of this Agreement, executed and delivered to the Company a Non- Disclosure Agreement (the "Confidentiality Agreement"). The Employee hereby affirms and ratifies his obligations thereunder. 9. Notices. All notices required or permitted under this Agreement shall be in writing and shall be deemed effective upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail, postage prepaid, addressed to the other party at the address shown above, or at such other address or addresses as either party shall designate to the other in accordance with this Section 9. 10. Pronouns. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular forms of nouns and pronouns shall include the plural, and vice versa. 11. Entire Agreement. This Agreement, together with the Confidentiality Agreement, constitutes the entire agreement between the parties and supersedes all prior agreements and understandings, whether written or oral, relating to the subject matter of this Agreement. 12. Amendment. This Agreement may be amended or modified only by a written instrument executed by both the Company and the Employee. 14 13. Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with the laws of New Jersey. 14. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and assigns, including any corporation with which or into which the Company may be merged or which may succeed to its assets or business; provided, however, that the obligations of the Employee are personal and shall not be assigned by him. 15. Miscellaneous. 15.1 No delay or omission by the Company in exercising any right under this Agreement shall operate as a waiver of that or any other right. A waiver or consent given by the Company on any one occasion shall be effective only in that instance and shall not be construed as a bar or waiver of any right on any other occasion. 15.2 The captions of the sections of this Agreement are for convenience of reference only and in no way define, limit or affect the scope or substance of any section of this Agreement. 15.3 In case any provision of this Agreement shall be invalid, illegal or otherwise unenforceable, the validity, legality and enforceability of the remaining provisions shall in no way be affected or impaired thereby. 15 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as an instrument under seal as of the day and year set forth above. PALATIN TECHNOLOGIES, INC. By: /s/ Edward J. Quilty --------------------------------------- Name: Edward J. Quilty Title: Chief Executive Officer EMPLOYEE /s/ Charles Putnam ------------------------------------------ Charles Putnam 16 EX-10.10 16 CLASS C WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS. RHOMED INCORPORATED CLASS C WARRANT FOR THE PURCHASE OF ----------------------------------- SHARES OF COMMON STOCK ---------------------- NO. 1 275,000 SHARES For value received, RhoMed Incorporated, a New Mexico corporation (the "COMPANY"), hereby certifies that William I. Franzblau or permitted assigns, is entitled to purchase from the Company, at any time or from time to time commencing on June 24, 1996 and prior to 5:00 P.M., New York City time, on four years from June 24, 1996 (the "TERMINATION DATE"), Two Hundred and Seventy-Five Thousand (275,000) fully paid and non-assessable shares of the Common Stock, no par value, of the Company for an aggregate purchase price of $110,000 (computed on the basis of $.40 per share). Herein, (i) said Common Stock, together with any other equity securities which may be issued by the Company with respect thereto or in substitution therefor, including, but not limited to, such securities as may be issued pursuant to the Agreement and Plan of Reorganization by and among Interfilm, Inc., Interfilm Acquisition Corp. and RhoMed Incorporated as of April 12, 1996, is referred to as the "COMMON STOCK", (ii) the shares of the Common Stock purchasable hereunder or under any other Warrant (as hereinafter defined) are referred to as the "WARRANT SHARES", (iii) the aggregate purchase price payable Class C Warrant Page 1 for the Warrant Shares hereunder is referred to as the "AGGREGATE WARRANT PRICE", (iv) the price payable for each of the Warrant Shares hereunder is referred to as the "PER SHARE WARRANT PRICE", (v) this Warrant, all similar Warrants issued on the date hereof and all Warrants hereafter issued in exchange or substitution for this Warrant or such similar Warrants are referred to as the "WARRANTS" and (vi) the holder of this Warrant or Warrant Shares issued upon the exercise of this Warrant is referred to as the "HOLDER" and the holder of this Warrant and all other Warrants or Warrant Shares issued upon the exercise of any Warrant are referred to as the "HOLDERS". The Aggregate Warrant Price is not subject to adjustment. The Per Share Warrant Price is subject to adjustment as hereinafter provided; in the event of any such adjustment, the number of Warrant Shares shall be adjusted by dividing the Aggregate Warrant Price by the Per Share Warrant Price in effect immediately after such adjustment. 1. EXERCISE OF WARRANT. (a) This Warrant may be exercised, in whole at any time or in part from time to time, commencing on June 24, 1996 and prior to the Termination Date, unless terminated earlier as set forth in Section 8 hereof, by the holder by the surrender of this Warrant (with the subscription form at the end hereof duly executed) at the address set forth in Subsection 10(a) hereof, together with proper payment of the Aggregate Warrant Price, or the proportionate part thereof if this Warrant is exercised in part, with payment for Warrant Shares made by certified or official bank check payable to the order of the Company; or (b) If this Warrant is exercised in part, this Warrant must be exercised for a number of whole shares of the Common Stock and the Holder is entitled to receive a new Warrant covering the Warrant Shares which have not been exercised and setting forth the proportionate part of the Aggregate Warrant Price applicable to such Warrant Shares. Upon surrender of this Warrant, the Company will (i) issue a certificate or certificates in the name of the Holder for the largest number of whole shares of the Common Stock to which the Holder shall be entitled and, if this Warrant is exercised in whole, in lieu of any fractional share of the Common Stock to which the Holder shall be entitled, pay to the Holder cash in an amount equal to the fair value of such fractional share (determined in such reasonable manner as the Board of Directors of the Company shall determine), and (ii) deliver the other securities and properties receivable upon the exercise of this Warrant, or the proportionate part thereof if this Warrant is exercised in part, pursuant to the provisions of this Warrant. 2. RESERVATION OF WARRANT SHARES; LISTING. The Company agrees that, prior to the expiration of this Warrant, the Company will at all times have authorized and in Class C Warrant Page 2 reserve, and keep available, solely for issuance and delivery upon the exercise of this Warrant, the shares of the Common Stock and other securities and properties as from time to time shall be receivable upon the exercise of this Warrant, free and clear of all restrictions (other than restrictions necessary to comply with Federal and state securities laws) on sale or transfer and free and clear of all preemptive rights and rights of first refusal. 3. PROTECTION AGAINST DILUTION. (a) In case the Company shall hereafter (i) pay a dividend or make a distribution on its capital stock in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares or (iv) issue by reclassification of its Common Stock any shares of capital stock of the Company, the Per Share Warrant Price shall be adjusted to be equal to a fraction, the numerator of which shall be the Aggregate Warrant Price and the denominator of which shall be the number of shares of Common Stock or other capital stock of the Company which he would have owned immediately following such action had such Warrant been exercised immediately prior thereto. An adjustment made pursuant to this Subsection 3(a) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. (b) In case of any capital reorganization or reclassification, or any consolidation or merger to which the Company is a party other than a merger or consolidation in which the Company is the continuing corporation, or in case of any sale or conveyance to another entity of the property of the Company as an entirety or substantially as an entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into the Company), the Holder of this Warrant shall have the right thereafter to receive on the exercise of this Warrant the kind and amount of securities, cash or other property which the Holder would have owned or have been entitled to receive immediately after such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance had this Warrant been exercised immediately prior to the effective date of such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Section 3 with respect to the rights and interests thereafter of the Holder of this Warrant to the end that the provisions set forth in this Section 3 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter deliverable on the exercise of this Warrant. The above provisions of this Subsection 3(c) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, statutory exchanges, sales or Class C Warrant Page 3 conveyances. The issuer of any shares of stock or other securities or property thereafter deliverable on the exercise of this Warrant shall be responsible for all of the agreements and obligations of the Company hereunder. Notice of any such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and of said provisions so proposed to be made, shall be mailed to the Holders of the Warrants not less than 30 days prior to such event; provided, however, that notice need not been give on account of transactions provided for in the Agreement and Plan of Reorganization by and among Interfilm, Inc., Interfilm Acquisition Corp. and RhoMed Incorporated as of April 12, 1996. A sale of all or substantially all of the assets of the Company for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes. (c) In case any event shall occur as to which the other provisions of this Section 3 are not strictly applicable but as to which the failure to make any adjustment would not fairly protect the purchase rights represented by this Warrant in accordance with the essential intent and principles hereof then, in each such case, the Holders of Warrants representing the right to purchase a majority of the Warrant Shares subject to all outstanding Warrants may appoint a firm of independent public accountants of recognized national standing reasonably acceptable to the Company, which shall give their opinion as to the adjustment, if any, on a basis consistent with the essential intent and principles established herein, necessary to preserve the purchase rights represented by the Warrants. Upon receipt of such opinion, the Company will promptly mail a copy thereof to the Holder of this Warrant and shall make the adjustments described therein. The fees and expenses of such independent public accountants shall be borne by the Company. (d) No adjustment in the Per Share Warrant Price shall be required unless such adjustment would require an increase or decrease of at least $0.05 per share of Common Stock; provided, however, that any adjustments which by reason of this Subsection 3(d) are not required to be made shall be carried forward and taken into account in any subsequent adjustment; provided, further, however, that adjustments shall be required and made in accordance with the provisions of this Section 3 (other than this Subsection 3(d)) not later than such time as may be required in order to preserve the tax-free nature of a distribution to the Holder of this Warrant or Common Stock issuable upon the exercise hereof. All calculations under this Section 3 shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. Anything in this Section 3 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Per Share Warrant Price, in addition to those required by this Section 3, as it in its discretion shall deem to be advisable in order that any stock dividend, subdivision of shares or distribution of rights to purchase stock or securities convertible or exchangeable for stock hereafter made by the Company to its stockholders shall not be taxable. Class C Warrant Page 4 (e) Whenever the Per Share Warrant Price is adjusted as provided in this Section 3 and upon any modification of the rights of a Holder of Warrants in accordance with this Section 3, the Company shall promptly obtain, at its expense, a certificate of a firm of independent public accountants of recognized standing selected by the Board of Directors (who may be the regular auditors of the Company) setting forth the Per Share Warrant Price and the number of Warrant Shares after such adjustment or the effect of such modification, a brief statement of the facts requiring such adjustment or modification and the manner of computing the same and cause copies of such certificate to be mailed to the Holders of the Warrants. (f) If the Board of Directors of the Company shall declare any dividend or other distribution with respect to the Common Stock other than a cash distribution out of earned surplus, the Company shall mail notice thereof to the Holders of the Warrants not less than 15 days prior to the record date fixed for determining stockholders entitled to participate in such dividend or other distribution. (g) If, as a result of an adjustment made pursuant to this Section 3, the Holder of any Warrant thereafter surrendered for exercise shall become entitled to receive shares of two or more classes of capital stock or shares of Common Stock and other capital stock of the Company, the Board of Directors (whose determination shall be conclusive and shall be described in a written notice to the Holder of any Warrant promptly after such adjustment) shall determine the allocation of the adjusted Per Share Warrant Price between or among shares or such classes of capital stock or shares of Common Stock and other capital stock. 4. FULLY PAID STOCK; TAXES. The Company agrees that the shares of the Common Stock represented by each and every certificate of Warrant Shares delivered on the exercise of this Warrant be validly issued and outstanding, fully paid and nonassessable, and not subject to preemptive rights or rights of first refusal, and the Company will take all such actions as may be necessary to assure that the par value or stated value, if any, per share of the Common Stock is at all times equal to or less than the then Per Share Warrant Price. The Company further covenants and agrees that it will pay, when due and payable, any and all Federal and state stamp, original issue or similar taxes which may be payable in respect of the issue of any Warrant Share or any certificate thereof. 5. REGISTRATION UNDER SECURITIES ACT OF 1933. The Holder of this Warrant shall have the registration rights provided in Exhibit A hereto. Class C Warrant Page 5 6. LIMITED TRANSFERABILITY. This Warrant may not be sold, transferred, assigned or hypothecated by the Holder except in compliance with the provisions of the Act and the applicable state securities "blue sky" laws, and is so transferable only upon the books of the Company which it shall cause to be maintained for such purpose. The Company may treat the registered Holder of this Warrant as he or it appears on the Company's books at any time as the Holder for all purposes. The Company shall permit any Holder of a Warrant or his duly authorized attorney, upon written request during ordinary business hours, to inspect and copy or make extracts from its books showing the registered holders of Warrants. All Warrants issued upon the transfer or assignment of this Warrant will be dated the same date as this Warrant, and all rights of the holder thereof shall be identical to those of the Holder. 7. CALL OF WARRANT BY COMPANY. This Warrant automatically terminates if: (a) The Common Stock, or any securities into which the Common Stock has been converted, trades on a national securities exchange, on the National Association of Security Dealers, Inc. Automated Quotations System ("NASDAQ"), on the NASD Electronic Bulletin Board, or in "pink sheets", and has, during any consecutive thirty trading day period, had a closing price for at least twenty trading days equal to or greater than $0.60 per share, said closing price to be determined on the basis of the initial Per Share Warrant Price and initial aggregate number of Warrant Shares, making adjustment to the Per Share Warrant Price and number of Warrant Shares as provided in Section 3(e) (the "TERMINATION EVENT"); (b) Notice of the Termination Event is given to the Holder at the address and as set forth in Subsection 10(a) hereof; and (c) The Holder has not, by the close of the thirtieth day following giving notice of the Termination Event, exercised the Warrant as set forth in Section 1. 8. LOSS, ETC., OF WARRANT. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and of indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed, and upon surrender and cancellation of this Warrant, if mutilated, the Company shall execute and deliver to the Holder a new Warrant of like date, tenor and denomination. 9. WARRANT HOLDER NOT SHAREHOLDER. Except as otherwise provided herein, this Warrant does not confer upon the Holder any right to vote or to consent to or Class C Warrant Page 6 receive notice as a stockholder of the Company, as such, in respect of any matters whatsoever, or any other rights or liabilities as a stockholder, prior to the exercise hereof. 10. COMMUNICATION. No notice or other communication under this Warrant shall be effective unless, but any notice or other communication shall be effective and shall be deemed to have been given if, the same is in writing and is mailed by first-class mail, postage prepaid, addressed to: (a) the Company at 214 Carnegie Center, Suite 100, Princeton, NJ 08540 or such other address as the Company has designated in writing to the Holder, or (b) the Holder at 162 Franklin Street, Morristown, NJ 07960, or such other address as the Holder has designated in writing to the Company. 11. HEADINGS. The headings of this Warrant have been inserted as a matter of convenience and shall not affect the construction hereof. 12. APPLICABLE LAW. This Warrant shall be governed by and construed in accordance with the law of the State of New York without giving effect to the principles of conflicts of law thereof. Class C Warrant Page 7 IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by an Executive Officer and its corporate seal to be hereunto affixed and attested by its Assistant Secretary this 24th day of June, 1996. RHOMED INCORPORATED By: s/ John J. McDonough ------------------------- John J. McDonough Vice President and CFO ATTEST: s/ Stephen A. Slusher --------------------- Assistant Secretary [Corporate Seal] Class C Warrant Page 8 SUBSCRIPTION ------------ The undersigned, William I. Franzblau, pursuant to the provisions of the foregoing Warrant, hereby agrees to subscribe for and purchase ____________________ shares of the Common Stock, no par value, of RhoMed Incorporated, covered by said Warrant, and makes payment therefor in full at the price per share provided by said Warrant. Dated:_______________ Signature:_____________________ Address:_______________________ ASSIGNMENT FOR VALUE RECEIVED William I. Franzblau hereby sells, assigns and transfers unto ____________________ the foregoing Warrant and all rights evidenced thereby, and does irrevocably constitute and appoint _____________________, attorney, to transfer said Warrant on the books of RhoMed Incorporated. Dated:_______________ Signature:_____________________ Address:_______________________ PARTIAL ASSIGNMENT FOR VALUE RECEIVED William I. Franzblau, hereby assigns and transfers unto ____________________ the right to purchase _______ shares of the Common Stock, no par value per share, of RhoMed Incorporated covered by the foregoing Warrant, and a proportionate part of said Warrant and the rights evidenced thereby, and does irrevocably constitute and appoint ____________________, attorney, to transfer that part of said Warrant on the books of RhoMed Incorporated. Dated:_______________ Signature:_____________________ Address:_______________________ Class C Warrant Page 9 REGISTRATION RIGHTS AGREEMENT 1.1 As used in this Registration Rights Agreement to the Warrant for the Purchase of Shares of Common Stock ("Registration Rights Agreement"), the following terms shall have the following meanings: (a) "Affiliate" shall mean, with respect to any person, any other person controlling, controlled by or under direct or indirect common control with such person (for the purposes of this definition "control," when used with respect to any specified person, shall mean the power to direct the management and policies of such person, directly or indirectly, whether through ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing). (b) "Business Day" shall mean a day Monday through Friday on which banks are generally open for business in New York. (c) "Holder" and "Holders" has the meaning given in the Warrant, and any person holding Registrable Securities to whom the rights under this Registration Rights Agreement have been transferred in accordance with Section 1.9 hereof. (d) "Person" shall mean any person, individual, corporation, partnership, trust or other nongovernmental entity or any governmental agency, court, authority or other body (whether foreign, federal, state, local or otherwise). (e) The terms "register," "registered" and "registration" refer to the registration effected by preparing and filing a registration statement in compliance with the Act, and the declaration or ordering of the effectiveness of such registration statement. (f) "Registrable Securities" shall mean any Warrant Shares issued upon exercise of the Warrant; provided, however, that securities shall only be treated as Registrable Securities if and only for so long as they (i) have not been disposed of pursuant to a registration statement declared effective by the Commission, (ii) have not been sold in a transaction exempt from the registration and prospectus delivery requirements of the Act so that all transfer restrictions and restrictive legends with respect thereto are removed upon the consummation of such sale, (iii) are not saleable as exempt securities pursuant to Section 3(a)(10) of the Securities Act of 1933 or (iv) are held by a Holder or a permitted transferee pursuant to Section 1.9. (g) "Registration Expenses" shall mean all expenses incurred by the Company in complying with Section 1.2 hereof, including, without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and expenses of counsel for Exhibit A - Registration Rights - Page 1 the Company, blue sky fees and expenses (for a reasonable number of states) and the expense of any special audits incident to or required by any such registration (but excluding the fees of legal counsel for any Holder). (h) "Registration Statement" shall have the meaning ascribed to such term in Section 1.2. (i) "Registration Period" shall have the meaning ascribed to such term in Section 1.4. (j) "Selling Expenses" shall mean all underwriting discounts and selling commissions applicable to the sale of Registrable Securities and all fees and expenses of legal counsel for any Holder. (k) "Warrant" shall mean the Class C Warrant for the Purchase of Shares of Common Stock of which this Registration Rights Agreement is a part. 1.2 The Company agrees that no later than 180 days after (x) the closing date of the first registration statement for an initial public offering of the Common Stock of the Company registered under the Act or (y) the first date on which the Common Stock of the Company (or securities received in exchange for Common Stock of the Company) trades on a national securities exchange, on the National Association of Security Dealers, Inc. Automated Quotations System ("NASDAQ"), on the OTC Electronic Bulletin Board or in "pink sheets", the Company will file a registration statement (the "Registration Statement") with the Commission and use its reasonable best efforts to effect the registration, qualifications or compliances (including, without limitation, the execution of any required undertaking to file post-effective amendments, appropriate qualifications under applicable blue sky or other state securities laws and appropriate compliance with applicable securities laws, requirements or regulations) as may be so reasonably requested and as would permit or facilitate the sale and distribution of all Registrable Securities. Notwithstanding the foregoing, the Company (i) will not be obligated to enter into any underwriting agreement for the sale of any of the Registrable Securities and (ii) may delay the filing for a period not to exceed sixty (60) days if the Company determines in good faith that such filing would have an adverse effect on the Company or would otherwise be inadvisable. 1.3 All Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to Section 1.2 shall be borne by the Company. All Selling Expenses relating to the sale of securities registered by or on behalf of Holders shall be borne by such Holders pro rata on the basis of the number of securities so registered. Exhibit A - Registration Rights - Page 2 1.4 In the case of the registration, qualification or compliance effected by the Company pursuant to this Registration Rights Agreement, the Company will, upon reasonable request, inform each Holder as to the status of such registration, qualification and compliance. At its expense the Company will: (a) use its reasonable best efforts to keep such registration and any qualification or compliance under state securities laws which the Company determines to obtain, continuously effective until the Holders have completed the distribution described in the Registration Statement. The period of time during which the Company is required hereunder to keep the Registration Statement effective is referred to herein as the "Registration Period." Notwithstanding the foregoing, at the Company's election the Company may cease to keep such registration, qualification or compliance effective with respect to any Registrable Securities, and the registration rights of a Holder shall expire, at such time as the Holder may sell under Rule 144 under the Act (or other exemption from registration acceptable to the Company) in a three-month period all Registrable Securities then held by such Holder; and (b) advise the Holders: (i) when the Registration Statement or any amendment thereto has been filed with the Commission and when the registration statement or any post-effective amendment thereto has become effective; (ii) of any request by the Commission for amendments or supplements to the Registration Statement or the prospectus included therein or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for such purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities included therein for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (v) of the happening of any event that requires the making of any changes in the Registration Statement or the prospectus so that, as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the Exhibit A - Registration Rights - Page 3 statements therein (in the case of the prospectus, in the light of the circumstances under which they were made) not misleading; (c) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of any Registration Statement at the earliest possible time; (d) furnish to each Holder, without charge, at least one copy of such Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits (including those incorporated by reference) in the form filed with the Commission; (e) during the Registration Period, deliver to each Holder, without charge, as many copies of the prospectus included in such Registration Statement and any amendment or supplement thereto as such Holder may reasonably request; and the Company consents to the use, consistent with the provisions hereof, of the prospectus or any amendment or supplement thereto by each of the selling Holders of Registrable Securities in connection with the offering and sale of the Registrable Securities covered by the prospectus or any amendment or supplement thereto. In addition, upon the reasonable request of the Subscriber and subject in all cases to confidentiality protections reasonably acceptable to the Company, the Company will meet with a Subscriber or a representative thereof at the Company's headquarters to discuss all information relevant for disclosure in the Registration Statement covering the Registrable Securities, and will otherwise cooperate with any Subscriber conducting an investigation for the purpose of reducing or eliminating such Subscriber's exposure to liability under the Act, including the reasonable production of information at the Company's headquarters; (f) during the Registration Period, deliver to each Holder, without charge, (i) as soon as practicable (but in the case of the annual report of the Company to its stockholders, within 120 days after the end of each fiscal year of the Company) one copy of: (A) its annual report to its stockholders (which annual report shall contain financial statements audited in accordance with generally accepted accounting principles in the United States of America by a firm of certified public accountants of recognized standing); (B) if not included in substance in its annual report to stockholders, its annual report on Form 10-K (or similar form); (C) each of its quarterly reports to its stockholders, and, if not included in substance in its quarterly reports to stockholders, its quarterly report on Form 10-Q (or similar form), and (D) a copy of the full Registration Statement (the foregoing, in each case, excluding exhibits); and (ii) upon reasonable request, all exhibits excluded by the parenthetical to the immediately preceding clause (D), and all other information that is generally available to the public; Exhibit A - Registration Rights - Page 4 (g) prior to any public offering of Registrable Securities pursuant to any Registration Statement, register or qualify for offer and sale under the securities or blue sky laws of such jurisdictions as any such Holders reasonably request in writing, provided that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction, and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Registrable Securities covered by such Registration Statement; (h) cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold pursuant to any Registration Statement free of any restrictive legends to the extent not required at such time and in such denominations and registered in such names as Holders may request at least three business days prior to sales of Registrable Securities pursuant to such Registration Statement; (i) upon the occurrence of any event contemplated by Section 1.4(b)(v) above, the Company shall promptly prepare a post-effective amendment to the Registration Statement or a supplement to the related prospectus, or file any other required document so that, as thereafter delivered to purchasers of the Registrable Securities included therein, the prospectus will not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (j) use its reasonable efforts to comply with all applicable rules and regulations of the Commission, and will make generally available to the Holders not later than 45 days (or 90 days if the fiscal quarter is the fourth fiscal quarter) after the end of its fiscal quarter in which the first anniversary date of the effective date of the Registration Statement occurs, an earnings statement satisfying the provisions of Section 11(a) of the Act. 1.5 The Holders shall have no right to take any action to restrain, enjoin or otherwise delay any registration pursuant to Section 1.2 hereof as a result of any controversy that may arise with respect to the interpretation or implementation of this Registration Rights Agreement. 1.6 (a) To the extent permitted by law, the Company will indemnify each Holder, each underwriter of the Registrable Securities and each person controlling such Holder within the meaning of Section 15 of the Act, with respect to which any registration, qualification or compliance has been effected pursuant to this Registration Rights Agreement, against all claims, losses, damages and liabilities (or action in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened (subject Exhibit A - Registration Rights - Page 5 to Section 4.6(c) below), arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus or offering circular, or any amendment or supplement thereof, incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in light of the circumstances in which they were made, and will reimburse each Holder, each underwriter of the Registrable Securities and each person controlling such Holder, for reasonable legal and any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action as incurred, provided that the Company will not be liable in any such case to the extent that any untrue statement or omission or allegation thereof is made in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Holder and stated to be specifically for use in preparation of such registration statement, prospectus or offering circular; provided that the Company will not be liable in any such case where the claim, loss, damage or liability arises out of or is related to the failure of the Holder to comply with the covenants and agreements contained in this Registration Rights Agreement respecting sales of Registrable Securities, and except that the foregoing indemnity agreement is subject to the condition that, insofar as it relates to any such untrue statement or alleged untrue statement or omission or alleged omission made in the preliminary prospectus but eliminated or remedied in the amended prospectus on file with the Securities and Exchange Commission at the time the registration statement becomes effective or in the amended prospectus filed with the Commission pursuant to Rule 424(b) or in the prospectus subject to completion and term sheet under Rule 434 of the Act, which together meet the requirements of Section 10(a) of the Act (the "Final Prospectus"), such indemnity agreement shall not inure to the benefit of any such Holder, any such underwriter or any such controlling person, if a copy of the Final Prospectus was not furnished to the person or entity asserting the loss, liability, claim or damage at or prior to the time such furnishing is required by the Act. (b) Each Holder will severally, if Registrable Securities held by such Holder are included in the securities as to which such registration, qualification or compliance is being effected, indemnify the Company, each of its directors and officers, each underwriter of the Registrable Securities and each person who controls the Company within the meaning of Section 15 of the Act, against all claims, losses, damages and liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened (subject to Section 4.6(c) below), arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus or offering circular, or any amendment or supplement thereof, incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in light of the circumstances in which they were made, and will reimburse the Company, such directors and officers, each underwriter of the Exhibit A - Registration Rights - Page 6 Registrable Securities and each person controlling the Company for reasonable legal and any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action as incurred, in each case to the extent, but only to the extent, that such untrue statement or omission or allegation thereof is made in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Holder and stated to be specifically for use in preparation of such registration statement, prospectus or offering circular; provided that the indemnity shall not apply to the extent that such claim, loss, damage or liability results from the fact that a current copy of the prospectus that was made available to the Holder was not sent or given to the person asserting any such claim, loss, damage or liability at or prior to the written confirmation of the sale of the Registrable Securities confirmed to such person if such current copy of the prospectus would have cured the defect giving rise to such loss, claim, damage or liability. Notwithstanding the foregoing, in no event shall a Holder be liable for any such claims, losses, damages or liabilities in excess of the proceeds received by such Holder in the offering, except in the event of fraud by such Holder. (c) Each party entitled to indemnification under this Section 1.6 (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such Indemnified Party's expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Registration Rights Agreement, unless such failure is prejudicial to the Indemnifying Party in defending such claim or litigation. An Indemnifying Party shall not be liable for any settlement of an action or claim effected without its written consent (which consent will not be unreasonably withheld). (d) If the indemnification provided for in this Section 1.6 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage or expense referred to therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party thereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions which resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a Exhibit A - Registration Rights - Page 7 material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. 1.7 (a) Each Holder agrees that, upon receipt of any notice from the Company of the happening of any event requiring the preparation of a supplement or amendment to a prospectus relating to Registrable Securities so that, as thereafter delivered to the Holders, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, each Holder will forthwith discontinue disposition of Registrable Securities pursuant to the registration statement contemplated by Section 1.2 until its receipt of copies of the supplemented or amended prospectus from the Company and, if so directed by the Company, each Holder shall deliver to the Company all copies, other than permanent file copies then in such Holder's possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice. (b) Each Holder agrees to suspend, upon request of the Company, any disposition of Registrable Securities pursuant to the registration statement and prospectus contemplated by Section 4.2 during (A) any period not to exceed two 30-day periods within any one 12-month period the Company requires in connection with a primary underwritten offering of equity securities (or such longer period as required by the underwriter of such offering) and (B) any period, not to exceed one 60-day period per circumstance or development, when the Company determines in good faith that offers and sales pursuant thereto should not be made by reason of the presence of material undisclosed circumstances or developments with respect to which the disclosure that would be required in such a prospectus is premature, would have an adverse effect on the Company or is otherwise inadvisable. (c) As a condition to the inclusion of its Registrable Securities, each Holder shall furnish to the Company such information regarding such Holder and the distribution proposed by such Holder as the Company may request in writing or as shall be required in connection with any registration, qualification or compliance referred to in this Registration Rights Agreement. (d) Each Holder hereby covenants with the Company (1) not to make any sale of the Registrable Securities without effectively causing the prospectus delivery requirements under the Act to be satisfied, and (2) if such Registrable Securities are to be sold by any method or in any transaction other than on NASDAQ (or other national securities exchange), in the over-the-counter market, in privately negotiated transactions, or in a Exhibit A - Registration Rights - Page 8 combination of such methods, to notify the Company at least five business days prior to the date on which the Holder first offers to sell any such Registrable Securities (e) Each Holder acknowledges and agrees that the Registrable Securities sold pursuant to the registration statement described in this Section are not transferable on the books of the Company unless the stock certificate submitted to the transfer agent evidencing such Shares is accompanied by a certificate reasonably satisfactory to the Company to the effect that (A) the Registrable Securities have been sold in accordance with such registration statement and (B) the requirement of delivering a current prospectus has been satisfied. (f) Each Holder agrees not to take any action with respect to any distribution deemed to be made pursuant to such registration statement, that constitutes a violation of Rule 10(b)-6 under the Exchange Act or any other applicable rule, regulation or law. (g) At the end of the period during which the Company is obligated to keep the registration statement current and effective as described above, the Holders of Registrable Securities included in the registration statement shall discontinue sales of Registrable Securities pursuant to such Registration Statement upon receipt of notice from the Company of its intention to remove from registration the Registrable Securities covered by such Registration Statement which remain unsold, and such Holders shall notify the Company of the number of Registrable Securities registered which remain unsold immediately upon receipt of such notice from the Company. 1.8 With a view to making available to the Holders the benefits of certain rules and regulations of the Commission which at any time permit the sale of the Registrable Securities to the public without registration, the Company agrees to use its reasonable best efforts to: (a) make and keep public information available, as those terms are understood and defined in Rule 144 under the Act, at all times; (b) file with the Commission in a timely manner all reports and other documents required of the Company under the Exchange Act; and (c) so long as a Holder owns any unregistered Registrable Securities, furnish to such Holder upon any reasonable request a written statement by the Company as to its compliance with Rule 144 under the Act, and of the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of Exhibit A - Registration Rights - Page 9 the Company as such Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any such securities without registration. 1.9 The rights to cause the Company to register Registrable Securities granted to the Holders by the Company under Section 1.2 may be assigned in full by a Holder, provided, that: (i) such transfer may otherwise be effected in accordance with applicable securities laws; (ii) such transfer involves not less than the lesser of all of such Holder's Registrable Securities or 100,000 Shares (or the amount of Registrable Securities issued in replacement of 100,000 Shares) of Common Stock, as defined in the Warrant; (iii) such Holder gives prior written notice to the Company; and (iv) such transferee agrees to comply with the terms and provisions of this Warrant and Registration Rights Agreement, and such transfer is otherwise in compliance with this Registration Rights Agreement and the Warrant. Except as specifically permitted by this Section 1.9, the rights of a Holder with respect to Registrable Securities as set out herein shall not be transferable to any other Person, and any attempted transfer shall cause all rights of such Holder therein to be forfeited. 1.10 With the written consent of the Company and the Holders holding at least a majority of the Registrable Securities that are then outstanding, any provision of this Registration Rights Agreement may be waived (either generally or in a particular instance, either retroactively or prospectively and either for a specified period of time or indefinitely) or amended. Upon the effectuation of each such waiver or amendment, the Company shall promptly give written notice thereof to the Holders, if any, who have not previously received notice thereof or consented thereto in writing. 1.11 If the Company files a registration statement with the Commission in connection with a public offering of the Company's securities, the Subscriber, by accepting this Registration Rights Agreement, agrees, if so requested by the Company, that such Subscriber will not directly or indirectly sell, make any short sale of, grant any option for the purchase of, or otherwise dispose of any capital stock of the Company during the 30-day period ending, and the 180-day period beginning (or any such other period as is required by the underwriter of such offering) on the first date of the effectiveness of such registration statement. Upon request, the Subscriber will sign an agreement in reasonable form to such effect with the underwriter of such an offering. Exhibit A - Registration Rights - Page 10 EX-10.11 17 LICENSE AGREEMENT LICENSE AGREEMENT BETWEEN RHOMED INCORPORATED AND ROUGIER BIO-TECH LIMITED TABLE OF CONTENTS ARTICLE 1 - DEFINITIONS..................................................Page 2 "Group A Patents"...............................................Page 2 "Group B Patents"...............................................Page 2 "Patent Rights".................................................Page 2 "Field of Use" .................................................Page 2 "Licensed Processes"............................................Page 3 "Licensed Product"..............................................Page 3 "Affiliates"....................................................Page 3 "Net Sales".....................................................Page 3 "Technology"....................................................Page 3 ARTICLE 2 - GRANT OF LICENSES............................................Page 4 ARTICLE 3 - PAYMENTS UNDER THE LICENSE...................................Page 5 ARTICLE 4 - REMITTANCES UNDER THE LICENSE................................Page 6 ARTICLE 5 - RECORDS UNDER THE LICENSE....................................Page 7 ARTICLE 6 - MARKING OF PRODUCTS..........................................Page 8 ARTICLE 7 - INVALIDITY OR NON-ISSUANCE OF LICENSED PATENTS.........................................................Page 8 ARTICLE 8 - ENFORCEMENT OF LICENSED PATENTS..............................Page 9 ARTICLE 9 - PERFORMANCE CRITERIA........................................Page 10 ARTICLE 10 - TERMS OF LICENSE; TERMINATION..............................Page 11 ARTICLE 11 - COMMUNICATION AND NOTICES..................................Page 12 ARTICLE 12 - MISCELLANEOUS..............................................Page 13 APPENDIX A..............................................................Page 16 APPENDIX B..............................................................Page 17 LICENSE AGREEMENT THIS AGREEMENT is effective as of the first day of May, 1992, by and between RhoMed Incorporated, a New Mexico corporation whose principal place of business is 4261 Balloon Park Road N.E., Albuquerque, New Mexico 87109 U.S.A. (hereinafter referred to as "Licensor") and Rougier Bio-Tech Limited, a Canadian corporation whose principal place of business is 8480 Blvd. St-Laurent, Montreal, Quebec H2P 2M6 Canada (hereinafter referred to as "Licensee"). W I T N E S S E T H: WHEREAS, Buck A. Rhodes, formerly of the College of Pharmacy at the University of New Mexico ("UNM") was one of two inventors of Method for Labelling Immunoglobulins with Tc-99m, which invention was issued United States Patent No. 4,424,200 and Canadian Patent No. 1,177,393 (hereinafter referred to as "Group A Patents"); WHEREAS, UNM received an undivided interest in Group A Patents derived from Rhodes, which undivided interest is owned by USET, Incorporated ("USET"), successor to University Patents Incorporated under its Servicing Agreement with UNM; WHEREAS, under a License Agreement effective 1 May 1988, and amended effective 1 September 1988 and 1 April 1992, USET granted to RhoMed a worldwide, exclusive license, subject to a pre-existing nonexclusive license to Summa Medical Corporation, under UNM's undivided one-half interest in Group A Patents, with right to sublicense; WHEREAS, Licensor is the owner in the entire right, title and interest in certain technology for radiolabeling antibodies and other proteins with Technetium- Page 1 99m and other radionuclides, and in the inventions and patents relating thereto (hereinafter referred to as "Group B Patents"; the technology comprising Group A Patents and Group B Patents is hereinafter sometimes referred to collectively as the "Inventions"); WHEREAS, Licensee is desirous of obtaining an exclusive license with the right to sublicense, and limited to a specified field of use, to manufacture, use, and sell products and/or services relating to the Inventions; and WHEREAS, Licensor is desirous of granting such a license to Licensee in accordance with the terms of this Agreement. NOW, THEREFORE, in consideration of the foregoing premises recitals, and based on the mutual promises and benefits herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: ARTICLE 1 - DEFINITIONS 1.1 "Group A Patents" shall mean the patents and patent applications listed under the heading "Group A Patents" in Appendix A and any divisions, continuations, and continuation-in-part applications, or reissues thereof, and all know-how and technology relating thereto. 1.2 "Group B Patents" shall mean the patents and patent applications listed under the heading "Group B Patents" in Appendix A and any divisions, continuations, and continuation-in-part applications, or reissues thereof, and all know-how and technology relating thereto. 1.3 "Patent Rights" shall mean Group A Patents and Group B Patents. 1.4 "Field of Use" shall mean the use of any radiolabeled antibody or fragment thereof, including any single antibody chain or fragment thereof and recombinant antibody or fragment thereof, with specificity for myosin or any cross- Page 2 reacting structure, for gamma ray scintigraphic imaging of myocardial or skeletal muscle necrosis and for gamma ray scintigraphic imaging of any tissue expressing myosin or any cross-reacting structure. 1.5 "Licensed Processes" shall mean the processes claiming or utilizing Patent Rights or some portion thereof. 1.6 "Licensed Product" or "Licensed Products" shall mean products claimed in Patent Rights, including products containing one or more substances radiolabeled or to be radiolabeled by a method claimed in Patent Rights, or products made in accordance with or by means of Licensed Processes or products made utilizing any substance, device, apparatus, method or process which embodies or is protected by Patent Rights. 1.7 "Affiliates" shall mean any company, corporation, or business in which Licensee owns or controls at least fifty percent (50%) of the voting stock. 1.8 "Net Sales" shall mean the amount billed or invoiced on sales of Licensed Products less: 1.8.1 Customary trade, quantity or cash discounts and non-affiliated brokers' or agents' commissions actually allowed and taken and all applicable taxes; and/or 1.8.2 Amounts repaid or credited by reason of rejection or return. If Licensed Products are sold in transactions which are not bona fide arm's-length transactions (including transactions between entities which are affiliated or have related interests), Net Sales shall be determined by the most recent commercial sale to an independent party. 1.9 "Technology" shall mean any and all information or Patent Rights supplied by Licensor to Licensee. Page 3 ARTICLE 2 - GRANT OF LICENSES 2.1 Group A Patents License. Licensor hereby grants to Licensee and Licensee accepts, subject to the terms and conditions hereof, a non-exclusive world-wide license as to Group A Patents, limited to the Field of Use, to make and have made, manufacture and have manufactured, use and have used, to sell and have sold, and distribute and have distributed Licensed Products and to practice Licensed Processes (hereinafter the "License"). 2.2 Group B Patents License. Licensor hereby grants to Licensee and Licensee accepts, subject to the terms and conditions hereof, an exclusive world-wide license as to Group B Patents, limited to the Field of Use, to make and have made, manufacture and have manufactured, use and have used, to sell and have sold, and distribute and have distributed Licensed Products and to practice Licensed Processes (hereinafter the "License"). 2.3 Right to Sublicense. The license granted shall include the right of Licensee to grant written sublicenses for the manufacture and sale of Licensed Products and the practice of Licensed Processes, all pursuant to the Group A Patents License and the Group B Patents License; provided, that Licensee shall require terms and conditions at least co-extensive with this Agreement, and shall include all sales of Licensed Products and Licensed Processes by all sublicensees in its statements to Licensor and shall pay royalties thereon as though all of such sales of sublicensees were in fact made by Licensee hereunder. Licensee will deliver to Licensor a true and correct copy of each and every sublicense entered into by Licensee within thirty (30) days after execution thereof and shall promptly advise Licensor in writing of any modification (and supply same) or termination of each sublicense. Upon termination of this Agreement for any cause, any and all existing sublicenses hereunder shall thereupon be assigned to Licensor. This shall be made a condition of any such sublicense that may be granted by License. Page 4 2.4 No License Other Than Licensed Patents. No license is granted by Licensor to Licensee, either directly or by implication, estoppel or otherwise, under any patents other than the Group A Patents and the Group B Patents. 2.5 Assignment. This agreement shall not be assignable by Licensee without the prior written consent of Licensor except to a successor in ownership of all or substantially all of the business assets of Licensee, which successor shall expressly assume in writing the performance of all the terms and conditions of this agreement to be performed by Licensee. This agreement may be assigned without restriction by Licensor. 2.6 Group A Patents License Assignment. Upon termination for any cause of the Agreement between RhoMed Incorporated and USET, Incorporated in which RhoMed Incorporated licenses Group A Patents, this Agreement shall, as to Group A Patents, thereupon be assigned to USET, Incorporated. The Licensor herein warrants that USET has agreed to accept all terms of this Agreement and to continue the Agreement with the Licensee as to Group A Patents under the same terms and conditions herein set forth if the Agreement is assigned to USET by the Licensor. ARTICLE 3 - PAYMENTS UNDER THE LICENSE 3.1 License Fee. Licensee agrees to pay Licensor Forty-Five Thousand Dollars ($45,000.00) as a license fee, with payments made as shown on the schedule in Appendix B. 3.2 Production Royalties. Licensee shall pay to Licensor a production royalty of six percent (6%) based on the total Net Sales. One-half of the total production royalty (3%) will be attributed to royalties on Group A Patents, and one-half of the total production royalty (3%) will be attributed to royalties on Group B Patents. Page 5 3.3 Minimum Royalties. Annual production royalties due and payable by Licensee to Licensor shall equal or exceed, or Licensee shall pay to Licensor, a minimum annual royalty of Seven Thousand Five Hundred Dollars ($7,500.00) commencing with the third license year and each subsequent year thereafter. Any minimum annual royalty paid to the Licensor by the Licensee prior to the commencement of sales by the Licensee shall be credited against royalties due to the Licensor after the commencement of sales and on amounts exceeding the minimum royalty for each subsequent year(s) until the Licensee has recovered the minimum royalty payments made to the Licensor prior to commencement of sales. 3.4 Licensed Processes. In the event Licensee performs Licensed Processes for profit without using Licensed Product made by Licensee, Licensee shall pay to RhoMed a royalty for each Licensed Process performed based upon the Net Sales price of Licensed Products required to perform such Licensed Process. ARTICLE 4 - REMITTANCES UNDER THE LICENSE 4.1 Accrual. Royalties shall accrue when Licensed Products are first used, sold, billed out, distributed or otherwise transferred, but excluding products transferred at no cost for clinical testing purposes. 4.2 Payments. Payments of accrued royalties shall be made to Licensor in U.S. dollars on a quarterly calendar basis for all Licensed Products used, sold, distributed, billed out, or otherwise transferred during that quarter. Such payment shall be made within sixty (60) days following the end of such calendar quarter and shall be accompanied by a statement which shall show the total quantity and Net Sales of Licensed Products for which royalties have accrued during such quarter. Quarterly royalty reports, certified to by an officer of Licensee, shall give sufficient information from which to calculate the amount of royalties due hereunder, including, but not limited to, the total quantity and Net Sales of goods for which royalty has accrued Page 6 during the preceding calendar quarter, and shall be made whether or not there are sales of Licensed Products during such quarter. The identity of the Licensee's customers shall remain confidential to the Licensor. 4.3 Royalty Payments on Sales Outside United States. Royalty payments which accrue outside the United States shall be paid in U. S. Dollars in the United States at the rates of exchange published in The Wall Street Journal on the last day of the accounting period in which the royalty accrues. Royalties shall be paid to Licensor free and clear of all foreign taxes, including withholding and turnover taxes, except such taxes which Licensee may be required to withhold by a foreign country and for which Licensor is entitled to receive a tax credit by treaty or otherwise. 4.4 Minimum Royalties. Licensee agrees that the minimum royalty shall become a present obligation of Licensee to Licensor on the anniversary date of this Agreement, as long as the Agreement is in force, and that such minimum amount is to be paid to Licensor together with the remittance made for the accounting period ending twelve months after the anniversary date of this Agreement, in the event earned production royalties for such year do not reach the minimum amount set forth. ARTICLE 5 - RECORDS UNDER THE LICENSE Licensee shall report to Licensor the date of first sale of Licensed Products within thirty (30) days of occurrence. Licensee shall keep, and shall require its Affiliates to keep, records in sufficient detail to permit the determination of royalties payable hereunder. Such records shall be retained for at least three (3) years following a given reporting period. They shall be available during normal business hours for inspection at the expense of Licensor by a Certified Public Accountant selected by Licensor and approved by Licensee for the sole purpose of verifying Page 7 reports and payments hereunder. The accountant may have access to Licensee's customer lists and identity, to the extent the accountant determines that such information is necessary or useful in verifying reports and payments hereunder. Such accountant shall not disclose to Licensor any information other than information relating to the accuracy of reports and payments made under this agreement. In the event that such inspection shows an underreporting and underpayment in excess of five percent (5%) for any twelve (12) month reporting period, then Licensee shall pay the costs of such examination. ARTICLE 6 - MARKING OF PRODUCTS Licensee agrees to mark every Licensed Product manufactured and/or sold by it, under this agreement, and all brochures and advertising materials, as to patents pending, or patents issued where patent coverage is obtained, in accordance with the laws of the United States and foreign countries. ARTICLE 7 - INVALIDITY OR NON-ISSUANCE OF LICENSED PATENTS 7.1 Technology and Know-How License. It is agreed and understood that this agreement is, in part, a license of the technology and know-how incorporated into the Inventions and Licensed Products. In the event that Patent Rights are subsequently held to be invalid by a court of the United States or any foreign country or countries, such failure to issue or holding of invalidity shall not render this agreement invalid; provided, the royalties shall be diminished by fifty percent (50%) in territory of the invalid patent rights. 7.2 Validity. Except to the extent prohibited by law, Licensee agrees that it shall not question or challenge, directly or indirectly, the validity of the patent or any reissue or extension thereof, or assist any other person in doing so. The parties shall promptly notify each other of a challenge to validity or enforceability of the Patent of Page 8 which the parties are to become aware. In the event of a lawsuit relating to validity or enforceability of the Patent, the Licensor shall have the right to defend such validity and/or to appeal. If no defense is lodged and the patent(s) is declared invalid, the royalties shall be diminished by fifty percent (50%) in the territory of the invalidated patent(s). ARTICLE 8 - ENFORCEMENT OF LICENSED PATENTS 8.1 Enforcement. In the event Licensee becomes aware of any actual or threatened infringement of a Licensed Patent in the Field of Use licensed herein, Licensee shall promptly notify Licensor in writing, and will supply Licensor with any available evidence pertaining to the infringement. Licensor, at its own expense, can take whatever steps are necessary to stop the infringement and recover damages therefor, and will be entitled to retain all damages so recovered to pay its out-of-pocket expenses to recover such damages, and any surplus in damages awarded shall be equally divided between Licensee and Licensor; provided, that Licensee shall recover no more than its loss in earnings due to the infringement. If Licensor does not proceed to enforcement the Patent Rights within one hundred eighty (180) days of notice, Licensee, after notifying Licensor in writing, shall be entitled to take proceedings against such infringer at its own expense; provided, that Licensee may suspend payment of earned royalties under the patent in suit in the country of such action to the extent of any out-of-pocket costs actually incurred in such action. The party conducting such suit shall have full control over its conduct. In either event, Licensee and Licensor shall assist one another and cooperate in any such litigation upon request and without expense to the requestee. 8.2 Defense. In the event a third party brings an action to obtain a declaration of patent invalidity (a "DJ Action") against Licensor and/or Licensee: Page 9 8.2.1 The named defendant shall have the first right to defend said action at its own cost and expense and to control ensuing litigation; 8.2.2 If the named defendant elects not to defend the DJ Action, the other Party may elect to defend the DJ Action at its own cost and expense and to control the ensuing litigation; 8.2.3 If a litigating Party finally prevails, it shall retain all damages which it may collect. ARTICLE 9 - PERFORMANCE CRITERIA 9.1 Best Effort. Licensee shall use its best effort to effect introduction of Licensed Products into the commercial market as soon as practicable, consistent with sound and reasonable business practices and judgment, and thereafter, until the expiration of this agreement. Licensee shall endeavor to keep Licensed Products reasonably available to the public. 9.2 Rendering License Non-Exclusive. Licensor shall have the right to render this License non-exclusive for any country or countries if, in Licensor's reasonable judgment, Licensee or its sub-licensee(s): 9.2.1 has not within seven (7) years from the date of License secured government approvals and put the licensed subject matter into commercial use in the countries or countries where licensed, directly or through a sublicense, and is not keeping the Licensed Products reasonably available to the public; or 9.2.2 is not within four (4) years from the date of License demonstrably engaged in product development and clinical trials necessary for product acceptance in countries of intended use. In making this determination, Licensor shall take into account the normal course of such programs conducted with sound and reasonable business practices and judgment Page 10 and shall take into account the reports provided hereunder by Licensee. 9.3 Field of Use. The licenses granted to Licensee by Licensor hereunder are limited to the Field of Use as defined above. A license in any other field or for any other antibody in such other field shall be the subject of a separate agreement and shall require Licensee's submission of evidence demonstrating its willingness and ability to develop and commercialize the kinds of products or processes likely to be encompassed in such other field. If Licensor has non-exclusively licensed in such other field prior to Licensee's request, Licensor shall grant to Licensee a non-exclusive license under terms and conditions at least as favorable as this agreement. ARTICLE 10 - TERMS OF LICENSE; TERMINATION 10.1 Term. The term of this Agreement shall be from the date first written above until the expiration of the last of the Patent Rights to expire or become abandoned, and covering the process(es) and/or product(s) being commercialized by the Licensee. 10.2 Termination by Licensee. Licensee may terminate this Agreement: 10.2.1 At the end of any License Year; or 10.2.2 For cause; or 10.2.3 If the Invention is finally determined by an Agency of the United States to be deleterious to man, animals, or the environment--and its use is proscribed. 10.3 Default. If Licensee shall at any time default in any obligation under this Agreement, included but not limited to failing to make any report, pay any royalties, or permit the inspection of its books and records as hereinabove required, and such default shall not be cured within sixty (60) days after written notice from Licensor to Licensee specifying the nature of the default, then Licensor shall have the right to terminate the license granted to Licensee hereunder and such termination shall Page 11 become effective at the close of business on the sixtieth (60th) day after giving such notice. 10.4 Rights and Obligations. Any termination pursuant hereto shall not relieve Licensee or Licensor of any obligation or liability accrued hereunder prior to such termination, nor rescind or give rise to any right to rescind anything done or any payments made or other consideration given hereunder prior to the time of such termination and shall not affect in any manner any rights of either party arising out of this Agreement prior to such termination. 10.5 Waiver. A waiver by either Party hereto of any violation of or default in any provision of this Agreement shall not constitute a waiver of any repeated violation of or default in the same provision, or any violation of or default in any other provision of this Agreement. ARTICLE 11 - COMMUNICATION AND NOTICES Any payment, notice, or other communication required or permitted to be made or given to either Party hereto pursuant to this Agreement shall be sufficiently made or given on the date of mailing if sent to such Party by certified or registered mail, postage prepaid, addressed to it at its address set forth or to such other address as it shall designate by written notice to the other Party as follows: In the case of Licensor: President RhoMed Incorporated 4261 Balloon Park Road, N.E. Albuquerque, New Mexico 87109 U.S.A. Page 12 In the case of Licensee: President Rougier Bio-Tech Ltd. 8480 Blvd. St-Laurent Montreal, Quebec H2P 2M6 Canada ARTICLE 12 - MISCELLANEOUS 12.1 Execution and Amendment. This Agreement will not be binding upon the Parties until it has been signed hereinbelow by or on behalf of each Party, in which event it shall be effective as of the date first above written. No amendment or modification hereof shall be valid or binding upon the Parties unless made in writing and signed as aforesaid. 12.2 Construction. This Agreement embodies the entire understanding of the Parties and shall supersede all previous communications, representations or undertakings, either verbal or written between the Parties relating to the subject matter hereof. 12.3 Indemnification. Licensee agrees to indemnify and hold harmless Licensor and the Inventors from and against any and all claims, damages and liabilities asserted by third parties (private and governmental) arising from Licensee's manufacture, use, distribution or sale of Licensed Products and/or the purchaser's use thereof. 12.4 Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 12.5 Arbitration. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled in the United States by arbitration, in accordance with the rules then obtaining, of the American Arbitration Association. Page 13 If the subject of the arbitration involves an intellectual property matter, as determined by the Association, then the arbitrator(s) should have had experience in that subject. The Association is authorized to make arrangements for this arbitration, to be held under these rules in any locality in the United States agreed upon by the parties or as designated by the Association. This agreement shall be enforceable and judgment upon any award rendered by all or a majority of the arbitrators may be entered in any court of any country having jurisdiction. 12.6 Jurisdiction. This Agreement shall be construed, and the legal relations between the Parties determined, in accordance with the laws of the United States of America and the State of New Mexico. 12.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of each of the Parties hereto and except as otherwise provided herein, their respective legal successors and assigns. 12.8 Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. --- --- --- --- --- Page 14 IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed as of the date first above written. LICENSOR: RhoMed Incorporated By: /S/ Buck A. Rhodes -------------------- Buck A. Rhodes President LICENSEE: ROUGIER BIO-TECH LIMITED By: /S/ ------------------- Name: Title: Page 15 APPENDIX A GROUP A PATENTS U.S. Patent No. 4,424,200 and Canadian Patent No. 1,177,393 Method for Labelling Immunoglobulins with Tc-99m; and any divisions, continuations, and continuation-in-part applications, or reissues thereof. GROUP B PATENTS U.S. Patent No. 5,078,985, Radiolabeling Antibodies and Other Proteins with Technetium or Rhenium by Regulated Reduction; U.S. Patent No. 5,102,990, Direct Radiolabeling of Antibodies and Other Proteins with Technetium or Rhenium; International Application PCT/US90/04461, Direct Radiolabeling of Antibodies and Other Proteins with Technetium or Rhenium; U.S. Patent Application 07/815,122, Composition for Radiolabeling Antibodies and Other Proteins by Regulated Reduction; U.S. Patent Application 07/815,123, Method for Radiolabeling Antibodies and Other Proteins by Regulated Reduction; U.S. Patent Application 07/816,477, Direct Labeling of Antibodies and Other Proteins with Metal Ions; and any divisions, continuations, and continuation-in-part applications, or reissues thereof. Page 16 APPENDIX B SCHEDULE OF PAYMENTS Group A Patents Group B Patents Total On Execution of Agreement $1,000 $14,000 $15,000 June 1, 1992 800 5,200 6,000 July 1, 1992 800 5,200 6,000 August 1, 1992 800 5,200 6,000 September 1, 1992 800 5,200 6,000 October 1, 1992 800 5,200 6,000 ------ ------- ------- TOTAL $5,000 $40,000 $45,000 Page 17 EX-10.12 18 LICENSE AGREEMENT LICENSE AGREEMENT BETWEEN RHOMED INCORPORATED AND STERLING WINTHROP INC. TABLE OF CONTENTS ARTICLE 1 - DEFINITIONS.................................................Page 2 "Group A Patents"..............................................Page 2 "Group B Patents"..............................................Page 2 "Patent Rights"................................................Page 2 "Diagnostic Imaging Field of Use"..............................Page 3 "Therapeutic Field of Use".....................................Page 3 "License Year".................................................Page 3 "Licensed Processes"...........................................Page 3 "Licensed Product".............................................Page 3 "Affiliates"...................................................Page 4 "Valid Claim"..................................................Page 4 "Net Sales"....................................................Page 5 "Licensed Technology"..........................................Page 5 "Development Agreement"........................................Page 6 "Commercial Sale"..............................................Page 6 ARTICLE 2 - GRANT OF LICENSES...........................................Page 6 ARTICLE 3 - OPTION TO ACQUIRE LICENSE...................................Page 8 ARTICLE 4 - PAYMENTS UNDER THE LICENSE.................................Page 10 ARTICLE 5 - REMITTANCES UNDER THE LICENSE..............................Page 12 ARTICLE 6 - RECORDS UNDER THE LICENSE..................................Page 13 ARTICLE 7 - MARKING OF PRODUCTS........................................Page 13 ARTICLE 8 - INVALIDITY OR NON-ISSUANCE OF LICENSED PATENTS............................................................Page 14 ARTICLE 9 - ENFORCEMENT OF LICENSED PATENTS............................Page 14 ARTICLE 10 - TERMS OF LICENSE; TERMINATION.............................Page 15 ARTICLE 11 - COMMUNICATION AND NOTICES.................................Page 16 ARTICLE 12 - MISCELLANEOUS.............................................Page 17 APPENDIX A.............................................................Page 20 APPENDIX B.............................................................Page 22 LICENSE AGREEMENT THIS AGREEMENT is effective as of the 2nd day of November, 1992, by and between RhoMed Incorporated, a New Mexico corporation whose principal place of business is 4261 Balloon Park Road N.E., Albuquerque, New Mexico 87109 U.S.A. (hereinafter referred to as "Licensor") and Sterling Winthrop Inc., a Delaware corporation with a place of business at 1250 South Collegeville Road, Collegeville, Pennsylvania 19426 U.S.A. (hereinafter referred to as "Licensee"). W I T N E S S E T H: WHEREAS, Buck A. Rhodes, formerly of the College of Pharmacy at the University of New Mexico ("UNM") was one of two inventors of Method for Labelling Immunoglobulins with Tc-99m, which invention was issued United States Patent No. 4,424,200 and Canadian Patent No. 1,177,393 (hereinafter referred to as "Group A Patents"); WHEREAS, UNM received an undivided interest in Group A Patents derived from Rhodes, which undivided interest is owned by USET, Incorporated ("USET"), successor to University Patents Incorporated under its Servicing Agreement with UNM; WHEREAS, under a License Agreement effective 1 May 1988, and amended effective 1 September 1988 and 1 April 1992, USET granted to RhoMed a worldwide, exclusive license, subject to a pre-existing nonexclusive license to Summa Medical Corporation, under UNM's undivided one-half interest in Group A Patents, with right to sublicense; WHEREAS, Licensor is the owner in the entire right, title and interest in certain technology for radiolabeling antibodies, peptides and other proteins with Page 1 Technetium-99m, isotopes of Rhenium and other radionuclides, and in the inventions and patents relating thereto (hereinafter referred to as "Group B Patents"; the technology comprising Group A Patents and Group B Patents is hereinafter sometimes referred to collectively as the "Inventions"); WHEREAS, Licensee is desirous of obtaining a non-exclusive license to manufacture, use, and sell products and/or services relating to the Inventions; and WHEREAS, Licensor is desirous of granting such a license to Licensee in accordance with the terms of this Agreement. NOW, THEREFORE, in consideration of the foregoing premises recitals, and based on the mutual promises and benefits herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: ARTICLE 1 - DEFINITIONS 1.1 "Group A Patents" shall mean the patents and patent applications listed under the heading "Group A Patents" in Appendix A and any divisions, continuations, continuation-in-part applications, reissues, reexaminations, extensions and/or renewals and improvements. 1.2 "Group B Patents" shall mean the patents and patent applications listed under the heading "Group B Patents" in Appendix A and any divisions, continuations,continuation-in-part applications, reissues, reexaminations, extensions and /or renewals and improvements . 1.3 "Patent Rights" shall mean the rights granted to Licensee by Licensor under the patents and patent applications listed in Appendix A and all future U.S. or foreign patents or patent applications covering or related to all inventions or improvements which fall within know-how and technology relating thereto, including Page 2 all divisions, continuations, continuations-in-part, extensions and/or renewals of any such applications; and all patents which shall issued based on such applications, divisions, continuations, continuations-in-part, extensions and/or renewals and any reissues and improvements of any of the foregoing patents. 1.4 "Diagnostic Imaging Field of Use" shall mean the use of any radiometals, except for: 1.4.1 radiolabeled antibodies or fragments thereof with specificity for myosin or any cross-reacting structure; 1.4.2 gamma ray scintigraphic imaging of myocardial or skeletal muscle necrosis: 1.4.3 for gamma ray scintigraphic imaging of any tissue expressing myosin or any cross-reacting structure; and 1.4.4 radiolabeled antibodies, antibody fragments or peptides for the detection of the site or sites of infection or inflammation. 1.5 "Therapeutic Field of Use" shall mean the use of any radiolabeled protein, polypeptide or peptide, including any radiolabeled antibody or fragment thereof, including any single antibody chain or fragment thereof and recombinant antibody or fragment thereof, for any therapeutic application. Any protein, polypeptide or peptide radiolabeled with an isotope which permits both diagnostic imaging and therapy shall be within the Therapeutic Field of Use, and shall not be within the definition of Diagnostic Imaging Field of Use, notwithstanding that such radiolabeled product may be used for diagnostic imaging. 1.6 "License Year" shall mean the calendar year. 1.7 "Licensed Processes" shall mean the processes claiming or utilizing Patent Rights or some portion thereof. 1.8 "Licensed Product" or "Licensed Products" shall mean products claimed Page 3 in Patent Rights, including products containing one or more substances radiolabeled or to be radiolabeled by a method claimed in Patent Rights, or products made in accordance with or by means of Licensed Processes or products made utilizing any substance, device, apparatus, method or process which embodies or is protected by Patent Rights which substance, device, apparatus, method or process of a Licensed Patent Right, or any product based on "Licensed Technology", except for the license rights granted herein, would infringe a "Valid Claim". 1.9 "Affiliates" shall mean with respect to a corporation, association, partnership, individual, trust, unincorporated organization or other entity, any other corporation, association, partnership, individual, trust unincorporated organization or other entity that directly or indirectly controls, is controlled by, or is under common control with such corporation, association, partnership, individual, trust, unincorporated organization or other entity. The term "control" herein shall mean the possession, direct or indirect, of more than fifty percent (50%) of the voting stock, equity or income interest of such corporation, association, partnership, trust, unincorporated organizations or other entity. With respect to Licensee, an "Affiliate" also includes: (a) a corporation, association, partnership, trust, unincorporated organization or other entity in which Licensee or its Affiliates own, directly or indirectly, at least twenty percent (20%) of the voting stock, equity or income interest and Elf Sanofi, S.A. or its Affiliates own, directly or indirectly, at least twenty percent (20%) of such voting stock, equity or income interest; or (b) any corporation, association, partnership, trust, unincorporated organization or other entity which is formed or created pursuant to or in furtherance of the joint venture agreements between Elf Sanofi S.A. and Licensee. 1.10 "Valid Claim" shall mean a claim of an issued patent, or of a patent application that is not pending more than ten (10) years after the earliest filing date, covering Licensed Technology, which patent or application has not lapsed or become Page 4 abandoned and which claim has not been declared or rendered invalid by reexamination, reissue, disclaimer or an unappealable final judgment of a court of a court of competent jurisdiction. 1.11 "Net Sales" shall mean the amount billed or invoiced on sales of Licensed Products less: 1.11.1 Customary trade, quantity or cash discounts and non-affiliated brokers' or agents' commissions actually allowed and taken and all applicable taxes; and/or 1.11.2 Amounts repaid or credited by reason of rejection or return. If Licensed Products are sold in transactions which are not bona fide arm's-length transactions (including transactions between entities which are affiliated or have related interests), Net Sales shall be determined by the most recent commercial sale to an independent party. If Licensed Products are sold in which there are two or more biologically active radiolabeled components, such as in a radiolabeled antibody cocktail product, and one or more biologically active radiolabeled components are radiolabeled by a means other than by means claimed under Patent Rights, then the Net Sales for such Licensed Product shall be reduced by the proportion that the biologically active radiolabeled components radiolabeled by means other than by means claimed under Patent Rights bears to the total number of biologically active radiolabeled components. 1.12 "Licensed Technology" shall mean any and all data, information, technology, know-how, process, technique, method, skill, proprietary information, trade secret, development, discovery, and invention, including improvements on such an invention, whether patentable or not, which relate to Patent Rights supplied by Licensor to Licensee. Page 5 1.13 "Development Agreement" shall mean that certain agreement entitled "Development Agreement" between the parties hereto and executed effective as of the same date as this License Agreement. 1.14 "Commercial Sale" shall mean any transaction which transfers to a purchaser physical possession and title to each Licensed Product, after which transfer seller has no right or power to determine purchaser's resale price, if any. Transfer of possession and title to an Affiliate shall not constitute a Commercial Sale, except where the Affiliate is an end user of a Licensed Product. ARTICLE 2 - GRANT OF LICENSES 2.1 Group A Patents License. Licensor hereby grants to Licensee and Licensee accepts, subject to the terms and conditions hereof, a non-exclusive world-wide license as to Group A Patents, limited to the Diagnostic Imaging Field of Use, to make and have made, manufacture and have manufactured, use and have used, to sell and have sold, and distribute and have distributed Licensed Products and to practice Licensed Processes (hereinafter the "License"). 2.2 Group B Patents License. Licensor hereby grants to Licensee and Licensee accepts, subject to the terms and conditions hereof, a non-exclusive world-wide license as to Group B Patents, limited to the Diagnostic Imaging Field of Use, to make and have made, manufacture and have manufactured, use and have used, to sell and have sold, and distribute and have distributed Licensed Products and to practice Licensed Processes (hereinafter the "License"). 2.3 License from Third Party. Licensor will be responsible for paying all underlying royalties for any licenses which are necessary to fully practice the Licensed Patents and Licensed Technology under this License Agreement. 2.4 Right to Sublicense. The license granted shall include the right of Licensee to grant written sublicenses for the manufacture and sale of Licensed Page 6 Products and the practice of Licensed Processes, all pursuant to the Group A Patents License and the Group B Patents License; provided, that Licensee shall require terms and conditions at least co-extensive with this Agreement, and shall include all sales of Licensed Products and Licensed Processes by all sublicensees in its statements to Licensor and shall pay royalties thereon as though all of such sales of sublicensees were in fact made by Licensee hereunder. Licensee will deliver to Licensor a true and correct copy of each and every sublicense entered into by Licensee within thirty (30) days after execution thereof and shall promptly advise Licensor in writing of any modification (and supply same) or termination of each sublicense. Upon termination of this Agreement for any cause, any and all existing sublicenses hereunder shall thereupon be assigned to Licensor. This shall be made a condition of any such sublicense that may be granted by License. 2.5 No License Other Than Licensed Patents. No license is granted by Licensor to Licensee, either directly or by implication, estoppel or otherwise, under any patents other than the Group A Patents and the Group B Patents. 2.6 Assignment. This agreement shall not be assignable by Licensee without the prior written consent of Licensor except to a successor in ownership of all or substantially all of the business assets of Licensee, which successor shall expressly assume in writing the performance of all the terms and conditions of this agreement to be performed by Licensee. This agreement may be assigned without restriction by Licensor. 2.7 Group A Patents License Assignment. Upon termination for any cause of the Agreement between RhoMed Incorporated and USET, Incorporated in which RhoMed Incorporated licenses Group A Patents, this Agreement shall, as to Group A Patents, thereupon be assigned to USET, Incorporated. The Licensor herein warrants that USET has agreed to accept all terms of this Agreement and to continue the Agreement with the Licensee as to Group A Patents under the same terms and Page 7 conditions herein set forth if the Agreement is assigned to USET by the Licensor. 2.8 Affiliates. Licensor hereby grants to Licensee the right to extend the License granted herein, and the license in Article 3 on exercise of the option, to an Affiliate subject to the terms and conditions hereof. ARTICLE 3 - OPTION TO ACQUIRE LICENSE 3.1 Group B Patents License Option. Licensor hereby grants to Licensee and Licensee accepts, subject to the terms and conditions hereof, an option to acquire a non-exclusive world-wide license as to Group B Patents, limited to the Therapeutic Field of Use, to make and have made, manufacture and have manufactured, use and have used, to sell and have sold, and distribute and have distributed Licensed Products and to practice Licensed Processes (hereinafter the "License Option"). 3.2 Option Payments. During the term of this option, Licensee agrees to pay Licensor an annual option fee of Fifty Thousand Dollars ($50,000.00), said amount due within thirty (30) days of the end of each License Year, unless Licensee shall have agreed to Work Orders pursuant to the Development Agreement having a value, during the License Year, of at least One Hundred Thousand Dollars ($100,000.00). 3.3 License from Third Party. Licensor will be responsible for paying all underlying royalties for any licenses which are necessary to fully practice the Licensed Patents and Licensed Technology under this License Agreement. 3.4 License Exercise Fee. Licensee agrees to pay Licensor One Hundred Fifty Thousand Dollars ($150,000.00) as a License Exercise Fee for the Therapeutic Field of Use License, which license shall be effective immediately upon receipt of the license fee by Licensor. No part of the License Exercise Fee is to be credited against Page 8 any royalties due or payable under this License Agreement or any Milestone Payments due or payable under this License Agreement, and no part of the License Exercise Fee is in any event repayable to Licensee by Licensor. 3.5 Exercise of Option. Licensee may exercise its option by giving notice to Licensor of its intent to exercise the option, accompanied by the License Exercise Fee specified in Article 3.3. Licensee shall exercise its option hereunder prior to use in any human being, whether experimental, investigational or otherwise, of any Licensed Product in the Therapeutic Field of Use. 3.6 Right to Sublicense after Exercise of Option. The license granted upon exercise of the License Option shall include the right of Licensee to grant written sublicenses for the manufacture and sale of Licensed Products and the practice of Licensed Processes, all pursuant to the Group B Patents License; provided, that Licensee shall require terms and conditions at least co-extensive with this Agreement, and shall include all sales of Licensed Products and Licensed Processes by all sublicensees in its statements to Licensor and shall pay royalties thereon as though all of such sales of sublicensees were in fact made by Licensee hereunder. Licensee will deliver to Licensor a true and correct copy of each and every sublicense entered into by Licensee within thirty (30) days after execution thereof and shall promptly advise Licensor in writing of any modification (and supply same) or termination of each sublicense. Upon termination of this Agreement for any cause, any and all existing sublicenses hereunder shall thereupon be assigned to Licensor. This shall be made a condition of any such sublicense that may be granted by License. Page 9 ARTICLE 4 - PAYMENTS UNDER THE LICENSE 4.1 License Fee. Licensee agrees to pay Licensor One Hundred Twenty- Five Thousand Dollars ($125,000.00) as a License Fee for the Diagnostic Imaging Field of Use License, as set forth in Articles 2.1 and 2.2, upon execution of this Agreement, and to, upon exercise of the License Option set forth in Article 3.1, to pay the License Exercise Fee set forth in Article 3.3. 4.2 Milestone Payments. For each Licensed Product for which Licensee uses Patent Rights, either under the License or the License Option, Licensee shall, for each Licensed Product, upon the first happening of each of the following in the United States, Japan, the United Kingdom, France, Germany, Italy or Spain, make the following payments: Upon filing of an Investigational New Drug application, or its equivalent under the laws of any of the foregoing countries, for a Licensed Product in the Diagnostic Imaging Field of Use, One Hundred Thousand Dollars ($100,000.00); Upon filing of an Investigational New Drug application, or its equivalent under the laws of any of the foregoing countries, for a Licensed Product in the Therapeutic Field of Use, Two Hundred Thousand Dollars ($200,000.00); Upon filing of an Product License Application, or its equivalent under the laws of any of the foregoing countries, for a Licensed Product in the Diagnostic Imaging Field of Use, One Hundred Fifty Thousand Dollars ($150,000.00); Upon filing of an Product License Application, or its equivalent under the laws of any of the foregoing countries, for a Licensed Product in the Therapeutic Field of Use, Three Hundred Fifty Thousand Dollars ($350,000.00); Upon approval of Licensed Product for commercial sales under the laws of any of the foregoing countries, for a Licensed Product in the Diagnostic Imaging Field of Use, Two Hundred Fifty Thousand Dollars ($250,000.00); and, Upon approval of Licensed Product for commercial sales under the laws of any of the Page 10 foregoing countries, for a Licensed Product in the Therapeutic Field of Use, Seven Hundred Thousand Dollars ($700,000.00). 4.3 Production Royalties. Licensee shall pay to Licensor a production royalty as set forth below: For Net Sales of up to Twenty-Five Million Dollars ($25,000,000.00) in any License Year, for each Licensed Product in either the Diagnostic Imaging Field of Use or Therapeutic Field of Use, five percent (5%) of such Net Sales; For Net Sales of between Twenty-Five Million Dollars ($25,000,000.00) and Fifty Million Dollars ($50,000.000.00) in any License Year, for each Licensed Product in either the Diagnostic Imaging Field of Use or Therapeutic Field of Use, seven percent (7%) of such Net Sales; and For Net Sales of over Fifty Million Dollars ($50,000,000.00) in any License Year, for each Licensed Product in either the Diagnostic Imaging Field of Use or Therapeutic Field of Use, ten percent (10%) of such Net Sales. The production royalties shall be attributed to Group A Patents and Group B Patents as set forth in Schedule B. 4.4 Credit for Development Support. Licensee shall receive a credit for all payments to Licensor under the Development Agreement, provided that the maximum credit taken in any one calendar quarter under Article 5.2 shall not reduce the royalty payment to RhoMed by more than twenty-five percent (25%) of the amount otherwise due. 4.5 Licensed Processes. In the event Licensee performs Licensed Processes for profit without producing Licensed Product, Licensee shall pay to Licensor a royalty for each Licensed Process performed as if such Licensed Process were used to produce Licensed Product, said royalty to be applied as stated under Article 4.3. Page 11 ARTICLE 5 - REMITTANCES UNDER THE LICENSE 5.1 Accrual. Royalties shall accrue when Licensed Products are first used, sold, billed out, distributed or otherwise transferred, but excluding products transferred at no cost for clinical testing purposes. 5.2 Payments. Payments of accrued royalties shall be made to Licensor in U.S. dollars on a quarterly calendar basis for all Licensed Products used, sold, distributed, billed out, or otherwise transferred during that quarter. Such payment shall be made within sixty (60) days following the end of such calendar quarter and shall be accompanied by a statement which shall show the total quantity and Net Sales of Licensed Products for which royalties have accrued during such quarter. Quarterly royalty reports, certified to by an officer of Licensee, shall give sufficient information from which to calculate the amount of royalties due hereunder, including, but not limited to, the total quantity and Net Sales of goods for which royalty has accrued during the preceding calendar quarter, and shall be made whether or not there are sales of Licensed Products during such quarter. The identity of the Licensee's customers shall remain confidential to the Licensor. 5.3 Royalty Payments on Sales Outside United States. Royalty payments which accrue outside the United States shall be paid in U. S. Dollars in the United States at the rates of exchange published in The Wall Street Journal on the last business day of the accounting period in which the royalty accrues. Royalties shall be paid to Licensor free and clear of all foreign taxes, including withholding and turnover taxes, except such taxes which Licensee may be required to withhold by a foreign country and for which Licensor is entitled to receive a tax credit by treaty or otherwise. Page 12 ARTICLE 6 - RECORDS UNDER THE LICENSE Licensee shall report to Licensor the date of first sale of Licensed Products within thirty (30) days of occurrence. Licensee shall keep, and shall require its Affiliates to keep, records in sufficient detail to permit the determination of royalties payable hereunder. Such records shall be retained for at least three (3) years following a given reporting period. They shall be available during normal business hours for inspection at the expense of Licensor by a Certified Public Accountant selected by Licensor and approved by Licensee for the sole purpose of verifying reports and payments hereunder. The accountant may have access to Licensee's customer lists and identity, to the extent the accountant determines that such information is necessary or useful in verifying reports and payments hereunder. Such accountant shall not disclose to Licensor any information other than information relating to the accuracy of reports and payments made under this agreement. In the event that such inspection shows an underreporting and underpayment in excess of five percent (5%) for any twelve (12) month reporting period, then Licensee shall pay the costs of such examination. ARTICLE 7 - MARKING OF PRODUCTS 7.1 Patents. Licensee agrees to mark every Licensed Product manufactured and/or sold by it, under this agreement, and all brochures and advertising materials (and to so require its sublicensees), as to patents pending, or patents issued where patent coverage is obtained, in accordance with the laws of the United States and foreign countries. 7.2 Trademarks. Notwithstanding anything in the License Agreement to the contrary, any Trademark used by Licensee in connection with Licensed Product or Licensed Technology shall be solely the property of Licensee. Page 13 ARTICLE 8 - INVALIDITY OR NON-ISSUANCE OF LICENSED PATENTS 8.1 Technology and Know-How License. It is agreed and understood that this agreement is, in part, a license of the technology and know-how incorporated into the Inventions and Licensed Products. In the event that Patent Rights are subsequently held to be invalid by a court of the United States or any foreign country or countries, such failure to issue or holding of invalidity shall not render this agreement invalid; provided, the royalties shall be diminished by fifty percent (50%) in territory of the invalid patent rights. 8.2 Validity. Except to the extent prohibited by law, Licensee agrees that it shall not question or challenge, directly or indirectly, the validity of the patent or any reissue or extension thereof, or assist any other person in doing so. The parties shall promptly notify each other of a challenge to validity or enforceability of the Patent of which the parties are to become aware. In the event of a lawsuit relating to validity or enforceability of the Patent, the Licensor shall have the right to defend such validity and/or to appeal. If no defense is lodged and the patent(s) is declared invalid, the royalties shall be diminished by fifty percent (50%) in the territory of the invalidated patent(s). ARTICLE 9 - ENFORCEMENT OF LICENSED PATENTS 9.1 Enforcement. In the event Licensee becomes aware of any actual or threatened infringement of a Licensed Patent in the Field of Use licensed herein, Licensee shall promptly notify Licensor in writing, and will supply Licensor with any available evidence pertaining to the infringement. Licensor, at its own expense, can take whatever steps are necessary to stop the infringement and recover damages therefor, and will be entitled to retain all damages so recovered to pay its out-of-pocket expenses to recover such damages, and any surplus in damages awarded shall be equally divided between Licensee and Licensor; provided, that Licensee shall Page 14 recover no more than its loss in earnings due to the infringement. If Licensor does not proceed to enforcement the Patent Rights within one hundred eighty (180) days of notice, Licensee, after notifying Licensor in writing, shall be entitled to take proceedings against such infringer at its own expense; provided, that Licensee may suspend payment of earned royalties under the patent in suit in the country of such action to the extent of any out-of-pocket costs actually incurred in such action. 9.2 The party conducting such suit shall have full control over its conduct. In either event, Licensee and Licensor shall assist one another and cooperate in any such litigation upon request and without expense to the requestee. 9.2 Defense. In the event a third party brings an action to obtain a declaration of patent invalidity (a "DJ Action") against Licensor and/or Licensee: 9.2.1 The named defendant shall have the first right to defend said action at its own cost and expense and to control ensuing litigation; 9.2.2 If the named defendant elects not to defend the DJ Action, the other Party may elect to defend the DJ Action at its own cost and expense and to control the ensuing litigation; 9.2.3 If a litigating Party finally prevails, it shall retain all damages which it may collect. ARTICLE 10 - TERMS OF LICENSE; TERMINATION 10.1 Patents. The term of this Agreement shall be from the date first written above until the expiration of the last of the Patent Rights to expire or become abandoned, and covering the process(es) and/or product(s) being commercialized by the Licensee, or for ten (10) years from first Commercial Sale, whichever is longer, on a country-by-country basis; provided, however, that after the expiration of Licensee's Patent Rights or after ten (10) years from first Commercial Sale, whichever Page 15 is longer, Licensee may freely use Licensed Technology, without any royalty obligations to Licensor. 10.2 Default. If Licensee shall at any time default in any obligation under this Agreement, included but not limited to failing to make any report, pay any royalties, or permit the inspection of its books and records as hereinabove required, and such default shall not be cured within sixty (60) days after written notice from Licensor to Licensee specifying the nature of the default, then Licensor shall have the right to terminate the license granted to Licensee hereunder and such termination shall become effective at the close of business on the sixtieth (60th) day after giving such notice. 10.3 Termination by Licensee. Licensee may terminate this License Agreement at any time, with or without cause, upon sixty (60) days written notice to Licensor. 10.4 Rights and Obligations. Any termination pursuant hereto shall not relieve Licensee or Licensor of any obligation or liability accrued hereunder prior to such termination, nor rescind or give rise to any right to rescind anything done or any payments made or other consideration given hereunder prior to the time of such termination and shall not affect in any manner any rights of either party arising out of this Agreement prior to such termination. 10.5 Waiver. A waiver by either Party hereto of any violation of or default in any provision of this Agreement shall not constitute a waiver of any repeated violation of or default in the same provision, or any violation of or default in any other provision of this Agreement. ARTICLE 11 - COMMUNICATION AND NOTICES Any payment, notice, or other communication required or permitted to be made or given to either Party hereto pursuant to this Agreement shall be sufficiently made Page 16 or given on the date of mailing if sent to such Party by certified or registered mail, postage prepaid, addressed to it at its address set forth or to such other address as it shall designate by written notice to the other Party as follows: In the case of Licensor: President RhoMed Incorporated 4261 Balloon Park Road, N.E. Albuquerque, New Mexico 87109 In the case of Licensee: Sterling Winthrop Inc. 1250 South Collegeville Road P. O. Box 5000 Collegeville, Pennsylvania 19426-0900 Attn: President, Pharmaceutical Research Division and Sterling Winthrop Inc. 90 Park Avenue New York, NY 10016 Attn: General Counsel ARTICLE 12 - MISCELLANEOUS 12.1 Execution and Amendment. This Agreement will not be binding upon the Parties until it has been signed hereinbelow by or on behalf of each Party, in which event it shall be effective as of the date first above written. No amendment or modification hereof shall be valid or binding upon the Parties unless made in writing and signed as aforesaid. 12.2 Construction. This Agreement embodies the entire understanding of the Parties and shall supersede all previous communications, representations or undertakings, either verbal or written between the Parties relating to the subject matter hereof. Page 17 12.3 Indemnification. Licensee agrees to indemnify and hold harmless Licensor and the Inventors from and against any and all claims, damages and liabilities asserted by third parties (private and governmental) arising from Licensee's manufacture, use, distribution or sale of Licensed Products and/or the purchaser's use thereof. 12.4 Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 12.5 Arbitration. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled in the United States by arbitration, in accordance with the rules then obtaining, of the American Arbitration Association. If the subject of the arbitration involves an intellectual property matter, as determined by the Association, then the arbitrator(s) should have had experience in that subject. The Association is authorized to make arrangements for this arbitration, to be held under these rules in any locality in the United States agreed upon by the parties or as designated by the Association. This agreement shall be enforceable and judgment upon any award rendered by all or a majority of the arbitrators may be entered in any court of any country having jurisdiction. 12.6 Jurisdiction. This Agreement shall be construed, and the legal relations between the Parties determined, in accordance with the laws of the United States of America and the State of New Mexico. 12.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of each of the Parties hereto and except as otherwise provided herein, their respective legal successors and assigns. 12.8 Force Majeure. Neither of the parties hereto shall be liable in damages or have the right to cancel this Agreement for any delay or default in performing Page 18 hereunder if such delay or default is caused by conditions beyond its control, including acts of God, government restrictions, wars and insurrections. 12.9 Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed as of the date first above written. LICENSOR: RhoMed Incorporated By:/S/ Buck A. Rhodes ------------------------------------------- Buck A. Rhodes President LICENSEE: STERLING WINTHROP INC. By:/S/ E.C. Bradley ---------------------------------------------- Name: E.C. Bradley Title: Vice President, Oncology STERLING WINTHROP INC. By: /S/ Paul Baehr ---------------------------------------------- Name: Paul Baehr Title: President, Technology & Development Page 19 APPENDIX A GROUP A PATENTS U.S. Patent No. 4,424,200 and Canadian Patent No. 1,177,393 Method for Labelling Immunoglobulins with Tc-99m; and any divisions, continuations, continuation-in-part applications, reissues, reexaminations, extensions and/or renewals and improvements thereof. GROUP B PATENTS U.S. Patent No. 5,078,985, Radiolabeling Antibodies and Other Proteins with Technetium or Rhenium by Regulated Reduction; U.S. Patent No. 5,102,990, Direct Radiolabeling of Antibodies and Other Proteins with Technetium or Rhenium; International Application PCT/US90/04461, Direct Radiolabeling of Antibodies and Other Proteins with Technetium or Rhenium (pending in Canada, Japan, Australia, and the following European countries: Austria, Belgium, Switz/Lit, Germany, Denmark, Great Britain, Italy, Netherlands, Sweden, Spain and France); U.S. Patent Application 07/815,122, Composition for Radiolabeling Antibodies and Other Proteins by Regulated Reduction; U.S. Patent Application 07/815,123, Method for Radiolabeling Antibodies and Other Proteins by Regulated Reduction; U.S. Patent Application 07/816,477, Direct Labeling of Antibodies and Other Proteins with Metal Ions U.S. Patent Application 07/840,077, Peptide-Metal Ion Pharmaceutical Preparation and Method Page 20 U.S. Patent Application 07/864,470, Direct Radiolabeling of Substrates Containing Monosulfides or Disulfide Bonds with Radionuclides and any divisions, continuations, continuation-in-part applications, reissues, reexaminations, extensions and/or renewals and improvements thereof. Page 21 APPENDIX B ALLOCATION OF PATENT ROYALTIES All License Fees under Article 4.1 for a concurrent license to both Group A Patents and Group B Patents shall be allocated 12.5 % to Group A Patents, and 87.5 % to Group B Patents. All Milestone Payments under Article 4.2 for any Licensed Product for which Licensee uses Patent Rights which, except for the license rights granted herein, would infringe a Valid Claim of Group A Patents and a Valid Claim of Group B Patents, shall be allocated 12.5 % to Group A Patents, and 87.5 % to Group B Patents. All Production Royalties under Article 4.3 for any Licensed Product for which Licensee uses Patent Rights which, except for the license rights granted herein, would infringe a Valid Claim of Group A Patents and a Valid Claim of Group B Patents, shall be allocated 50% to Group A Patents and 50% to Group B Patents. Page 22 EX-10.13 19 ASSIGNMENT AND ASSUMPTION ASSIGNMENT AND ASSUMPTION ------------------------- (License Agreement with RhoMed Inc.) This Assignment and Assumption, dated January 21, 1994, by Sterling Winthrop Inc., a Delaware corporation ("Seller"), and by Burroughs Wellcome Co., a North Carolina corporation ("Buyer"). WHEREAS, Seller and Buyer are parties to an Asset Purchase Agreement dated as of January 11, 1994 (the "APA"), pursuant to which Seller has agreed to sell to Buyer and Buyer has agreed to purchase certain Assets and assume certain Liabilities, as defined therein, of Seller used in the business of the Sterling Winthrop Immunoconjugate Division of Seller ("SWIC"); and WHEREAS, the Assets include all of the rights of Seller in, to and under the contract set forth on Schedule A hereto (the "Contract"); and WHEREAS, pursuant to the terms of the APA, Seller desires to assign and delegate, and Buyer desires to assume, certain rights and obligations of Seller under the Contract. NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the adequacy and receipt of which are hereby acknowledged, and intending to be legally bound hereby: 1. Assignment. Seller hereby sells, grants, assigns and conveys to Buyer all of Seller's right, title and interest in and to the Contract that arise on or after the date hereof. 2. Assumption. Buyer hereby assumes and agrees to perform all of those obligations of Seller under and pursuant to the Contract that arise on or after the date hereof. 3. Successors and Assigns. This Assignment and Assumption binds, inures to the benefit of, and is enforceable by the successors and assigns of the parties. 4. Governing Law. This Assignment and Assumption shall be governed by, construed and enforced in accordance with New York law, without regard to principles of conflicts of law applicable in such jurisdiction. 5. Counterparts. This Assignment and Assumption may be executed in any number of counterparts and either party hereto may execute any such counterpart, each of which when executed and delivered shall be deemed to be an original and all of which counterparts taken together shall constitute but one and the same instrument. IN WITNESS WHEREOF, the parties have caused this Assignment and Assumption to be executed on their behalf by their duly authorized officers on the date first above written. BURROUGHS WELLCOME CO. By: /S/David Barry --------------- David Barry Vice President-Research, Development and Medical STERLING WINTHROP INC. By: /S/George Doherty ------------------ George Doherty Vice President Business Development EX-10.14 20 OPTION AGREEMENT OPTION AGREEMENT THIS OPTION AGREEMENT ("Option Agreement") is entered into by and between The Wistar Institute of Anatomy and Biology of Philadelphia, Pennsylvania (hereafter "Wistar"), and RhoMed Incorporated of Albuquerque, New Mexico (hereafter "RhoMed"), this 22nd day of August 1996. WHEREAS, RhoMed and Wistar were parties to an option agreement, dated June 29, 1987, that gave RhoMed an option to obtain an exclusive license to use monoclonal antibody cell line MCA-480 for purposes of making human diagnostic imaging products (the "Prior Option Agreement"); WHEREAS, the Prior Option Agreement, as extended, expired on July 31, 1993, without execution of a license agreement; WHEREAS, RhoMed and Wistar renewed licensing discussions during the previous six months and have exchanged draft license terms; and WHEREAS, as an expression of good faith, RhoMed desires to secure an exclusive option for a limited period of time to facilitate continued negotiation of a license to the cell line. NOW THEREFORE, in consideration of the mutual covenants herein contained and intending to be legally bound, Wistar and RhoMed agree as follows: 1. Option Grant. Wistar hereby grants to RhoMed an exclusive option for the period of sixty (60) days from the date of this Option Agreement (the "Option Term") to enter into a license agreement for the cell line MCA-480. In order to exercise this option, RhoMed shall sign and deliver to Wistar prior to the sixty-first day after the date of this Option Agreement a license agreement acceptable to Wistar. Wistar and RhoMed will engage in good faith negotiations to complete a license agreement during the Option Term. 2. Consideration for Option. In consideration of this option, RhoMed shall pay Wistar the nonrefundable sum of ten thousand dollars ($10,000) upon execution of this Option Agreement, by check made payable to "The Wistar Institute of Anatomy and Biology." The entire sum of ten thousand dollars ($10,000) will be fully credited against any license initiation fee (however called) required under a license agreement between the parties for the cell line MCA-480, but shall not be creditable against any other sums (including without limitation, royalties on sales of product) payable by RhoMed to Wistar thereunder. 3. Termination of Option. Should Wistar and RhoMed fail to reach agreement on a license agreement for the cell line MCA- 480 prior to the end of the Option Term, this Option Agreement shall terminate without action of the parties and they shall have no further obligation to one another under this Option Agreement or otherwise. 4. Governing Law. The laws of the Commonwealth of Pennsylvania shall govern this Option Agreement. 5. Entire Agreement. This Option Agreement embodies the entire understanding of the parties relating to the subject matter hereof and supersedes all prior understandings and agreements. No modification or amendment of this Option Agreement shall be valid and binding except by a writing signed by each of the parties. 6. Notices. Any notices to be given by either party under this Option Agreement shall be given by overnight courier service or by registered or certified mail, addressed as follows: If to Wistar: The Wistar Institute of Anatomy and Biology 3601 Spruce Street Philadelphia, Pennsylvania 19104 Attn: Executive Vice President of Administration If to RhoMed: RhoMed, Inc. 4261 Balloon Park Road N.E. Albuquerque, New Mexico 87109-5802 Attn: Vice President or such other address as the parties shall designate in writing. Such notice shall be deemed to have been given when received as indicated on the postal or courier receipt. IN WITNESS WHEREOF, the parties hereto have duly executed this Option Agreement as of the date first above written. THE WISTAR INSTITUTE OF ANATOMY AND BIOLOGY RHOMED INC. By: /S/ By: /S/ Charles L. Putnam -------------------- --------------------------- Title: President Title: Executive Vice President ----------------- ------------------------ EX-10.15 21 BUCK RHODES CONSULTING AGREEMENT CONSULTING AGREEMENT CONSULTING AGREEMENT dated as of March 7, 1996 between RhoMed Incorporated, a New Mexico corporation (the "Corporation"), and Buck A. Rhodes (the "Consultant"). W I T N E S S E T H : WHEREAS, the Corporation wishes to engage the Consultant, and the Consultant wishes to be retained by the Corporation, on the terms and conditions set forth below; NOW, THEREFORE, in consideration of the foregoing, the parties hereto agree as follows: 1. Position and Responsibilities. 1.1. The Corporation hereby appoints the Consultant, and the Consultant hereby accepts such appointment, to act as a consultant to the Corporation, and to perform for the Corporation duties and functions as reasonably assigned from time to time by the Chief Executive Officer or any person designated by the Chief Executive Officer. 1.2. The Consultant shall devote at least 21 hours per week and his best efforts to the business and affairs of the Corporation and to the promotion of its interests. 2. Term. 2.1. The term of this Agreement shall commence on the date hereof and shall terminate on the second anniversary of the date hereof, unless sooner terminated as provided in this Agreement (the "Term"). 2.2 The Corporation shall have the right to terminate this Agreement for Cause (as hereinafter defined) or the Consultant's Disability (as hereinafter defined), such termination to be effective on the date on which notice is given or as of such later date otherwise specified in the notice (the "Termination Date"). 2.3 For purposes of this Agreement, the term "Cause" shall mean fraud or dishonesty or acts of gross negligence in the course of providing the Consultant's services herein; misrepresentation to directors; failure to comply with a written direction of the Chief Executive Officer of the Corporation or any person designated by the Chief Executive Officer to assign duties and functions to the Consultant, which shall not be cured within 10 days after written notice of such failure; a material breach of this Agreement; or the commission of a felony. Any dispute, controversy or claim relating to the determination that the Corporation had Cause to terminate the Consultant's appointment shall be finally settled under the rules of the American Arbitration Association (the "AAA") in effect from time to time. A single arbitrator shall be appointed by agreement between the parties or, failing such agreement, by the AAA. The arbitrator may grant any remedy that he deems just and equitable 2 within the scope of this Agreement, including specific performance. The award of the arbitrator shall be final and binding and judgement thereon may be entered in any court having jurisdiction. The costs and expenses (including reasonable attorney's fees) of the prevailing party shall be borne and paid by the party that the arbitrator determines is the non-prevailing party. 3. Compensation. 3.1. The Corporation, subject to Article 4, shall pay to the Consultant for the services to be rendered by the Consultant hereunder $82,000.00 per annum. The fee shall be payable in equal monthly installments of $6,833.33 each, commencing after the expiration of the "Revocation Period" (as hereinafter defined). 3.2 The Corporation, in addition to the fee provided for in Section 3.1, shall pay to the Consultant on or before July 1, 1996, the sum of $51,023.41, such payment representing unpaid salary that accrued prior to the date hereof. 3.3 The Corporation shall pay the Consultant the sum of $36,000 if the Consultant resigns from the Board of Directors of the Corporation on or before May 15, 1996, such payment representing severance compensation for such resignation. 3.4 The Corporation shall reimburse the Consultant for one-half of all premiums incurred by the Consultant to maintain the $1 million key-man life insurance policy issued on June 6, 1995, procured from Allied Life Insurance Company. 3 3.5 During the Term, the Consultant shall be entitled to participate in any medical insurance program available to employees of the Corporation if he is eligible under the terms and conditions thereof. If the Consultant is not eligible to participate in such insurance program and elects to continue his medical insurance coverage for 18 months pursuant to the COBRA law, the Consultant shall be reimbursed for the cost of such medical insurance coverage, in an amount equal to the cost to the Corporation of providing medical insurance coverage for an employee in such insurance program for the period represented by such reimbursement, for 18 months from the date of this Agreement. After such 18 month period has expired and until the end of the Term, the Corporation shall reimburse the Consultant for the expenses of obtaining medical insurance in a maximum amount equal to and on the basis as the last reimbursement to the Consultant for medical insurance coverage pursuant to the Cobra law as set forth in the preceding sentence. 3.6 The Corporation shall reimburse the Consultant for all documented business expenses reasonably and necessarily incurred by the Consultant in the performance of his duties hereunder, including business travel expenses. 3.7 The Consultant shall be entitled to appropriate office space and secretarial assistance. 4. Payments Upon Termination. 4.1 If prior to the second anniversary of the date hereof, the Corporation terminates the Consultant other than for 4 Cause or for the Consultant's Disability (as hereinafter defined), the Corporation shall continue to pay the Consultant pursuant to Section 3.1 until the second anniversary of the date hereof as if such termination had not occurred, but shall have no other obligations under any other provision of Article 3. If such termination is for Cause or for the Consultant's Disability (as hereinafter defined), the Corporation's obligations under Article 3 cease as of the Termination Date. 4.2 If the Consultant dies prior to the second anniversary of the date hereof, the Corporation's obligations under Article 3 cease as of the date of the Consultant's death. 4.2 "Disability" as used herein shall mean any condition whereby the Consultant is unable to substantially perform his duties hereunder by reason of illness, accident or other physical or mental disability for an aggregate period of 180 days during any continuous twelve-month period. 5. Confidential Information. 5.1. The Consultant shall not (during the Term or after the termination hereof) directly or indirectly divulge, furnish, use, publish or make accessible to any person or entity any Confidential Information (as hereinafter defined). Any records of Confidential Information prepared by the Consultant or which come into the Consultant's possession during the Term are and remain the property of the Corporation and upon termination of this Agreement all such records, including Confidential 5 Information and copies thereof, shall be returned to the Corporation. 5.2. The term "Confidential Information" shall mean information disclosed to the Consultant or known, learned, created or observed by him as a consequence of or through this Agreement, not generally known or available from published sources in the relevant trade or industry, about the Corporation's business activities, services and processes, including but not limited to information concerning advertising, sales promotion, publicity, sales data, medical research, trade secrets, confidential know-how, techniques, systems, software programs, works of authorship, specifications, data, drawings, sketches, documentation, formulas, discoveries, designs, finances, accounting, methods, processes, business plans, client or supplier lists and records, potential client or supplier lists, and client or supplier billing. 6. Non-Compete. 6.1. So long as the Corporation continues to pay the Consultant under Section 3.1 and, to the extent applicable, for the period specified in Section 6.2, the Consultant shall not, without the prior written approval of the Board, for any reason whatsoever, directly or indirectly: i) Own, manage, operate, join or control, or participate in the ownership, management, operation or control of, or be a director, officer or employee of, or a consultant to, any business enterprise which may be deemed "competitive" (as 6 hereinafter defined) with any business engaged in by the Corporation. Nothing in this paragraph shall preclude the Consultant from holding an interest of less than 5% of a publicly owned company or business entity. 6.2. If the Corporation terminates this Agreement for Cause, the provisions of Section 6.1 shall be applicable for twelve months after the date of such termination. 6.3. A business shall be considered "competitive" with the business of the Corporation if it is located anywhere in the world and is engaged in the development, manufacture, production, distribution or marketing of radiopharmaceutical or peptide drugs intended to diagnose or treat diseases, including, without limitation, infection, cancer and blood clots. 7. Proprietary Rights and Information in Respect of Inventions, etc. 7.1 In consideration of the Consultant's appointment to act as a consultant to the Corporation and of the compensation provided for herein the Consultant for his services in the course of such appointment and for being permitted access to information pertaining to the Corporation's business, the Consultant hereby agrees: (A) To promptly disclose in detail and in writing to the Corporation, each Invention (as hereinafter defined) that the Consultant alone or with others makes or conceives during the Term whether or not made or conceived during working hours, which pertains to the Corporation's business or its actual or 7 demonstrably anticipated research or development or is aided by the use of time, materials or facilities of the Corporation and the Consultant will without further consideration other than reimbursement of his expenses to the extent hereinafter provided, assign (and does hereby assign) to the Corporation or its nominee, all right, title and interest in each such Invention and will, at all times, whether during or after the Term, execute, acknowledge and deliver such assignment affidavits and other instruments prepared by the Corporation or its nominee and do such other things as will assist the Corporation or its nominee to obtain patents on each such Invention and Inventions developed by the Consultant which pertain to the Corporation's business or its actual or demonstrably anticipated research and development, or that were developed with the aid of use of time, materials or facilities of the Corporation, in any and all countries. The expenses for which the Corporation or its nominees shall be obligated to reimburse the Consultant shall be limited to mailing charges and notary fees and to such payments to others that the Corporation or its nominee has given the Consultant prior written authorization to mail. The Corporation shall have no right of ownership in an Invention, and no assignment to the Corporation in accordance with this paragraph is required, if it is determined that such Invention is: an Invention for which no equipment, supplies, facility, or trade secret information of the Corporation was used and which was developed entirely on the Consultant's own time, and (a) which does not relate (1) to the Corporation's business or (2) to the Corporation's actual or 8 demonstrably anticipated research or development or (b) which does not result from any work permitted by the Consultant for the Corporation. (B) To assign to the Corporation all of the Consultant, right, title and interest in and to all work that pertains to the Corporation's business or demonstrably anticipated research or development of the Corporation or that is aided by the use of time, material or facilities of the Corporation, unless the Corporation expressly waives, in writing, its right, title and interest to such work. (C) To make and maintain adequate and current written records of all Inventions, in the form of note sketches, drawings, or reports relating thereto, which records shall be and remain the property of and available to the Corporation at all times. (D) At the Corporation's expense, to assist the Corporation in every proper way to obtain and to help the Corporation enforce any and all patents, copyrights, and other legal protection for the Corporation's Inventions in any and all countries and to execute any documents that the Corporation may reasonably request for use in enforcing such patents, copyrights and other legal protection. The Consultant acknowledges that all original works of authorship that are made by him (solely or jointly with others) within the scope of his services to the Corporation, and that are protectable by copyright are "works for hire," as that term is defined in the United States Copyright Act (17 U.S.C. Section 101), subject to the good faith negotiation of 9 fair market royalty payments to the Consultant by the Corporation for such work. (E) Not to disclose or utilize in work at the Corporation any confidential information of third parties, including prior employers, or any Inventions or copyrightable work of the Consultant which are not within the scope of this Consulting Agreement. (F) To notify the Corporation in writing before the Consultant makes any disclosure or performs or causes to be performed any work for or on behalf of the Corporation which appears to threaten or conflict with: (1) rights the Consultant claims in any Invention or idea (a) conceived by the Consultant or others prior to the Consultant's "Prior Employment" (as hereinafter defined) by the Corporation, or (b) otherwise outside the scope of this Consulting Agreement, or (2) rights of others arising out of obligations incurred by the Consultant, (a) prior to this Consulting Agreement, or (b) otherwise outside the scope of this Consulting Agreement. In the event of the Consultant's failure to give notice under the circumstances specified in (1) of the foregoing, the Corporation may assume that no conflicting invention or idea exists, and the Consultant agrees that the Consultant will make no claim against the Corporation with respect to the use of any such Invention or idea in any work or live product of any work which the Consultant 10 performs or causes to be performed for or on behalf of the Cor- poration; 7.2 For purposes hereof, the term "the Corporation's business" shall include the business of developing, manufacturing, producing, distributing and marketing radiopharmaceutical and peptide drugs intended to treat diseases, including, without limitation, infection, cancer and blood clots. 7.3 As used herein, "Inventions" shall mean any and all inventions and discoveries, technological innovations including improvements, original works of authorship, designs, formulae, processes, computer programs, databases, and trade secrets and related proprietary information and materials, in each case regardless of whether patented or unpatented. 8. Acknowledgment Release. 8.1. The Consultant acknowledges that on March 7, 1996, he resigned his employment as President of the Corporation (the "Prior Employment"). As a material inducement to the Corporation to enter into this Agreement and to give him the payments and benefits described above, the Consultant forever releases and discharges the Corporation and each of the Corpora- tion's stockholders, predecessors, successors, assigns, agents, directors, officers, employees, representatives, attorneys, parent companies, divisions, subsidiaries, affiliates (and agents, directors, officers, employees, representatives and attorneys of such parent companies, divisions, subsidiaries and affiliates), and all persons acting by, through, under or in 11 concert with any of them, from any and all charges, complaints, claims, liabilities, obligations, promises, agreements, controversies, damages, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses (including attorneys' fees and costs actually incurred) of any nature whatsoever, in law or equity, known or unknown, suspected or unsuspected, that the Consultant, his issue, heirs, representatives, successors, agents, executors, administrators or assigns, ever had, now has or hereafter can, shall or may have, for, upon, or by reason of any matter, cause or thing whatsoever from the beginning of the world to the date of this Agreement, including but not limited to, claims arising out of his Prior Employment by the Corporation and the termination of such employment, including any claims for unpaid wages, back pay, commissions, vacation pay, severance or other compensation, or any claims for alleged violation of any contracts, express or implied, or any covenant of good faith and fair dealing, express or implied, or any tort, or any legal restrictions on the Corporation's right to terminate employees, and any federal, state or other governmental statute, regulation, or ordinance, including without limitation: Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act, the Equal Pay Act, and the Rehabilitation Act of 1973, excluding, however, any matter relating to the expiration of the Consultant's stock options to purchase shares of the Corporation's common stock. This covenant shall not apply to actions for breach of this Agreement. 12 8.2. The Consultant, for himself, his heirs, assigns and legal representatives, hereby covenants and represents that he has not instituted, and will not institute, any complaints, claims, charges or lawsuits, with any governmental agency or any court, against the Corporation, by reason of any claim present or future, known or unknown, arising from or related in any way to his Prior Employment with the Corporation or the termination of such employment, or any relationship, association, or transaction to date between the parties hereto or any of their predecessors or their respective agents, employees or officers, excluding, however, any matter relating to the expiration of the Consultant's stock options to purchase shares of the Corporation's common stock. This covenant shall not apply to actions for breach of this Agreement. 8.3 The Consultant has 21 days from the date on which a copy of this Agreement has been delivered to him to consider whether to sign it. In addition, if the Consultant returns to the Corporation a signed copy of this Agreement, he has 7 days following the date of such return (the "Revocation Period") to deliver to the Corporation a notice of revocation. This Agreement will not be effective or enforceable until the expiration of the Revocation Period. 9. Relationship. The Consultant shall be an independent contractor and not an employee of the Corporation. Nothing herein shall serve to create a relationship of partnership or joint venture between the parties. The Consultant 13 shall not be an agent of the Corporation and shall have no power to bind or otherwise obligate the Corporation in any manner without the prior consent of the Corporation. 10. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that the Consultant shall not assign or transfer this Agreement or its rights or obligations hereunder without the Corporation's prior consent. 11. No Third Party Beneficiaries. This Agreement does not create, and shall not be construed as creating, any rights enforceable by any person not a party to this Agreement, except as provided in Section 6 hereof. 12. Headings. The headings of the sections hereof are inserted for convenience only and shall not be deemed to constitute a part hereof nor to affect the meaning thereof. 13. Interpretation. In case any one or more of the provisions contained in this Agreement, including, without limitation, the provisions of Article 6, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. If, moreover, any one or more of the provisions contained in this Agreement, including, 14 without limitation, the provisions of Article 5, shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the extent compatible with the applicable law as it shall then appear. 14. Notices. All notices and consents under this Agreement shall be in writing and shall be deemed to have been given at the time when mailed by registered or certified mail or when delivered by hand or recognized overnight courier service, addressed to the address below stated of the party to which notice is given, or to such changed address as such party may have fixed by notice: To the Corporation: Edward J. Quilty RhoMed Incorporated 214 Carnegie Center, Suite 100 Princeton, New Jersey 08540 with a copy to Eric J. Wallach, Esq. Rosenman & Colin LLP 575 Madison Avenue New York, New York 10022 To the Consultant: Buck A. Rhodes 3212 Rio Grande Boulevard, N.E. Albuquerque, New Mexico 87107 provided, however, that any notice of change of address shall be effective only upon receipt. 15 15. Waivers. If any party should waive any breach of any provision of this Agreement, it shall not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement. 16. Complete Agreement; Prior Agreement; Amendments. The foregoing is the entire agreement of the parties with respect to the subject matter hereof and may not be amended, supplemented, canceled or discharged except by written instrument executed by the parties hereto. 17. Governing Law. This Agreement is to be governed by and construed in accordance with the laws of New York without giving effect to principles of conflicts of law. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. RHOMED INCORPORATED By: /s/ Edward J. Quilty ---------------------------- Edward J. Quilty By: /s/ Buck A. Rhodes ---------------------------- Buck A. Rhodes 16 EX-10.16 22 FORM OF CLASS A WARRANT THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS. RHOMED INCORPORATED Warrant for the Purchase of Shares of Common Stock No. ______ _______ Shares FOR VALUE RECEIVED, RHOMED INCORPORATED, a New Mexico corporation (the "COMPANY"), hereby certifies that _____________________ or his permitted assigns, is entitled to purchase from the Company, at any time or from time to time commencing on August __ , 1995 and prior to 5:00 P.M., New York City time, on ten years from August __ , 1995 (the "TERMINATION DATE"), _______________ thousand ( _________ ) fully paid and non-assessable shares of the Common Stock, no par value, of the Company for an aggregate purchase price of $ ____ (computed on the basis of $.01 per share). (Hereinafter, (i) said Common Stock, together with any other equity securities which may be issued by the Company with respect thereto or in substitution therefor, is referred to as the "COMMON STOCK", (ii) the shares of the Common Stock purchasable hereunder or under any other Warrant (as hereinafter defined) are referred to as the "WARRANT SHARES", (iii) the aggregate purchase price payable for the Warrant Shares hereunder is referred to as the "AGGREGATE WARRANT PRICE", (iv) the price payable for each of the Warrant Shares hereunder is referred to as the "PER SHARE WARRANT PRICE", (v) this Warrant, all similar Warrants issued on the date hereof and all Warrants hereafter issued in exchange or substitution for this Warrant or such similar Warrants are referred to as the "WARRANTS" and (vi) the holder of this Warrant is referred to as the "HOLDER" and the holder of this Warrant and all other Warrants or Warrant Shares issued upon the Warrant Page 1 exercise of any Warrant are referred to as the "HOLDERS"). The Aggregate Warrant Price is not subject to adjustment. The Per Share Warrant Price is subject to adjustment as hereinafter provided; in the event of any such adjustment, the number of Warrant Shares shall be adjusted by dividing the Aggregate Warrant Price by the Per Share Warrant Price in effect immediately after such adjustment. 1. EXERCISE OF WARRANT. (a) This Warrant may be exercised, in whole at any time or in part from time to time, commencing on August __ , 1995, and prior to the Termination Date, by the holder by the surrender of this Warrant (with the subscription form at the end hereof duly executed) at the address set forth in Subsection 9(a) hereof, together with proper payment of the Aggregate Warrant Price, or the proportionate part thereof if this Warrant is exercised in part, with payment for Warrant Shares made by certified or official bank check payable to the order of the Company; or (b) If this Warrant is exercised in part, this Warrant must be exercised for a number of whole shares of the Common Stock and the Holder is entitled to receive a new Warrant covering the Warrant Shares which have not been exercised and setting forth the proportionate part of the Aggregate Warrant Price applicable to such Warrant Shares. Upon surrender of this Warrant, the Company will (i) issue a certificate or certificates in the name of the Holder for the largest number of whole shares of the Common Stock to which the Holder shall be entitled and, if this Warrant is exercised in whole, in lieu of any fractional share of the Common Stock to which the Holder shall be entitled, pay to the Holder cash in an amount equal to the fair value of such fractional share (determined in such reasonable manner as the Board of Directors of the Company shall determine), and (ii) deliver the other securities and properties receivable upon the exercise of this Warrant, or the proportionate part thereof if this Warrant is exercised in part, pursuant to the provisions of this Warrant. 2. RESERVATION OF WARRANT SHARES; LISTING. The Company agrees that, prior to the expiration of this Warrant, the Company will at all times (a) after 60 days from the date hereof, have authorized and in reserve, and keep available, solely for issuance and delivery upon the exercise of this Warrant, the shares of the Common Stock and other securities and properties as from time to time shall be receivable upon the exercise of this Warrant, free and clear of all restrictions (other than restrictions necessary to comply with Federal and state securities laws) on sale or transfer and free and clear of all preemptive rights and rights of first refusal; and (b) if the Company hereafter lists its Common Stock on any national securities exchange, keep the shares of Common Stock Warrant Page 2 receivable upon exercise of this Warrant authorized for listing on such exchange upon notice of issuance. 3. PROTECTION AGAINST DILUTION. (a) If, at any time or from time to time after the date of this Warrant, the Company shall issue or distribute to the holders of shares of Common Stock evidence of its indebtedness, any other securities of the Company or any cash, property or other assets (excluding a subdivision, combination or reclassification, or dividend or distribution payable in shares of Common Stock, referred to in Subsection 3(b), and also excluding cash dividends or cash distributions paid out of net profits legally available therefor in the full amount thereof, together with the value of other dividends and distributions made substantially concurrently therewith or pursuant to a plan which includes payment thereof, is equivalent to not more than 5% of the Company's net worth) (any such non-excluded event being herein called a "SPECIAL DIVIDEND"), the Per Share Warrant Price shall be adjusted by multiplying the Per Share Warrant Price then in effect by a fraction, the numerator of which shall be the then current Market Price of the Common Stock less the fair market value (as determined in good faith by the Company's Board of Directors) of the evidence of indebtedness, cash, securities or property, or other assets issued or distributed in such Special Dividend applicable to one share of Common Stock and the denominator of which shall be the then current Market Price of the Common Stock. An adjustment made pursuant to this Subsection 3(a) shall become effective immediately after the record date of any such Special Dividend. (b) In case the Company shall hereafter (i) pay a dividend or make a distribution on its capital stock in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares or (iv) issue by reclassification of its Common Stock any shares of capital stock of the Company, the Per Share Warrant Price shall be adjusted to be equal to a fraction, the numerator of which shall be the Aggregate Warrant Price and the denominator of which shall be the number of shares of Common Stock or other capital stock of the Company which he would have owned immediately following such action had such Warrant been exercised immediately prior thereto. An adjustment made pursuant to this Subsection 3(b) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. (c) Except as provided in Subsections 3(a) and 3(d), in case the Company shall hereafter issue or sell any Common Stock, any securities convertible into Warrant Page 3 Common Stock or any rights, options or Warrants to purchase Common Stock or securities convertible into Common Stock, in each case for a price per share or entitling the holders thereof to purchase Common Stock at a price per share (determined by dividing (i) the total amount, if any, received or receivable by the Company in consideration of the issuance or sale of such securities plus the total consideration, if any, payable to the Company upon exercise or conversion thereof (the "TOTAL CONSIDERATION") by (ii) the number of additional shares of Common Stock issuable upon exercise or conversion of such securities) less than the then current Per Share Warrant Price in effect on the date of such issuance or sale, the Per Share Warrant Price shall be adjusted as of the date of such issuance or sale so that the same shall equal the price determined by dividing (i) the sum of (A) the number of shares of Common Stock outstanding on the date of such issuance or sale multiplied by the Per Share Warrant Price plus (B) the Total Consideration by (ii) the number of shares of Common Stock outstanding on the date of such issuance or sale plus the maximum number of additional shares of Common Stock issuable upon exercise or conversion of such securities. (d) No adjustment in the Per Share Warrant Price shall be required in the case of the issuance by the Company of Common Stock pursuant to the exercise of any Warrant. (e) In case of any capital reorganization or reclassification, or any consolidation or merger to which the Company is a party other than a merger or consolidation in which the Company is the continuing corporation, or in case of any sale or conveyance to another entity of the property of the Company as an entirety or substantially as an entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into the Company), the Holder of this Warrant shall have the right thereafter to receive on the exercise of this Warrant the kind and amount of securities, cash or other property which the Holder would have owned or have been entitled to receive immediately after such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance had this Warrant been exercised immediately prior to the effective date of such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Section 3 with respect to the rights and interests thereafter of the Holder of this Warrant to the end that the provisions set forth in this Section 3 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter deliverable on the exercise of this Warrant. The above provisions of this Subsection 3(e) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, statutory exchanges, sales or conveyances. The issuer of any shares of stock or other securities or property thereafter deliverable on the Warrant Page 4 exercise of this Warrant shall be responsible for all of the agreements and obligations of the Company hereunder. Notice of any such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and of said provisions so proposed to be made, shall be mailed to the Holders of the Warrants not less than 30 days prior to such event. A sale of all or substantially all of the assets of the Company for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes. (f) In case any event shall occur as to which the other provisions of this Section 3 are not strictly applicable but as to which the failure to make any adjustment would not fairly protect the purchase rights represented by this Warrant in accordance with the essential intent and principles hereof then, in each such case, the Holders of Warrants representing the right to purchase a majority of the Warrant Shares subject to all outstanding Warrants may appoint a firm of independent public accountants of recognized national standing reasonably acceptable to the Company, which shall give their opinion as to the adjustment, if any, on a basis consistent with the essential intent and principles established herein, necessary to preserve the purchase rights represented by the Warrants. Upon receipt of such opinion, the Company will promptly mail a copy thereof to the Holder of this Warrant and shall make the adjustments described therein. The fees and expenses of such independent public accountants shall be borne by the Company. (g) No adjustment in the Per Share Warrant Price shall be required unless such adjustment would require an increase or decrease of at least $0.05 per share of Common Stock; provided, however, that any adjustments which by reason of this Subsection 3(g) are not required to be made shall be carried forward and taken into account in any subsequent adjustment; provided, further, however, that adjustments shall be required and made in accordance with the provisions of this Section 3 (other than this Subsection 3(g)) not later than such time as may be required in order to preserve the tax-free nature of a distribution to the Holder of this Warrant or Common Stock issuable upon the exercise hereof. All calculations under this Section 3 shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. Anything in this Section 3 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Per Share Warrant Price, in addition to those required by this Section 3, as it in its discretion shall deem to be advisable in order that any stock dividend, subdivision of shares or distribution of rights to purchase stock or securities convertible or exchangeable for stock hereafter made by the Company to its stockholders shall not be taxable. (h) Whenever the Per Share Warrant Price is adjusted as provided in this Section 3 and upon any modification of the rights of a Holder of Warrants in accordance with this Section 3, the Company shall promptly obtain, at its expense, a certificate of a firm of independent public accountants of recognized standing selected by Warrant Page 5 the Board of Directors (who may be the regular auditors of the Company) setting forth the Per Share Warrant Price and the number of Warrant Shares after such adjustment or the effect of such modification, a brief statement of the facts requiring such adjustment or modification and the manner of computing the same and cause copies of such certificate to be mailed to the Holders of the Warrants. (i) If the Board of Directors of the Company shall declare any dividend or other distribution with respect to the Common Stock other than a cash distribution out of earned surplus, the Company shall mail notice thereof to the Holders of the Warrants not less than 15 days prior to the record date fixed for determining stock holders entitled to participate in such dividend or other distribution. (j) If, as a result of an adjustment made pursuant to this Section 3, the Holder of any Warrant thereafter surrendered for exercise shall become entitled to receive shares of two or more classes of capital stock or shares of Common Stock and other capital stock of the Company, the Board of Directors (whose determination shall be conclusive and shall be described in a written notice to the Holder of any Warrant promptly after such adjustment) shall determine the allocation of the adjusted Per Share Warrant Price between or among shares or such classes of capital stock or shares of Common Stock and other capital stock. 4. FULLY PAID STOCK; TAXES. The Company agrees that the shares of the Common Stock represented by each and every certificate of Warrant Shares delivered on the exercise of this Warrant be validly issued and outstanding, fully paid and nonassessable, and not subject to preemptive rights or rights of first refusal, and the Company will take all such actions as may be necessary to assure that the par value or stated value, if any, per share of the Common Stock is at all times equal to or less than the then Per Share Warrant Price. The Company further covenants and agrees that it will pay, when due and payable, any and all Federal and state stamp, original issue or similar taxes which may be payable in respect of the issue of any Warrant Share or any certificate thereof. 5. REGISTRATION UNDER SECURITIES ACT OF 1933. The Holder of this Warrant shall have the same registration rights as provided in Section 4 of the Unit Purchase Agreement dated as of the date hereof between the Company and such Holder (or such Holder's predecessor in interest). Warrant Page 6 6. LIMITED TRANSFERABILITY. This Warrant may not be sold, transferred, assigned or hypothecated by the Holder (a) except in compliance with the provisions of the Act and the applicable state securities "blue sky" laws, and is so transferable only upon the books of the Company which it shall cause to be maintained for such purpose. The Company may treat the registered Holder of this Warrant as he or it appears on the Company's books at any time as the Holder for all purposes. The Company shall permit any Holder of a Warrant or his duly authorized attorney, upon written request during ordinary business hours, to inspect and copy or make extracts from its books showing the registered holders of Warrants. All Warrants issued upon the transfer or assignment of this Warrant will be dated the same date as this Warrant, and all rights of the holder thereof shall be identical to those of the Holder. 7. LOSS, ETC., OF WARRANT. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and of indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed, and upon surrender and cancelation of this Warrant, if mutilated, the Company shall execute and deliver to the Holder a new Warrant of like date, tenor and denomination. 8. WARRANT HOLDER NOT SHAREHOLDER. Except as otherwise provided herein, this Warrant does not confer upon the Holder any right to vote or to consent to or receive notice as a stockholder of the Company, as such, in respect of any matters whatsoever, or any other rights or liabilities as a stockholder, prior to the exercise hereof. 9. COMMUNICATION. No notice or other communication under this Warrant shall be effective unless, but any notice or other communication shall be effective and shall be deemed to have been given if, the same is in writing and is mailed by first-class mail, postage prepaid, addressed to: (a) the Company at 4261 Balloon Park Road NE, Albuquerque, NM 87109-5802 or other address as the Company has designated in writing to the Holder, or (b) the Holder at the address indicated on the signature page to the Unit Purchase Agreement, or other such address as the Holder has designated in writing to the Company. Warrant Page 7 10. HEADINGS. The headings of this Warrant have been inserted as a matter of convenience and shall not affect the construction hereof. 11. APPLICABLE LAW. This Warrant shall be governed by and construed in accordance with the law of the State of New York without giving effect to the principles of conflicts of law thereof. IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its President and its corporate seal to be hereunto affixed and attested by its Secretary this ___ day of August, 1995. RHOMED INCORPORATED By: ___________________________ Buck A. Rhodes President ATTEST: - -------------------- Stephen A. Slusher Secretary [Corporate Seal] Warrant Page 8 SUBSCRIPTION The undersigned, ___________________, pursuant to the provisions of the foregoing Warrant, hereby agrees to subscribe for and purchase ____________________ shares of the Common Stock, no par value, of RhoMed Incorporated, covered by said Warrant, and makes payment therefor in full at the price per share provided by said Warrant. Dated:_______________ Signature:____________________ Address:______________________ ASSIGNMENT FOR VALUE RECEIVED _______________ hereby sells, assigns and transfers unto ____________________ the foregoing Warrant and all rights evidenced thereby, and does irrevocably constitute and appoint _____________________, attorney, to transfer said Warrant on the books of RhoMed Incorporated. Dated:_______________ Signature:____________________ Address:______________________ PARTIAL ASSIGNMENT FOR VALUE RECEIVED _______________ hereby assigns and transfers unto ____________________ the right to purchase _______ shares of the Common Stock, no par value per share, of RhoMed Incorporated covered by the foregoing Warrant, and a proportionate part of said Warrant and the rights evidenced thereby, and does irrevocably constitute and appoint ____________________, attorney, to transfer that part of said Warrant on the books of RhoMed Incorporated. Dated:_______________ Signature:____________________ Address:______________________ Warrant Page 9 EX-10.17 23 FORM OF PLACEMENT AGENT THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS. RHOMED INCORPORATED Warrant for the Purchase of Shares of Common Stock No. Shares FOR VALUE RECEIVED, RHOMED INCORPORATED, a New Mexico corporation (the "COMPANY"), hereby certifies that [] or his permitted assigns, is entitled to purchase from the Company, at any time or from time to time commencing on July __, 1995 and prior to 5:00 P.M., New York City time, on ten years from [Insert Final Closing Date] (the "TERMINATION DATE"), [Insert Number of Shares] ([]) fully paid and non-assessable shares of the Common Stock, no par value, of the Company for an aggregate purchase price of $[] (computed on the basis of $.01 per share). (Hereinafter, (i) said Common Stock, together with any other equity securities which may be issued by the Company with respect thereto or in substitution therefor, is referred to as the "COMMON STOCK", (ii) the shares of the Common Stock purchasable hereunder or under any other Warrant (as hereinafter defined) are referred to as the "WARRANT SHARES", (iii) the aggregate purchase price payable for the Warrant Shares hereunder is referred to as the "AGGREGATE WARRANT PRICE", (iv) the price payable for each of the Warrant Shares hereunder is referred to as the "PER SHARE WARRANT PRICE", (v) this Warrant, all similar Warrants issued on the date hereof and all Warrants hereafter issued in exchange or substitution for this Warrant or such similar Warrants are referred to as the "WARRANTS" and (vi) the holder of this Warrant is referred to as the "HOLDER" and the holder of this Warrant and all other Warrants or Warrant Shares issued upon the exercise of any Warrant are referred to as the "HOLDERS"). The Aggregate Warrant Price is not subject to adjustment. The Per Share Warrant Price is subject to adjustment as hereinafter provided; in the event of any such adjustment, the number of Warrant Shares shall be adjusted by dividing the Aggregate Warrant Price by the Per Share Warrant Price in effect immediately after such adjustment. 1. EXERCISE OF WARRANT. (a) This Warrant may be exercised, in whole at any time or in part from time to time, commencing on [Insert Final Closing Date] and prior to the Termination Date, by the holder by the surrender of this Warrant (with the subscription form at the end hereof duly executed) at the address set forth in Subsection 9(a) hereof, together with proper payment of the Aggregate Warrant Price, or the proportionate part thereof if this Warrant is exercised in part, with payment for Warrant Shares made by certified or official bank check payable to the order of the Company; or (b) If this Warrant is exercised in part, this Warrant must be exercised for a number of whole shares of the Common Stock and the Holder is entitled to receive a new Warrant covering the Warrant Shares which have not been exercised and setting forth the proportionate part of the Aggregate Warrant Price applicable to such Warrant Shares. Upon surrender of this Warrant, the Company will (i) issue a certificate or certificates in the name of the Holder for the largest number of whole shares of the Common Stock to which the Holder shall be entitled and, if this Warrant is exercised in whole, in lieu of any fractional share of the Common Stock to which the Holder shall be entitled, pay to the Holder cash in an amount equal to the fair value of such fractional share (determined in such reasonable manner as the Board of Directors of the Company shall determine), and (ii) deliver the other securities and properties receivable upon the exercise of this Warrant, or the proportionate part thereof if this Warrant is exercised in part, pursuant to the provisions of this Warrant. (c) By the surrender of this Warrant (with the cashless exercise form at the end hereof duly executed) (a "CASHLESS EXERCISE") at the address set forth in Subsection 9(a) hereof. Such presentation and surrender shall be deemed a waiver of the Holder's obligation to pay the Aggregate Warrant Price, or the proportionate part thereof if this Warrant is exercised in part. In the event of a Cashless Exercise, the Holder shall exchange its Warrant for that number of Warrant Shares subject to such Cashless Exercise multiplied by a fraction, the numerator of which shall be the difference between the then current Market Price per share (as hereinafter defined) of Common Stock and the Per Share Warrant Price, and the denominator of which shall be the then current Market Price per share of Common Stock. For purposes of any computation under this Section 1(c), the then current market price per share of the Common Stock at any date (the "MARKET PRICE") shall be deemed to be the last sale price of the Common Stock on the business day prior to the date of the Cashless Exercise or, in case no such reported sales take place on such day, the average of the last reported bid and asked prices of the Common Stock on such day, in either case on the principal national securities exchange on which the Common Stock is admitted to trading or listed, or if not listed or admitted to trading on any such exchange, the representative closing bid price of the Common Stock as reported by NASDAQ, or other similar organization if NASDAQ is no longer reporting such information, or on the OTC Electronic -2- Bulletin or in the "Pink Sheets," or if not so available, the fair market price of the Common Stock as determined in good faith by the Board of Directors. 2. RESERVATION OF WARRANT SHARES; LISTING. The Company agrees that, prior to the expiration of this Warrant, the Company will at all times (a) have authorized and in reserve, and will keep available, solely for issuance or delivery upon the exercise of this Warrant, the shares of the Common Stock and other securities and properties as from time to time shall be receivable upon the exercise of this Warrant, free and clear of all restrictions on sale or transfer and free and clear of all preemptive rights and rights of first refusal; and (b) if the Company hereafter lists its Common Stock on any national securities exchange, keep the shares of Common Stock receivable upon exercise of this Warrant authorized for listing on such exchange upon notice of issuance. 3. PROTECTION AGAINST DILUTION. (a) If, at any time or from time to time after the date of this Warrant, the Company shall issue or distribute to the holders of shares of Common Stock evidence of its indebtedness, any other securities of the Company or any cash, property or other assets (excluding a subdivision, combination or reclassification, or dividend or distribution payable in shares of Common Stock, referred to in Subsection 3(b), and also excluding cash dividends or cash distributions paid out of net profits legally available therefor in the full amount thereof, together with the value of other dividends and distributions made substantially concurrently therewith or pursuant to a plan which includes payment thereof, is equivalent to not more than 5% of the Company's net worth) (any such non-excluded event being herein called a "SPECIAL DIVIDEND"), the Per Share Warrant Price shall be adjusted by multiplying the Per Share Warrant Price then in effect by a fraction, the numerator of which shall be the then current Market Price of the Common Stock less the fair market value (as determined in good faith by the Company's Board of Directors) of the evidence of indebtedness, cash, securities or property, or other assets issued or distributed in such Special Dividend applicable to one share of Common Stock and the denominator of which shall be the then current Market Price of the Common Stock. An adjustment made pursuant to this Subsection 3(a) shall become effective immediately after the record date of any such Special Dividend. (b) In case the Company shall hereafter (i) pay a dividend or make a distribution on its capital stock in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares or (iv) issue by reclassification of its Common Stock any shares of capital stock of the Company, the Per Share Warrant Price shall be adjusted to be equal to a fraction, the numerator of which shall be the Aggregate Warrant Price and the denominator of which shall be the number of shares of Common Stock or other capital stock of the Company which he would have owned immediately following such action had such Warrant been exercised immediately prior thereto. An adjustment made pursuant to this Subsection 3(b) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. (c) Except as provided in Subsections 3(a) and 3(d), in case the Company shall hereafter issue or sell any Common Stock, any securities convertible into Common Stock or any rights, options or Warrants to purchase Common Stock or securities convertible into -3- Common Stock, in each case for a price per share or entitling the holders thereof to purchase Common Stock at a price per share (determined by dividing (i) the total amount, if any, received or receivable by the Company in consideration of the issuance or sale of such securities plus the total consideration, if any, payable to the Company upon exercise or conversion thereof (the "TOTAL CONSIDERATION") by (ii) the number of additional shares of Common Stock issuable upon exercise or conversion of such securities) less than the then current Per Share Warrant Price in effect on the date of such issuance or sale, the Per Share Warrant Price shall be adjusted as of the date of such issuance or sale so that the same shall equal the price determined by dividing (i) the sum of (A) the number of shares of Common Stock outstanding on the date of such issuance or sale multiplied by the Per Share Warrant Price plus (B) the Total Consideration by (ii) the number of shares of Common Stock outstanding on the date of such issuance or sale plus the maximum number of additional shares of Common Stock issuable upon exercise or conversion of such securities. (d) No adjustment in the Per Share Warrant Price shall be required in the case of the issuance by the Company of Common Stock pursuant to the exercise of any Warrant. (e) In case of any capital reorganization or reclassification, or any consolidation or merger to which the Company is a party other than a merger or consolidation in which the Company is the continuing corporation, or in case of any sale or conveyance to another entity of the property of the Company as an entirety or substantially as an entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into the Company), the Holder of this Warrant shall have the right thereafter to receive on the exercise of this Warrant the kind and amount of securities, cash or other property which the Holder would have owned or have been entitled to receive immediately after such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance had this Warrant been exercised immediately prior to the effective date of such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Section 3 with respect to the rights and interests thereafter of the Holder of this Warrant to the end that the provisions set forth in this Section 3 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter deliverable on the exercise of this Warrant. The above provisions of this Subsection 3(e) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, statutory exchanges, sales or conveyances. The issuer of any shares of stock or other securities or property thereafter deliverable on the exercise of this Warrant shall be responsible for all of the agreements and obligations of the Company hereunder. Notice of any such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and of said provisions so proposed to be made, shall be mailed to the Holders of the Warrants not less than 30 days prior to such event. A sale of all or substantially all of the assets of the Company for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes. (f) In case any event shall occur as to which the other provisions of this Section 3 are not strictly applicable but as to which the failure to make any adjustment would not fairly protect the purchase rights represented by this Warrant in accordance with the -4- essential intent and principles hereof then, in each such case, the Holders of Warrants representing the right to purchase a majority of the Warrant Shares subject to all outstanding Warrants may appoint a firm of independent public accountants of recognized national standing reasonably acceptable to the Company, which shall give their opinion as to the adjustment, if any, on a basis consistent with the essential intent and principles established herein, necessary to preserve the purchase rights represented by the Warrants. Upon receipt of such opinion, the Company will promptly mail a copy thereof to the Holder of this Warrant and shall make the adjustments described therein. The fees and expenses of such independent public accountants shall be borne by the Company. (g) No adjustment in the Per Share Warrant Price shall be required unless such adjustment would require an increase or decrease of at least $0.05 per share of Common Stock; provided, however, that any adjustments which by reason of this Subsection 3(g) are not required to be made shall be carried forward and taken into account in any subsequent adjustment; provided, further, however, that adjustments shall be required and made in accordance with the provisions of this Section 3 (other than this Subsection 3(g)) not later than such time as may be required in order to preserve the tax-free nature of a distribution to the Holder of this Warrant or Common Stock issuable upon the exercise hereof. All calculations under this Section 3 shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. Anything in this Section 3 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Per Share Warrant Price, in addition to those required by this Section 3, as it in its discretion shall deem to be advisable in order that any stock dividend, subdivision of shares or distribution of rights to purchase stock or securities convertible or exchangeable for stock hereafter made by the Company to its stockholders shall not be taxable. (h) Whenever the Per Share Warrant Price is adjusted as provided in this Section 3 and upon any modification of the rights of a Holder of Warrants in accordance with this Section 3, the Company shall promptly obtain, at its expense, a certificate of a firm of independent public accountants of recognized standing selected by the Board of Directors (who may be the regular auditors of the Company) setting forth the Per Share Warrant Price and the number of Warrant Shares after such adjustment or the effect of such modification, a brief statement of the facts requiring such adjustment or modification and the manner of computing the same and cause copies of such certificate to be mailed to the Holders of the Warrants. (i) If the Board of Directors of the Company shall declare any dividend or other distribution with respect to the Common Stock other than a cash distribution out of earned surplus, the Company shall mail notice thereof to the Holders of the Warrants not less than 15 days prior to the record date fixed for determining stockholders entitled to participate in such dividend or other distribution. (j) If, as a result of an adjustment made pursuant to this Section 3, the Holder of any Warrant thereafter surrendered for exercise shall become entitled to receive shares of two or more classes of capital stock or shares of Common Stock and other capital stock of the Company, the Board of Directors (whose determination shall be conclusive and shall be described in a written notice to the Holder of any Warrant promptly after such adjustment) shall determine the allocation of the adjusted Per Share Warrant Price between -5- or among shares or such classes of capital stock or shares of Common Stock and other capital stock. 4. FULLY PAID STOCK; TAXES. The Company agrees that the shares of the Common Stock represented by each and every certificate of Warrant Shares delivered on the exercise of this Warrant be validly issued and outstanding, fully paid and nonassessable, and not subject to preemptive rights or rights of first refusal, and the Company will take all such actions as may be necessary to assure that the par value or stated value, if any, per share of the Common Stock is at all times equal to or less than the then Per Share Warrant Price. The Company further covenants and agrees that it will pay, when due and payable, any and all Federal and state stamp, original issue or similar taxes which may be payable in respect of the issue of any Warrant Share or any certificate thereof. 5. REGISTRATION UNDER SECURITIES ACT OF 1933. The Holder of this Warrant shall have the same registration rights as provided in Section 4 of the Unit Purchase Agreement dated as of the date hereof between the Company and such Holder (or such Holder's predecessor in interest). 6. LIMITED TRANSFERABILITY. This Warrant may not be sold, transferred, assigned or hypothecated by the Holder (a) except in compliance with the provisions of the Act and the applicable state securities "blue sky" laws, and is so transferable only upon the books of the Company which it shall cause to be maintained for such purpose. The Company may treat the registered Holder of this Warrant as he or it appears on the Company's books at any time as the Holder for all purposes. The Company shall permit any Holder of a Warrant or his duly authorized attorney, upon written request during ordinary business hours, to inspect and copy or make extracts from its books showing the registered holders of Warrants. All Warrants issued upon the transfer or assignment of this Warrant will be dated the same date as this Warrant, and all rights of the holder thereof shall be identical to those of the Holder. 7. LOSS, ETC., OF WARRANT. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and of indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed, and upon surrender and cancellation of this Warrant, if mutilated, the Company shall execute and deliver to the Holder a new Warrant of like date, tenor and denomination. 8. WARRANT HOLDER NOT SHAREHOLDER. Except as otherwise provided herein, this Warrant does not confer upon the Holder any right to vote or to consent to or receive notice as a stockholder of the Company, as such, in respect of any matters whatsoever, or any other rights or liabilities as a stockholder, prior to the exercise hereof. 9. COMMUNICATION. No notice or other communication under this Warrant shall be effective unless, but any notice or other communication shall be effective and shall be deemed to have been given if, the same is in writing and is mailed by first-class mail, postage prepaid, addressed to: (a) the Company at 4261 Balloon Park Road NE, Albuquerque, NM 87109-5802 or other address as the Company has designated in writing to the Holder, or -6- (b) the Holder at the address indicated on the signature page to the Unit Purchase Agreement, or other such address as the Holder has designated in writing to the Company. 10. HEADINGS. The headings of this Warrant have been inserted as a matter of convenience and shall not affect the construction hereof. 11. APPLICABLE LAW. This Warrant shall be governed by and construed in accordance with the law of the State of New York without giving effect to the principles of conflicts of law thereof. -7- IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its President and its corporate seal to be hereunto affixed and attested by its Secretary this ___ day of __________, 1995. RHOMED INCORPORATED By: ___________________________ President ATTEST: - -------------------- Secretary [Corporate Seal] -8- SUBSCRIPTION The undersigned, ___________________, pursuant to the provisions of the foregoing Warrant, hereby agrees to subscribe for and purchase ____________________ shares of the Common Stock, no par value, of RhoMed Incorporated, covered by said Warrant, and makes payment therefor in full at the price per share provided by said Warrant. Dated:_______________ Signature:____________________ Address:______________________ CASHLESS EXERCISE The undersigned ___________________, pursuant to the provisions of the foregoing Warrant, hereby elects to exchange its Warrant for ___________________ shares of Common Stock, no par value, of RhoMed Incorporated pursuant to the Cashless Exercise provisions of the Warrant. Dated:_______________ Signature:____________________ Address:______________________ ASSIGNMENT FOR VALUE RECEIVED _______________ hereby sells, assigns and transfers unto ____________________ the foregoing Warrant and all rights evidenced thereby, and does irrevocably constitute and appoint _____________________, attorney, to transfer said Warrant on the books of RhoMed Incorporated. Dated:_______________ Signature:____________________ Address:______________________ PARTIAL ASSIGNMENT FOR VALUE RECEIVED _______________ hereby assigns and transfers unto ____________________ the right to purchase _______ shares of the Common Stock, no par value per share, of RhoMed Incorporated covered by the foregoing Warrant, and a proportionate part of said Warrant and the rights evidenced thereby, and does irrevocably constitute and appoint ____________________, attorney, to transfer that part of said Warrant on the books of RhoMed Incorporated. Dated:_______________ Signature:____________________ Address:______________________ EXHIBIT B -9- WARRANT RECEIPT [Address of Warrant Holder] Dear Sirs: Pursuant to Section 2(d) of the Placement Agency Agreement dated July __, 1995, between RhoMed Incorporated and Paramount Capital, Inc., we are delivering herewith a warrant in your name to purchase [ ] shares of Common Stock, no par value (the "Common Stock") of the Company. We hereby acknowledge receipt of $________ representing payment in full for the warrant in an amount equal to $.001 per share. Very truly yours, RHOMED INCORPORATED By______________________________ Name: Title: I hereby acknowledge receipt of a warrant to purchase [] shares of Common Stock. - ------------------------------- [ ] -10- EXHIBIT C ORDER TO ISSUE PLACEMENT AGENT'S WARRANTS RhoMed Incorporated 4261 Balloon Park Road NE Albuquerque, NM 87109-5802 Dear Sirs: Pursuant to Section 2(d) of the Placement Agency Agreement dated July __, 1995, between RhoMed Incorporated and Paramount Capital, Inc., we hereby request that you issue warrants to purchase [ ] shares of Common Stock, in an amount equal to $.001 per share, in the names and denominations as set forth below: Name Denominations Very truly yours, PARAMOUNT CAPITAL, INC. By______________________________ Name: Wayne Rubin Title: Chief Financial Officer -11- EX-10.18 24 FORM OF UNIT PURCHASE AGREEMENT 8/3/95 UNIT PURCHASE AGREEMENT UNIT PURCHASE AGREEMENT (this "Agreement") made as of the date set forth on the signature page hereof between RhoMed Incorporated, a New Mexico corporation with its principal offices at 4261 Balloon Park Road NE, Albuquerque, New Mexico 87109 ("RhoMed" or the "Corporation") and the undersigned (the "Subscriber"). W I T N E S S E T H: WHEREAS, the Corporation desires to issue an aggregate of up to a maximum $1,000,000 of senior bridge notes (the "Notes") in a private placement offering (the "Offering") in Units (the "Units"), each Unit consisting of (a) $25,000 face amount of Notes and (b) Class A Warrants (the "Warrants") to purchase 75,000 shares of Common Stock, no par value, of the Corporation (the "Common Stock") and the Subscriber desires to purchase that number of Units set forth on the signature page hereof on the terms and conditions hereinafter set forth (the Notes, the Warrants, and the shares of Common Stock issuable upon exercise of the Warrants being sometimes referred to collectively herein as the "Securities"). NOW, THEREFORE, in consideration of the premises and the mutual representations and covenants hereinafter set forth, the parties hereto do hereby agree as follows: ARTICLE I. SUBSCRIPTION FOR UNITS AND REPRESENTATIONS BY SUBSCRIBER 1.1 Subject to the terms and conditions hereinafter set forth, the Subscriber hereby subscribes for and agrees to purchase from the Corporation such number of Units or fractions thereof as is set forth upon the signature page hereof at a price equivalent to $25,000 per Unit and the Corporation agrees to sell such Units to the Subscriber for said purchase price. The terms of the Notes are set forth in the form of Senior Bridge Note attached hereto as Exhibit A and the terms of the Warrants are set forth in the form of warrant attached hereto as Exhibit B. The purchase price for the Units is payable by personal or business check, wire transfer of immediately available funds or money order made payable to "RhoMed Incorporat ed" contemporaneously with the execution and delivery of this Agreement. The Units will be delivered by the Corporation in accordance with the terms set forth in Article III hereof. 1.2 The Subscriber recognizes that the purchase of Units involves a high degree of risk in that (i) the Corporation may not have the funds necessary to pay the principal of, and interest on, the Notes, (ii) the Corporation remains a development stage business with limited operating history and requires substantial funds in addition to the proceeds of the Offering; (iii) an investment in the Corporation is highly speculative, and only investors who can afford the loss of their entire investment should consider investing in the Corporation and the Notes; (iv) Page 1 the Subscriber may not be able to liquidate his investment; (v) transferability of the Securities is extremely limited; and (vi) in the event of a disposition, the Subscriber could sustain the loss of his entire investment. 1.3 The Subscriber acknowledges that Subscriber must be an "accredited investor", as described herein, in order to qualify for the purchase of Units, and that Subscriber must be able to bear the economic risk of an investment in the Units. 1.4 The Subscriber represents that Subscriber is an "accredited investor" as such term is defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended (the "Act"), as indicated by his responses to the questions contained in Article VII hereof, and that Subscriber is able to bear the economic risk of an investment in the Units. 1.5 The Subscriber hereby acknowledges and represents that (i) Subscriber has prior investment experience, including investment in non-listed and unregistered securities, or Subscriber has employed the services of an investment advisor, attorney and/or accountant to read all of the documents furnished or made available by the Corporation both to Subscriber and to all other prospective investors in the Units and to evaluate the merits and risks of such an investment on Subscriber's behalf; (ii) Subscriber recognizes the highly speculative nature of this investment; and (iii) Subscriber is able to bear the economic risk which Subscriber hereby assumes. 1.6 The Subscriber hereby represents that the Subscriber either (i) has a preexisting personal or business relationship with the Corporation or its officers or directors or (ii) by reason of the Subscriber's business or financial experience or the business or financial experience of the Subscriber's professional advisors (who are unaffiliated with and who are not compensated by the Corporation or any affiliate or selling agent of the Corporation, including the Placement Agent, directly or indirectly) has the capacity to protect the Subscriber's own interests in connection with the transaction contemplated hereby. 1.7 The Subscriber hereby represents that (i) Subscriber has read this Agreement and all attachments and Exhibits to it, including the Schedule of Exceptions; (ii) Subscriber has been furnished by the Corporation during the course of this transaction with all information regarding the Corporation which Subscriber has requested or desired to know; (iii) Subscriber has been afforded the opportunity to ask questions of and receive answers from duly authorized officers or other representatives of the Corporation concerning the terms and conditions of the Offering; (iv) Subscriber has received any additional information which Subscriber had requested; and (v) Subscriber is not subscribing to purchase the Units as a result of or pursuant to any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. Page 2 1.8 The Subscriber hereby acknowledges that the offering of Units have not been reviewed by the United States Securities and Exchange Commission (the "Commission") or any state regulatory authority, since the Offering is intended to be exempt from the registra tion requirements of Section 5 of the Act pursuant to Regulation D promulgated under the Act. The Subscriber agrees that Subscriber will not sell or otherwise transfer the Securities unless they are registered under the Act or unless an exemption from such registration is available and until such Subscriber complies with the transfer restrictions set forth in Paragraph 1.10 hereof. 1.9 The Subscriber understands that none of the Securities have been registered under the Act or any state securities or "blue sky" laws and are being sold in reliance on exemp tions from the registration requirements of such Act and such laws and agrees that the Securities will not be resold or transferred except as permitted under such Act and such laws pursuant to registration or exemption therefrom. The Subscriber hereby represents that Subscriber is purchasing the Units for Subscriber's own account for investment and not with a view toward the resale or distribution of the Units. 1.10 The Subscriber understands that there is no market for the Units or any of the Securities comprising the Units and that no market may develop for the Units or any of the Securities comprising the Units. The Subscriber understands that even if a public market develops for the Units or any of the Securities comprising the Units, Rule 144 (the "Rule 144") promulgated under the Act requires, among other conditions, a two-year holding period prior to the resale (in limited amounts) of securities acquired in a non-public offering without having to satisfy the registration requirements under the Act. The Subscriber understands that the Corporation is not obligated to comply with any reporting requirements under the Securities Exchange Act of 1934, as amended, and that the Corporation makes no representation or war ranty that it will disseminate to the public any current financial or other information concerning the Corporation, as is required by Rule 144 as one of the conditions of its availability. The Subscriber understands and hereby acknowledges that the Corporation is under no obligation to register any of the Units or any of the Securities comprising the Units under the Act or any state securities or "blue sky" laws other than as set forth in Article IV. The Subscriber agrees to hold the Corporation and its directors, officers, agents, shareholders and controlling persons and their respective heirs, representatives, successors and assigns harmless and to indemnify them against all liabilities, costs and expenses (including reasonable legal fees) incurred by them as a result of or arising out of (i) any misrepresentation made by such Subscriber contained herein or in the Confidential Investor Questionnaire contained in Article VII hereof, (ii) any sale or distribution by the undersigned Subscriber in violation of the Act or any applicable state securities or "blue sky" laws or (iii) any untrue statement or alleged untrue statement of a material fact made by the Subscriber and contained herein. 1.11 The Subscriber consents to the placement of a legend on any certificate or other document evidencing the Securities that such Securities have not been registered under the Act or any state securities or "blue sky" laws and setting forth or referring to the Page 3 restrictions on transferability and sale thereof contained in this Agreement. The Subscriber is aware that the Corporation will make a notation in its appropriate records with respect to the restrictions on the transferability of such Securities. 1.12 The Subscriber understands that the Corporation will review this Agreement and is hereby given authority by the Subscriber to call Subscriber's bank or place of employment or otherwise review the financial standing of the Subscriber; and it is further agreed that the Corporation reserves the unrestricted right to reject or limit any subscription, to accept subscriptions for fractional Units and to close the Offering to the Subscriber at any time. 1.13 The Subscriber hereby represents that the address of the Subscriber furnished by Subscriber on the signature page hereof is the Subscriber's principal residence if Subscriber is an individual or its principal business address if it is a corporation or other entity. 1.14 Subscriber represents that he or it has full power and authority (corporate, statutory and otherwise) to execute and deliver this Agreement and to purchase the Units and the Securities. This Agreement constitutes the legal, valid and binding obligation of subscriber, enforceable against Subscriber in accordance with its terms. 1.15 If the subscriber is a corporation, company, trust, employee benefit plan, individual retirement account, Keogh Plan, or other tax-exempt entity, it is authorized and qualified to become an investor in the Corporation and the person signing this Agreement on behalf of such entity has been duly authorized by such entity to do so. ARTICLE II. REPRESENTATIONS BY AND COVENANTS OF RHOMED. RhoMed hereby represents and warrants to each Subscriber that, as of April 20, 1995, unless otherwise set forth on the "Schedule of Exceptions" attached hereto which specifically identifies the relevant subparagraph hereof, which exceptions shall be deemed to be representa tions and warranties as if made hereunder: 2.1 Organization, Good Standing and Qualification. RhoMed is a corporation duly organized, validly existing and in good standing under the laws of the State of New Mexico and has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted. RhoMed is duly qualified to transact business and is in good standing in New Mexico and all other jurisdictions in which the failure so to qualify would have a material adverse effect on its business or properties. Page 4 2.2 Capitalization and Voting Rights. The authorized Capital Stock of RhoMed consists of 15,000,000 shares of common stock, no par value (the "Common Stock"), of which 6,914,140 were outstanding as of April 20, 1995, and 5,000,000 shares of preferred stock, no par value, of which none were outstanding as of April 20, 1995. There were 9,735,492 shares of Common Stock issued or issuable as of April 20, 1995, including shares issuable upon the exercise or conversion of all outstanding options, warrants, convertible notes and other securities convertible into Common Stock. All of the outstanding shares of Capital Stock of the Corporation have been duly and validly authorized, and are fully paid and non assessable. The Notes and Warrants to be issued and sold by the Corporation as contemplated hereby and all shares of Common Stock issuable upon exercise of the Warrants, have been duly and validly authorized and, when issued (and, in the case of the Notes and Warrants, paid for as contemplated herein), will be validly issued, fully paid and nonassessable. A sufficient number of shares of Common Stock will, within sixty days of the date hereof, be authorized and reserved for issuance (i) upon exercise of the Warrants and (ii) upon the exercise of all outstanding options, warrants and other rights to purchase or subscribe for any shares of Common Stock, and RhoMed will, at all times that the Warrants are outstanding, have autho rized and reserved a sufficient number of shares of Common Stock to provide for exercise of the Warrants. Except as set forth in Schedule 2.2, there are no outstanding options, warrants, agreements, conversion rights, preemptive rights or other rights to subscribe for or to purchase any shares of Capital Stock of the Corporation. Except as set forth in Schedule 2.2 and as otherwise required by law, there are no restrictions upon the voting or transfer of any shares of the Corporation's Capital Stock pursuant to the Corporation's Articles of Incorporation, ByLaws or other governing documents or any agreement or other instruments to which the Corporation is a party or by which the Corporation is bound. 2.3 Authorization; Enforceability. RhoMed has the corporate power to execute, deliver and perform the terms and provisions of each of the Unit Purchase Agreements, Notes and Warrants (together, the "Transaction Documents") to which it is a party, and has taken prior to the date hereof all necessary corporate action to authorize the execution, delivery and performance by it of each of the Transaction Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. No other corporate proceedings on the part of RhoMed are necessary for the issuance of the Notes and Warrants. RhoMed has duly executed and delivered this Agreement and each of the Trans action Documents to which it is a party. This Agreement constitutes, and each of the other Transaction Documents, when executed and delivered by RhoMed, assuming due execution by the other parties hereto and thereto, will constitute the legal, valid and binding obligations of RhoMed enforceable against RhoMed in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). Page 5 2.4 Governmental Consents. (i) The execution, delivery and performance by RhoMed of this Agreement and the other Transaction Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby (i) does not and will not contravene the applicable provisions of any law, statute, rule, regulation, order, writ, injunction, judgment or decree of any court or governmental authority to or by which RhoMed is bound, (ii) will not violate, result in a breach of or constitute (with due notice or lapse of time or both) a default under any contract, lease, loan agreement, mortgage, security agreement, trust indenture or other agreement or instrument to which RhoMed is a party or by which it is bound or to which any of its properties or assets is subject, nor result in the creation or imposition of any lien upon any of the properties or assets of RhoMed, and (iii) will not violate any provision of the Articles of Incorporation or By-Laws of RhoMed. (ii) No consent, authorization or order of, or filing or registration with, any court or U.S. governmental authority or other person is required to be obtained or made by RhoMed for the execution, delivery and performance of this Agreement or any of the other Transaction Documents to which it is a party, or the consummation of any of the transactions contemplated hereby or thereby, except for (i) those consents or authorizations previously obtained and those filings previously made, and (ii) any post-sale filings required under applicable securities or blue sky laws. (iii) RhoMed holds and is operating in compliance with all licenses, permits, authorizations, approvals and certificates from governmental authorities, including, without limitation, all applicable approvals and authorizations of the Food and Drug Administration, which are necessary to the conduct of its business as currently contemplated. 2.5 Litigation. Except as disclosed in Schedule 2.5, there is no action, suit, proceeding or investigation pending or, to the best knowledge of RhoMed, currently threatened against RhoMed which questions the validity of this Agreement or any of the Transaction Documents or the right of RhoMed to enter into it, or to consummate the transactions contemplated hereby or thereby, or which might result, either individually or in the aggregate, in any changes in the assets, condition, affairs or prospects of RhoMed which are materially adverse to RhoMed taken as a whole, financially or otherwise, or any change in the current equity ownership of RhoMed. The foregoing includes, without limitation, actions pending or threatened involving the use in RhoMed's business of any information or techniques allegedly proprietary to any of its former employers or their obligations under any agreements with prior employers. RhoMed is not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. 2.6 Patents and Trademarks. Schedule 2.6 hereto lists all patents, trademarks, service marks, trade names, corporate names, and all applications and registrations therefor, Page 6 owned or licensed to or by RhoMed. Except as described in the Schedule of Exceptions, RhoMed owns and possesses all right, title, and interest or holds a valid license in and to all patents, copyrights, trademarks, service marks, trade names, corporate names, and all applica tions and registrations therefor, and to all mask works, licenses, inventions, trade secrets, know how and other intellectual property rights necessary for the conduct of its business as presently contemplated (collectively, the "Intellectual Property Rights"). RhoMed has taken all necessary action to protect all the Intellectual Property Rights. Except as set forth in the Schedule of Exceptions, RhoMed has not received any notice of, and there are not any facts known to RhoMed which indicate the likelihood of, any infringement or misappropriation by any third party of any of the Intellectual Property Rights; RhoMed has not received any notice of, and there are not any facts known to RhoMed which indicate a likelihood of, any claim by a third party contesting the validity of any of the Intellectual Property Rights; RhoMed has not received any notice of any infringement, misappropriation or violation by RhoMed or any of its employees of any intellectual property rights of third parties, and, to the best of RhoMed's knowledge, neither RhoMed nor any of its employees has infringed, misappropriated or otherwise violated any intellectual property rights of any third parties; and, to the best of RhoMed's knowledge, no infringement, illicit copying, misappropriation or violation of any intellectual property rights of any third party has occurred or will occur with respect to any products currently being sold by RhoMed or with respect to any products currently under development by RhoMed or with respect to the conduct of RhoMed's business as currently contemplated. Except as described in the Schedule of Exceptions, RhoMed is not aware that any of its employees are obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with the use of his best efforts to promote the interests of RhoMed or that would conflict with RhoMed's business as proposed to be conducted. To the best of RhoMed's knowledge, neither the execution nor delivery of this Agreement, nor the carrying on of RhoMed's business by the employees of RhoMed, nor the conduct of RhoMed's business, as proposed, will conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or instrument under which any of such employees is now obligated. 2.7 Compliance with Other Instruments. Except as set forth in Schedule 2.7 hereto, RhoMed is not in violation or default of any provisions of its Restated Articles of Incorporation or Bylaws or of any instrument, judgment, order, writ, decree or contract to which it is a party or by which it is bound or, to its knowledge, of any provision of federal or state statute, rule or regulation applicable to RhoMed. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any such provision, instrument, judgment, order, writ, decree or contract or an event which results in the creation of any lien, charge or encumbrance upon any assets of RhoMed. Page 7 2.8 Agreements; Action. The performance of this Agreement and the consummation of the transactions contemplated hereby will not result in a breach or violation of any of the terms and provisions of, or constitute a default under or conflict with, any inden ture, mortgage, deed of trust, voting trust agreement, loan agreement, bond, debenture, note agreement or other evidence of indebtedness, material lease, contract or other agreement or instrument to which RhoMed is a party or by which RhoMed or any of its property is bound, or under the Restated Articles of Incorporation or By-Laws of RhoMed or under any statute or under any order, rule or regulation applicable to RhoMed or its business or property nor is the approval of any court or other governmental agency or body required for the consummation by RhoMed of the transactions on its part herein contemplated. (i) Registration Rights. Except as provided in Article IV below, or as disclosed in the Schedule of Exceptions, RhoMed has not granted or agreed to grant any registration rights, including piggyback rights, to any person or entity. 2.9 Corporate Documents. Except for amendments necessary to satisfy representations and warranties or conditions contained herein (the form of which amendments has been attached hereto as Exhibit E), the By-Laws and Articles of Incorporation of RhoMed are, in all material respects, in the form attached hereto as Exhibits C and D respectively. 2.10 Title to Property and Assets. Except as disclosed in Schedule 2.10 hereto, RhoMed owns its properties and assets free and clear of all mortgages, liens, loans and encumbrances, except such encumbrances and liens which arise in the ordinary course of business and do not materially impair RhoMed's ownership or use of such properties or assets. With respect to the properties and assets it leases, RhoMed is in compliance with such leases and holds a valid leasehold interest free of any liens, claims or encumbrances. 2.11 Financial Statements. RhoMed has delivered to the Subscriber its unaudited financial statements at August 31, 1994 for the fiscal year ended on such date. To the best of RhoMed's knowledge the Financial Statements (i) are complete and correct in all material respects and, to the best of RhoMed's knowledge, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated and with each other and (ii) accurately set forth and describe in all material respects the financial condition and operating results of RhoMed as of the dates, and for the periods, indicated therein. To the best of RhoMed's knowledge, except as set forth in the Financial Statements, this Agreement or the Schedule of Exceptions, RhoMed has no liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent to September 1, 1994 and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in the Financial Statements, which, in both cases, indi vidually or in the aggregate, are not material to the financial condition or operating results of RhoMed. RhoMed agrees that it will use reasonable efforts promptly to establish and hereafter Page 8 maintain a standard system of accounting established and administered in accordance with generally accepted accounting principles. 2.12 Changes. Except as set forth in Schedule 2.12 hereto, since September 1, 1994, to the best of RhoMed's knowledge there has not been: (i) any change in the consolidated assets, liabilities, financial condition or operating results of RhoMed from that reflected in the Financial Statements, except changes in the ordinary course of business which have not been, in the aggregate, materially adverse; (ii) any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the assets, properties, financial condition, operating results, prospects or business of RhoMed (as such business is presently conducted and as it is proposed to be conducted); (iii) any waiver by RhoMed of a valuable right or of a material debt owed to it; (iv) any satisfaction or discharge of any lien, claim or encumbrance or payment of any obligation by RhoMed, except in the ordinary course of business and which is not material to the assets, properties, financial condition, operating results or business of RhoMed taken as a whole (as such business is presently conducted and as it is proposed to be conducted); (v) any change or amendment to a contract or arrangement by which RhoMed or any of its assets or properties is bound or subject which is material to RhoMed taken as a whole; (vi) any material change in any compensation arrangement or agreement with any employee; or (vii) any other event or condition of any character which might materially and adversely affect the consolidated assets, properties, financial condition, operating results or business of RhoMed (as such business is presently conducted and as it is proposed to be conducted). 2.13 Tax Returns, Payments and Elections. RhoMed has filed all tax returns and reports as required by law. These returns and reports are true and correct in all material respects and RhoMed has paid all taxes and other assessments due in accordance with such re turns. The provision for taxes of RhoMed as shown in the Financial Statements is adequate for taxes due or accrued as of the date thereof. Page 9 2.14 Minute Book. The minute book of RhoMed contains the minutes of all meetings of directors and shareholders since the time of RhoMed's incorporation and reflects all transactions referred to in such minutes accurately in all material respects. 2.15 ERISA. Except as set forth in Schedule 2.15 hereto, RhoMed does not have any "employee welfare benefit plans" or "employee pension benefit plans" as defined in Section 3 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). RhoMed has made all required contributions and has complied in all material respects with all laws applicable to any of its employee benefit plans, including, without limitation, ERISA. RhoMed does not participate in any single employer or multiemployer pension plan subject to Title IV of ERISA. RhoMed does not provide any medical or other welfare-type benefits to any retiree, except as required by law. 2.16 Investment Company Act; Other Regulations. RhoMed is not, and immediately following the consummation of the transactions contemplated hereby will not be, an "investment company", or a company "controlled" by an "investment company," within the meaning of the Investment Company Act. Except for the Securities Act, the Exchange Act and state securities and "blue sky" laws, RhoMed is not subject to any federal or state law or regulation limiting its ability to issue and perform its obligations under or in connection with the issuance and sale of the Securities. 2.17 Environmental Matters. Except as set forth on Schedule 2.17 hereto, (a) the operations, properties, and facilities owned, leased, or otherwise controlled by RhoMed (i) are, and to the best of RhoMed's knowledge have been, in compliance with all Environmental Laws, (ii) are not contaminated with any "Hazardous Material" (as defined below), (iii) are not now being and, to the best of RhoMed's knowledge, were never used as a landfill, dump, or other storage or disposal area for Hazardous Materials, (iv) are not now being and, to the best of RhoMed's knowledge, were never used for military, industrial or manufacturing purposes or as a gasoline service station, and (v) do not contain any underground or aboveground storage tanks (whether or not currently in use) and, to the best of RhoMed's knowledge, no such tank has been removed therefrom; (b) the operations, properties and facilities presently or previously owned, leased or otherwise controlled by RhoMed are not the subject of any United States federal or state or Canadian federal or provincial investigation, demand or proceeding, including, without limitation, any civil, criminal and/or administrative proceeding, of which RhoMed has knowledge, whether or not seeking costs, damages, expenses, penalties or injunctive relief, in connection with the enforcement or any purported violation of any Environmental Laws or evaluating whether any remedial action is required or purported to be required pursuant to any Environmental Laws to respond to any release or threatened release, whether intentional or unintentional, of any Hazardous Material into the environment; (c) Hazardous Materials have not been generated, treated, manufactured, processed, stored, transported or disposed of by RhoMed in violation of, or in a manner or to a location which could reasonably be expected to give rise to liability under, nor has RhoMed generated, treated, Page 10 manufactured, processed, stored, transported or disposed of at or under any of its presently or previously owned, leased or controlled operations, properties or facilities any Hazardous Material in violation of, or that could reasonably be expected to give rise to liability under, any Environmental Law; (d) RhoMed has not received written notice to the effect that it is or may be liable to any person (including, without limitation, any individual or government, whether federal, state, provincial, or local) in connection with, or as a result of, any release or threatened release, whether intentional or unintentional, of any Hazardous Material into the environment; and (e) RhoMed has not commissioned any reviews, audits, reports or other analyses regarding the environmental condition of any operation, property or facility presently or previously owned, leased or otherwise controlled by RhoMed, nor has RhoMed received any documents or correspondence from, nor has RhoMed sent any documents or correspondence to, the United States Environmental Protection Agency, or any state, county or local environmental or health agency concerning, the environmental condition of any operation, property or facility presently or previously owned, leased or otherwise controlled by RhoMed. For purposes of this Paragraph 2.17: "Environmental Laws" means any and all federal, state or local laws, statutes, codes, ordinances, rules, regulations, policies, judgments, orders, decrees, permits, licenses, or other governmental restrictions or requirements relating to pollution or protection of public or employee health or safety or the environment, including, but not limited to, CERCLA, SARA, RCRA, CWA, CAA, FIFRA, TSCA (each, as defined below), and any comparable state, county or local Environmental Law. "Hazardous Material" means (i) any hazardous substance, pollutant or contaminant as now or hereafter defined in, or regulated under, CERCLA and its implementing regulations, any toxic, carcinogenic, infectious, mutagenic, radioactive, explosive or otherwise dangerous substance, hazardous or other waste, hazardous constituent, petroleum and petroleum products, including crude oil and any fraction thereof, asbestos, polychlorinated biphenyls, urea-formaldehyde insulation, and any other chemical, material or substance now or hereafter regulated under any Environmental Law and (ii) any substance, the presence of which on or under the operations, properties, and facilities now and, as appropriate, previously owned, leased, or otherwise controlled by RhoMed threatens to cause a nuisance to, could constitute a trespass by RhoMed upon, or poses a health or safety hazard to persons on or about, any adjacent property or facility. "CERCLA" means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA") 42 U.S.C. ss.ss. 9601-9675; "RCRA" means the Resource Conservation and Recovery Act of 1976 42 U.S.C. ss. 6901-6991; "CWA" means the Clean Water Act 33 U.S.C. ss. 1321 et seq; "CAA" means the Clean Air Act 42 U.S.C. ss.ss. 7401 et seq; "FIFRA" means the Federal Insecticide, Fungicide and Rodenticide Act 7 U.S.C. ss. 136 et seq; "TSCA" means the Toxic Substances Control Act 15 U.S.C. ss.ss. 2601-2671; in each case, as amended from time to time and including any regulations now or hereafter promulgated thereunder. 2.18 Insurance. Schedule 2.18 sets forth a true, complete and correct description of all insurance currently maintained by RhoMed. RhoMed has paid all premiums Page 11 due under such policies and RhoMed is not in default with respect to its obligations under any of such policies. The amount and nature of self-insurance reserves are adequate and reasonable in view of the loss experience of RhoMed and the business in which RhoMed is engaged, the pending claims against RhoMed, and the known threatened claims and the known occurrences which have not given rise to a pending claim. 2.19 Labor Matters. RhoMed is not a party to any collective bargaining or other labor agreement and has not violated any laws, regulations, orders or contract terms affecting the collective bargaining rights of employees, equal opportunity employment, or employees health, safety, welfare, wages and hours. There are no labor disputes existing, or to the best knowledge of RhoMed, threatened, involving strikes, slow-downs, work stoppages, job actions or lockouts of any employees of RhoMed or any grievance under any collective bargaining or other labor agreement involving employees of RhoMed; (ii) there are no unfair labor practices or petitions for election pending before the National Labor Relations Board of any other federal or state labor commission relating to the employees of RhoMed; and (iii) no demand for recognition heretofore made by any labor organization is pending with respect to RhoMed. There are no pending retaliatory or wrongful discharge claims or federal, state or local employment discrimination charges or administrative or judicial complaints arising therefrom pending against RhoMed nor, to the knowledge of RhoMed, are any such charges or complaints threatened against RhoMed. ARTICLE III. TERMS OF SUBSCRIPTION 3.1 The Units will be offered on a "best efforts" basis. The minimum subscrip tion per Subscriber shall be 1 Unit at $25,000 per Unit, subject to the Corporation's right to accept subscriptions for fractions thereof. The Corporation will hold closings until $1,000,000 of Units is purchased by and sold to investors, unless earlier terminated by mutual agreement of the Placement Agent and the Corporation. (the "Final Closing Date"). 3.2 Delivery of Units purchased pursuant to this Agreement shall be made by the Corporation within 30 days of the payment of the purchase price therefor by the Subscriber by personal or business check, wire transfer of immediately available funds or money order made payable to "RhoMed Incorporated". ARTICLE IV. REGISTRATION UNDER THE 1933 ACT 4.1 The Corporation agrees that if, at any time during the period commencing one year after (x) the closing date of an initial public offering of the Common Stock by the Corporation registered under the Securities Act of 1933, as amended (the "Act") or (y) the first date on which the Common Stock of the Corporation (or securities received in exchange for Page 12 Common Stock of the Corporation) trades on a national securities exchange or on the National Association of Security Dealers, Inc. Automated Quotations System ("NASDAQ") and ending on the date which is five years later (the "Registration Period"), a Subscriber who holds Warrants, or shares of the Corporation's Common Stock which were issued upon the exercise of Warrants and which have not previously been registered under the Act or which are not freely transferable without registration under the Act due to the lapse of time or otherwise ("Restricted Shares"), shall request that the Corporation file a registration statement under the Act covering Restricted Shares or shares of Common Stock issuable upon the exercise of the Warrants, the Corporation will (i) promptly notify each Subscriber who holds Restricted Shares or Warrants that such registration statement will be filed and that Restricted Shares which are then held, and/or may be acquired upon exercise of Warrants by the Subscriber, will be included in such registration statement at the Subscriber's request, (ii) cause such registration statement to cover all of such Common Stock which it has been so requested to include, (iii) use its best efforts to cause such registration statement to become effective as soon as practicable and (iv) take all other action necessary under any Federal or state law or regulation of any governmental authority to permit all such Common Stock which it has been so requested to include in such registration statement to be sold or otherwise disposed of, and will use its best efforts to maintain such compliance with each such Federal and state law and regulation of any governmental authority for the period necessary for such Subscribers to effect the proposed sale or other disposition. The Corporation shall be required to effect a registration or qualifica tion pursuant to this Paragraph 4.1 on one occasion only; provided, however, in the event that the Corporation is eligible to utilize Form S-3, the Corporation will be required to effect an unlimited number of such S-3 registrations but no more than 2 per year. 4.2 The Corporation agrees that if, at any time and from time to time during the Registration Period, the Board of Directors of the Corporation shall authorize the filing of a registration statement under the Act (other than the initial public offering of the Corporation's Common Stock and otherwise than pursuant to Paragraph 4.1 hereof, or other than a registration statement on Form S-8, S-4 or other form which does not include substantially the same information as would be required in a form for the general registration of securities) in connection with the proposed offer of any of its securities by it or any of its stockholders, the Corporation will (i) promptly notify each Subscriber who holds Warrants or Restricted Shares that such registration statement will be filed and that the Restricted Shares and/or Common Stock issuable upon the exercise of the Warrants which are then held will be included in such registration statement at the Subscriber's request, (ii) cause such registration statement to cover all of such Common Stock which it has been so requested to include, (iii) use its best efforts to cause such registration statement to become effective as soon as practicable and (iv) take all other action necessary under any Federal or state law or regulation of any governmental authority to permit all such Common Stock which it has been so requested to include in such registration statement to be sold or otherwise disposed of, and will use its best efforts to maintain such compliance with each such Federal and state law and regulation of any governmental authority for the period necessary for the Subscriber to effect the proposed sale Page 13 or other disposition; provided, however that the foregoing "piggyback" registration right shall be subject to cutbacks in the sole discretion of the underwriter for the Corporation. 4.3 Whenever the Corporation is required pursuant to the provisions of this Article IV to include in a registration statement Restricted Shares or shares Common Stock issuable upon exercise of the Warrants, the Corporation shall (i) furnish each Subscriber who holds any Restricted Shares and/or Warrants and each underwriter of such Common Stock with such copies of the prospectus, including the preliminary prospectus, conforming to the Act (and such other documents as each such Subscriber or each such underwriter may reasonably request) in order to facilitate the sale or distribution of such Common Stock, (ii) use its best efforts to register or qualify such Common Stock under the blue sky laws (to the extent applicable) of such jurisdiction or laws (to the extent applicable) of such jurisdiction or jurisdictions as the Subscriber who holds any Restricted Shares and/or Warrants and each underwriter of such Common Stock being sold by such Subscribers shall reasonably request and (iii) take such other actions as may be reasonably necessary or advisable to enable such Subscribers and such underwriters to consummate the sale or distribution in such jurisdiction or jurisdictions in which such Subscribers shall have reasonably requested that such Common Stock be sold. 4.4 The Corporation shall pay all expenses incurred in connection with any registration statement or other action pursuant to the provisions of this Article IV, other than underwriting discounts and applicable transfer taxes relating to the Common Stock issued upon exercise of the Warrants. 4.5 The Corporation will indemnify the holders of Common Stock issued upon the exercise of Warrants which is included in each registration statement referred to in Paragraphs 4.1 and 4.2, and the underwriters of such Common Stock, substantially to the same extent as is customary for indemnification and contribution provisions in favor of underwriters and selling shareholders of similar offerings, and such Subscribers will indemnify the Corporation (and the underwriters, if applicable) with respect to information furnished by them in writing to the Corporation for inclusion therein substantially to the same extent as the under writers indemnify the Corporation. 4.6 If the Corporation shall at any time have completed a public offering of shares of its Common Stock, it shall thereafter take such steps as may be necessary to register its Common Stock, as the case may be, under Section 12(g) of the Securities Exchange Act of 1934, as amended, to maintain such status, and to file with the Securities and Exchange Commission all current reports and the information as may be necessary to enable the Subscrib er to effect sales of the Subscriber's shares of Common Stock in reliance upon Rule 144 promulgated under the Act. Page 14 4.7 If the Corporation files a registration statement with the Securities and Exchange Commission in connection with a public offering of the Corporation's securities, the Subscriber, by accepting this Agreement, agrees, if so requested by the Corporation, that such Subscriber will not directly or indirectly sell, make any short sale of, grant any option for the purchase of, or otherwise dispose of any capital stock of the Corporation during the 30-day period ending, and the 180-day period beginning (or any such other period as is required by the underwriter of such offering) on the first date of the effectiveness of such registration statement. Upon request, the Subscriber will sign an agreement in reasonable form to such effect with the underwriter of such an offering. ARTICLE V. MISCELLANEOUS 5.1 Any notice or other communication given hereunder shall be deemed sufficient if in writing and sent by registered or certified mail, return receipt requested, or delivered by hand against written receipt therefor, addressed to RhoMed Incorporated, 4261 Balloon Park Road NE, Albuquerque, NM, 87109-5802, Attn: President, and to the Subscrib er at the Subscriber's address indicated on the signature page of this Agreement. Notices shall be deemed to have been given or delivered on the date of mailing, except notices of change of address, which shall be deemed to have been given or delivered when received. 5.2 This Agreement shall not be changed, modified or amended except by a writing signed by the parties to be charged, and this Agreement may not be discharged except by performance in accordance with its terms or by a writing signed by the party to be charged. 5.3 This Agreement shall be binding upon and inure to the benefit of the parties hereto and to their respective heirs, legal representatives, successors and assigns. This Agreement sets forth the entire agreement and understanding between the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them. 5.4 Upon the execution and delivery of this Agreement by the Subscriber, this Agreement shall become a binding obligation of the Subscriber with respect to the purchase of Units as herein provided; subject, however, to the right hereby reserved to the Corporation to enter into the same agreements with other subscribers and to add and/or delete other persons as subscribers. 5.5 NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EX PRESSLY AGREE THAT ALL THE TERMS AND PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE Page 15 STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. 5.6 In order to discourage frivolous claims the parties agree that unless a claimant in any proceeding arising out of this Agreement succeeds in establishing his claim and recovering a judgment against another party (regardless of whether such claimant succeeds against one of the other parties to the action), then the other party shall be entitled to recover from such claimant all of its/their reasonable legal costs and expenses relating to such proceeding and/or incurred in preparation therefor. 5.7 The holding of any provision of this Agreement to be invalid or unenforceable by a court of competent jurisdiction shall not affect any other provision of this Agreement, which shall remain in full force and effect. If any provision of this Agreement shall be declared by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced in whole or in part, such provision shall be interpreted so as to remain enforceable to the maximum extent permissible consistent with applicable law and the remaining conditions and provisions or portions thereof shall nevertheless remain in full force and effect and enforceable to the extent they are valid, legal and enforceable, and no provisions shall be deemed dependent upon any other covenant or provision unless so expressed herein. 5.8 It is agreed that a waiver by either party of a breach of any provision of this Agreement shall not operate, or be construed, as a waiver of any subsequent breach by that same party. 5.9 The parties agree to execute and deliver all such further documents, agreements and instruments and take such other and further action as may be necessary or appropriate to carry out the purposes and intent of this Agreement. 5.10 This Agreement may be executed in two or more counterparts each of which shall be deemed an original, but all of which shall together constitute one and the same instrument. ARTICLE VI. NOTICE TO, AND REPRESENTATIONS AND COVENANTS OF CERTAIN STATE RESIDENTS 6.1 Pennsylvania Residents: The undersigned hereby acknowledges that the Corporation is relying upon the exemption from registration of securities set forth in Section 203(d) of the Pennsylvania Securities Act of 1972, as amended (the "Pennsylvania Act"), in connection with the sale of the Units to the undersigned. Page 16 In accordance with the requirements of the Pennsylvania Act, the undersigned hereby acknowledges and agrees that (a) the Units purchased cannot be sold for a period of twelve (12) months from the date of purchase, except as permitted under Section 204.0ll of the Pennsylvania Securities Regulations, and (b) pursuant to Section 207(m) of the Pennsylvania Act, EACH PENNSYLVANIA RESIDENT WHO ACCEPTS AN OFFER TO PURCHASE SECURITIES EXEMPTED FROM REGISTRATION UNDER SECTION 203(D) OF THE PENNSYLVANIA ACT HAS THE RIGHT TO WITHDRAW HIS OR HER ACCEPTANCE WITHOUT INCURRING ANY LIABILITY TO THE CORPORATION, THE PLACEMENT AGENT OR ANY OTHER PERSON WITHIN TWO (2) BUSINESS DAYS FROM THE DATE OF RECEIPT BY THE CORPORATION OF THIS AGREEMENT. 6.2 Alabama Residents: The undersigned represents that he or she, either alone or with the undersigned's representative, has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of investment in the Units. 6.3 Massachusetts Residents: If the undersigned is a natural person, he or she represents that his or her investment in these Units does not exceed 25% of his or her net worth or joint net worth with spouse (excluding principal residence and its furnishings). 6.4 Maryland Residents: The undersigned acknowledges and agrees that these Units will not be sold without registration under the Maryland Securities Act or exemption therefrom. 6.5 Missouri Residents: The undersigned acknowledges that these Units are not registered under the Missouri Securities Act and may be disposed of only through a registered broker-dealer in Missouri. The undersigned also acknowledges that it is a felony to sell securities in violation of the Missouri Securities Act. 6.6 Wisconsin Residents: The undersigned represents that he or she, either alone or with his or her representative, has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of investment in the Units. Page 17 ARTICLE VII. CONFIDENTIAL INVESTOR QUESTIONNAIRE The Subscriber represents and warrants that he, she or it comes within one cate gory marked below, and that for any category marked, he or she has truthfully set forth, where applicable, the factual basis or reason the Subscriber comes within that category. ALL INFORMATION IN RESPONSE TO THIS SECTION WILL BE KEPT STRICTLY CONFIDENTIAL. The undersigned agrees to furnish any additional information which the Corporation deems necessary in order to verify the answers set forth below. Category A The undersigned is an individual (not a partnership, corporation, etc.) whose individual net worth, or joint net worth with his or her spouse, presently exceeds $1,000,000. Explanation. In calculating net worth you may include equity in personal property and real estate, including your principal residence, cash, short-term investments, stock and securities. Equity in personal property and real estate should be based on the fair market value of such property less debt secured by such property. Category B The undersigned is an individual (not a partnership, corporation, etc.) who had an income in excess of $200,000 in each of the two most recent years, or joint income with his or her spouse in excess of $300,000 in each of those years (in each case includ ing foreign income, tax exempt income and full amount of capital gains and loses but excluding any income of other family members and any unrealized capital appreciation) and has a reasonable expectation of reaching the same income level in the current year. Category C The undersigned is a director or executive officer of the Corpo ration which is issuing and selling the Units. Category D The undersigned is a bank; a savings and loan association, insurance company, registered investment company; registered business development company; licensed small business invest ment company ("SBIC"); or employee benefit plan within the meaning of Title 1 of ERISA and (a) the investment decision is made by a plan fiduciary which is either a bank, savings and loan association, insurance company or registered investment advisor, or (b) the plan has total assets in excess of $5,000,000 Page 18 or is a self directed plan with investment decisions made solely by persons that are accredited investors. ----------------------------- ----------------------------- (describe entity) Category E The undersigned is a private business development company as defined in Section 202(a)(22) of the Investment Advisors Act of 1940. ----------------------------- ----------------------------- (describe entity) Category F The undersigned is a corporation, partnership, Massachusetts business trust, or non-profit organization within the meaning of Section 501(c)(3) of the Internal Revenue Code, in each case not formed for the specific purpose of acquiring the Units and with total assets in excess of $5,000,000. ----------------------------- ----------------------------- (describe entity) Category G The undersigned is a trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Units, where the purchase is directed by a "sophisticated per son" as defined in Regulation 506(b)(2)(ii). Page 19 Category H The undersigned is an entity all the equity owners of which are "accredited investors" within one or more of the above catego ries. If relying upon this Category alone, each equity owner must complete a separate copy of this Agreement. ----------------------------- ----------------------------- (describe entity) Category I The undersigned is not within any of the categories above and is therefore not an accredited investor. The undersigned is informed of the significance to the Corporation of the foregoing representations, and they are made with the intention that the Corporation will rely on them. Page 20 ARTICLE VIII. MANNER IN WHICH TITLE TO BE HELD (circle one) (a) Individual Ownership (b) Community Property (c) Joint Tenant with Right of Survivorship (both parties must sign) (d) Partnership* (e) Tenants in Common (f) Corporation* (g) Trust* (h) Other *If Units are being subscribed for by an entity, the attached Certificate of Signatory must also be completed. - ------------------------------------------------------------------------------- _____ Check here if Subscriber is a member of the National Associa tion of Securities Dealers, Inc. (the "NASD"), or owns any stock or other interest in any member of the NASD (other than interests acquired in open market purchases), or has, for a period of twelve months prior to the date of this Agreement, been affiliated or associated with any company, firm, or other entity which is a member of the NASD. ----------------------------- ----------------------------- (describe entity) Page 21 NUMBER OF UNITS________X $25,000 = ____________(THE "PURCHASE PRICE") - ----------------------------------- ----------------------------------- Signature Signature [if purchasing jointly] - ----------------------------------- ----------------------------------- Name Typed or Printed Name Typed or Printed - ----------------------------------- ----------------------------------- Residence Address Residence Address - ----------------------------------- ----------------------------------- City, State and Zip Code City, State and Zip Code - ----------------------------------- ----------------------------------- Tax Identification or Tax Identification or Social Security Number Social Security Number Telephone No. Business ---------------------------- Telephone No. Home -------------------------------- Name in which Notes should be issued: ------------------------------------------- Dated: , 1995 Dated: , 1995 ----------------------- ----------------------- This Unit Purchase Agreement is agreed to and accepted as of , 1995. RHOMED INCORPORATED By:__________________________ Name: Title: Page 22 CERTIFICATE OF SIGNATORY (To be completed if Units are being subscribed for by an entity) I,______________________________, am the__________________of ______________________________(the "Entity"). I certify that I am empowered and duly authorized by the Entity to execute and carry out the terms of the Unit Purchase Agreement and to purchase and hold the Units, and certify further that the Unit Purchase Agreement has been duly and validly executed on behalf of the Entity and constitutes a legal and binding obligation of the Entity. IN WITNESS WHEREOF, I have set my hand this ______day of _____________________, 1995. ------------------------------ (Signature) Page 23 EX-10.19 25 FORM OF CLASS B WARRANT THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS. RHOMED INCORPORATED Class B Warrant for the Purchase of Shares of Common Stock No. ______ _______ Shares FOR VALUE RECEIVED, RHOMED INCORPORATED, a New Mexico corporation (the "COMPANY"), hereby certifies that [] or his permitted assigns, is entitled to purchase from the Company, at any time or from time to time commencing on [Insert Closing Date] and prior to 5:00 P.M., New York City time, on five years from [Insert Closing Date] (the "TERMINATION DATE"), [Insert Number of Shares] ([]) fully paid and non-assessable shares of the Common Stock, no par value, of the Company for an aggregate purchase price which is the lesser of: Class B Warrant Page 1 (a) $[] (computed on the basis of $.25 per share); or (b) the number of shares purchasable multiplied by fifty percent (50%) of the price per share of Common Stock (as defined below), in any single public offering or private placement of the Company's Common Stock in which gross proceeds exceed $2,500,000. Herein, (i) said Common Stock, together with any other equity securities which may be issued by the Company with respect thereto or in substitution therefor, is referred to as the "COMMON STOCK", (ii) the shares of the Common Stock purchasable hereunder or under any other Warrant (as hereinafter defined) are referred to as the "WARRANT SHARES", (iii) the aggregate purchase price payable for the Warrant Shares hereunder is referred to as the "AGGREGATE WARRANT PRICE", (iv) the price payable for each of the Warrant Shares hereunder is referred to as the "PER SHARE WARRANT PRICE", (v) this Warrant, all similar Warrants issued on the date hereof and all Warrants hereafter issued in exchange or substitution for this Warrant or such similar Warrants are referred to as the "WARRANTS" and (vi) the holder of this Warrant is referred to as the "HOLDER" and the holder of this Warrant and all other Warrants or Warrant Shares issued upon the exercise of any Warrant are referred to as the "HOLDERS". The Per Share Warrant Price is subject to adjustment as hereinafter provided; in the event of any such adjustment, the number of Warrant Shares shall be adjusted by dividing the Aggregate Warrant Price by the Per Share Warrant Price in effect immediately after such adjustment. 1. EXERCISE OF WARRANT. (a) This Warrant may be exercised, in whole at any time or in part from time to time, commencing on [Insert Closing Date] and prior to the Termination Date, unless terminated earlier as set forth in Section 8 hereof, by the holder by the surrender of this Warrant (with the subscription form at the end hereof duly executed) at the address set forth in Subsection 11(a) hereof, together with proper payment of the Aggregate Warrant Price, or the proportionate part thereof if this Warrant is exercised in part, with payment for Warrant Shares made by certified or official bank check payable to the order of the Company; or (b) If this Warrant is exercised in part, this Warrant must be exercised for a number of whole shares of the Common Stock and the Holder is entitled to receive a new Warrant covering the Warrant Shares which have not been exercised and setting forth the proportionate part of the Aggregate Warrant Price applicable to such Warrant Shares. Upon surrender of this Warrant, the Company will (i) issue a certificate or certificates in the name of the Holder for the largest number of whole shares of the Common Stock to which the Class B Warrant Page 2 Holder shall be entitled and, if this Warrant is exercised in whole, in lieu of any fractional share of the Common Stock to which the Holder shall be entitled, pay to the Holder cash in an amount equal to the fair value of such fractional share (determined in such reasonable manner as the Board of Directors of the Company shall determine), and (ii) deliver the other securities and properties receivable upon the exercise of this Warrant, or the proportionate part thereof if this Warrant is exercised in part, pursuant to the provisions of this Warrant. 2. RESERVATION OF WARRANT SHARES; LISTING. The Company agrees that, prior to the expiration of this Warrant, the Company will at all times (a) have authorized and in reserve, and keep available, solely for issuance and delivery upon the exercise of this Warrant, the shares of the Common Stock and other securities and properties as from time to time shall be receivable upon the exercise of this Warrant, free and clear of all restrictions (other than restrictions necessary to comply with Federal and state securities laws) on sale or transfer and free and clear of all preemptive rights and rights of first refusal; and (b) if the Company hereafter lists its Common Stock on any national securities exchange, keep the shares of Common Stock receivable upon exercise of this Warrant authorized for listing on such exchange upon notice of issuance. 3. PROTECTION AGAINST DILUTION. (a) If, at any time or from time to time after the date of this Warrant, the Company shall issue or distribute to the holders of shares of Common Stock evidence of its indebtedness, any other securities of the Company or any cash, property or other assets (excluding a subdivision, combination or reclassification, or dividend or distribution payable in shares of Common Stock, referred to in Subsection 3(b), and also excluding cash dividends or cash distributions paid out of net profits legally available therefor in the full amount thereof, together with the value of other dividends and distributions made substantially concurrently therewith or pursuant to a plan which includes payment thereof, is equivalent to not more than 5% of the Company's net worth) (any such non-excluded event being herein called a "SPECIAL DIVIDEND"), the Per Share Warrant Price shall be adjusted by multiplying the Per Share Warrant Price then in effect by a fraction, the numerator of which shall be the then current Market Price of the Common Stock less the fair market value (as determined in good faith by the Company's Board of Directors) of the evidence of indebtedness, cash, securities or property, or other assets issued or distributed in such Special Dividend applicable to one share of Common Stock and the denominator of which shall be the then current Market Price of the Common Stock. An adjustment made pursuant to this Subsection 3(a) shall become effective immediately after the record date of any such Special Dividend. (b) In case the Company shall hereafter (i) pay a dividend or make a distribution on its capital stock in shares of Common Stock, (ii) subdivide its outstanding Class B Warrant Page 3 shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares or (iv) issue by reclassification of its Common Stock any shares of capital stock of the Company, the Per Share Warrant Price shall be adjusted to be equal to a fraction, the numerator of which shall be the Aggregate Warrant Price and the denominator of which shall be the number of shares of Common Stock or other capital stock of the Company which he would have owned immediately following such action had such Warrant been exercised immediately prior thereto. An adjustment made pursuant to this Subsection 3(b) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. (c) Except as provided in Subsections 3(a) and 3(d), in case the Company shall hereafter issue or sell any Common Stock, or any securities convertible into Common Stock or any rights, options or Warrants to purchase Common Stock or securities convertible into Common Stock, in each case for a price per share or entitling the holders thereof to purchase Common Stock at a price per share (determined by dividing (i) the total amount, if any, received or receivable by the Company in consideration of the issuance or sale of such securities plus the total consideration, if any, payable to the Company upon exercise or conversion thereof (the "TOTAL CONSIDERATION") by (ii) the number of additional shares of Common Stock issuable upon exercise or conversion of such securities) less than the then current Per Share Warrant Price in effect on the date of such issuance or sale, the Per Share Warrant Price shall be adjusted as of the date of such issuance or sale so that the same shall equal the price determined by dividing (i) the sum of (A) the number of shares of Common Stock outstanding on the date of such issuance or sale multiplied by the Per Share Warrant Price plus (B) the Total Consideration by (ii) the number of shares of Common Stock outstanding on the date of such issuance or sale plus the maximum number of additional shares of Common Stock issuable upon exercise or conversion of such securities. (d) No adjustment in the Per Share Warrant Price shall be required in the case of the issuance by the Company of Common Stock pursuant to the exercise of any Warrant or any other rights, option, warrant or convertible security outstanding as of the date hereof, or the grant at any time hereafter of an option pursuant to any employee incentive stock option plan or nonqualified stock option plan of the Company. (e) In case of any capital reorganization or reclassification, or any consolidation or merger to which the Company is a party other than a merger or consolidation in which the Company is the continuing corporation, or in case of any sale or conveyance to another entity of the property of the Company as an entirety or substantially as an entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into the Company), the Holder of this Warrant shall have the right thereafter to receive on the exercise of this Class B Warrant Page 4 Warrant the kind and amount of securities, cash or other property which the Holder would have owned or have been entitled to receive immediately after such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance had this Warrant been exercised immediately prior to the effective date of such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Section 3 with respect to the rights and interests thereafter of the Holder of this Warrant to the end that the provisions set forth in this Section 3 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter deliverable on the exercise of this Warrant. The above provisions of this Subsection 3(e) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, statutory exchanges, sales or conveyances. The issuer of any shares of stock or other securities or property thereafter deliverable on the exercise of this Warrant shall be responsible for all of the agreements and obligations of the Company hereunder. Notice of any such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and of said provisions so proposed to be made, shall be mailed to the Holders of the Warrants not less than 30 days prior to such event. A sale of all or substantially all of the assets of the Company for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes. (f) In case any event shall occur as to which the other provisions of this Section 3 are not strictly applicable but as to which the failure to make any adjustment would not fairly protect the purchase rights represented by this Warrant in accordance with the essential intent and principles hereof then, in each such case, the Holders of Warrants representing the right to purchase a majority of the Warrant Shares subject to all outstanding Warrants may appoint a firm of independent public accountants of recognized national standing reasonably acceptable to the Company, which shall give their opinion as to the adjustment, if any, on a basis consistent with the essential intent and principles established herein, necessary to preserve the purchase rights represented by the Warrants. Upon receipt of such opinion, the Company will promptly mail a copy thereof to the Holder of this Warrant and shall make the adjustments described therein. The fees and expenses of such independent public accountants shall be borne by the Company. (g) No adjustment in the Per Share Warrant Price shall be required unless such adjustment would require an increase or decrease of at least $0.05 per share of Common Stock; provided, however, that any adjustments which by reason of this Subsection 3(g) are not required to be made shall be carried forward and taken into account in any subsequent adjustment; provided, further, however, that adjustments shall be required and made in accordance with the provisions of this Section 3 (other than this Subsection 3(g)) not later than such time as may be required in order to preserve the tax-free nature of a distribution to Class B Warrant Page 5 the Holder of this Warrant or Common Stock issuable upon the exercise hereof. All calculations under this Section 3 shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. Anything in this Section 3 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Per Share Warrant Price, in addition to those required by this Section 3, as it in its discretion shall deem to be advisable in order that any stock dividend, subdivision of shares or distribution of rights to purchase stock or securities convertible or exchangeable for stock hereafter made by the Company to its stockholders shall not be taxable. (h) Whenever the Per Share Warrant Price is adjusted as provided in this Section 3 and upon any modification of the rights of a Holder of Warrants in accordance with this Section 3, the Company shall promptly obtain, at its expense, a certificate of a firm of independent public accountants of recognized standing selected by the Board of Directors (who may be the regular auditors of the Company) setting forth the Per Share Warrant Price and the number of Warrant Shares after such adjustment or the effect of such modification, a brief statement of the facts requiring such adjustment or modification and the manner of computing the same and cause copies of such certificate to be mailed to the Holders of the Warrants. (i) If the Board of Directors of the Company shall declare any dividend or other distribution with respect to the Common Stock other than a cash distribution out of earned surplus, the Company shall mail notice thereof to the Holders of the Warrants not less than 15 days prior to the record date fixed for determining stockholders entitled to participate in such dividend or other distribution. (j) If, as a result of an adjustment made pursuant to this Section 3, the Holder of any Warrant thereafter surrendered for exercise shall become entitled to receive shares of two or more classes of capital stock or shares of Common Stock and other capital stock of the Company, the Board of Directors (whose determination shall be conclusive and shall be described in a written notice to the Holder of any Warrant promptly after such adjustment) shall determine the allocation of the adjusted Per Share Warrant Price between or among shares or such classes of capital stock or shares of Common Stock and other capital stock. 4. FULLY PAID STOCK; TAXES. The Company agrees that the shares of the Common Stock represented by each and every certificate of Warrant Shares delivered on the exercise of this Warrant be validly issued and outstanding, fully paid and nonassessable, and not subject to preemptive rights or rights of first refusal, and the Company will take all such actions as may be necessary to assure that the par value or stated value, if any, per share of the Common Stock is at all times equal to or less than the then Per Share Warrant Price. The Class B Warrant Page 6 Company further covenants and agrees that it will pay, when due and payable, any and all Federal and state stamp, original issue or similar taxes which may be payable in respect of the issue of any Warrant Share or any certificate thereof. 5. REGISTRATION UNDER SECURITIES ACT OF 1933. The Holder of this Warrant shall have the same registration rights as provided in Section 4 of the Unit Purchase Agreement dated as of the date hereof between the Company and such Holder (or such Holder's predecessor in interest). 6. LIMITED TRANSFERABILITY. This Warrant may not be sold, transferred, assigned or hypothecated by the Holder (a) except in compliance with the provisions of the Act and the applicable state securities "blue sky" laws, and is so transferable only upon the books of the Company which it shall cause to be maintained for such purpose. The Company may treat the registered Holder of this Warrant as he or it appears on the Company's books at any time as the Holder for all purposes. The Company shall permit any Holder of a Warrant or his duly authorized attorney, upon written request during ordinary business hours, to inspect and copy or make extracts from its books showing the registered holders of Warrants. All Warrants issued upon the transfer or assignment of this Warrant will be dated the same date as this Warrant, and all rights of the holder thereof shall be identical to those of the Holder. 7. INCREASE IN SHARES. In the event that payment on the Series B Senior Bridge Note (the "Note") issued in conjunction with this Warrant and as part of a Unit pursuant to the Unit Purchase Agreement is not made by the Maturity Date specified in the Note (as that term is defined in the Note), then the number of shares the Holder is then entitled to purchase from the Company (after giving effect to any adjustment required under Section 3) will be increased by ten percent (10%). The purchase price per share for additional shares purchasable pursuant to this section will be the Per Share Warrant Price. 8. WARRANT TERMINATION. This Warrant automatically terminates if: (a) The Common Stock, or any securities into which the Common Stock has been converted, trades on a national securities exchange or on the National Association of Security Dealers, Inc. Automated Quotations System ("NASDAQ"), and has, during any consecutive thirty trading day period, had a closing price for at least twenty trading days equal to or greater than two times the Per Share Warrant Price (the "Termination Event"); Class B Warrant Page 7 (b) Notice of the Termination Event is given to the Holder at the address and as set forth in Subsection 11(a) hereof; and (c) The Holder has not, by the close of the sixtieth day following giving notice of the Termination Event, exercised the Warrant as set forth in Section 1. 9. LOSS, ETC., OF WARRANT. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and of indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed, and upon surrender and cancellation of this Warrant, if mutilated, the Company shall execute and deliver to the Holder a new Warrant of like date, tenor and denomination. 10. WARRANT HOLDER NOT SHAREHOLDER. Except as otherwise provided herein, this Warrant does not confer upon the Holder any right to vote or to consent to or receive notice as a stockholder of the Company, as such, in respect of any matters whatsoever, or any other rights or liabilities as a stockholder, prior to the exercise hereof. 11. COMMUNICATION. No notice or other communication under this Warrant shall be effective unless, but any notice or other communication shall be effective and shall be deemed to have been given if, the same is in writing and is mailed by first-class mail, postage prepaid, addressed to: (a) the Company at 4261 Balloon Park Road NE, Albuquerque, NM 87109-5802 or such other address as the Company has designated in writing to the Holder, or (b) the Holder at the address indicated on the signature page to the Unit Purchase Agreement, or such other address as the Holder has designated in writing to the Company. 12. HEADINGS. The headings of this Warrant have been inserted as a matter of convenience and shall not affect the construction hereof. 13. APPLICABLE LAW. This Warrant shall be governed by and construed in accordance with the law of the State of New York without giving effect to the principles of conflicts of law thereof. Class B Warrant Page 8 IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its President and its corporate seal to be hereunto affixed and attested by its Secretary this ___ day of __________, 1995. RHOMED INCORPORATED By: ___________________________ President ATTEST: - -------------------- Secretary [Corporate Seal] Class B Warrant Page 9 SUBSCRIPTION The undersigned, ___________________, pursuant to the provisions of the foregoing Warrant, hereby agrees to subscribe for and purchase ____________________ shares of the Common Stock, no par value, of RhoMed Incorporated, covered by said Warrant, and makes payment therefor in full at the price per share provided by said Warrant. Dated:_______________ Signature:____________________ Address:______________________ ASSIGNMENT FOR VALUE RECEIVED _______________ hereby sells, assigns and transfers unto ____________________ the foregoing Warrant and all rights evidenced thereby, and does irrevocably constitute and appoint _____________________, attorney, to transfer said Warrant on the books of RhoMed Incorporated. Dated:_______________ Signature:____________________ Address:______________________ PARTIAL ASSIGNMENT FOR VALUE RECEIVED _______________ hereby assigns and transfers unto ____________________ the right to purchase _______ shares of the Common Stock, no par value per share, of RhoMed Incorporated covered by the foregoing Warrant, and a proportionate part of said Warrant and the rights evidenced thereby, and does irrevocably constitute and appoint ____________________, attorney, to transfer that part of said Warrant on the books of RhoMed Incorporated. Dated:_______________ Signature:____________________ Address:______________________ Class B Warrant Page 10 EX-10.20 26 FORM OF PLACEMENT AGENT WARRANT THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS. RHOMED INCORPORATED Warrant for the Purchase of Shares of Common Stock No. Shares FOR VALUE RECEIVED, RHOMED INCORPORATED, a New Mexico corporation (the "COMPANY"), hereby certifies that [] or his permitted assigns, is entitled to purchase from the Company, at any time or from time to time commencing on [Insert Final Closing Date] and prior to 5:00 P.M., New York City time, on ten years from [Insert Final Closing Date] (the "TERMINATION DATE"), [Insert Number of Shares] ([]) fully paid and non-assessable shares of the Common Stock, no par value, of the Company for an aggregate purchase price of $[] (computed on the basis of $.30 per share). (Hereinafter, (i) said Common Stock, together with any other equity securities which may be issued by the Company with respect thereto or in substitution therefor, is referred to as the "COMMON STOCK", (ii) the shares of the Common Stock purchasable hereunder or under any other Warrant (as hereinafter defined) are referred to as the "WARRANT SHARES", (iii) the aggregate purchase price payable for the Warrant Shares hereunder is referred to as the "AGGREGATE WARRANT PRICE", (iv) the price payable for each of the Warrant Shares hereunder is referred to as the "PER SHARE WARRANT PRICE", (v) this Warrant, all similar Warrants issued on the date hereof and all Warrants hereafter issued in exchange or substitution for this Warrant or such similar Warrants are referred to as the "WARRANTS" and (vi) the holder of this Warrant is referred to as the "HOLDER" and the holder of this Warrant and all other Warrants or Warrant Shares issued upon the exercise of any Warrant are referred to as the "HOLDERS"). The Aggregate Warrant Price is not subject to adjustment. The Per Share Warrant Price is subject to adjustment as hereinafter provided; in the event of any such adjustment, the number of Warrant Shares shall be adjusted by dividing the Aggregate Warrant Price by the Per Share Warrant Price in effect immediately after such adjustment. 1. EXERCISE OF WARRANT. (a) This Warrant may be exercised, in whole at any time or in part from time to time, commencing on [Insert Final Closing Date] and prior to the Termination Date, by the holder: (i) by the surrender of this Warrant (with the subscription form at the end hereof duly executed) at the address set forth in Subsection 9(a) hereof, together with proper payment of the Aggregate Warrant Price, or the proportionate part thereof if this Warrant is exercised in part, with payment for Warrant Shares made by certified or official bank check payable to the order of the Company; or (ii) by the surrender of this Warrant (with the cashless exercise form at the end hereof duly executed) (a "CASHLESS EXERCISE") at the address set forth in Subsection 9(a) hereof. Such presentation and surrender shall be deemed a waiver of the Holder's obligation to pay the Aggregate Warrant Price, or the proportionate part thereof if this Warrant is exercised in part. In the event of a Cashless Exercise, the Holder shall exchange its Warrant for that number of Warrant Shares subject to such Cashless Exercise multiplied by a fraction, the numerator of which shall be the difference between the then current Market Price per share (as hereinafter defined) of Common Stock and the Per Share Warrant Price, and the denominator of which shall be the then current Market Price per share of Common Stock. For purposes of any computation under this Section 1(a)(ii), the then current market price per share of the Common Stock at any date (the "MARKET PRICE") shall be deemed to be the last sale price of the Common Stock on the business day prior to the date of the Cashless Exercise or, in case no such reported sales take place on such day, the average of the last reported bid and asked prices of the Common Stock on such day, in either case on the principal national securities exchange on which the Common Stock is admitted to trading or listed, or if not listed or admitted to trading on any such exchange, the representative closing bid price of the Common Stock as reported by NASDAQ, or other similar organization if NASDAQ is no longer reporting such information, or on the OTC Electronic Bulletin or in the "Pink Sheets," or if not so available, the fair market price of the Common Stock as determined in good faith by the Board of Directors. (b) If this Warrant is exercised in part, this Warrant must be exercised for a number of whole shares of the Common Stock and the Holder is entitled to receive a new Warrant covering the Warrant Shares which have not been exercised and setting forth the proportionate part of the Aggregate Warrant Price applicable to such Warrant Shares. Upon surrender of this Warrant, the Company will (i) issue a certificate or certificates in the name of the Holder for the largest number of whole shares of the Common Stock to which the Holder shall be entitled and, if this Warrant is exercised in whole, in lieu of any fractional share of the Common Stock to which the Holder shall be entitled, pay to the Holder cash in an amount equal to the fair value of such fractional share (determined in such reasonable manner as the Board of Directors of the Company shall determine), and (ii) deliver the other securities and properties receivable upon the exercise of this Warrant, if any, or the proportionate part thereof if this Warrant is exercised in part, pursuant to the provisions of this Warrant. 2. RESERVATION OF WARRANT SHARES; LISTING. The Company agrees that, prior to the expiration of this Warrant, the Company will at all times (a) have authorized and in reserve, and will keep available, solely for issuance or delivery upon the exercise of this Warrant, the shares of the Common Stock and other securities and properties as from time to time shall be receivable upon the exercise of this Warrant, free and clear of all restrictions on sale or transfer and free and clear of all preemptive rights and rights of first refusal; and (b) if the Company hereafter lists its Common Stock on any national securities exchange, keep the shares of Common Stock receivable upon exercise of this Warrant authorized for listing on such exchange upon notice of issuance. 3. PROTECTION AGAINST DILUTION. (a) If, at any time or from time to time after the date of this Warrant, the Company shall issue or distribute to the holders of shares of Common Stock evidence of its indebtedness, any other securities of the Company or any cash, property or other assets (excluding a subdivision, combination or reclassification, or dividend or distribution payable in shares of Common Stock, referred to in Subsection 3(b), and also excluding cash dividends or cash distributions paid out of net profits legally available therefor in the full amount thereof, together with the value of other dividends and distributions made substantially concurrently therewith or pursuant to a plan which includes payment thereof, is equivalent to not more than 5% of the Company's net worth) (any such non-excluded event being herein called a "SPECIAL DIVIDEND"), the Per Share Warrant Price shall be adjusted by multiplying the Per Share Warrant Price then in effect by a fraction, the numerator of which shall be the then current Market Price of the Common Stock less the fair market value (as determined in good faith by the Company's Board of Directors) of the evidence of indebtedness, cash, securities or property, or other assets issued or distributed in such Special Dividend applicable to one share of Common Stock and the denominator of which shall be the then current Market Price of the Common Stock. An adjustment made pursuant to this Subsection 3(a) shall become effective immediately after the record date of any such Special Dividend. (b) In case the Company shall hereafter (i) pay a dividend or make a distribution on its capital stock in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares or (iv) issue by reclassification of its Common Stock any shares of capital stock of the Company, the Per Share Warrant Price shall be adjusted to be equal to a fraction, the numerator of which shall be the Aggregate Warrant Price and the denominator of which shall be the number of shares of Common Stock or other capital stock of the Company which he would have owned immediately following such action -3- had such Warrant been exercised immediately prior thereto. An adjustment made pursuant to this Subsection 3(b) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. (c) Except as provided in Subsections 3(a) and 3(d), in case the Company shall hereafter issue or sell any Common Stock, any securities convertible into Common Stock or any rights, options or Warrants to purchase Common Stock or securities convertible into Common Stock, in each case for a price per share or entitling the holders thereof to purchase Common Stock at a price per share (determined by dividing (i) the total amount, if any, received or receivable by the Company in consideration of the issuance or sale of such securities plus the total consideration, if any, payable to the Company upon exercise or conversion thereof (the "TOTAL CONSIDERATION") by (ii) the number of additional shares of Common Stock issuable upon exercise or conversion of such securities) less than the then current Per Share Warrant Price in effect on the date of such issuance or sale, the Per Share Warrant Price shall be adjusted as of the date of such issuance or sale so that the same shall equal the price determined by dividing (i) the sum of (A) the number of shares of Common Stock outstanding on the date of such issuance or sale multiplied by the Per Share Warrant Price plus (B) the Total Consideration by (ii) the number of shares of Common Stock outstanding on the date of such issuance or sale plus the maximum number of additional shares of Common Stock issuable upon exercise or conversion of such securities. (d) No adjustment in the Per Share Warrant Price shall be required in the case of the issuance by the Company of Common Stock pursuant to the exercise of any Warrant. (e) In case of any capital reorganization or reclassification, or any consolidation or merger to which the Company is a party other than a merger or consolidation in which the Company is the continuing corporation, or in case of any sale or conveyance to another entity of the property of the Company as an entirety or substantially as an entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into the Company), the Holder of this Warrant shall have the right thereafter to receive on the exercise of this Warrant the kind and amount of securities, cash or other property which the Holder would have owned or have been entitled to receive immediately after such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance had this Warrant been exercised immediately prior to the effective date of such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Section 3 with respect to the rights and interests thereafter of the Holder of this Warrant to the end that the provisions set forth in this Section 3 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter deliverable on the exercise of this Warrant. The above provisions of this Subsection 3(e) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, statutory exchanges, sales or conveyances. The issuer of any shares of stock or other securities or property thereafter deliverable on the exercise of this Warrant shall be responsible for all of the agreements and obligations of the Company hereunder. Notice of any such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and of said provisions so -4- proposed to be made, shall be mailed to the Holders of the Warrants not less than 30 days prior to such event. A sale of all or substantially al proposed to be made, shall be mailed to the Holders of the Warrants not less than 30 days l of the assets of the Company for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes. (f) In case any event shall occur as to which the other provisions of this Section 3 are not strictly applicable but as to which the failure to make any adjustment would not fairly protect the purchase rights represented by this Warrant in accordance with the essential intent and principles hereof then, in each such case, the Holders of Warrants representing the right to purchase a majority of the Warrant Shares subject to all outstanding Warrants may appoint a firm of independent public accountants of recognized national standing reasonably acceptable to the Company, which shall give their opinion as to the adjustment, if any, on a basis consistent with the essential intent and principles established herein, necessary to preserve the purchase rights represented by the Warrants. Upon receipt of such opinion, the Company will promptly mail a copy thereof to the Holder of this Warrant and shall make the adjustments described therein. The fees and expenses of such independent public accountants shall be borne by the Company. (g) No adjustment in the Per Share Warrant Price shall be required unless such adjustment would require an increase or decrease of at least $0.05 per share of Common Stock; provided, however, that any adjustments which by reason of this Subsection 3(g) are not required to be made shall be carried forward and taken into account in any subsequent adjustment; provided, further, however, that adjustments shall be required and made in accordance with the provisions of this Section 3 (other than this Subsection 3(g)) not later than such time as may be required in order to preserve the tax-free nature of a distribution to the Holder of this Warrant or Common Stock issuable upon the exercise hereof. All calculations under this Section 3 shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. Anything in this Section 3 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Per Share Warrant Price, in addition to those required by this Section 3, as it in its discretion shall deem to be advisable in order that any stock dividend, subdivision of shares or distribution of rights to purchase stock or securities convertible or exchangeable for stock hereafter made by the Company to its stockholders shall not be taxable. (h) Whenever the Per Share Warrant Price is adjusted as provided in this Section 3 and upon any modification of the rights of a Holder of Warrants in accordance with this Section 3, the Company shall promptly obtain, at its expense, a certificate of a firm of independent public accountants of recognized standing selected by the Board of Directors (who may be the regular auditors of the Company) setting forth the Per Share Warrant Price and the number of Warrant Shares after such adjustment or the effect of such modification, a brief statement of the facts requiring such adjustment or modification and the manner of computing the same and cause copies of such certificate to be mailed to the Holders of the Warrants. (i) If the Board of Directors of the Company shall declare any dividend or other distribution with respect to the Common Stock other than a cash distribution out of earned surplus, the Company shall mail notice thereof to the Holders of the Warrants not less than 15 days prior to the record date fixed for determining stock holders entitled to participate in such dividend or other distribution. -5- (j) If, as a result of an adjustment made pursuant to this Section 3, the Holder of any Warrant thereafter surrendered for exercise shall become entitled to receive shares of two or more classes of capital stock or shares of Common Stock and other capital stock of the Company, the Board of Directors (whose determination shall be conclusive and shall be described in a written notice to the Holder of any Warrant promptly after such adjustment) shall determine the allocation of the adjusted Per Share Warrant Price between or among shares or such classes of capital stock or shares of Common Stock and other capital stock. 4. FULLY PAID STOCK; TAXES. The Company agrees that the shares of the Common Stock represented by each and every certificate of Warrant Shares delivered on the exercise of this Warrant be validly issued and outstanding, fully paid and nonassessable, and not subject to preemptive rights or rights of first refusal, and the Company will take all such actions as may be necessary to assure that the par value or stated value, if any, per share of the Common Stock is at all times equal to or less than the then Per Share Warrant Price. The Company further covenants and agrees that it will pay, when due and payable, any and all Federal and state stamp, original issue or similar taxes which may be payable in respect of the issue of any Warrant Share or any certificate thereof. 5. REGISTRATION UNDER SECURITIES ACT OF 1933. The Holder of this Warrant shall have the same registration rights as provided in Section 4 of the Purchase Agreement which is defined in the Placement Agency Agreement dated March 5,1996 between the Company and Paramount Capital, Inc. 6. LIMITED TRANSFERABILITY. This Warrant may not be sold, transferred, assigned or hypothecated by the Holder (a) except in compliance with the provisions of the Act and the applicable state securities "blue sky" laws, and is so transferable only upon the books of the Company which it shall cause to be maintained for such purpose. The Company may treat the registered Holder of this Warrant as he or it appears on the Company's books at any time as the Holder for all purposes. The Company shall permit any Holder of a Warrant or his duly authorized attorney, upon written request during ordinary business hours, to inspect and copy or make extracts from its books showing the registered holders of Warrants. All Warrants issued upon the transfer or assignment of this Warrant will be dated the same date as this Warrant, and all rights of the holder thereof shall be identical to those of the Holder. 7. LOSS, ETC., OF WARRANT. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and of indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed, and upon surrender and cancellation of this Warrant, if mutilated, the Company shall execute and deliver to the Holder a new Warrant of like date, tenor and denomination. 8. WARRANT HOLDER NOT SHAREHOLDER. Except as otherwise provided herein, this Warrant does not confer upon the Holder any right to vote or to consent to or receive notice as a stockholder of the Company, as such, in respect of any matters whatsoever, or any other rights or liabilities as a stockholder, prior to the exercise hereof. 9. COMMUNICATION. No notice or other communication under this Warrant shall be effective unless, but any notice or other communication shall be effective and -6- shall be deemed to have been given if, the same is in writing and is mailed by first-class mail, postage prepaid, addressed to: (a) the Company at 4261 Balloon Park Road NE, Albuquerque, New Mexico 87109-5802 or other address as the Company has designated in writing to the Holder, or (b) the Holder at 375 Park Avenue, Suite 1501, New York, New York 10152 or other such address as the Holder has designated in writing to the Company. 10. HEADINGS. The headings of this Warrant have been inserted as a matter of convenience and shall not affect the construction hereof. 11. APPLICABLE LAW. This Warrant shall be governed by and construed in accordance with the law of the State of New York without giving effect to the principles of conflicts of law thereof. -7- IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its President and its corporate seal to be hereunto affixed and attested by its Secretary this ___ day of __________, 1996. RHOMED INCORPORATED By: ___________________________ President ATTEST: - -------------------- Secretary [Corporate Seal] -8- SUBSCRIPTION The undersigned, ___________________, pursuant to the provisions of the foregoing Warrant, hereby agrees to subscribe for and purchase ____________________ shares of the Common Stock, no par value, of RhoMed Incorporated, covered by said Warrant, and makes payment therefor in full at the price per share provided by said Warrant. Dated:_______________ Signature:____________________ Address:______________________ CASHLESS EXERCISE The undersigned ___________________, pursuant to the provisions of the foregoing Warrant, hereby elects to exchange its Warrant for ___________________ shares of Common Stock, no par value, of RhoMed Incorporated pursuant to the Cashless Exercise provisions of the Warrant. Dated:_______________ Signature:____________________ Address:______________________ ASSIGNMENT FOR VALUE RECEIVED _______________ hereby sells, assigns and transfers unto ____________________ the foregoing Warrant and all rights evidenced thereby, and does irrevocably constitute and appoint _____________________, attorney, to transfer said Warrant on the books of RhoMed Incorporated. Dated:_______________ Signature:____________________ Address:______________________ PARTIAL ASSIGNMENT FOR VALUE RECEIVED _______________ hereby assigns and transfers unto ____________________ the right to purchase _______ shares of the Common Stock, no par value per share, of RhoMed Incorporated covered by the foregoing Warrant, and a proportionate part of said Warrant and the rights evidenced thereby, and does irrevocably constitute and appoint ____________________, attorney, to transfer that part of said Warrant on the books of RhoMed Incorporated. Dated:_______________ Signature:____________________ Address:______________________ -9- EXHIBIT B WARRANT RECEIPT [Address of Warrant Holder] Dear Sirs: Pursuant to Section 2(d) of the Placement Agency Agreement dated March 5, 1996, between RhoMed Incorporated and Paramount Capital, Inc., we are delivering herewith a warrant in your name to purchase Warrants of the Company. We hereby acknowledge receipt of $_________representing payment in full for the warrant, in an amount equal to $.001 per share of the Common Stock of the Company. Very truly yours, RHOMED INCORPORATED By______________________________ Name: Title: I hereby acknowledge receipt of a warrant to purchase [] shares of Common Stock. - ------------------------------- [ ] -10- EXHIBIT C ORDER TO ISSUE PLACEMENT AGENT'S WARRANTS RhoMed Incorporated 4261 Balloon Park Road NE Albuquerque, NM 87109-5802 Dear Sirs: Pursuant to Section 2(d) of the Placement Agency Agreement dated March 5, 1996, between RhoMed Incorporated and Paramount Capital, Inc., we hereby request that you issue warrants to purchase shares of Common Stock, in an amount equal to $.001 per share, in the names and denominations as set forth below: Name Denominations Very truly yours, PARAMOUNT CAPITAL, INC. By______________________________ Name: Wayne Rubin Title: Chief Financial Officer -11- EX-10.21 27 FORM OF UNIT PURCHASE AGREEMENT 12/8/95 UNIT PURCHASE AGREEMENT UNIT PURCHASE AGREEMENT (this "Agreement") made as of the date set forth on the signature page hereof between RhoMed Incorporated, a New Mexico corporation with its principal offices at 4261 Balloon Park Road NE, Albuquerque, New Mexico 87109 ("RhoMed" or the "Corporation") and the undersigned (the "Subscriber"). W I T N E S S E T H: WHEREAS, the Corporation desires to issue an aggregate of up to a maximum $750,000 of Series B Senior Bridge Notes (the "Notes") in a private placement offering (the "Offering") in Units (the "Units"), each Unit consisting of (a) $100,000 face amount of Notes and (b) Class B Warrants (the "Warrants") to purchase 100,000 shares of Common Stock, no par value, of the Corporation (the "Common Stock") and the Subscriber desires to purchase that number of Units set forth on the signature page hereof on the terms and conditions hereinafter set forth (the Notes, the Warrants, and the shares of Common Stock issuable upon exercise of the Warrants being sometimes referred to collectively herein as the "Securities"). NOW, THEREFORE, in consideration of the premises and the mutual representations and covenants hereinafter set forth, the parties hereto do hereby agree as follows: ARTICLE I. SUBSCRIPTION FOR UNITS AND REPRESENTATIONS BY SUBSCRIBER 1.1 Subject to the terms and conditions hereinafter set forth, the Subscriber hereby subscribes for and agrees to purchase from the Corporation such number of Units or fractions thereof as is set forth upon the signature page hereof at a price equivalent to $100,000 per Unit and the Corporation agrees to sell such Units to the Subscriber for said purchase price. The terms of the Notes are set forth in the form of Series B Senior Bridge Note attached hereto as Exhibit A and the terms of the Class B Warrants are set forth in the form of warrant attached hereto as Exhibit B. The purchase price for the Units is payable by personal or business check, wire transfer of immediately available funds or money order made payable to "RhoMed Incorporated" contemporaneously with the execution and delivery of this Agreement. The Units will be delivered by the Corporation in accordance with the terms set forth in Article III hereof. 1.2 The Subscriber recognizes that the purchase of Units involves a high degree of risk in that (i) the Corporation may not have the funds necessary to pay the principal of, and interest on, the Notes, (ii) the Corporation remains a development stage business with limited operating history and requires substantial funds in addition to the proceeds of the Offering; (iii) an investment in the Corporation is highly speculative, and only investors who can afford the loss of their entire investment should consider investing in the Corporation and the Notes; (iv) the Subscriber may not be able to liquidate his investment; (v) transferability of the Securities is extremely limited; and (vi) in the event of a disposition, the Subscriber could sustain the loss of his entire investment. 1.3 The Subscriber acknowledges that Subscriber must be an "accredited investor", as described herein, in order to qualify for the purchase of Units, and that Subscriber must be able to bear the economic risk of an investment in the Units. 1.4 The Subscriber represents that Subscriber is an "accredited investor" as such term is defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended (the "Act"), as indicated by his responses to the questions contained in Article VII hereof, and that Subscriber is able to bear the economic risk of an investment in the Units. 1.5 The Subscriber hereby acknowledges and represents that (i) Subscriber has prior investment experience, including investment in non-listed and unregistered securities, or Subscriber has employed the services of an investment advisor, attorney and/or accountant to read all of the documents furnished or made available by the Corporation both to Subscriber and to all other prospective investors in the Units and to evaluate the merits and risks of such an investment on Subscriber's behalf; (ii) Subscriber recognizes the highly speculative nature of this investment; and (iii) Subscriber is able to bear the economic risk which Subscriber hereby assumes. 1.6 The Subscriber hereby represents that the Subscriber either (i) has a preexisting personal or business relationship with the Corporation or its officers or directors or (ii) by reason of the Subscriber's business or financial experience or the business or financial experience of the Subscriber's professional advisors (who are unaffiliated with and who are not compensated by the Corporation or any affiliate or selling agent of the Corporation, including the Placement Agent, directly or indirectly) has the capacity to protect the Subscriber's own interests in connection with the transaction contemplated hereby. 1.7 The Subscriber hereby represents that (i) Subscriber has read this Agreement and all attachments and Exhibits to it, including the Schedule of Exceptions; (ii) Subscriber has been furnished by the Corporation during the course of this transaction with all information regarding the Corporation which Subscriber has requested or desired to know; (iii) Subscriber has been afforded the opportunity to ask questions of and receive answers from duly authorized officers or other representatives of the Corporation concerning the terms and conditions of the Offering; (iv) Subscriber has received any additional information which Subscriber had requested; and (v) Subscriber is not subscribing to purchase the Units as a result of or pursuant to any advertisement, article, notice or other communication published in any Page 2 newspaper, magazine or similar media or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. 1.8 The Subscriber hereby acknowledges that the offering of Units have not been reviewed by the United States Securities and Exchange Commission (the "Commission") or any state regulatory authority, since the Offering is intended to be exempt from the registra tion requirements of Section 5 of the Act pursuant to Regulation D promulgated under the Act. The Subscriber agrees that Subscriber will not sell or otherwise transfer the Securities unless they are registered under the Act or unless an exemption from such registration is available and until such Subscriber complies with the transfer restrictions set forth in Paragraph 1.10 hereof. 1.9 The Subscriber understands that none of the Securities have been registered under the Act or any state securities or "blue sky" laws and are being sold in reliance on exemp tions from the registration requirements of such Act and such laws and agrees that the Securities will not be resold or transferred except as permitted under such Act and such laws pursuant to registration or exemption therefrom. The Subscriber hereby represents that Subscriber is purchasing the Units for Subscriber's own account for investment and not with a view toward the resale or distribution of the Units. 1.10 The Subscriber understands that there is no market for the Units or any of the Securities comprising the Units and that no market may develop for the Units or any of the Securities comprising the Units. The Subscriber understands that even if a public market develops for the Units or any of the Securities comprising the Units, Rule 144 (the "Rule 144") promulgated under the Act requires, among other conditions, a two-year holding period prior to the resale (in limited amounts) of securities acquired in a non-public offering without having to satisfy the registration requirements under the Act. The Subscriber understands that the Corporation is not obligated to comply with any reporting requirements under the Securities Exchange Act of 1934, as amended, and that the Corporation makes no representation or war ranty that it will disseminate to the public any current financial or other information concerning the Corporation, as is required by Rule 144 as one of the conditions of its availability. The Subscriber understands and hereby acknowledges that the Corporation is under no obligation to register any of the Units or any of the Securities comprising the Units under the Act or any state securities or "blue sky" laws other than as set forth in Article IV. The Subscriber agrees to hold the Corporation and its directors, officers, agents, shareholders and controlling persons and their respective heirs, representatives, successors and assigns harmless and to indemnify them against all liabilities, costs and expenses (including reasonable legal fees) incurred by them as a result of or arising out of (i) any misrepresentation made by such Subscriber contained herein or in the Confidential Investor Questionnaire contained in Article VII hereof, (ii) any sale or distribution by the undersigned Subscriber in violation of the Act or any applicable state securities or "blue sky" laws or (iii) any untrue statement or alleged untrue statement of a material fact made by the Subscriber and contained herein. Page 3 1.11 The Subscriber consents to the placement of a legend on any certificate or other document evidencing the Securities that such Securities have not been registered under the Act or any state securities or "blue sky" laws and setting forth or referring to the restrictions on transferability and sale thereof contained in this Agreement. The Subscriber is aware that the Corporation will make a notation in its appropriate records with respect to the restrictions on the transferability of such Securities. 1.12 The Subscriber understands that the Corporation will review this Agreement and is hereby given authority by the Subscriber to call Subscriber's bank or place of employment or otherwise review the financial standing of the Subscriber; and it is further agreed that the Corporation reserves the unrestricted right to reject or limit any subscription, to accept subscriptions for fractional Units and to close the Offering to the Subscriber at any time. 1.13 The Subscriber hereby represents that the address of the Subscriber furnished by Subscriber on the signature page hereof is the Subscriber's principal residence if Subscriber is an individual or its principal business address if it is a corporation or other entity. 1.14 Subscriber represents that he or it has full power and authority (corporate, statutory and otherwise) to execute and deliver this Agreement and to purchase the Units and the Securities. This Agreement constitutes the legal, valid and binding obligation of subscriber, enforceable against Subscriber in accordance with its terms. 1.15 If the subscriber is a corporation, company, trust, employee benefit plan, individual retirement account, Keogh Plan, or other tax-exempt entity, it is authorized and qualified to become an investor in the Corporation and the person signing this Agreement on behalf of such entity has been duly authorized by such entity to do so. ARTICLE II. REPRESENTATIONS BY AND COVENANTS OF RHOMED. RhoMed hereby represents and warrants to each Subscriber that, as of the acceptance date set forth on the signature page hereof, unless otherwise set forth on the "Schedule of Exceptions" attached hereto which specifically identifies the relevant subparagraph hereof, which exceptions shall be deemed to be representations and warranties as if made hereunder: 2.1 Organization, Good Standing and Qualification. RhoMed is a corporation duly organized, validly existing and in good standing under the laws of the State of New Mexico and has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted. RhoMed is duly qualified to transact business and is in good standing in New Mexico and all other jurisdictions in which the failure so to qualify would have a material adverse effect on its business or properties. Page 4 2.2 Capitalization and Voting Rights. The authorized Capital Stock of RhoMed consists of 40,000,000 shares of common stock, no par value (the "Common Stock"), of which 6,914,140 were outstanding as of October 30, 1995, and 10,000,000 shares of preferred stock, no par value, of which 4,000,000 (the "Series A Preferred Stock") were outstanding as of October 30, 1995. The Series A Preferred Stock is convertible to a maximum of 10,132,859 shares of Common Stock. There were 23,402,113 shares of Common Stock issued or issuable as of October 30, 1995, including shares issuable upon the exercise or conversion of all outstanding options, including options not yet vested, warrants, convertible notes, the Series A Preferred Stock and other securities convertible into Common Stock. In addition, and as set forth in the Schedule of Exceptions, there were, as of October 30, 1995, obligations to issue additional shares of stock for which the actual number of shares can not be determined. All of the outstanding shares of Capital Stock of the Corporation have been duly and validly authorized, and are fully paid and nonassessable. The Notes and Warrants to be issued and sold by the Corporation as contemplated hereby and all shares of Common Stock issuable upon exercise of the Warrants, have been duly and validly authorized and, when issued (and, in the case of the Notes and Warrants, paid for as contemplated herein), will be validly issued, fully paid and nonassessable. A sufficient number of shares of Common Stock are authorized and reserved for issuance (i) upon exercise of the Warrants and (ii) upon the exercise of all outstanding options, warrants and other rights to purchase or subscribe for any shares of Common Stock, and RhoMed will, at all times that the Warrants are outstanding, have authorized and reserved a sufficient number of shares of Common Stock to provide for exercise of the Warrants. Except as set forth in Schedule 2.2 and as otherwise required by law, there are no restrictions upon the voting or transfer of any shares of the Corporation's Capital Stock pursuant to the Corporation's Articles of Incorporation, By-Laws or other governing documents or any agreement or other instruments to which the Corporation is a party or by which the Corporation is bound. 2.3 Authorization; Enforceability. RhoMed has the corporate power to execute, deliver and perform the terms and provisions of each of the Unit Purchase Agreements, Notes and Warrants (together, the "Transaction Documents") to which it is a party, and has taken prior to the date hereof all necessary corporate action to authorize the execution, delivery and performance by it of each of the Transaction Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. No other corporate proceedings on the part of RhoMed are necessary for the issuance of the Notes and Warrants. RhoMed has duly executed and delivered this Agreement and each of the Trans action Documents to which it is a party. This Agreement constitutes, and each of the other Transaction Documents, when executed and delivered by RhoMed, assuming due execution by the other parties hereto and thereto, will constitute the legal, valid and binding obligations of RhoMed enforceable against RhoMed in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). Page 5 2.4 Governmental Consents. (i) The execution, delivery and performance by RhoMed of this Agreement and the other Transaction Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby (i) does not and will not contravene the applicable provisions of any law, statute, rule, regulation, order, writ, injunction, judgment or decree of any court or governmental authority to or by which RhoMed is bound, (ii) will not violate, result in a breach of or constitute (with due notice or lapse of time or both) a default under any contract, lease, loan agreement, mortgage, security agreement, trust indenture or other agreement or instrument to which RhoMed is a party or by which it is bound or to which any of its properties or assets is subject, nor result in the creation or imposition of any lien upon any of the properties or assets of RhoMed, and (iii) will not violate any provision of the Articles of Incorporation or By-Laws of RhoMed. (ii) No consent, authorization or order of, or filing or registration with, any court or U.S. governmental authority or other person is required to be obtained or made by RhoMed for the execution, delivery and performance of this Agreement or any of the other Transaction Documents to which it is a party, or the consummation of any of the transactions contemplated hereby or thereby, except for (i) those consents or authorizations previously obtained and those filings previously made, and (ii) any post-sale filings required under applicable securities or blue sky laws. (iii) RhoMed holds and is operating in compliance with all licenses, permits, authorizations, approvals and certificates from governmental authorities, including, without limitation, all applicable approvals and authorizations of the Food and Drug Administration, which are necessary to the conduct of its business as currently contemplated. 2.5 Litigation. Except as disclosed in Schedule 2.5, there is no action, suit, proceeding or investigation pending or, to the best knowledge of RhoMed, currently threatened against RhoMed which questions the validity of this Agreement or any of the Transaction Documents or the right of RhoMed to enter into it, or to consummate the transactions contemplated hereby or thereby, or which might result, either individually or in the aggregate, in any changes in the assets, condition, affairs or prospects of RhoMed which are materially adverse to RhoMed taken as a whole, financially or otherwise, or any change in the current equity ownership of RhoMed. The foregoing includes, without limitation, actions pending or threatened involving the use in RhoMed's business of any information or techniques allegedly proprietary to any of its former employers or their obligations under any agreements with prior employers. RhoMed is not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. 2.6 Patents and Trademarks. Schedule 2.6 hereto lists all patents, trademarks, service marks, trade names, corporate names, and all applications and registrations therefor, Page 6 owned or licensed to or by RhoMed. Except as described in the Schedule of Exceptions, RhoMed owns and possesses all right, title, and interest or holds a valid license in and to all patents, copyrights, trademarks, service marks, trade names, corporate names, and all applica tions and registrations therefor, and to all mask works, licenses, inventions, trade secrets, know how and other intellectual property rights necessary for the conduct of its business as presently contemplated (collectively, the "Intellectual Property Rights"). RhoMed has taken all necessary action to protect all the Intellectual Property Rights. Except as set forth in the Schedule of Exceptions, RhoMed has not received any notice of, and there are not any facts known to RhoMed which indicate the likelihood of, any infringement or misappropriation by any third party of any of the Intellectual Property Rights; RhoMed has not received any notice of, and there are not any facts known to RhoMed which indicate a likelihood of, any claim by a third party contesting the validity of any of the Intellectual Property Rights; RhoMed has not received any notice of any infringement, misappropriation or violation by RhoMed or any of its employees of any intellectual property rights of third parties, and, to the best of RhoMed's knowledge, neither RhoMed nor any of its employees has infringed, misappropriated or otherwise violated any intellectual property rights of any third parties; and, to the best of RhoMed's knowledge, no infringement, illicit copying, misappropriation or violation of any intellectual property rights of any third party has occurred or will occur with respect to any products currently being sold by RhoMed or with respect to any products currently under development by RhoMed or with respect to the conduct of RhoMed's business as currently contemplated. Except as described in the Schedule of Exceptions, RhoMed is not aware that any of its employees are obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with the use of his best efforts to promote the interests of RhoMed or that would conflict with RhoMed's business as proposed to be conducted. To the best of RhoMed's knowledge, neither the execution nor delivery of this Agreement, nor the carrying on of RhoMed's business by the employees of RhoMed, nor the conduct of RhoMed's business, as proposed, will conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or instrument under which any of such employees is now obligated. 2.7 Compliance with Other Instruments. Except as set forth in Schedule 2.7 hereto, RhoMed is not in violation or default of any provisions of its Restated Articles of Incorporation or Bylaws or of any instrument, judgment, order, writ, decree or contract to which it is a party or by which it is bound or, to its knowledge, of any provision of federal or state statute, rule or regulation applicable to RhoMed. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any such provision, instrument, judgment, order, writ, decree or contract or an event which results in the creation of any lien, charge or encumbrance upon any assets of RhoMed. Page 7 2.8 Agreements; Action. The performance of this Agreement and the consummation of the transactions contemplated hereby will not result in a breach or violation of any of the terms and provisions of, or constitute a default under or conflict with, any inden ture, mortgage, deed of trust, voting trust agreement, loan agreement, bond, debenture, note agreement or other evidence of indebtedness, material lease, contract or other agreement or instrument to which RhoMed is a party or by which RhoMed or any of its property is bound, or under the Restated Articles of Incorporation or By-Laws of RhoMed or under any statute or under any order, rule or regulation applicable to RhoMed or its business or property nor is the approval of any court or other governmental agency or body required for the consummation by RhoMed of the transactions on its part herein contemplated. (i) Registration Rights. Except as provided in Article IV below, or as disclosed in the Schedule 2.8 hereto, RhoMed has not granted or agreed to grant any registration rights, including piggyback rights, to any person or entity. 2.9 Corporate Documents. The By-Laws and Articles of Incorporation of RhoMed are, in all material respects, in the form attached hereto as Exhibits C and D respectively. 2.10 Title to Property and Assets. Except as disclosed in Schedule 2.10 hereto, RhoMed owns its properties and assets free and clear of all mortgages, liens, loans and encumbrances, except such encumbrances and liens which arise in the ordinary course of business and do not materially impair RhoMed's ownership or use of such properties or assets. With respect to the properties and assets it leases, RhoMed is in compliance with such leases and holds a valid leasehold interest free of any liens, claims or encumbrances. 2.11 Financial Statements. RhoMed has delivered to the Subscriber its audited financial statements at August 31, 1994 for the fiscal year ended on such date (attached hereto as Exhibit E), and its unaudited financial statements at August 31, 1995 for the fiscal year ended on such date (attached hereto as Exhibit F) (collectively, the "Financial Statements"). To the best of RhoMed's knowledge the Financial Statements (i) are complete and correct in all material respects and, to the best of RhoMed's knowledge, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated and with each other and (ii) accurately set forth and describe in all material respects the financial condition and operating results of RhoMed as of the dates, and for the periods, indicated therein. To the best of RhoMed's knowledge, except as set forth in the Financial Statements, this Agreement or the Schedule of Exceptions, RhoMed has no liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent to September 1, 1995 and (ii) obligations under contracts and commit ments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in the Financial Statements, which, in both cases, indi vidually or in the aggregate, are not material to the financial condition or operating results of Page 8 RhoMed. RhoMed agrees that it will use reasonable efforts promptly to establish and hereafter maintain a standard system of accounting established and administered in accordance with generally accepted accounting principles. 2.12 Changes. Except as set forth in Schedule 2.12 hereto, since September 1, 1995, to the best of RhoMed's knowledge there has not been: (i) any change in the consolidated assets, liabilities, financial condition or operating results of RhoMed from that reflected in the Financial Statements, except changes in the ordinary course of business which have not been, in the aggregate, materially adverse; (ii) any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the assets, properties, financial condition, operating results, prospects or business of RhoMed (as such business is presently conducted and as it is proposed to be conducted); (iii) any waiver by RhoMed of a valuable right or of a material debt owed to it; (iv) any satisfaction or discharge of any lien, claim or encumbrance or payment of any obligation by RhoMed, except in the ordinary course of business and which is not material to the assets, properties, financial condition, operating results or business of RhoMed taken as a whole (as such business is presently conducted and as it is proposed to be conducted); (v) any change or amendment to a contract or arrangement by which RhoMed or any of its assets or properties is bound or subject which is material to RhoMed taken as a whole; (vi) any material change in any compensation arrangement or agreement with any employee; or (vii) any other event or condition of any character which might materially and adversely affect the consolidated assets, properties, financial condition, operating results or business of RhoMed (as such business is presently conducted and as it is proposed to be conducted). 2.13 Tax Returns, Payments and Elections. RhoMed has filed all tax returns and reports as required by law. These returns and reports are true and correct in all material respects and RhoMed has paid all taxes and other assessments due in accordance with such re- Page 9 turns. The provision for taxes of RhoMed as shown in the Financial Statements is adequate for taxes due or accrued as of the date thereof. 2.14 Minute Book. The minute book of RhoMed contains the minutes of all meetings of directors and shareholders since the time of RhoMed's incorporation and reflects all transactions referred to in such minutes accurately in all material respects. 2.15 ERISA. Except as set forth in Schedule 2.15 hereto, RhoMed does not have any "employee welfare benefit plans" or "employee pension benefit plans" as defined in Section 3 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). RhoMed has made all required contributions and has complied in all material respects with all laws applicable to any of its employee benefit plans, including, without limitation, ERISA. RhoMed does not participate in any single employer or multiemployer pension plan subject to Title IV of ERISA. RhoMed does not provide any medical or other welfare-type benefits to any retiree, except as required by law. 2.16 Investment Company Act; Other Regulations. RhoMed is not, and immediately following the consummation of the transactions contemplated hereby will not be, an "investment company", or a company "controlled" by an "investment company," within the meaning of the Investment Company Act. Except for the Securities Act, the Exchange Act and state securities and "blue sky" laws, RhoMed is not subject to any federal or state law or regulation limiting its ability to issue and perform its obligations under or in connection with the issuance and sale of the Securities. 2.17 Environmental Matters. Except as set forth on Schedule 2.17 hereto, (a) the operations, properties, and facilities owned, leased, or otherwise controlled by RhoMed (i) are, and to the best of RhoMed's knowledge have been, in compliance with all Environmental Laws, (ii) are not contaminated with any "Hazardous Material" (as defined below), (iii) are not now being and, to the best of RhoMed's knowledge, were never used as a landfill, dump, or other storage or disposal area for Hazardous Materials, (iv) are not now being and, to the best of RhoMed's knowledge, were never used for military, industrial or manufacturing purposes or as a gasoline service station, and (v) do not contain any underground or aboveground storage tanks (whether or not currently in use) and, to the best of RhoMed's knowledge, no such tank has been removed therefrom; (b) the operations, properties and facilities presently or previously owned, leased or otherwise controlled by RhoMed are not the subject of any United States federal or state or Canadian federal or provincial investigation, demand or proceeding, including, without limitation, any civil, criminal and/or administrative proceeding, of which RhoMed has knowledge, whether or not seeking costs, damages, expenses, penalties or injunctive relief, in connection with the enforcement or any purported violation of any Environmental Laws or evaluating whether any remedial action is required or purported to be required pursuant to any Environmental Laws to respond to any release or threatened release, whether intentional or unintentional, of any Hazardous Material into the environment; (c) Page 10 Hazardous Materials have not been generated, treated, manufactured, processed, stored, transported or disposed of by RhoMed in violation of, or in a manner or to a location which could reasonably be expected to give rise to liability under, nor has RhoMed generated, treated, manufactured, processed, stored, transported or disposed of at or under any of its presently or previously owned, leased or controlled operations, properties or facilities any Hazardous Material in violation of, or that could reasonably be expected to give rise to liability under, any Environmental Law; (d) RhoMed has not received written notice to the effect that it is or may be liable to any person (including, without limitation, any individual or government, whether federal, state, provincial, or local) in connection with, or as a result of, any release or threatened release, whether intentional or unintentional, of any Hazardous Material into the environment; and (e) RhoMed has not commissioned any reviews, audits, reports or other analyses regarding the environmental condition of any operation, property or facility presently or previously owned, leased or otherwise controlled by RhoMed, nor has RhoMed received any documents or correspondence from, nor has RhoMed sent any documents or correspondence to, the United States Environmental Protection Agency, or any state, county or local environmental or health agency concerning, the environmental condition of any operation, property or facility presently or previously owned, leased or otherwise controlled by RhoMed. For purposes of this Paragraph 2.17: "Environmental Laws" means any and all federal, state or local laws, statutes, codes, ordinances, rules, regulations, policies, judgments, orders, decrees, permits, licenses, or other governmental restrictions or requirements relating to pollution or protection of public or employee health or safety or the environment, including, but not limited to, CERCLA, SARA, RCRA, CWA, CAA, FIFRA, TSCA (each, as defined below), and any comparable state, county or local Environmental Law. "Hazardous Material" means (i) any hazardous substance, pollutant or contaminant as now or hereafter defined in, or regulated under, CERCLA and its implementing regulations, any toxic, carcinogenic, infectious, mutagenic, radioactive, explosive or otherwise dangerous substance, hazardous or other waste, hazardous constituent, petroleum and petroleum products, including crude oil and any fraction thereof, asbestos, polychlorinated biphenyls, urea-formaldehyde insulation, and any other chemical, material or substance now or hereafter regulated under any Environmental Law and (ii) any substance, the presence of which on or under the operations, properties, and facilities now and, as appropriate, previously owned, leased, or otherwise controlled by RhoMed threatens to cause a nuisance to, could constitute a trespass by RhoMed upon, or poses a health or safety hazard to persons on or about, any adjacent property or facility. "CERCLA" means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA") 42 U.S.C. Sections 9601-9675; "RCRA" means the Resource Conservation and Recovery Act of 1976 42 U.S.C. Sections 6901-6991; "CWA" means the Clean Water Act 33 U.S.C. Section 1321 et seq; "CAA" means the Clean Air Act 42 U.S.C. Sections 7401 et seq; "FIFRA" means the Federal Insecticide, Fungicide and Rodenticide Act 7 U.S.C. Section 136 et seq; "TSCA" means the Toxic Substances Control Act 15 U.S.C. Sections 2601-2671; in each case, as amended from time to time and including any regulations now or hereafter promulgated thereunder. Page 11 2.18 Insurance. Schedule 2.18 sets forth a true, complete and correct description of all insurance currently maintained by RhoMed. RhoMed has paid all premiums due under such policies and RhoMed is not in default with respect to its obligations under any of such policies. The amount and nature of self-insurance reserves are adequate and reasonable in view of the loss experience of RhoMed and the business in which RhoMed is engaged, the pending claims against RhoMed, and the known threatened claims and the known occurrences which have not given rise to a pending claim. 2.19 Labor Matters. RhoMed is not a party to any collective bargaining or other labor agreement and has not violated any laws, regulations, orders or contract terms affecting the collective bargaining rights of employees, equal opportunity employment, or employees health, safety, welfare, wages and hours. There are no labor disputes existing, or to the best knowledge of RhoMed, threatened, involving strikes, slow-downs, work stoppages, job actions or lockouts of any employees of RhoMed or any grievance under any collective bargaining or other labor agreement involving employees of RhoMed; (ii) there are no unfair labor practices or petitions for election pending before the National Labor Relations Board of any other federal or state labor commission relating to the employees of RhoMed; and (iii) no demand for recognition heretofore made by any labor organization is pending with respect to RhoMed. There are no pending retaliatory or wrongful discharge claims or federal, state or local employment discrimination charges or administrative or judicial complaints arising therefrom pending against RhoMed nor, to the knowledge of RhoMed, are any such charges or complaints threatened against RhoMed. ARTICLE III. TERMS OF SUBSCRIPTION 3.1 The Units will be offered on a "best efforts" basis. The minimum subscrip tion per Subscriber shall be 1 Unit at $100,000 per Unit, subject to the Corporation's right to accept subscriptions for fractions thereof. The maximum amount of the offering is $750,000. The Corporation and the Placement Agent may, by mutual agreement, terminate the offering at any time. 3.2 Subject to acceptance of this Agreement by the Corporation, delivery of Units purchased pursuant to this Agreement shall be made by the Corporation within 30 days of the payment of the purchase price therefor by the Subscriber by personal or business check, wire transfer of immediately available funds or money order made payable to "RhoMed Incorporated". The Corporation reserves the right to reject any subscription with or without cause. In the event that the Corporation does not accept a subscription, the Corporation will return the Subscriber's funds immediately, with any interest which the Corporation may have earned on those funds. Page 12 ARTICLE IV. REGISTRATION UNDER THE 1933 ACT 4.1 The Corporation agrees that if, at any time during the period commencing one year after (x) the closing date of an initial public offering of the Common Stock by the Corporation registered under the Securities Act of 1933, as amended (the "Act") or (y) the first date on which the Common Stock of the Corporation (or securities received in exchange for Common Stock of the Corporation) trades on a national securities exchange or on the National Association of Security Dealers, Inc. Automated Quotations System ("NASDAQ") and ending on the date which is five years later (the "Registration Period"), a Subscriber who holds Warrants, or shares of the Corporation's Common Stock which were issued upon the exercise of Warrants and which have not previously been registered under the Act or which are not freely transferable without registration under the Act due to the lapse of time or otherwise ("Restricted Shares"), shall request that the Corporation file a registration statement under the Act covering Restricted Shares or shares of Common Stock issuable upon the exercise of the Warrants, the Corporation will (i) promptly notify each Subscriber who holds Restricted Shares or Warrants that such registration statement will be filed and that Restricted Shares which are then held, and/or may be acquired upon exercise of Warrants by the Subscriber, will be included in such registration statement at the Subscriber's request, (ii) cause such registration statement to cover all of such Common Stock which it has been so requested to include, (iii) use its best efforts to cause such registration statement to become effective as soon as practicable and (iv) take all other action necessary under any Federal or state law or regulation of any governmental authority to permit all such Common Stock which it has been so requested to include in such registration statement to be sold or otherwise disposed of, and will use its best efforts to maintain such compliance with each such Federal and state law and regulation of any governmental authority for the period necessary for such Subscribers to effect the proposed sale or other disposition. The Corporation shall be required to effect a registration or qualifica tion pursuant to this Paragraph 4.1 on one occasion only; provided, however, in the event that the Corporation is eligible to utilize Form S-3, the Corporation will be required to effect an unlimited number of such S-3 registrations but no more than 2 per year. 4.2 The Corporation agrees that if, at any time and from time to time during the Registration Period, the Board of Directors of the Corporation shall authorize the filing of a registration statement under the Act (other than the initial public offering of the Corporation's Common Stock and otherwise than pursuant to Paragraph 4.1 hereof, or other than a registration statement on Form S-8, S-4 or other form which does not include substantially the same information as would be required in a form for the general registration of securities) in connection with the proposed offer of any of its securities by it or any of its stockholders, the Corporation will (i) promptly notify each Subscriber who holds Warrants or Restricted Shares that such registration statement will be filed and that the Restricted Shares and/or Common Stock issuable upon the exercise of the Warrants which are then held will be included in such registration statement at the Subscriber's request, (ii) cause such registration statement to cover all of such Common Stock which it has been so requested to include, (iii) use its best efforts Page 13 to cause such registration statement to become effective as soon as practicable and (iv) take all other action necessary under any Federal or state law or regulation of any governmental authority to permit all such Common Stock which it has been so requested to include in such registration statement to be sold or otherwise disposed of, and will use its best efforts to maintain such compliance with each such Federal and state law and regulation of any governmental authority for the period necessary for the Subscriber to effect the proposed sale or other disposition; provided, however that the foregoing "piggyback" registration right shall be subject to cutbacks in the sole discretion of the underwriter for the Corporation. 4.3 Whenever the Corporation is required pursuant to the provisions of this Article IV to include in a registration statement Restricted Shares or shares Common Stock issuable upon exercise of the Warrants, the Corporation shall (i) furnish each Subscriber who holds any Restricted Shares and/or Warrants and each underwriter of such Common Stock with such copies of the prospectus, including the preliminary prospectus, conforming to the Act (and such other documents as each such Subscriber or each such underwriter may reasonably request) in order to facilitate the sale or distribution of such Common Stock, (ii) use its best efforts to register or qualify such Common Stock under the blue sky laws (to the extent applicable) of such jurisdiction or laws (to the extent applicable) of such jurisdiction or jurisdictions as the Subscriber who holds any Restricted Shares and/or Warrants and each underwriter of such Common Stock being sold by such Subscribers shall reasonably request and (iii) take such other actions as may be reasonably necessary or advisable to enable such Subscribers and such underwriters to consummate the sale or distribution in such jurisdiction or jurisdictions in which such Subscribers shall have reasonably requested that such Common Stock be sold. 4.4 The Corporation shall pay all expenses incurred in connection with any registration statement or other action pursuant to the provisions of this Article IV, other than underwriting discounts and applicable transfer taxes relating to the Common Stock issued upon exercise of the Warrants. 4.5 The Corporation will indemnify the holders of Common Stock issued upon the exercise of Warrants which is included in each registration statement referred to in Paragraphs 4.1 and 4.2, and the underwriters of such Common Stock, substantially to the same extent as is customary for indemnification and contribution provisions in favor of underwriters and selling shareholders of similar offerings, and such Subscribers will indemnify the Corporation (and the underwriters, if applicable) with respect to information furnished by them in writing to the Corporation for inclusion therein substantially to the same extent as the under writers indemnify the Corporation. 4.6 If the Corporation shall at any time have completed a public offering of shares of its Common Stock, it shall thereafter take such steps as may be necessary to register its Common Stock, as the case may be, under Section 12(g) of the Securities Exchange Act of Page 14 1934, as amended, to maintain such status, and to file with the Securities and Exchange Commission all current reports and the information as may be necessary to enable the Subscrib er to effect sales of the Subscriber's shares of Common Stock in reliance upon Rule 144 promulgated under the Act. 4.7 If the Corporation files a registration statement with the Securities and Exchange Commission in connection with a public offering of the Corporation's securities, the Subscriber, by accepting this Agreement, agrees, if so requested by the Corporation, that such Subscriber will not directly or indirectly sell, make any short sale of, grant any option for the purchase of, or otherwise dispose of any capital stock of the Corporation during the 30-day period ending, and the 180-day period beginning (or any such other period as is required by the underwriter of such offering) on the first date of the effectiveness of such registration statement. Upon request, the Subscriber will sign an agreement in reasonable form to such effect with the underwriter of such an offering. ARTICLE V. MISCELLANEOUS 5.1 Any notice or other communication given hereunder shall be deemed sufficient if in writing and sent by registered or certified mail, return receipt requested, or delivered by hand against written receipt therefor, addressed to RhoMed Incorporated, 4261 Balloon Park Road NE, Albuquerque, NM, 87109-5802, Attn: President, and to the Subscrib er at the Subscriber's address indicated on the signature page of this Agreement. Notices shall be deemed to have been given or delivered on the date of mailing, except notices of change of address, which shall be deemed to have been given or delivered when received. 5.2 This Agreement shall not be changed, modified or amended except by a writing signed by the parties to be charged, and this Agreement may not be discharged except by performance in accordance with its terms or by a writing signed by the party to be charged. 5.3 This Agreement shall be binding upon and inure to the benefit of the parties hereto and to their respective heirs, legal representatives, successors and assigns. This Agreement sets forth the entire agreement and understanding between the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them. 5.4 Upon the execution and delivery of this Agreement by the Subscriber, this Agreement shall become a binding obligation of the Subscriber with respect to the purchase of Units as herein provided; subject, however, to the right hereby reserved to the Corporation to enter into the same agreements with other subscribers and to add and/or delete other persons as subscribers. Page 15 5.5 NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EX PRESSLY AGREE THAT ALL THE TERMS AND PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. 5.6 In order to discourage frivolous claims the parties agree that unless a claimant in any proceeding arising out of this Agreement succeeds in establishing his claim and recovering a judgment against another party (regardless of whether such claimant succeeds against one of the other parties to the action), then the other party shall be entitled to recover from such claimant all of its/their reasonable legal costs and expenses relating to such proceeding and/or incurred in preparation therefor. 5.7 The holding of any provision of this Agreement to be invalid or unenforceable by a court of competent jurisdiction shall not affect any other provision of this Agreement, which shall remain in full force and effect. If any provision of this Agreement shall be declared by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced in whole or in part, such provision shall be interpreted so as to remain enforceable to the maximum extent permissible consistent with applicable law and the remaining conditions and provisions or portions thereof shall nevertheless remain in full force and effect and enforceable to the extent they are valid, legal and enforceable, and no provisions shall be deemed dependent upon any other covenant or provision unless so expressed herein. 5.8 It is agreed that a waiver by either party of a breach of any provision of this Agreement shall not operate, or be construed, as a waiver of any subsequent breach by that same party. 5.9 The parties agree to execute and deliver all such further documents, agreements and instruments and take such other and further action as may be necessary or appropriate to carry out the purposes and intent of this Agreement. 5.10 This Agreement may be executed in two or more counterparts each of which shall be deemed an original, but all of which shall together constitute one and the same instrument. Page 16 ARTICLE VI. NOTICE TO, AND REPRESENTATIONS AND COVENANTS OF UNITED STATES AND CERTAIN STATE RESIDENTS 6.1 FOR ALL UNITED STATES RESIDENTS: THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHER MORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTA TION TO THE CONTRARY IS A CRIMINAL OFFENSE. 6.2 FOR CALIFORNIA RESIDENTS ONLY: THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS OFFERING HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPTED FROM QUALIFICATION BY SECTION 25100, 25102 OR 25104 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS OFFERING ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICA TIONS BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT. 6.3 FOR CONNECTICUT RESIDENTS ONLY: THE SECURITIES HAVE NOT BEEN REGISTERED UNDER SECTION 36-485 OF THE CONNECTICUT UNIFORM SECURITIES ACT AND, THEREFORE, CANNOT BE RESOLD UNLESS REGISTERED UNDER SUCH ACT OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE. Page 17 THE UNDERSIGNED ACKNOWLEDGES THAT THE SECURITIES HAVE NOT BEEN REGISTERED UNDER SECTION 36-485 OF THE CONNECTICUT UNIFORM SECURITIES ACT AND ARE OFFERED AND SOLD PURSUANT TO AN EXEMPTION THEREFROM. THE SECURITIES CANNOT BE SOLD OR TRANSFERRED UNLESS THEY ARE REGISTERED OR EXEMPT FROM REGISTRATION UNDER THE CONNECTICUT UNIFORM SECURITIES ACT OR SOLD IN A TRANSACTION WHICH IS EXEMPT UNDER SAID ACT. 6.4 FOR FLORIDA RESIDENTS ONLY: THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE FLORIDA SECURITIES ACT AND ARE BEING SOLD IN RELIANCE UPON AN EXEMPTION PROVIDED BY SECTION 517.061 THEREOF. UNLESS THE SECURI TIES ARE REGISTERED, THEY MAY NOT BE REOFFERED FOR SALE OR RESOLD IN THE STATE OF FLORIDA EXCEPT AS AN EXEMPT SECURITY OR IN AN EXEMPT TRANSACTION UNDER SAID ACT. 6.5 FOR IOWA RESIDENTS ONLY: THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. 6.6 FOR MASSACHUSETTS RESIDENTS ONLY: WITH RESPECT TO ACCREDITED INVESTORS WHO ARE NATURAL PERSONS, THE INVESTMENT MUST BE SUITABLE AND IS PRESUMED SUITABLE IF THE INVESTMENT DOES NOT EXCEED 25 PERCENT OF THE INVESTOR'S INDIVIDUAL NET WORTH OR NET WORTH COMBINED WITH SPOUSE, EXCLUSIVE OF PRINCIPAL RESIDENCE AND FURNISHINGS. 6.7 FOR PENNSYLVANIA RESIDENTS ONLY: EACH PENNSYLVANIA RESIDENT WHO PURCHASED THE SECURITIES REPRE SENTED BY THIS CERTIFICATE HAS AGREED NOT TO SELL THESE SECURITIES FOR A PERIOD OF TWELVE (12) MONTHS AFTER THE DATE OF PURCHASE. Page 18 PURSUANT TO SECTION 207 OF THE PENNSYLVANIA SECURITIES ACT OF 1972, EACH PERSON WHO ACCEPTS THIS OFFER TO PURCHASE SECURITIES EXEMPT FROM REGISTRATION BY SECTION 203 OF THE PENNSYLVANIA SECURITIES ACT OF 1972 DIRECTLY FROM THE COMPANY OR ITS AFFILIATES WILL HAVE THE RIGHT TO WITHDRAW HIS ACCEPTANCE WITHOUT INCURRING ANY LIABILITY TO THE SELLER, SELLING AGENTS OR ANY OTHER PERSON, WITHIN TWO (2) BUSINESS DAYS AFTER HE MAKES THE INITIAL PAYMENT FOR THE SECURITIES BEING OFFERED. TO ACCOMPLISH THIS WITHDRAWAL, A SUBSCRIBER NEED ONLY SEND A LETTER OR TELEGRAM TO THE ISSUER AT THE ADDRESS SET FORTH IN THE TEXT OF THE OFFERING LITERATURE, INDICATING HIS OR HER INTENTION TO WITHDRAW. SUCH LETTER OR TELEGRAM SHOULD BE SENT AND POSTMARKED PRIOR TO THE END OF THE AFOREMENTIONED SECOND BUSINESS DAY. IT IS PRUDENT TO SEND SUCH LETTER BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ENSURE THAT IT IS RECEIVED AND TO EVIDENCE THE TIME WHEN IT WAS MAILED. IF THE REQUEST IS MADE ORALLY IN PERSON OR BY TELEPHONE TO THE ISSUER AT THE NUMBER LISTED IN THE TEXT OF THE OFFERING LITERATURE, A WRITTEN CONFIRMATION THAT THE REQUEST HAS BEEN RECEIVED SHOULD BE REQUESTED. Page 19 ARTICLE VII. CONFIDENTIAL INVESTOR QUESTIONNAIRE The Subscriber represents and warrants that he, she or it comes within one cate gory marked below, and that for any category marked, he or she has truthfully set forth, where applicable, the factual basis or reason the Subscriber comes within that category. ALL INFORMATION IN RESPONSE TO THIS SECTION WILL BE KEPT STRICTLY CONFIDENTIAL. The undersigned agrees to furnish any additional information which the Corporation deems necessary in order to verify the answers set forth below. Category A The undersigned is an individual (not a partnership, corporation, etc.) whose individual net worth, or joint net worth with his or her spouse, presently exceeds $1,000,000. Explanation. In calculating net worth you may include equity in personal property and real estate, including your principal residence, cash, short-term investments, stock and securities. Equity in personal property and real estate should be based on the fair market value of such property less debt secured by such property. Category B The undersigned is an individual (not a partnership, corporation, etc.) who had an income in excess of $200,000 in each of the two most recent years, or joint income with his or her spouse in excess of $300,000 in each of those years (in each case includ ing foreign income, tax exempt income and full amount of capital gains and loses but excluding any income of other family members and any unrealized capital appreciation) and has a reasonable expectation of reaching the same income level in the current year. Category C The undersigned is a director or executive officer of the Corpo ration which is issuing and selling the Units. Category D The undersigned is a bank; a savings and loan association, insurance company, registered investment company; registered business development company; licensed small business invest ment company ("SBIC"); or employee benefit plan within the meaning of Title 1 of ERISA and (a) the investment decision is made by a plan fiduciary which is either a bank, savings and loan association, insurance company or registered investment advisor, or (b) the plan has total assets in excess of $5,000,000 Page 20 or is a self directed plan with investment decisions made solely by persons that are accredited investors. --------------------------- --------------------------- (describe entity) Category E The undersigned is a private business development company as defined in Section 202(a)(22) of the Investment Advisors Act of 1940. --------------------------- --------------------------- (describe entity) Category F The undersigned is a corporation, partnership, Massachusetts business trust, or non-profit organization within the meaning of Section 501(c)(3) of the Internal Revenue Code, in each case not formed for the specific purpose of acquiring the Units and with total assets in excess of $5,000,000. --------------------------- --------------------------- (describe entity) Category G The undersigned is a trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Units, where the purchase is directed by a "sophisticated per son" as defined in Regulation 506(b)(2)(ii). Page 21 Category H The undersigned is an entity all the equity owners of which are "accredited investors" within one or more of the above catego ries. If relying upon this Category alone, each equity owner must complete a separate copy of this Agreement. --------------------------- --------------------------- (describe entity) Category I The undersigned is not within any of the categories above and is therefore not an accredited investor. The undersigned is informed of the significance to the Corporation of the foregoing representations, and they are made with the intention that the Corporation will rely on them. Page 22 ARTICLE VIII. MANNER IN WHICH TITLE TO BE HELD (circle one) (a) Individual Ownership (b) Community Property (c) Joint Tenant with Right of Survivorship (both parties must sign) (d) Partnership* (e) Tenants in Common (f) Corporation* (g) Trust* (h) Other *If Units are being subscribed for by an entity, the attached Certificate of Signatory must also be completed. ---------------------------------------------------------- _____ Check here if Subscriber is a member of the National Associa tion of Securities Dealers, Inc. (the "NASD"), or owns any stock or other interest in any member of the NASD (other than interests acquired in open market purchases), or has, for a period of twelve months prior to the date of this Agreement, been affiliated or associated with any company, firm, or other entity which is a member of the NASD. --------------------------- --------------------------- (describe entity) Page 23 NUMBER OF UNITS________X $100,000 = ____________(THE "PURCHASE PRICE") - ---------------------------------- ---------------------------------- Signature Signature [if purchasing jointly] - ---------------------------------- ---------------------------------- Name Typed or Printed Name Typed or Printed - ---------------------------------- ---------------------------------- Residence Address Residence Address - ---------------------------------- ---------------------------------- City, State and Zip Code City, State and Zip Code - ---------------------------------- ---------------------------------- Tax Identification or Tax Identification or Social Security Number Social Security Number Telephone No. Business_____________________ Telephone No. Home_________________________ Name in which Notes should be issued:____________________________________ Dated: , 1995 Dated: , 1995 --------------------- ------------------------ This Unit Purchase Agreement is agreed to and accepted as of , 1995. RHOMED INCORPORATED By:_______________________________ Name: Title: Page 24 CERTIFICATE OF SIGNATORY (To be completed if Units are being subscribed for by an entity) I,__________________, am the___________________________of (the "Entity"). I certify that I am empowered and duly authorized by the Entity to execute and carry out the terms of the Unit Purchase Agreement and to purchase and hold the Units, and certify further that the Unit Purchase Agreement has been duly and validly executed on behalf of the Entity and constitutes a legal and binding obligation of the Entity. IN WITNESS WHEREOF, I have set my hand this _____ day of ___________________, 1995. ----------------------------------- (Signature) Page 25 EX-10.22 28 FORM OF PLACEMENT AGENT WARRANT THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS. RHOMED INCORPORATED Warrant for the Purchase of Shares of Common Stock No. Shares FOR VALUE RECEIVED, RHOMED INCORPORATED, a New Mexico corporation (the "COMPANY"), hereby certifies that [] or his permitted assigns, is entitled to purchase from the Company, at any time or from time to time commencing on [Insert Final Closing Date] and prior to 5:00 P.M., New York City time, on ten years from [Insert Final Closing Date] (the "TERMINATION DATE"), [Insert Number of Shares] ([]) fully paid and non-assessable shares of the Common Stock, no par value, of the Company for an aggregate purchase price of $[] (computed on the basis of $.30 per share). (Hereinafter, (i) said Common Stock, together with any other equity securities which may be issued by the Company with respect thereto or in substitution therefor, is referred to as the "COMMON STOCK", (ii) the shares of the Common Stock purchasable hereunder or under any other Warrant (as hereinafter defined) are referred to as the "WARRANT SHARES", (iii) the aggregate purchase price payable for the Warrant Shares hereunder is referred to as the "AGGREGATE WARRANT PRICE", (iv) the price payable for each of the Warrant Shares hereunder is referred to as the "PER SHARE WARRANT PRICE", (v) this Warrant, all similar Warrants issued on the date hereof and all Warrants hereafter issued in exchange or substitution for this Warrant or such similar Warrants are referred to as the "WARRANTS" and (vi) the holder of this Warrant is referred to as the "HOLDER" and the holder of this Warrant and all other Warrants or Warrant Shares issued upon the exercise of any Warrant are referred to as the "HOLDERS"). The Aggregate Warrant Price is not subject to adjustment. The Per Share Warrant Price is subject to adjustment as hereinafter provided; in the event of any such adjustment, the number of Warrant Shares shall be adjusted by dividing the Aggregate Warrant Price by the Per Share Warrant Price in effect immediately after such adjustment. 1. EXERCISE OF WARRANT. (a) This Warrant may be exercised, in whole at any time or in part from time to time, commencing on [Insert Final Closing Date] and prior to the Termination Date, by the holder: (i) by the surrender of this Warrant (with the subscription form at the end hereof duly executed) at the address set forth in Subsection 9(a) hereof, together with proper payment of the Aggregate Warrant Price, or the proportionate part thereof if this Warrant is exercised in part, with payment for Warrant Shares made by certified or official bank check payable to the order of the Company; or (ii) by the surrender of this Warrant (with the cashless exercise form at the end hereof duly executed) (a "CASHLESS EXERCISE") at the address set forth in Subsection 9(a) hereof. Such presentation and surrender shall be deemed a waiver of the Holder's obligation to pay the Aggregate Warrant Price, or the proportionate part thereof if this Warrant is exercised in part. In the event of a Cashless Exercise, the Holder shall exchange its Warrant for that number of Warrant Shares subject to such Cashless Exercise multiplied by a fraction, the numerator of which shall be the difference between the then current Market Price per share (as hereinafter defined) of Common Stock and the Per Share Warrant Price, and the denominator of which shall be the then current Market Price per share of Common Stock. For purposes of any computation under this Section 1(a)(ii), the then current market price per share of the Common Stock at any date (the "MARKET PRICE") shall be deemed to be the last sale price of the Common Stock on the business day prior to the date of the Cashless Exercise or, in case no such reported sales take place on such day, the average of the last reported bid and asked prices of the Common Stock on such day, in either case on the principal national securities exchange on which the Common Stock is admitted to trading or listed, or if not listed or admitted to trading on any such exchange, the representative closing bid price of the Common Stock as reported by NASDAQ, or other similar organization if NASDAQ is no longer reporting such information, or on the OTC Electronic Bulletin or in the "Pink Sheets," or if not so available, the fair market price of the Common Stock as determined in good faith by the Board of Directors. (b) If this Warrant is exercised in part, this Warrant must be exercised for a number of whole shares of the Common Stock and the Holder is entitled to receive a new Warrant covering the Warrant Shares which have not been exercised and setting forth the proportionate part of the Aggregate Warrant Price applicable to such Warrant Shares. Upon surrender of this Warrant, the Company will (i) issue a certificate or certificates in the name of the Holder for the largest number of whole shares of the Common Stock to which the Holder shall be entitled and, if this Warrant is exercised in whole, in lieu of any fractional share of the Common Stock to which the Holder shall be entitled, pay to the Holder cash in an amount equal to the fair value of such fractional share (determined in such reasonable manner as the Board of Directors of the Company shall determine), and (ii) deliver the other securities and properties receivable upon the exercise of this Warrant, if any, or the proportionate part thereof if this Warrant is exercised in part, pursuant to the provisions of this Warrant. 2. RESERVATION OF WARRANT SHARES; LISTING. The Company agrees that, prior to the expiration of this Warrant, the Company will at all times (a) have authorized and in reserve, and will keep available, solely for issuance or delivery upon the exercise of this Warrant, the shares of the Common Stock and other securities and properties as from time to time shall be receivable upon the exercise of this Warrant, free and clear of all restrictions on sale or transfer and free and clear of all preemptive rights and rights of first refusal; and (b) if the Company hereafter lists its Common Stock on any national securities exchange, keep the shares of Common Stock receivable upon exercise of this Warrant authorized for listing on such exchange upon notice of issuance. 3. PROTECTION AGAINST DILUTION. (a) If, at any time or from time to time after the date of this Warrant, the Company shall issue or distribute to the holders of shares of Common Stock evidence of its indebtedness, any other securities of the Company or any cash, property or other assets (excluding a subdivision, combination or reclassification, or dividend or distribution payable in shares of Common Stock, referred to in Subsection 3(b), and also excluding cash dividends or cash distributions paid out of net profits legally available therefor in the full amount thereof, together with the value of other dividends and distributions made substantially concurrently therewith or pursuant to a plan which includes payment thereof, is equivalent to not more than 5% of the Company's net worth) (any such non-excluded event being herein called a "SPECIAL DIVIDEND"), the Per Share Warrant Price shall be adjusted by multiplying the Per Share Warrant Price then in effect by a fraction, the numerator of which shall be the then current Market Price of the Common Stock less the fair market value (as determined in good faith by the Company's Board of Directors) of the evidence of indebtedness, cash, securities or property, or other assets issued or distributed in such Special Dividend applicable to one share of Common Stock and the denominator of which shall be the then current Market Price of the Common Stock. An adjustment made pursuant to this Subsection 3(a) shall become effective immediately after the record date of any such Special Dividend. (b) In case the Company shall hereafter (i) pay a dividend or make a distribution on its capital stock in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares or (iv) issue by reclassification of its Common Stock any shares of capital stock of the Company, the Per Share Warrant Price shall be adjusted to be equal to a fraction, the numerator of which shall be the Aggregate Warrant Price and the denominator of which shall be the number of shares of Common Stock or other capital stock of the Company which he would have owned immediately following such action had such Warrant been exercised immediately prior thereto. An adjustment made pursuant to this Subsection 3(b) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. (c) Except as provided in Subsections 3(a) and 3(d), in case the Company shall hereafter issue or sell any Common Stock, any securities convertible into Common Stock or any rights, options or Warrants to purchase Common Stock or securities convertible into Common Stock, in each case for a price per share or entitling the holders thereof to purchase Common Stock at a price per share (determined by dividing (i) the total amount, if any, received or receivable by the Company in consideration of the issuance or sale of such securities plus the total consideration, if any, payable to the Company upon exercise or conversion thereof (the "TOTAL CONSIDERATION") by (ii) the number of additional shares of Common Stock issuable upon exercise or conversion of such securities) less than the then current Per Share Warrant Price in effect on the date of such issuance or sale, the Per Share Warrant Price shall be adjusted as of the date of such issuance or sale so that the same shall equal the price determined by dividing (i) the sum of (A) the number of shares of Common Stock outstanding on the date of such issuance or sale multiplied by the Per Share Warrant Price plus (B) the Total Consideration by (ii) the number of shares of Common Stock outstanding on the date of such issuance or sale plus the maximum number of additional shares of Common Stock issuable upon exercise or conversion of such securities. (d) No adjustment in the Per Share Warrant Price shall be required in the case of the issuance by the Company of Common Stock pursuant to the exercise of any Warrant. (e) In case of any capital reorganization or reclassification, or any consolidation or merger to which the Company is a party other than a merger or consolidation in which the Company is the continuing corporation, or in case of any sale or conveyance to another entity of the property of the Company as an entirety or substantially as an entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into the Company), the Holder of this Warrant shall have the right thereafter to receive on the exercise of this Warrant the kind and amount of securities, cash or other property which the Holder would have owned or have been entitled to receive immediately after such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance had this Warrant been exercised immediately prior to the effective date of such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Section 3 with respect to the rights and interests thereafter of the Holder of this Warrant to the end that the provisions set forth in this Section 3 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter deliverable on the exercise of this Warrant. The above provisions of this Subsection 3(e) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, statutory exchanges, sales or conveyances. The issuer of any shares of stock or other securities or property thereafter deliverable on the exercise of this Warrant shall be responsible for all of the agreements and obligations of the Company hereunder. Notice of any such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and of said provisions so proposed to be made, shall be mailed to the Holders of the Warrants not less than 30 days prior to such event. A sale of all or substantially all of the assets of the Company for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes. (f) In case any event shall occur as to which the other provisions of this Section 3 are not strictly applicable but as to which the failure to make any adjustment would not fairly protect the purchase rights represented by this Warrant in accordance with the essential intent and principles hereof then, in each such case, the Holders of Warrants representing the right to purchase a majority of the Warrant Shares subject to all outstanding Warrants may appoint a firm of independent public accountants of recognized national standing reasonably acceptable to the Company, which shall give their opinion as to the adjustment, if any, on a basis consistent with the essential intent and principles established herein, necessary to preserve the purchase rights represented by the Warrants. Upon receipt of such opinion, the Company will promptly mail a copy thereof to the Holder of this Warrant and shall make the adjustments described therein. The fees and expenses of such independent public accountants shall be borne by the Company. (g) No adjustment in the Per Share Warrant Price shall be required unless such adjustment would require an increase or decrease of at least $0.05 per share of Common Stock; provided, however, that any adjustments which by reason of this Subsection 3(g) are not required to be made shall be carried forward and taken into account in any subsequent adjustment; provided, further, however, that adjustments shall be required and made in accordance with the provisions of this Section 3 (other than this Subsection 3(g)) not later than such time as may be required in order to preserve the tax-free nature of a distribution to the Holder of this Warrant or Common Stock issuable upon the exercise hereof. All calculations under this Section 3 shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. Anything in this Section 3 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Per Share Warrant Price, in addition to those required by this Section 3, as it in its discretion shall deem to be advisable in order that any stock dividend, subdivision of shares or distribution of rights to purchase stock or securities convertible or exchangeable for stock hereafter made by the Company to its stockholders shall not be taxable. (h) Whenever the Per Share Warrant Price is adjusted as provided in this Section 3 and upon any modification of the rights of a Holder of Warrants in accordance with this Section 3, the Company shall promptly obtain, at its expense, a certificate of a firm of independent public accountants of recognized standing selected by the Board of Directors (who may be the regular auditors of the Company) setting forth the Per Share Warrant Price and the number of Warrant Shares after such adjustment or the effect of such modification, a brief statement of the facts requiring such adjustment or modification and the manner of computing the same and cause copies of such certificate to be mailed to the Holders of the Warrants. (i) If the Board of Directors of the Company shall declare any dividend or other distribution with respect to the Common Stock other than a cash distribution out of earned surplus, the Company shall mail notice thereof to the Holders of the Warrants not less than 15 days prior to the record date fixed for determining stockholders entitled to participate in such dividend or other distribution. (j) If, as a result of an adjustment made pursuant to this Section 3, the Holder of any Warrant thereafter surrendered for exercise shall become entitled to receive shares of two or more classes of capital stock or shares of Common Stock and other capital stock of the Company, the Board of Directors (whose determination shall be conclusive and shall be described in a written notice to the Holder of any Warrant promptly after such adjustment) shall determine the allocation of the adjusted Per Share Warrant Price between or among shares or such classes of capital stock or shares of Common Stock and other capital stock. 4. FULLY PAID STOCK; TAXES. The Company agrees that the shares of the Common Stock represented by each and every certificate of Warrant Shares delivered on the exercise of this Warrant be validly issued and outstanding, fully paid and nonassessable, and not subject to preemptive rights or rights of first refusal, and the Company will take all such actions as may be necessary to assure that the par value or stated value, if any, per share of the Common Stock is at all times equal to or less than the then Per Share Warrant Price. The Company further covenants and agrees that it will pay, when due and payable, any and all Federal and state stamp, original issue or similar taxes which may be payable in respect of the issue of any Warrant Share or any certificate thereof. 5. REGISTRATION UNDER SECURITIES ACT OF 1933. The Holder of this Warrant shall have the same registration rights as provided in Section 4 of the Purchase Agreement which is defined in the Placement Agency Agreement dated March 5,1996 between the Company and Paramount Capital, Inc. 6. LIMITED TRANSFERABILITY. This Warrant may not be sold, transferred, assigned or hypothecated by the Holder (a) except in compliance with the provisions of the Act and the applicable state securities "blue sky" laws, and is so transferable only upon the books of the Company which it shall cause to be maintained for such purpose. The Company may treat the registered Holder of this Warrant as he or it appears on the Company's books at any time as the Holder for all purposes. The Company shall permit any Holder of a Warrant or his duly authorized attorney, upon written request during ordinary business hours, to inspect and copy or make extracts from its books showing the registered holders of Warrants. All Warrants issued upon the transfer or assignment of this Warrant will be dated the same date as this Warrant, and all rights of the holder thereof shall be identical to those of the Holder. 7. LOSS, ETC., OF WARRANT. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and of indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed, and upon surrender and cancellation of this Warrant, if mutilated, the Company shall execute and deliver to the Holder a new Warrant of like date, tenor and denomination. 8. WARRANT HOLDER NOT SHAREHOLDER. Except as otherwise provided herein, this Warrant does not confer upon the Holder any right to vote or to consent to or receive notice as a stockholder of the Company, as such, in respect of any matters whatsoever, or any other rights or liabilities as a stockholder, prior to the exercise hereof. 9. COMMUNICATION. No notice or other communication under this Warrant shall be effective unless, but any notice or other communication shall be effective and shall be deemed to have been given if, the same is in writing and is mailed by first-class mail, postage prepaid, addressed to: (a) the Company at 4261 Balloon Park Road NE, Albuquerque, New Mexico 87109-5802 or other address as the Company has designated in writing to the Holder, or (b) the Holder at 375 Park Avenue, Suite 1501, New York, New York 10152 or other such address as the Holder has designated in writing to the Company. 10. HEADINGS. The headings of this Warrant have been inserted as a matter of convenience and shall not affect the construction hereof. 11. APPLICABLE LAW. This Warrant shall be governed by and construed in accordance with the law of the State of New York without giving effect to the principles of conflicts of law thereof. IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its President and its corporate seal to be hereunto affixed and attested by its Secretary this ___ day of __________, 1996. RHOMED INCORPORATED By: ___________________________ President ATTEST: ___________________ Secretary [Corporate Seal] SUBSCRIPTION The undersigned, ___________________, pursuant to the provisions of the foregoing Warrant, hereby agrees to subscribe for and purchase ____________________ shares of the Common Stock, no par value, of RhoMed Incorporated, covered by said Warrant, and makes payment therefor in full at the price per share provided by said Warrant. Dated:_______________ Signature:____________________ Address:______________________ CASHLESS EXERCISE The undersigned ___________________, pursuant to the provisions of the foregoing Warrant, hereby elects to exchange its Warrant for ___________________ shares of Common Stock, no par value, of RhoMed Incorporated pursuant to the Cashless Exercise provisions of the Warrant. Dated:_______________ Signature:____________________ Address:______________________ ASSIGNMENT FOR VALUE RECEIVED _______________ hereby sells, assigns and transfers unto ____________________ the foregoing Warrant and all rights evidenced thereby, and does irrevocably constitute and appoint _____________________, attorney, to transfer said Warrant on the books of RhoMed Incorporated. Dated:_______________ Signature:____________________ Address:______________________ PARTIAL ASSIGNMENT FOR VALUE RECEIVED _______________ hereby assigns and transfers unto ____________________ the right to purchase _______ shares of the Common Stock, no par value per share, of RhoMed Incorporated covered by the foregoing Warrant, and a proportionate part of said Warrant and the rights evidenced thereby, and does irrevocably constitute and appoint ____________________, attorney, to transfer that part of said Warrant on the books of RhoMed Incorporated. Dated:_______________ Signature:____________________ Address:______________________ EXHIBIT B WARRANT RECEIPT [Address of Warrant Holder] Dear Sirs: Pursuant to Section 2(d) of the Placement Agency Agreement dated March 5, 1996, between RhoMed Incorporated and Paramount Capital, Inc., we are delivering herewith a warrant in your name to purchase Warrants of the Company. We hereby acknowledge receipt of $ _________ representing payment in full for the warrant, in an amount equal to $.001 per share of the Common Stock of the Company. Very truly yours, RHOMED INCORPORATED By__________________________ Name: Title: I hereby acknowledge receipt of a warrant to purchase [] shares of Common Stock. _______________________________ [ ] EXHIBIT C ORDER TO ISSUE PLACEMENT AGENT'S WARRANTS RhoMed Incorporated 4261 Balloon Park Road NE Albuquerque, NM 87109-5802 Dear Sirs: Pursuant to Section 2(d) of the Placement Agency Agreement dated March 5, 1996, between RhoMed Incorporated and Paramount Capital, Inc., we hereby request that you issue warrants to purchase shares of Common Stock, in an amount equal to $.001 per share, in the names and denominations as set forth below: Name Denominations Very truly yours, PARAMOUNT CAPITAL, INC. By______________________________ Name: Wayne Rubin Title: Chief Financial Officer EX-10.23 29 FORM OF COMMON STOCK PURCHASE AGREEMENT COMMON STOCK PURCHASE AGREEMENT COMMON STOCK PURCHASE AGREEMENT (this "Agreement") made as of the last date set forth on the signature page hereof between RhoMed Incorporated, a New Mexico corporation with its principal offices at 4261 Balloon Park Road NE, Albuquerque, New Mexico 87109 ("RhoMed" or the "Company") and the undersigned (the "Subscriber"). W I T N E S S E T H: WHEREAS, the Company desires to issue an aggregate of up to a maximum $4,000,000 of Common Stock in a private placement offering (the "Offering") in Units (the "Units"), each Unit consisting of 400,000 shares of Common Stock, no par value, of the Company (the "Common Stock"), at a purchase price of $.25 per share, and the Subscriber desires to purchase that number of Units set forth on the signature page hereof on the terms and conditions hereinafter set forth (the shares of Common Stock being sometimes referred to herein as the "Securities" or "Shares"). The terms of the Offering are contained in the Confidential Term Sheet as herein defined. NOW, THEREFORE, in consideration of the premises and the mutual representations and covenants hereinafter set forth, the parties hereto do hereby agree as follows: ARTICLE I. SUBSCRIPTION FOR UNITS AND REPRESENTATIONS BY THE SUBSCRIBER 1.1 Subject to the terms and conditions hereinafter set forth, the Subscriber hereby subscribes for and agrees to purchase from the Company such number of Units or fractions thereof as is set forth upon the signature page hereof at a price equivalent to $100,000 per Unit and the Company agrees to sell such Units to the Subscriber for said purchase price. The purchase price for the Units is payable by personal or business check, wire transfer of immediately available funds or money order made payable to "RhoMed Incorporated" contem poraneously with the execution and delivery of this Agreement by the Subscriber. The Units will be delivered by the Company in accordance with the terms set forth in Article III hereof. 1.2 The Subscriber recognizes that the purchase of Units involves a high degree of risk in that (i) the Company remains a development stage business with limited oper ating history and requires substantial funds in addition to the proceeds of the Offering; (ii) an investment in the Company is highly speculative, and only investors who can afford the loss of their entire investment should consider investing in the Company; (iii) the Subscriber may not be able to liquidate his investment; (iv) transferability of the Securities is extremely limit ed; and (v) in the event of a disposition, the Subscriber could sustain the loss of his entire investment. 1.3 The Subscriber represents that the Subscriber is an "accredited investor" as such term is defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended (the "Act"), as indicated by his responses to the questions contained in Article VII hereof, and that the Subscriber is able to bear the economic risk of an investment in the Units. 1.4 The Subscriber hereby acknowledges and represents that (i) the Subscriber has prior investment experience, including investment in non-listed and unregis tered securities, or the Subscriber has employed the services of an investment advisor, attorney and/or accountant to read all of the documents furnished or made available by the Company both to the Subscriber and to all other prospective investors in the Units and to evaluate the merits and risks of such an investment on the Subscriber's behalf; (ii) the Subscriber recog nizes the highly speculative nature of this investment; and (iii) the Subscriber is able to bear the economic risk which th e Subscriber hereby assumes. 1.5 The Subscriber hereby acknowledges receipt and careful review of (a) the Confidential Term Sheet dated March 6, 1996, as supplemented and amended, and the attachments and exhibits thereto, all of which constitute an integral part thereof (the "Term Sheet") and (b) this Agreement and all attachments to it, including the Schedule of Exceptions; and hereby represents that the Subscriber has been furnished by the Company during the course of this transaction with all information regarding the Company which the Subscriber has requested or desired to know, has been afforded the opportunity to ask questions of and receive answers from duly authorized officers or other representatives of the Company concerning the terms and conditions of the Offering and has received any additional infor mation which the Subscriber has requested. 1.6 (a) The Subscriber has relied solely upon the information provided by the Company in the Term Sheet in making the decision to invest in the Units. To the extent necessary, the Subscriber has retained, at the expense of the Subscriber, and relied upon appropriate professional advice regarding the investment, tax and legal merits and conse quences of this Agreement and its purchase of the Units hereunder. The Subscriber acknowledges and agrees that Paramount Capital, Inc. (the "Placement Agent") has not supplied any information for inclusion in the Term Sheet other than information furnished in writing to the Company by the Placement Agent specifically for inclusion in the Term Sheet relating to the Placement Agent, that the Placement Agent has no responsibility for the accuracy or completeness of the Term Sheet and that the Subscriber has not relied upon the independent investigation or verification, if any, which may have been undertaken by the Placement Agent. (b) The Subscriber covenants that (i) the Subscriber was contacted regarding the sale of the Units by the Placement Agent (or an authorized agent or representa tive thereof) with whom the Subscriber had a prior substantial pre-existing relationship and (ii) Page 2 no Units were offered or sold to it by means of any form of general solicitation or general advertising, and in connection therewith the Subscriber did not: (A) receive or review any advertisement, article, notice or other communication published in a newspaper or magazine or similar media or broadcast over television or radio whether closed circuit, or generally available; or (B) attend any seminar meeting or industry investor conference whose attendees were invited by any general solicitation or general advertising. 1.7 The Subscriber hereby represents that the Subscriber either by reason of the Subscriber's business or financial experience or the business or financial experience of the Subscriber's professional advisors (who are unaffiliated with and who are not compensated by the Company or any affiliate or selling agent of the Company, including the Placement Agent, directly or indirectly) has the capacity to protect the Subscriber's own interests in connection with the transaction contemplated hereby. 1.8 The Subscriber hereby acknowledges that the offering of Units have not been reviewed by the United States Securities and Exchange Commission (the "Commission") or any state regulatory authority, since the Offering is intended to be exempt from the registra tion requirements of Section 5 of the Act pursuant to Regulation D promulgated under the Act. The Subscriber agrees that Subscriber will not sell or otherwise transfer the Securities unless they are registered under the Act or unless an exemption from such registration is available and until such Subscriber complies with the transfer restrictions set forth in Paragraph 1.10 hereof. 1.9 The Subscriber understands that none of the Securities have been registered under the Act or any state securities or "blue sky" laws and are being sold in reliance on exemptions from the registration requirements of such Act and such laws and agrees that the Securities will not be resold or transferred except as permitted under such Act and such laws pursuant to registration or exemption therefrom. The Subscriber hereby represents that Subscriber is purchasing the Units for Subscriber's own account for investment and not with a view toward the resale or distribution of the Units. 1.10 The Subscriber understands that there is no market for the Units or any of the Securities comprising the Units and that no market may develop for the Units or any of the Securities comprising the Units. The Subscriber understands that even if a public market develops for the Units or any of the Securities comprising the Units, Rule 144 ("Rule 144") promulgated under the Act requires, among other conditions, a two-year holding period prior to the resale (in limited amounts) of securities acquired in a non-public offering without having to satisfy the registration requirements under the Act. The Subscriber understands that the Company is not obligated to comply with any reporting requirements under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and that the Company makes no representation or warranty that it will disseminate to the public any current financial or other information concerning the Company, as is required by Rule 144 as one of the conditions of its availability. The Subscriber understands and hereby acknowledges that the Company is under no obligation to register any of the Units or any of the Securities comprising the Units Page 3 under the Act or any state securities or "blue sky" laws other than as set forth in Article IV. The Subscriber agrees to hold the Company and its directors, officers, agents (including the Placement Agent), shareholders and controlling persons and their respective heirs, represen tatives, successors and assigns harmless and to indemnify them against all liabilities, costs and expenses (including reasonable legal fees) incurred by them as a result of or arising out of (i) any misrepresentation made by such Subscriber contained herein or in the Confidential Investor Questionnaire contained in Article VII hereof, (ii) any sale or distribution by the undersigned Subscriber in violation of the Act or any applicable state securities or "blue sky" laws or (iii) any untrue statement or alleged untrue statement of a material fact made by the Subscriber and contained herein. 1.11 The Subscriber consents to the placement of a legend on any certificate or other document evidencing the Securities that such Securities have not been registered under the Act or any state securities or "blue sky" laws and setting forth or referring to the restrictions on transferability and sale thereof contained in this Agreement. The Subscriber is aware that the Company will make a notation in its appropriate records with respect to the restrictions on the transferability of such Securities. 1.12 The Subscriber understands that the Company will review this Agreement and is hereby given authority by the Subscriber to call Subscriber's bank or place of employment or otherwise review the financial standing of the Subscriber; and it is further agreed that the Company reserves the unrestricted right, without further documentation or agreement on the part of the Subscriber, to reject or limit any subscription, to accept subscriptions for fractional Units and to close the Offering to the Subscriber at any time. 1.13 The Subscriber hereby represents that the address of the Subscriber furnished by Subscriber on the signature page hereof is the Subscriber's principal residence if Subscriber is an individual or its principal business address if it is a corporation or other entity. 1.14 Subscriber represents that he or it has full power and authority (corporate, statutory and otherwise) to execute and deliver this Agreement and to purchase the Units and the Securities. This Agreement constitutes the legal, valid and binding obligation of subscriber, enforceable against Subscriber in accordance with its terms. 1.15 If the subscriber is a Company, company, trust, employee benefit plan, individual retirement account, Keogh Plan, or other tax-exempt entity, it is authorized and qualified to become an investor in the Company and the person signing this Agreement on behalf of such entity has been duly authorized by such entity to do so. 1.16 The Subscriber acknowledges that if he is a Registered Representative of an NASD member firm, he must give such firm the notice required by the NASD's Rules of Fair Practice, receipt of which must be acknowledged by such firm in Section 7.4 below. Page 4 1.17 The Subscriber acknowledges that at such time, if ever, as the Shares are registered, sales of the Shares will be subject to state securities laws, including those of the State of New Jersey which requires any securities sold in New Jersey to be sold through a registered broker-dealer or in reliance upon an exemption from registration. ARTICLE II. REPRESENTATIONS BY AND COVENANTS OF RHOMED. RhoMed hereby represents and warrants to each Subscriber that, as of the acceptance date set forth on the signature page hereof, unless otherwise set forth on the "Schedule of Exceptions" attached hereto which specifically identifies the relevant subparagraph hereof, which exceptions shall be deemed to be representations and warranties as if made hereunder: 2.1 Organization, Good Standing and Qualification. RhoMed is a Company duly organized, validly existing and in good standing under the laws of the State of New Mexico and has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted. RhoMed is duly qualified to transact business and is in good standing in New Mexico and all other jurisdictions in which the failure so to qualify would have a material adverse effect on its business or properties. 2.2 Capitalization and Voting Rights. The authorized Capital Stock of RhoMed consists of 40,000,000 shares of common stock, no par value (the "Common Stock"), of which 6,928,069 were outstanding as of January 31, 1996, and 10,000,000 shares of preferred stock, no par value, of which 4,000,000 (the "Series A Preferred Stock") were outstanding as of January 31, 1996. The Series A Preferred Stock is convertible to a maximum of 10,132,859 shares of Common Stock. There were 27,837,988 shares of Common Stock issued or issuable as of January 31, 1996, including shares issuable upon the exercise or conversion of all outstanding options, including options not yet vested, warrants, convertible notes, the Series A Preferred Stock and other securities convertible into Common Stock. In addition, and as set forth in the Schedule of Exceptions, there were, as of January 31, 1996, obligations to issue additional shares of stock for which the actual number of shares can not be determined. A sufficient number of shares of Common Stock will, within sixty days of the date hereof, be reserved for issuance (i) upon conversion of the Series A Preferred Stock and (ii) upon the exercise of all outstanding options, warrants and other rights to purchase or subscribe for any shares of Common Stock. The holder of 3,548,681 shares of Series A Preferred Stock, convertible into a maximum of 8,989,571 shares of Common Stock, has agreed to not exercise any right to convert until such time as the authorized Capital Stock has been increased to at least 60,000,000 shares of Common Stock. All of the outstanding shares of Capital Stock of the Company have been duly and validly authorized and issued, and are fully paid and nonassessable. The shares of Common Stock have been duly and validly authorized and, when issued, will be validly issued, fully paid and nonassessable. Except as set forth in Schedule 2.2 and as otherwise required by law, there are no restrictions upon the voting or transfer of any shares of the Company's Capital Stock pursuant to the Company's Articles of Incorporation, Page 5 Bylaws or other governing documents or any agreement or other instruments to which the Company is a party or by which the Company is bound. 2.3 Authorization; Enforceability. RhoMed has the corporate power to execute, deliver and perform the terms and provisions of each of the Unit Purchase Agreements (together, the "Transaction Documents") to which it is a party, and has taken prior to the date hereof all necessary corporate action to authorize the execution, delivery and performance by it of each of the Transaction Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. No other corporate proceedings on the part of RhoMed are necessary for the issuance of the Common Stock. RhoMed has duly executed and delivered this Agreement and each of the Transaction Documents to which it is a party. This Agreement constitutes, and each of the other Transaction Documents, when executed and delivered by RhoMed, assuming due execution by the other parties hereto and thereto, will constitute the legal, valid and binding obligations of RhoMed enforceable against RhoMed in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). 2.4 Governmental Consents. (i) The execution, delivery and performance by RhoMed of this Agreement and the other Transaction Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby (i) does not and will not contravene the applicable provisions of any law, statute, rule, regulation, order, writ, injunction, judgment or decree of any court or governmental authority to or by which RhoMed is bound, (ii) will not violate, result in a breach of or constitute (with due notice or lapse of time or both) a default under any contract, lease, loan agreement, mortgage, security agreement, trust indenture or other agreement or instrument to which RhoMed is a party or by which it is bound or to which any of its properties or assets is subject, nor result in the creation or imposition of any lien upon any of the properties or assets of RhoMed, and (iii) will not violate any provision of the Articles of Incorporation or Bylaws of RhoMed. (ii) No consent, authorization or order of, or filing or registration with, any court or U.S. governmental authority or other person is required to be obtained or made by RhoMed for the execution, delivery and performance of this Agreement or any of the other Transaction Documents to which it is a party, or the consummation of any of the transactions contemplated hereby or thereby, except for (i) those consents or authorizations previously obtained and those filings previously made, and (ii) any post-sale filings required under applicable securities or blue sky laws. (iii) RhoMed holds and is operating in compliance with all licenses, permits, authorizations, approvals and certificates from governmental authorities, including, Page 6 without limitation, all applicable approvals and authorizations of the Food and Drug Administration, which are necessary to the conduct of its business as currently contemplated. 2.5 Litigation. Except as disclosed in Schedule 2.5, there is no action, suit, proceeding or investigation pending or, to the best knowledge of RhoMed, currently threatened against RhoMed which questions the validity of this Agreement or any of the Transaction Documents or the right of RhoMed to enter into it, or to consummate the transactions contemplated hereby or thereby, or which might result, either individually or in the aggregate, in any changes in the assets, condition, affairs or prospects of RhoMed which are materially adverse to RhoMed taken as a whole, financially or otherwise, or any change in the current equity ownership of RhoMed. The foregoing includes, without limitation, actions pending or threatened involving the use in RhoMed's business of any information or techniques allegedly proprietary to any of its former employers or their obligations under any agreements with prior employers. RhoMed is not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. 2.6 Patents and Trademarks. Schedule 2.6 hereto lists all patents, trademarks, service marks, trade names, corporate names, and all applications and registrations therefor, owned or licensed to or by RhoMed. Except as described in the Schedule of Exceptions, RhoMed owns and possesses all right, title, and interest or holds a valid license in and to all patents, copyrights, trademarks, service marks, trade names, corporate names, and all applica tions and registrations therefor, and to all mask works, licenses, inventions, trade secrets, know how and other intellectual property rights necessary for the conduct of its business as presently contemplated (collectively, the "Intellectual Property Rights"). RhoMed has taken all necessary action to protect all the Intellectual Property Rights. Except as set forth in the Schedule of Exceptions, RhoMed has not received any notice of, and there are not any facts known to RhoMed which indicate the likelihood of, any infringement or misappropriation by any third party of any of the Intellectual Property Rights; RhoMed has not received any notice of, and there are not any facts known to RhoMed which indicate a likelihood of, any claim by a third party contesting the validity of any of the Intellectual Property Rights; RhoMed has not received any notice of any infringement, misappropriation or violation by RhoMed or any of its employees of any intellectual property rights of third parties, and, to the best of RhoMed's knowledge, neither RhoMed nor any of its employees has infringed, misappropriated or otherwise violated any intellectual property rights of any third parties; and, to the best of RhoMed's knowledge, no infringement, illicit copying, misappropriation or violation of any intellectual property rights of any third party has occurred or will occur with respect to any products currently being sold by RhoMed or with respect to any products currently under development by RhoMed or with respect to the conduct of RhoMed's business as currently contemplated. Except as described in the Schedule of Exceptions, RhoMed is not aware that any of its employees are obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with the use of his best efforts to promote the interests of RhoMed or that would conflict with RhoMed's business as proposed Page 7 to be conducted. To the best of RhoMed's knowledge, neither the execution nor delivery of this Agreement, nor the carrying on of RhoMed's business by the employees of RhoMed, nor the conduct of RhoMed's business, as proposed, will conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or instrument under which any of such employees is now obligated. 2.7 Compliance with Other Instruments. Except as set forth in Schedule 2.7 hereto, RhoMed is not in violation or default of any provisions of its Restated Articles of Incorporation or Bylaws or of any instrument, judgment, order, writ, decree or contract to which it is a party or by which it is bound or, to its knowledge, of any provision of federal or state statute, rule or regulation applicable to RhoMed. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any such provision, instrument, judgment, order, writ, decree or contract or an event which results in the creation of any lien, charge or encumbrance upon any assets of RhoMed. 2.8 Agreements; Action. The performance of this Agreement and the consummation of the transactions contemplated hereby will not result in a breach or violation of any of the terms and provisions of, or constitute a default under or conflict with, any inden ture, mortgage, deed of trust, voting trust agreement, loan agreement, bond, debenture, note agreement or other evidence of indebtedness, material lease, contract or other agreement or instrument to which RhoMed is a party or by which RhoMed or any of its property is bound, or under the Restated Articles of Incorporation or Bylaws of RhoMed or under any statute or under any order, rule or regulation applicable to RhoMed or its business or property nor is the approval of any court or other governmental agency or body required for the consummation by RhoMed of the transactions on its part herein contemplated. 2.9 Registration Rights. Except as provided in Article IV below, or as disclosed in Schedule 2.9 hereto, RhoMed has not granted or agreed to grant any registration rights, including piggyback rights, to any person or entity. 2.10 Corporate Documents. The Bylaws and Articles of Incorporation of RhoMed are, in all material respects, in the form attached to the Term Sheet as Exhibit A and Exhibit B respectively. 2.11 Title to Property and Assets. Except as disclosed in Schedule 2.11 hereto, RhoMed owns its properties and assets free and clear of all mortgages, liens, loans and encumbrances, except such encumbrances and liens which arise in the ordinary course of business and do not materially impair RhoMed's ownership or use of such properties or assets. With respect to the properties and assets it leases, RhoMed is in compliance with such leases and holds a valid leasehold interest free of any liens, claims or encumbrances. Page 8 2.12 Financial Statements. RhoMed has delivered to the Subscriber its audited financial statements at August 31, 1995 for the fiscal year ended on such date (attached to the Term Sheet as Exhibit C) and its unaudited financial statements for the period ended January 31, 1996 (attached to the Term Sheet as Exhibit D) (collectively, the "Financial Statements"). To the best of RhoMed's knowledge the Financial Statements (i) are complete and correct in all material respects and, to the best of RhoMed's knowledge, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated and with each other and (ii) accurately set forth and describe in all material respects the financial condition and operating results of RhoMed as of the dates, and for the periods, indicated therein. To the best of RhoMed's knowledge, except as set forth in the Financial Statements, this Agreement or the Schedule of Exceptions, RhoMed has no liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent to September 1, 1995 and (ii) obligations under contracts and commit ments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in the Financial Statements, which, in both cases, indi vidually or in the aggregate, are not material to the financial condition or operating results of RhoMed. RhoMed agrees that it will use reasonable efforts to hereafter maintain a standard system of accounting established and administered in accordance with generally accepted accounting principles. 2.13 Changes. Except as set forth in Schedule 2.13 hereto, since September 1, 1995, to the best of RhoMed's knowledge there has not been: (i) any change in the consolidated assets, liabilities, financial condition or operating results of RhoMed from that reflected in the Financial Statements, except changes in the ordinary course of business which have not been, in the aggregate, materially adverse; (ii) any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the assets, properties, financial condition, operating results, prospects or business of RhoMed (as such business is presently conducted and as it is proposed to be conducted); (iii) any waiver by RhoMed of a valuable right or of a material debt owed to it; (iv) any satisfaction or discharge of any lien, claim or encumbrance or payment of any obligation by RhoMed, except in the ordinary course of business and which is not material to the assets, properties, financial condition, operating results or business of RhoMed taken as a whole (as such business is presently conducted and as it is proposed to be conducted); Page 9 (v) any change or amendment to a contract or arrangement by which RhoMed or any of its assets or properties is bound or subject which is material to RhoMed taken as a whole; (vi) any material change in any compensation arrangement or agreement with any employee; or (vii) any other event or condition of any character which might materially and adversely affect the consolidated assets, properties, financial condition, operating results or business of RhoMed (as such business is presently conducted and as it is proposed to be conducted). 2.14 Tax Returns, Payments and Elections. Except as set forth in Schedule 2.14 hereto, RhoMed has filed all tax returns and reports as required by law. These returns and reports are true and correct in all material respects and RhoMed has paid all taxes and other assessments due in accordance with such returns. The provision for taxes of RhoMed as shown in the Financial Statements is adequate for taxes due or accrued as of the date thereof. 2.15 Minute Book. The minute book of RhoMed contains the minutes of all meetings of directors and shareholders since the time of RhoMed's incorporation and reflects all transactions referred to in such minutes accurately in all material respects. 2.16 ERISA. Except as set forth in Schedule 2.16 hereto, RhoMed does not have any "employee welfare benefit plans" or "employee pension benefit plans" as defined in Section 3 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). RhoMed has made all required contributions and has complied in all material respects with all laws applicable to any of its employee benefit plans, including, without limitation, ERISA. RhoMed does not participate in any single employer or multiemployer pension plan subject to Title IV of ERISA. RhoMed does not provide any medical or other welfare-type benefits to any retiree, except as required by law. 2.17 Investment Company Act; Other Regulations. RhoMed is not, and immediately following the consummation of the transactions contemplated hereby will not be, an "investment company", or a company "controlled" by an "investment company," within the meaning of the Investment Company Act. Except for the Act, the Exchange Act and state securities and "blue sky" laws, RhoMed is not subject to any federal or state law or regulation limiting its ability to issue and perform its obligations under or in connection with the issuance and sale of the Securities. 2.18 Environmental Matters. Except as set forth on Schedule 2.18 hereto, (a) the operations, properties, and facilities owned, leased, or otherwise controlled by RhoMed (i) are, and to the best of RhoMed's knowledge have been, in compliance with all Environmental Laws, (ii) are not contaminated with any "Hazardous Material" (as defined below), (iii) are not Page 10 now being and, to the best of RhoMed's knowledge, were never used as a landfill, dump, or other storage or disposal area for Hazardous Materials, (iv) are not now being and, to the best of RhoMed's knowledge, were never used for military, industrial or manufacturing purposes or as a gasoline service station, and (v) do not contain any underground or aboveground storage tanks (whether or not currently in use) and, to the best of RhoMed's knowledge, no such tank has been removed therefrom; (b) the operations, properties and facilities presently or previously owned, leased or otherwise controlled by RhoMed are not the subject of any United States federal or state or Canadian federal or provincial investigation, demand or proceeding, including, without limitation, any civil, criminal and/or administrative proceeding, of which RhoMed has knowledge, whether or not seeking costs, damages, expenses, penalties or injunctive relief, in connection with the enforcement or any purported violation of any Environmental Laws or evaluating whether any remedial action is required or purported to be required pursuant to any Environmental Laws to respond to any release or threatened release, whether intentional or unintentional, of any Hazardous Material into the environment; (c) Hazardous Materials have not been generated, treated, manufactured, processed, stored, transported or disposed of by RhoMed in violation of, or in a manner or to a location which could reasonably be expected to give rise to liability under, nor has RhoMed generated, treated, manufactured, processed, stored, transported or disposed of at or under any of its presently or previously owned, leased or controlled operations, properties or facilities any Hazardous Material in violation of, or that could reasonably be expected to give rise to liability under, any Environmental Law; (d) RhoMed has not received written notice to the effect that it is or may be liable to any person (including, without limitation, any individual or government, whether federal, state, provincial, or local) in connection with, or as a result of, any release or threatened release, whether intentional or unintentional, of any Hazardous Material into the environment; and (e) RhoMed has not commissioned any reviews, audits, reports or other analyses regarding the environmental condition of any operation, property or facility presently or previously owned, leased or otherwise controlled by RhoMed, nor has RhoMed received any documents or correspondence from, nor has RhoMed sent any documents or correspondence to, the United States Environmental Protection Agency, or any state, county or local environmental or health agency concerning, the environmental condition of any operation, property or facility presently or previously owned, leased or otherwise controlled by RhoMed. For purposes of this Paragraph 2.18: "Environmental Laws" means any and all federal, state or local laws, statutes, codes, ordinances, rules, regulations, policies, judgments, orders, decrees, permits, licenses, or other governmental restrictions or requirements relating to pollution or protection of public or employee health or safety or the environment, including, but not limited to, CERCLA, SARA, RCRA, CWA, CAA, FIFRA, TSCA (each, as defined below), and any comparable state, county or local Environmental Law. "Hazardous Material" means (i) any hazardous substance, pollutant or contaminant as now or hereafter defined in, or regulated under, CERCLA and its implementing regulations, any toxic, carcinogenic, infectious, mutagenic, radioactive, explosive or otherwise dangerous substance, hazardous or other waste, hazardous constituent, petroleum and petroleum products, including crude oil and any fraction thereof, asbestos, polychlorinated biphenyls, urea-formaldehyde insulation, and any other Page 11 chemical, material or substance now or hereafter regulated under any Environmental Law and (ii) any substance, the presence of which on or under the operations, properties, and facilities now and, as appropriate, previously owned, leased, or otherwise controlled by RhoMed threatens to cause a nuisance to, could constitute a trespass by RhoMed upon, or poses a health or safety hazard to persons on or about, any adjacent property or facility. "CERCLA" means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA") 42 U.S.C. ss.ss. 9601-9675; "RCRA" means the Resource Conservation and Recovery Act of 1976 42 U.S.C. ss. 6901-6991; "CWA" means the Clean Water Act 33 U.S.C. ss. 1321 et seq; "CAA" means the Clean Air Act 42 U.S.C. ss.ss. 7401 et seq; "FIFRA" means the Federal Insecticide, Fungicide and Rodenticide Act 7 U.S.C. ss. 136 et seq; "TSCA" means the Toxic Substances Control Act 15 U.S.C. ss.ss. 2601-2671; in each case, as amended from time to time and including any regulations now or hereafter promulgated thereunder. 2.19 Insurance. Schedule 2.19 sets forth a true, complete and correct description of all insurance currently maintained by RhoMed. RhoMed has paid all premiums due under such policies and RhoMed is not in default with respect to its obligations under any of such policies. The amount and nature of self-insurance reserves are adequate and reasonable in view of the loss experience of RhoMed and the business in which RhoMed is engaged, the pending claims against RhoMed, and the known threatened claims and the known occurrences which have not given rise to a pending claim. 2.20 Labor Matters. RhoMed is not a party to any collective bargaining or other labor agreement and has not violated any laws, regulations, orders or contract terms affecting the collective bargaining rights of employees, equal opportunity employment, or employees health, safety, welfare, wages and hours. There are no labor disputes existing, or to the best knowledge of RhoMed, threatened, involving strikes, slow-downs, work stoppages, job actions or lockouts of any employees of RhoMed or any grievance under any collective bargaining or other labor agreement involving employees of RhoMed; (ii) there are no unfair labor practices or petitions for election pending before the National Labor Relations Board of any other federal or state labor commission relating to the employees of RhoMed; and (iii) no demand for recognition heretofore made by any labor organization is pending with respect to RhoMed. There are no pending retaliatory or wrongful discharge claims or federal, state or local employment discrimination charges or administrative or judicial complaints arising therefrom pending against RhoMed nor, to the knowledge of RhoMed, are any such charges or complaints threatened against RhoMed. ARTICLE III. TERMS OF SUBSCRIPTION 3.1 The Units will be offered on a "best efforts" basis. The minimum sub scription per Subscriber shall be 1 Unit at $100,000 per Unit, subject to the Company's right to accept subscriptions for fractions thereof. The maximum amount of the offering is Page 12 $4,000,000. The Company and the Placement Agent may, by mutual agreement, terminate the offering at any time. 3.2 Placement of the Units will be made by the Placement Agent, who will receive (i) a placement fee in the amount 9% of the purchase price of the Units placed and (ii) a non-accountable expense allowance equal to 4% of the purchase price of the Units placed. The Placement Agent shall be entitled to warrants to purchase Units equal to 10% of the Common Stock issued in the Offering at an exercise price of $.30 per share. 3.3 Subject to acceptance of this Agreement by the Company, delivery of Units purchased pursuant to this Agreement shall be made by the Company within 30 days of the payment of the purchase price therefor by the Subscriber by personal or business check, wire transfer of immediately available funds or money order made payable to "RhoMed Incorporated". The Company reserves the right to reject any subscription with or without cause. In the event that the Company does not accept a subscription, the Company will return the Subscriber's funds immediately, with any interest which the Company may have earned on those funds. 3.4 The Subscriber hereby authorizes and directs the Company to deliver the Securities to be issued to the Subscriber pursuant to this Agreement directly to the Subscriber's account maintained by the Placement Agent or, if no such account exists, to the residential or business address indicated on the signature page hereto. 3.5 The Subscriber hereby authorizes and directs the Company to return any funds for unaccepted subscriptions to the same account from which the funds were drawn, including any customer account maintained with the Placement Agent. ARTICLE IV. REGISTRATION UNDER THE 1933 ACT 4.1 As used in this Agreement, the following terms shall have the following meanings: (a) "Affiliate" shall mean, with respect to any person, any other person controlling, controlled by or under direct or indirect common control with such person (for the purposes of this definition "control," when used with respect to any specified person, shall mean the power to direct the management and policies of such person, directly or indirectly, whether through ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing). (b) "Business Day" shall mean a day Monday through Friday on which banks are generally open for business in New York. Page 13 (c) "Holders" shall mean the Subscribers and any person holding Registrable Securities to whom the rights under Article IV have been transferred in accordance with Section 4.9 hereof. (d) "Person" shall mean any person, individual, corporation, partnership, trust or other nongovernmental entity or any governmental agency, court, authority or other body (whether foreign, federal, state, local or otherwise). (e) The terms "register," "registered" and "registration" refer to the registration effected by preparing and filing a registration statement in compliance with the Act, and the declaration or ordering of the effectiveness of such registration statement. (f) "Registrable Securities" shall mean (A) the Common Stock and (B) any Common Stock issued as (or issuable upon the conversion of any warrant, right or other security which is issued as) a dividend or other distribution with respect to or in replacement of the Shares; provided, however, that securities shall only be treated as Registrable Securities if and only for so long as they (I) have not been disposed of pursuant to a registration statement declared effective by the Commission, (II) have not been sold in a transaction exempt from the registration and prospectus delivery requirements of the Act so that all transfer restrictions and restrictive legends with respect thereto are removed upon the consummation of such sale, (III) are not saleable as exempt securities pursuant to Section 3(a)(10) of the Securities Act of 1933 or (IV) are held by a Holder or a permitted transferee pursuant to Section 4.9. (g) "Registration Expenses" shall mean all expenses incurred by the Company in complying with Section 4.2 hereof, including, without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and expenses of counsel for the Company, blue sky fees and expenses (for a reasonable number of states) and the expense of any special audits incident to or required by any such registration (but excluding the fees of legal counsel for any Holder). (h) "Registration Statement" shall have the meaning ascribed to such term in Section 4.2. (i) "Registration Period" shall have the meaning ascribed to such term in Section 4.4. (j) "Selling Expenses" shall mean all underwriting discounts and selling commissions applicable to the sale of Registrable Securities and all fees and expenses of legal counsel for any Holder. Page 14 4.2 The Company agrees that no later than 180 days after (x) the closing date of the first registration statement for an initial public offering of the Common Stock of the Company registered under the Act or (y) the first date on which the Common Stock of the Company (or securities received in exchange for Common Stock of the Company) trades on a national securities exchange, on the National Association of Security Dealers, Inc. Automated Quotations System ("NASDAQ"), on the OTC Electronic Bulletin Board or in "pink sheets", the Company will file a registration statement (the "Registration Statement") with the Commission and use its reasonable best efforts to effect the registration, qualifications or compliances (including, without limitation, the execution of any required undertaking to file post-effective amendments, appropriate qualifications under applicable blue sky or other state securities laws and appropriate compliance with applicable securities laws, requirements or regulations) as may be so reasonably requested and as would permit or facilitate the sale and distribution of all Registrable Securities. Notwithstanding the foregoing, the Company (i) will not be obligated to enter into any underwriting agreement for the sale of any of the Shares and (ii) may delay the filing for a period not to exceed sixty (60) days if the Company determines in good faith that such filing would have an adverse effect on the Company or would otherwise be inadvisable. 4.3 All Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to Section 4.2 shall be borne by the Company. All Selling Expenses relating to the sale of securities registered by or on behalf of Holders shall be borne by such Holders pro rata on the basis of the number of securities so registered. 4.4 In the case of the registration, qualification or compliance effected by the Company pursuant to this Agreement, the Company will, upon reasonable request, inform each Holder as to the status of such registration, qualification and compliance. At its expense the Company will: (a) use its reasonable best efforts to keep such registration and any qualification or compliance under state securities laws which the Company determines to obtain, continuously effective until the Holders have completed the distribution described in the registration statement relating thereto. The period of time during which the Company is required hereunder to keep the Registration Statement effective is referred to herein as the "Registration Period." Notwithstanding the foregoing, at the Company's election the Company may cease to keep such registration, qualification or compliance effective with respect to any Registrable Securities, and the registration rights of a Holder shall expire, at such time as the Holder may sell under Rule 144 under the Act (or other exemption from registration acceptable to the Company) in a three-month period all Registrable Securities then held by such Holder; and (b) advise the Holders: Page 15 (i) when the Registration Statement or any amendment thereto has been filed with the Commission and when the registration statement or any post-effective amendment thereto has become effective; (ii) of any request by the Commission for amendments or supplements to the Registration Statement or the prospectus included therein or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for such purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Shares included therein for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (v) of the happening of any event that requires the making of any changes in the Registration Statement or the prospectus so that, as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the prospectus, in the light of the circumstances under which they were made) not misleading; (c) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of any Registration Statement at the earliest possible time; (d) furnish to each Holder, without charge, at least one copy of such Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits (including those incorporated by reference) in the form filed with the Commission; (e) during the Registration Period, deliver to each Holder, without charge, as many copies of the prospectus included in such Registration Statement and any amendment or supplement thereto as such Holder may reasonably request; and the Company consents to the use, consistent with the provisions hereof, of the prospectus or any amendment or supplement thereto by each of the selling Holders of Registrable Securities in connection with the offering and sale of the Registrable Securities covered by the prospectus or any amendment or supplement thereto. In addition, upon the reasonable request of the Subscriber and subject in all cases to confidentiality protections reasonably acceptable to the Company, the Company will meet with a Subscriber or a representative thereof at the Company's headquarters to discuss all information relevant for disclosure in the Registration Statement covering the Registrable Securities, and will otherwise cooperate with any Subscriber Page 16 conducting an investigation for the purpose of reducing or eliminating such Subscriber's exposure to liability under the Act, including the reasonable production of information at the Company's headquarters; (f) during the Registration Period, deliver to each Holder, without charge, (i) as soon as practicable (but in the case of the annual report of the Company to its stockholders, within 120 days after the end of each fiscal year of the Company) one copy of: (A) its annual report to its stockholders (which annual report shall contain financial statements audited in accordance with generally accepted accounting principles in the United States of America by a firm of certified public accountants of recognized standing); (B) if not included in substance in its annual report to stockholders, its annual report on Form 10-K (or similar form); (C) each of its quarterly reports to its stockholders, and, if not included in substance in its quarterly reports to stockholders, its quarterly report on Form 10-Q (or similar form), and (D) a copy of the full Registration Statement (the foregoing, in each case, excluding exhibits); and (ii) upon reasonable request, all exhibits excluded by the parenthetical to the immediately preceding clause (D), and all other information that is generally available to the public; (g) prior to any public offering of Registrable Securities pursuant to any Registration Statement, register or qualify for offer and sale under the securities or blue sky laws of such jurisdictions as any such Holders reasonably request in writing, provided that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction, and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Registrable Securities covered by such Registration Statement; (h) cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold pursuant to any Registration Statement free of any restrictive legends to the extent not required at such time and in such denominations and registered in such names as Holders may request at least three business days prior to sales of Registrable Securities pursuant to such Registration Statement; (i) upon the occurrence of any event contemplated by Section 4.4(b)(v) above, the Company shall promptly prepare a post-effective amendment to the Registration Statement or a supplement to the related prospectus, or file any other required document so that, as thereafter delivered to purchasers of the Registrable Securities included therein, the prospectus will not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (j) use its reasonable efforts to comply with all applicable rules and regulations of the Commission, and will make generally available to the Holders not later than 45 days (or 90 days if the fiscal quarter is the fourth fiscal quarter) after the end of its fiscal Page 17 quarter in which the first anniversary date of the effective date of the Registration Statement occurs, an earnings statement satisfying the provisions of Section 11(a) of the Act. 4.5 The Holders shall have no right to take any action to restrain, enjoin or otherwise delay any registration pursuant to Section 4.2 hereof as a result of any controversy that may arise with respect to the interpretation or implementation of this Agreement. 4.6 (a) To the extent permitted by law, the Company will indemnify each Holder, each underwriter of the Shares and each person controlling such Holder within the meaning of Section 15 of the Act, with respect to which any registration, qualification or compliance has been effected pursuant to this Agreement, against all claims, losses, damages and liabilities (or action in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened (subject to Section 4.6(c) below), arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus or offering circular, or any amendment or supplement thereof, incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in light of the circumstances in which they were made, and will reimburse each Holder, each underwriter of the Shares and each person controlling such Holder, for reasonable legal and any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action as incurred, provided that the Company will not be liable in any such case to the extent that any untrue statement or omission or allegation thereof is made in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Holder and stated to be specifically for use in preparation of such registration statement, prospectus or offering circular; provided that the Company will not be liable in any such case where the claim, loss, damage or liability arises out of or is related to the failure of the Holder to comply with the covenants and agreements contained in this Agreement respecting sales of Registrable Securities, and except that the foregoing indemnity agreement is subject to the condition that, insofar as it relates to any such untrue statement or alleged untrue statement or omission or alleged omission made in the preliminary prospectus but eliminated or remedied in the amended prospectus on file with the Securities and Exchange Commission at the time the registration statement becomes effective or in the amended prospectus filed with the Commission pursuant to Rule 424(b) or in the prospectus subject to completion and term sheet under Rule 434 of the Act, which together meet the requirements of Section 10(a) of the Act (the "Final Prospectus"), such indemnity agreement shall not inure to the benefit of any such Holder, any such underwriter or any such controlling person, if a copy of the Final Prospectus was not furnished to the person or entity asserting the loss, liability, claim or damage at or prior to the time such furnishing is required by the Act. (b) Each Holder will severally, if Registrable Securities held by such Holder are included in the securities as to which such registration, qualification or compliance Page 18 is being effected, indemnify the Company, each of its directors and officers, each underwriter of the Shares and each person who controls the Company within the meaning of Section 15 of the Act, against all claims, losses, damages and liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened (subject to Section 4.6(c) below), arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus or offering circular, or any amendment or supplement thereof, incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in light of the circumstances in which they were made, and will reimburse the Company, such directors and officers, each underwriter of the Shares and each person controlling the Company for reasonable legal and any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action as incurred, in each case to the extent, but only to the extent, that such untrue statement or omission or allegation thereof is made in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Holder and stated to be specifically for use in preparation of such registration statement, prospectus or offering circular; provided that the indemnity shall not apply to the extent that such claim, loss, damage or liability results from the fact that a current copy of the prospectus that was made available to the Holder was not sent or given to the person asserting any such claim, loss, damage or liability at or prior to the written confirmation of the sale of the Registrable Securities confirmed to such person if such current copy of the prospectus would have cured the defect giving rise to such loss, claim, damage or liability. Notwithstanding the foregoing, in no event shall a Holder be liable for any such claims, losses, damages or liabilities in excess of the proceeds received by such Holder in the offering, except in the event of fraud by such Holder. (c) Each party entitled to indemnification under this Section 4.6 (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such Indemnified Party's expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Agreement, unless such failure is prejudicial to the Indemnifying Party in defending such claim or litigation. An Indemnifying Party shall not be liable for any settlement of an action or claim effected without its written consent (which consent will not be unreasonably withheld). (d) If the indemnification provided for in this Section 4.6 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any Page 19 loss, liability, claim, damage or expense referred to therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party thereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions which resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. 4.7 (a) Each Holder agrees that, upon receipt of any notice from the Company of the happening of any event requiring the preparation of a supplement or amendment to a prospectus relating to Registrable Securities so that, as thereafter delivered to the Holders, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, each Holder will forthwith discontinue disposition of Registrable Securities pursuant to the registration statement contemplated by Section 4.2 until its receipt of copies of the supplemented or amended prospectus from the Company and, if so directed by the Company, each Holder shall deliver to the Company all copies, other than permanent file copies then in such Holder's possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice. (b) Each Holder agrees to suspend, upon request of the Company, any disposition of Registrable Securities pursuant to the registration statement and prospectus contemplated by Section 4.2 during (A) any period not to exceed two 30-day periods within any one 12-month period the Company requires in connection with a primary underwritten offering of equity securities (or such longer period as required by the underwriter of such offering) and (B) any period, not to exceed one 60-day period per circumstance or develop ment, when the Company determines in good faith that offers and sales pursuant thereto should not be made by reason of the presence of material undisclosed circumstances or developments with respect to which the disclosure that would be required in such a prospectus is premature, would have an adverse effect on the Company or is otherwise inadvisable. (c) As a condition to the inclusion of its Registrable Securities, each Holder shall furnish to the Company such information regarding such Holder and the distribution proposed by such Holder as the Company may request in writing or as shall be required in connection with any registration, qualification or compliance referred to in this Article IV. Page 20 (d) Each Holder hereby covenants with the Company (1) not to make any sale of the Registrable Securities without effectively causing the prospectus delivery requirements under the Act to be satisfied, and (2) if such Registrable Securities are to be sold by any method or in any transaction other than on Nasdaq (or other national securities exchange), in the over-the-counter market, in privately negotiated transactions, or in a combination of such methods, to notify the Company at least five business days prior to the date on which the Holder first offers to sell any such Shares. (e) Each Holder acknowledges and agrees that the Registrable Securities sold pursuant to the registration statement described in this Section are not transferable on the books of the Company unless the stock certificate submitted to the transfer agent evidencing such Shares is accompanied by a certificate reasonably satisfactory to the Company to the effect that (A) the Registrable Securities have been sold in accordance with such registration statement and (B) the requirement of delivering a current prospectus has been satisfied. (f) Each Holder agrees not to take any action with respect to any distribution deemed to be made pursuant to such registration statement, that constitutes a violation of Rule 10(b)-6 under the Exchange Act or any other applicable rule, regulation or law. (g) At the end of the period during which the Company is obligated to keep the registration statement current and effective as described above, the Holders of Registrable Securities included in the registration statement shall discontinue sales of shares pursuant to such registration statement upon receipt of notice from the Company of its intention to remove from registration the shares covered by such registration statement which remain unsold, and such Holders shall notify the Company of the number of shares registered which remain unsold immediately upon receipt of such notice from the Company. 4.8 With a view to making available to the Holders the benefits of certain rules and regulations of the Commission which at any time permit the sale of the Registrable Securities to the public without registration, the Company agrees to use its reasonable best efforts to: (a) make and keep public information available, as those terms are understood and defined in Rule 144 under the Act, at all times; (b) file with the Commission in a timely manner all reports and other documents required of the Company under the Exchange Act; and (c) so long as a Holder owns any unregistered Registrable Securities, furnish to such Holder upon any reasonable request a written statement by the Company as to its compliance with Rule 144 under the Act, and of the Exchange Act, a copy of the most Page 21 recent annual or quarterly report of the Company, and such other reports and documents of the Company as such Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any such securities without registration. 4.9 The rights to cause the Company to register Registrable Securities granted to the Holders by the Company under Section 4.1 may be assigned in full by a Holder, provided, that: (i) such transfer may otherwise be effected in accordance with applicable securities laws; (ii) such transfer involves not less than the lesser of all of such Holder's Shares or 100,000 Shares; (iii) such Holder gives prior written notice to the Company; and (iv) such transferee agrees to comply with the terms and provisions of this Agreement, including, without limitation, the restrictions in Section 1.17, and such transfer is otherwise in compliance with this Agreement. Except as specifically permitted by this Section 4.9, the rights of a Holder with respect to Registrable Securities as set out herein shall not be transferable to any other Person, and any attempted transfer shall cause all rights of such Holder therein to be forfeited. 4.10 With the written consent of the Company and the Holders holding at least a majority of the Registrable Securities that are then outstanding, any provision of this Article IV may be waived (either generally or in a particular instance, either retroactively or prospectively and either for a specified period of time or indefinitely) or amended. Upon the effectuation of each such waiver or amendment, the Company shall promptly give written notice thereof to the Holders, if any, who have not previously received notice thereof or consented thereto in writing. 4.11 If the Company files a registration statement with the Commission in connection with a public offering of the Company's securities, the Subscriber, by accepting this Agreement, agrees, if so requested by the Company, that such Subscriber will not directly or indirectly sell, make any short sale of, grant any option for the purchase of, or otherwise dispose of any capital stock of the Company during the 30-day period ending, and the 180-day period beginning (or any such other period as is required by the underwriter of such offering) on the first date of the effectiveness of such registration statement. Upon request, the Subscriber will sign an agreement in reasonable form to such effect with the underwriter of such an offering. ARTICLE V. MISCELLANEOUS 5.1 Any notice or other communication given hereunder shall be deemed sufficient if in writing and sent by registered or certified mail, return receipt requested, or delivered by hand against written receipt therefor, addressed to RhoMed Incorporated, 4261 Balloon Park Road NE, Albuquerque, NM, 87109-5802, Attn: President, and to the Subscrib er at the Subscriber's address indicated on the signature page of this Agreement. Notices shall be deemed to have been given or delivered on the date of mailing, except notices of change of address, which shall be deemed to have been given or delivered when received. Page 22 5.2 This Agreement shall not be changed, modified or amended except by a writing signed by the parties to be charged, and this Agreement may not be discharged except by performance in accordance with its terms or by a writing signed by the party to be charged. 5.3 This Agreement shall be binding upon and inure to the benefit of the parties hereto and to their respective heirs, legal representatives, successors and assigns. This Agreement sets forth the entire agreement and understanding between the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them. 5.4 Upon the execution and delivery of this Agreement by the Subscriber, this Agreement shall become a binding obligation of the Subscriber with respect to the purchase of Units as herein provided; subject, however, to the right hereby reserved to the Company to enter into the same agreements with other subscribers and to add and/or delete other persons as subscribers. 5.5 NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EX PRESSLY AGREE THAT ALL THE TERMS AND PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. 5.6 In order to discourage frivolous claims the parties agree that unless a claimant in any proceeding arising out of this Agreement succeeds in establishing his claim and recovering a judgment against another party (regardless of whether such claimant succeeds against one of the other parties to the action), then the other party shall be entitled to recover from such claimant all of its/their reasonable legal costs and expenses relating to such proceeding and/or incurred in preparation therefor. 5.7 The holding of any provision of this Agreement to be invalid or unenforceable by a court of competent jurisdiction shall not affect any other provision of this Agreement, which shall remain in full force and effect. If any provision of this Agreement shall be declared by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced in whole or in part, such provision shall be interpreted so as to remain enforceable to the maximum extent permissible consistent with applicable law and the remaining conditions and provisions or portions thereof shall nevertheless remain in full force and effect and enforceable to the extent they are valid, legal and enforceable, and no provisions shall be deemed dependent upon any other covenant or provision unless so expressed herein. 5.8 It is agreed that a waiver by either party of a breach of any provision of this Agreement shall not operate, or be construed, as a waiver of any subsequent breach by that same party. Page 23 5.9 The parties agree to execute and deliver all such further documents, agreements and instruments and take such other and further action as may be necessary or appropriate to carry out the purposes and intent of this Agreement. 5.10 This Agreement may be executed in two or more counterparts each of which shall be deemed an original, but all of which shall together constitute one and the same instrument. Page 24 ARTICLE VI. NOTICE TO, AND REPRESENTATIONS AND COVENANTS OF UNITED STATES AND CERTAIN STATE RESIDENTS 6.1 FOR ALL UNITED STATES RESIDENTS: THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHER MORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTA TION TO THE CONTRARY IS A CRIMINAL OFFENSE. 6.2 FOR CALIFORNIA RESIDENTS ONLY: THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS OFFERING HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPTED FROM QUALIFICATION BY SECTION 25100, 25102 OR 25104 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS OFFERING ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICA TIONS BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT. 6.3 FOR CONNECTICUT RESIDENTS ONLY: THE SECURITIES HAVE NOT BEEN REGISTERED UNDER SECTION 36-485 OF THE CONNECTICUT UNIFORM SECURITIES ACT AND, THEREFORE, CANNOT BE RESOLD UNLESS REGISTERED UNDER SUCH ACT OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE UNDERSIGNED ACKNOWLEDGES THAT THE SECURITIES HAVE NOT BEEN REGISTERED UNDER SECTION 36-485 OF THE CONNECTICUT UNIFORM Page 25 SECURITIES ACT AND ARE OFFERED AND SOLD PURSUANT TO AN EXEMPTION THEREFROM. THE SECURITIES CANNOT BE SOLD OR TRANSFERRED UNLESS THEY ARE REGISTERED OR EXEMPT FROM REGISTRATION UNDER THE CONNECTICUT UNIFORM SECURITIES ACT OR SOLD IN A TRANSACTION WHICH IS EXEMPT UNDER SAID ACT. 6.4 FOR FLORIDA RESIDENTS ONLY: THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE FLORIDA SECURITIES ACT AND ARE BEING SOLD IN RELIANCE UPON AN EXEMPTION PROVIDED BY SECTION 517.061 THEREOF. UNLESS THE SECURI TIES ARE REGISTERED, THEY MAY NOT BE REOFFERED FOR SALE OR RESOLD IN THE STATE OF FLORIDA EXCEPT AS AN EXEMPT SECURITY OR IN AN EXEMPT TRANSACTION UNDER SAID ACT. 6.5 FOR IOWA RESIDENTS ONLY: THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. 6.6 FOR MASSACHUSETTS RESIDENTS ONLY: WITH RESPECT TO ACCREDITED INVESTORS WHO ARE NATURAL PERSONS, THE INVESTMENT MUST BE SUITABLE AND IS PRESUMED SUITABLE IF THE INVESTMENT DOES NOT EXCEED 25 PERCENT OF THE INVESTOR'S INDIVIDUAL NET WORTH OR NET WORTH COMBINED WITH SPOUSE, EXCLUSIVE OF PRINCIPAL RESIDENCE AND FURNISHINGS. 6.7 FOR PENNSYLVANIA RESIDENTS ONLY: EACH PENNSYLVANIA RESIDENT WHO PURCHASED THE SECURITIES REPRE SENTED BY THIS CERTIFICATE HAS AGREED NOT TO SELL THESE SECURITIES FOR A PERIOD OF TWELVE (12) MONTHS AFTER THE DATE OF PURCHASE. PURSUANT TO SECTION 207 OF THE PENNSYLVANIA SECURITIES ACT OF 1972, EACH PERSON WHO ACCEPTS THIS OFFER TO PURCHASE SECURITIES EXEMPT FROM REGISTRATION BY SECTION 203 OF THE PENNSYLVANIA SECURITIES ACT OF 1972 DIRECTLY FROM THE COMPANY OR ITS AFFILIATES WILL HAVE Page 26 THE RIGHT TO WITHDRAW HIS ACCEPTANCE WITHOUT INCURRING ANY LIABILITY TO THE SELLER, SELLING AGENTS OR ANY OTHER PERSON, WITHIN TWO (2) BUSINESS DAYS AFTER HE MAKES THE INITIAL PAYMENT FOR THE SECURITIES BEING OFFERED. TO ACCOMPLISH THIS WITHDRAWAL, A SUBSCRIBER NEED ONLY SEND A LETTER OR TELEGRAM TO THE ISSUER AT THE ADDRESS SET FORTH IN THE TEXT OF THE OFFERING LITERATURE, INDICATING HIS OR HER INTENTION TO WITHDRAW. SUCH LETTER OR TELEGRAM SHOULD BE SENT AND POSTMARKED PRIOR TO THE END OF THE AFOREMENTIONED SECOND BUSINESS DAY. IT IS PRUDENT TO SEND SUCH LETTER BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ENSURE THAT IT IS RECEIVED AND TO EVIDENCE THE TIME WHEN IT WAS MAILED. IF THE REQUEST IS MADE ORALLY IN PERSON OR BY TELEPHONE TO THE ISSUER AT THE NUMBER LISTED IN THE TEXT OF THE OFFERING LITERATURE, A WRITTEN CONFIRMATION THAT THE REQUEST HAS BEEN RECEIVED SHOULD BE REQUESTED. Page 27 ARTICLE VII. CONFIDENTIAL INVESTOR QUESTIONNAIRE 7.1 The Subscriber represents and warrants that he, she or it comes within one category marked below, and that for any category marked, he or she has truthfully set forth, where applicable, the factual basis or reason the Subscriber comes within that category. ALL INFORMATION IN RESPONSE TO THIS SECTION WILL BE KEPT STRICTLY CONFIDENTIAL. The undersigned agrees to furnish any additional information which the Company deems necessary in order to verify the answers set forth below. Category A__ The undersigned is an individual (not a partnership, corporation, etc.) whose individual net worth, or joint net worth with his or her spouse, presently exceeds $1,000,000. Explanation. In calculating net worth you may include equity in personal property and real estate, including your principal residence, cash, short-term investments, stock and securities. Equity in personal property and real estate should be based on the fair market value of such property less debt secured by such property. Category B__ The undersigned is an individual (not a partnership, corporation, etc.) who had an income in excess of $200,000 in each of the two most recent years, or joint income with his or her spouse in excess of $300,000 in each of those years (in each case includ ing foreign income, tax exempt income and full amount of capital gains and loses but excluding any income of other family members and any unrealized capital appreciation) and has a reasonable expectation of reaching the same income level in the current year. Category C__ The undersigned is a director or executive officer of the Compa ny which is issuing and selling the Units. Category D__ The undersigned is a bank; a savings and loan association, insurance company, registered investment company; registered business development company; licensed small business invest ment company ("SBIC"); or employee benefit plan within the meaning of Title 1 of ERISA and (a) the investment decision is made by a plan fiduciary which is either a bank, savings and loan association, insurance company or registered investment advisor, or (b) the plan has total assets in excess of $5,000,000 Page 28 or is a self directed plan with investment decisions made solely by persons that are accredited investors. ---------------------------- ---------------------------- (describe entity) Category E__ The undersigned is a private business development company as defined in section 202(a)(22) of the Investment Advisors Act of 1940. ---------------------------- ---------------------------- (describe entity) Category F__ The undersigned is a corporation, partnership, Massachusetts business trust, or non-profit organization within the meaning of Section 501(c)(3) of the Internal Revenue Code, in each case not formed for the specific purpose of acquiring the Units and with total assets in excess of $5,000,000. ---------------------------- ---------------------------- (describe entity) Category G__ The undersigned is a trust with total assets in excess of $5,000, 000, not formed for the specific purpose of acquiring the Units, where the purchase is directed by a "sophisticated person" as defined in Regulation 506(b)(2)(ii). Category H__ The undersigned is an entity all the equity owners of which are "accredited investors" within one or more of the above catego ries. If relying upon this Category alone, each equity owner must complete a separate copy of this Agreement. ---------------------------- ---------------------------- (describe entity) Page 29 Category I The undersigned is not within any of the categories above and is therefore not an accredited investor. The undersigned is informed of the significance to you of the foregoing representations, and they are made with the intention that you will rely on them. 7.2 SUITABILITY (please answer each question) (a) Describe your current employment, including the company by which you are employed and its principal business: - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (b) Describe any college or graduate degrees held by you: - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (c) Types of prior investments: - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (d) Have you participated in other private placements before: YES_______ NO_______ (e) Please indicate frequency of such prior participation in private placements of: Public Private Public or Private Companies Companies Biotechnology Companies --------- --------- ----------------------- Frequently ------ ------- -------- Occasionally ------ ------- -------- Never ------ ------- -------- Page 30 (f) Do you expect your current level of income to significantly decrease in the foreseeable future: YES_______ NO_______ (g) Do you have any other investments or contingent liabilities which you reasonably anticipate could cause you to need sudden cash requirements in excess of cash readily available to you: YES_______ NO_______ (h) Are you familiar with the risk aspects and the non-liquidity of investments such as the securities for which you seek to subscribe? YES_______ NO_______ (i) Do you understand that there is no guarantee of financial return on this investment and that you run the risk of losing your entire investment? YES_______ NO_______ Page 31 7.3 MANNER IN WHICH TITLE TO BE HELD (circle one) (a) Individual Ownership (b) Community Property (c) Joint Tenant with Right of Survivorship (both parties must sign) (d) Partnership* (e) Tenants in Common (f) Corporation* (g) Trust* (h) Other *If Units are being subscribed for by an entity, the attached Certificate of Signatory must also be completed. Page 32 7.4 NASD Affiliation Are you affiliated or associated with an NASD member firm (please check one): Yes _________ No __________ If Yes, please describe: - --------------------------------------------------------- - --------------------------------------------------------- - --------------------------------------------------------- *If Subscriber is a Registered Representative with an NASD member firm, have the following acknowledgment signed by the appropriate party: The undersigned NASD member firm acknowledges receipt of the notice required by Article 3, Sections 28(a) and (b) of the Rules of Fair Practice. - --------------------------------- Name of NASD Member Firm By: ______________________________ Authorized Officer Date: ____________________________ Page 33 7.5 REPRESENTATIONS AND WARRANTIES The Undersigned hereby represents and warrants to the Company as follows: The Undersigned has been informed of the significance to the Company of the foregoing representations and answers contained in this Agreement. The answers to the foregoing questions are true, complete and correct and have been provided under the assumption that the Company will rely upon them for all purposes, including but not limited to the purpose of determining whether the offering in which I propose to participate is exempt from registration under federal and state securities laws. The Undersigned will notify the Company immediately, at any time on or prior to the Final Closing Date, in the event that the representations and warranties in this Agreement shall cease to be true, accurate and complete. The Undersigned is able to bear the economic risk of the investment and, at the present time, can afford a complete loss of such investment. Page 34 SIGNATURE PAGE NUMBER OF UNITS X $100,000 = (THE "PURCHASE PRICE") ---------- --------------- - ----------------------------------- --------------------------------- Signature Signature (if purchasing jointly) - ----------------------------------- --------------------------------- Name Typed or Printed Name Typed or Printed - ----------------------------------- --------------------------------- Address Address - ----------------------------------- --------------------------------- City, State and Zip Code City, State and Zip Code - ----------------------------------- --------------------------------- Telephone-Business Telephone--Business - ----------------------------------- --------------------------------- Telephone-Residence Telephone--Residence - ----------------------------------- --------------------------------- Facsimile-Business Facsimile--Business - ----------------------------------- --------------------------------- Facsimile-Residence Facsimile--Residence - ----------------------------------- --------------------------------- Tax ID # or Social Security # Tax ID # or Social Security # Name in which securities should be issued: Dated:___________________________, 1996 This Subscription Agreement is agreed to and accepted as of , 1996. RHOMED INCORPORATED By:_____________________________________ Name: Edward J. Quilty Title: CEO and Chairman Page 35 CERTIFICATE OF SIGNATORY (To be completed if Units are being subscribed for by an entity) I,____________________, am the_____________________ of _____________________________________________ (the "Entity"). I certify that I am empowered and duly authorized by the Entity to execute and carry out the terms of the Subscription Agreement and to purchase and hold the Units, and certify further that the Subscription Agreement has been duly and validly executed on behalf of the Entity and constitutes a legal and binding obligation of the Entity. IN WITNESS WHEREOF, I have set my hand this day of ,_____ ______, 1996. -------------------- (Signature) Page 36 EX-21.1 30 SUBSIDIARIES ANNUAL REPORT ON FORM 10-KSB For the transition period from September 1, 1995 to June 30, 1996 Commission file number 0-22686 PALATIN TECHNOLOGIES, INC. Exhibit 21.1, subsidiaries of the registrant
Names under which Name of subsidiary: State of incorporation: subsidiary does business: - ------------------- ----------------------- ------------------------- RhoMed Incorporated New Mexico RhoMed Incorporated Ediflex Digital Systems, Inc. Delaware Ediflex Digital Systems, Inc. Interfilm Technologies, Inc. New York Interfilm Technologies, Inc.
EX-23.1 31 CONSENT OF ARTHUR ANDERSEN As independent public accountants, we hereby consent to the incorporation in this Form 10-KSB of our report dated July 31, 1996. It should be noted that we have not audited any financial statements of the Company subsequent to June 30, 1996 or performed any audit procedures subsequent to the date of our report. /s/ ARTHUR ANDERSEN LLP -------------------------- ARTHUR ANDERSEN LLP Albuquerque, New Mexico September 24, 1996 EX-27 32 ARTICLE 5 FINANCIAL DATE SCHEDULE
5 This schedule contains summary financial information extracted from financial statements for the ten month period ended June 30, 1996 and is qualified in its entirety by reference to such financial statements. 10-MOS JUN-30-1996 SEP-1-1995 JUN-30-1996 6,791,300 0 4,461 0 0 6,862,304 279,889 183,535 7,041,205 2,359,400 1,843,598 0 0 115,388 2,722,819 2,838,207 24,457 24,457 0 2,120,239 1,802,097 0 0 0 0 (3,897,879) 0 0 0 (3,897,879) 0 0
EX-99.1 33 CERTIFICATE OF LIMITED PARTNERSHIP STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 09:00 AM 06/17/1996 960174859 - 2634913 CERTIFICATE OF LIMITED PARTNERSHIP OF THE INTERFILM STOCKHOLDERS LIMITED PARTNERSHIP This Certificate of Limited Partnership of The Interfilm Stockholders Limited Partnership is being executed by the undersigned for the purpose of forming a limited partnership pursuant to the Delaware Revised Uniform Limited Partnership Act. 1. The name of the limited partnership is The Interfilm Stockholders Limited Partnership. 2. The address of the registered office of the limited partnership in Delaware is 1209 Orange Street, Wilmington, Delaware 19801. The limited partnership's registered agent at that address is The Corporation Trust Company. 3. The name and address of the general partner is: NAME ADDRESS ---- ------- Fab Five, Inc. 110 Greene Street, Suite 601 New York, New York 10012 IN WITNESS WHEREOF, the undersigned, constituting all of the general partners of the Partnership, have caused this Certificate of Limited Partnership, which shall become effective on June 17, 1996, to be duly executed as of the 11th day of June, 1996. FAB FIVE, INC. By: /s/ William Franzblau ---------------------------- William Franzblau, President EX-99.2 34 AGREEMENT OF LIMITED PARTNERSHIP AGREEMENT OF LIMITED PARTNERSHIP OF THE INTERFILM STOCKHOLDERS LIMITED PARTNERSHIP This AGREEMENT OF LIMITED PARTNERSHIP of The Interfilm Stockholders Limited Partnership (the "Partnership") is made and entered into as of the 11th day of June, 1996, by and among Fab Five, Inc., a New Jersey corporation ("FFI"), and whose address is set forth on Schedule A hereto, as the General Partner, and those persons whose names and addresses are set forth on Schedule A hereto as Limited Partners with reference to the following: A. Pursuant to that certain Agreement and Plan of Reorganization dated as of April 12, 1996 (the "Merger Agreement") by and among RhoMed Incorporated, ("RhoMed"), Interfilm, Inc. ("Interfilm") and Interfilm Acquisition Corp. ("InSub"), concurrently herewith, InSub will merge (the "Merger") with and into RhoMed and each issued and outstanding share of the Preferred Stock and Common Stock of RhoMed will be converted into shares of Interfilm Series A Preferred Stock and Interfilm Series B Preferred Stock, respectively. B. In connection with the Merger and pursuant to the Merger Agreement, the assets of Interfilm and Interfilm Technologies, Inc. ("ITI") set forth on Exhibit A attached hereto (the "Interfilm Assets") are being transferred herewith to the Partnership effective immediately after the effective time of the Merger (the "Effective Time") to hold, liquidate and distribute the same as set forth herein. C. Pursuant to the Merger Agreement, The Interfilm Stockholders Trust (the "Trust") has been established to hold on behalf of certain stockholders of Interfilm a limited partnership interest in the Partnership. In consideration of the mutual covenants herein contained and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows: ARTICLE I FORMATION OF LIMITED PARTNERSHIP 1.1 Formation. The General Partner and the Limited Partners hereby agree by execution of this Agreement to form a limited partnership under the provisions of the Delaware 1 Revised Uniform Limited Partnership Act (the "Delaware Act"). Each party hereto represents and warrants that it is duly authorized to join in such limited partnership and that the person executing this Agreement of Limited Partnership on its behalf is duly authorized to do so. 1.2 Partnership Name. The name of the Partnership shall be "The Interfilm Stockholders Limited Partnership." The business of the Partnership may be conducted under such other name or names as the General Partner may from time to time select. 1.3 Certificate of Limited Partnership. The Partners shall execute a Certificate of Limited Partnership (the "Certificate") pursuant to the provisions of the Delaware Act. The General Partner shall file the executed copy of the Certificate together with a duplicate copy with the Secretary of State of the State of Delaware, and upon receipt from the Secretary of State of the duplicate copy of the Certificate (and any certificates of amendment thereto that may subsequently be filed) marked "Filed", the General Partner shall promptly deliver or mail a copy of such Certificate (or any such certificate of amendment) to each Limited Partner. The Partners hereby agree to execute, and the General Partner agrees to file, and record all such other certificates and documents, including amendments to the Certificate, and to do such other acts as may be appropriate to comply with all requirements for the formation and operation of a limited partnership, the ownership of property, and the conduct of business under the laws of the State of Delaware and any other jurisdiction in which the Partnership may own property or conduct business. 1.4 Principal Business Office, Registered Office and Registered Agent. The principal business office of the Partnership shall be located at 110 Greene Street, Room 601, New York, New York 10012. The registered office of the Partnership shall be c/o The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801. The registered agent for service of process on the Partnership shall be The Corporation Trust Company, whose address is 1209 Orange Street, Wilmington, Delaware 19801. The principal business office, the registered office and the registered agent of the Partnership may be changed by the General Partner from time to time in accordance with the then applicable provisions of the Delaware Act and any other applicable laws. The General Partner shall give prompt written notice to the Limited Partners of any change of such business office, registered office or registered agent for service of process and file a certificate of amendment to the Certificate reflecting such change. 2 1.5 Term of Partnership. The Partnership shall commence upon the filing of the Certificate with the Secretary of State of the State of Delaware, and shall continue until December 31, 2006, unless the Partnership is sooner terminated and dissolved upon the happening of any of the following events: (a) The liquidation of all or substantially all of the Partnership Estate and the satisfaction of all probable transferee liabilities of the Partnership; (b) The agreement to dissolve the Partnership by the General Partner and the Limited Partners (acting by Consent of the Limited Partners); (c) The happening of any event that makes it unlawful for the Partnership's business to be continued or for the Partners to continue the Partnership's business in the form of a limited partnership; or (d) The Retirement of the General Partner, except as otherwise provided in Section 11.1(b). ARTICLE II DEFINED TERMS The defined terms used in this Agreement shall have the meanings specified below: "Affiliate" shall mean, with respect to any person, any other person directly or indirectly controlling, controlled by, or under direct or indirect common control with such person. The ownership by a person of ten percent (10%) or more of another person shall create a rebuttable presumption of control of such other person. "Agreement" shall mean this Agreement of Limited Partnership, including the exhibits and schedules attached hereto, as it may be further amended from time to time. "Assignee" shall have the meaning set forth in Section 10.1. "Capital Contribution" shall mean, as to any Partner, the amount of capital deemed contributed to the Partnership by such Partner pursuant to Section 4.1. "Certificate" shall have the meaning set forth in Section 1.3. 3 "Claims" shall have the meaning set forth in Section 7.5(a). "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, or any subsequent Federal law of similar import. "Consent of the Limited Partners" shall mean the written consent or approval of the Limited Partners whose Percentage Interests represent at least fifty percent (50%) of all Percentage Interests in the Partnership. "Delaware Act" shall have the meaning set forth in Section 1.1. "Determination" shall have the meaning set forth in Section 7.5(b). "Effective Time" shall have the meaning set forth in Recital B. "Event of Bankruptcy" shall mean, as to any Partner, the filing of a petition for relief as debtor or bankrupt under the Federal Bankruptcy Reform Act of 1978, as amended, or like provision of law; insolvency of such Partner as finally determined by a court proceeding; filing by such Partner, or another in respect of such Partner, of a petition or application to accomplish the same or for the appointment of a receiver or a trustee for such Partner or a substantial portion of its assets; or commencement of any proceeding relating to such Partner under any other reorganization, arrangement, insolvency, adjustment of debt or liquidation law of any jurisdiction, unless, with respect to any of the foregoing, such event of bankruptcy is susceptible to cure and is cured (and all proceedings dismissed with prejudice) within 90 days. "General Partner" shall mean Fab Five, Inc. or any individual or entity who becomes a General Partner as provided herein, in his or its capacity as a General Partner. "InSub" shall mean Interfilm Acquisition Corp., a New Mexico corporation. "Interfilm" shall mean Interfilm, Inc., a New Jersey corporation. "ITI" shall mean Interfilm Technologies, Inc., a Delaware corporation and a wholly owned subsidiary of Interfilm. 4 "Limited Partner" or "Limited Partners" shall mean any or all of the Limited Partners or any individual or entity who becomes a Substitute Limited Partner as provided herein, in his or its capacity as a Limited Partner. "Merger" shall have the meaning set forth in Recital A. "Merger Agreement" shall have the meaning set forth in Recital A. "Partnership" shall mean The Interfilm Stockholders Limited Partnership, a Delaware limited partnership. "Partnership Estate" shall mean the aggregate of the Interfilm Assets. "Partnership Receipts" shall mean all rents, royalties, income proceeds and other receipts of or from the Partnership Estate, including, without limitation, any recovery against Sony Corporation of America and its affiliates ("Sony") arising from litigation filed or to be filed against Sony (the "Sony Litigation") and any amounts obtained from the sale or licensing of any intellectual property. "Percentage Interest" of a Partner shall mean that percentage set forth after such Partner's name in Schedule A as the same may be adjusted from time to time in accordance with the provisions of this Agreement. "Private Letter Ruling" shall have the meaning set forth in Section 7.5(b). "Proceeds" shall have the meaning set forth in Section 7.5(b). "Record Date" shall mean the business day prior to the Effective Time. "Retirement" (including the verb form "Retire" and the adjective form "Retiring") means, as to a General Partner, the occurrence of an Event of Bankruptcy, dissolution without continuation, liquidation, or voluntary or involuntary withdrawal or retirement from the Partnership for any reason, or abandonment by the General Partner of its performance of its functions as the General Partner, including any state of facts by reason of which the General Partner may no longer continue as a General Partner by law or pursuant to any terms of this Agreement. "RhoMed" shall mean RhoMed Incorporated, a New Mexico corporation. 5 "Schedule A" shall mean the schedule attached hereto and marked as Schedule A, identifying the General Partner and the Limited Partners and stating their respective Percentage Interests. "Substitute Limited Partner" shall mean any individual or entity who becomes a Substitute Limited Partner pursuant to the provisions of Section 10.1. "Tax Assessment" shall have the meaning set forth in Section 7.5(b). "Tax Matters Partner" shall have the meaning set forth in Section 8.1. "Terminating Partner" shall have the meaning set forth in Section 11.1(b). "Trust" shall have the meaning set forth in Recital C. ARTICLE III PURPOSES POWERS AND LIMITATIONS 3.1 Purpose. The Partnership has been organized pursuant to Section 5.18(d) of the Merger Agreement for the primary purpose of receiving, liquidating and distributing the Partnership Estate, and, subject to the limitations set forth herein, its activities shall be limited to those reasonably necessary to, and consistent with, the accomplishment of such purpose. 3.2 Status of Partnership Estate. Except as provided herein, in no event shall any part of the Partnership Estate revert or be distributed to Interfilm, ITI or to any stockholder of Interfilm or ITI as such other than a Limited Partner entitled thereto under the terms of this Agreement. Any unclaimed part of the Partnership Estate shall be subject to disposition in accordance with applicable laws. 3.3 Limitations. No part of the Partnership Estate or the Partnership Receipts shall be used or disposed of by the General Partner for any purpose other than (i) for the purposes for which this Partnership was created as set forth herein, including without limitation, the payment of, and the creation of reserves for the payment of, the unpaid or contingent liabilities and debts of Interfilm as of the Effective Time, the indemnity obligations of Interfilm under the Merger Agreement or the liabilities of Interfilm existing as of the Effective Time which are assumed by the Partnership pursuant to the terms of the Merger Agreement and which are listed on Exhibit B attached hereto, 6 (collectively, the "Interfilm Liabilities") and the obligations, liabilities and the expenses incurred in connection with the administration of the Partnership Estate; and (ii) the distribution thereof to the Partners in accordance with the terms of this Agreement. In order to preserve and protect the Partnership Estate pending disposition or distribution thereof, the General Partner shall not invest monies forming a part of the Partnership Estate except in demand and time deposits in federally insured banks or savings institutions or short term certificates of deposit. ARTICLE IV CAPITAL CONTRIBUTIONS; DEFAULTS; CAPITAL ACCOUNTS 4.1 Capital Contributions. Immediately following the Effective Time, Interfilm and ITI shall irrevocably assign, set over and deliver to the Partnership the Interfilm Assets and each Partner's capital account shall be credited as set forth on Schedule A for such Partner's deemed share of the Interfilm Assets calculated in accordance with the percentage that the number of shares of Interfilm Common Stock beneficially owed by each Partner bears to the total number of shares of Interfilm Common Stock outstanding, each determined as of the Record Date, provided, however, that in the case of (a) the Trust, the Trust shall be deemed to own the aggregate number of shares of Interfilm Common Stock beneficially owned by all of the beneficiaries of the Trust and (b) FFI, FFI shall be deemed to own the shares of Interfilm Common Stock beneficially owned by William Franzblau. 4.2 No Further Additional Contributions. Except as otherwise provided in this Agreement, or upon the written agreement of all of the Partners, no Partner shall be required or permitted to make additional Capital Contributions to the Partnership. 4.3 No Interest on Capital. No Partner shall be entitled to receive interest on such Partner's Capital Contribution. 4.4 Capital Accounts. A capital account shall be established and maintained for each Partner. Each Partner's capital account shall be credited initially with an amount equal to such Partner's deemed initial Capital Contribution. Thereafter, the capital accounts of the Partners shall be credited with additional Capital Contributions, if any, charged for distributions made and credited or charged pursuant to the provisions of Article V, and shall otherwise 7 appropriately reflect the transactions of the Partnership and the Partners. ARTICLE V ALLOCATIONS AND DISTRIBUTIONS 5.1 Allocation of Profits and Losses. In each fiscal year, the items of income, gain, loss and deduction shall be allocated, for purposes of adjusting the Partners' respective capital accounts, among the Partners in accordance with their Percentage Interests. For purposes of income taxation, a Partner's share of income, gain, loss, deduction, or credit (or item thereof) shall be determined in accordance with the Partner's interest in the Partnership within the meaning of Section 704(b) of the Code. If, as the result of a transfer of an interest in the Partnership, or otherwise, there is a change in ownership, such allocation of the items of income, gain, loss and deduction shall take into account the varying interests of the Partners during such year (by appropriate and equitable adjustments consistent with the requirements of the Code and applicable regulations issued thereunder). 5.2 Distributions. (a) Subject to the provisions of this Agreement, the General Partner shall, as the General Partner in its sole discretion deems appropriate (but at least on an annual basis), distribute and pay, or cause to be distributed and paid, to the Partners on a date set by the General Partner, all or part of the Partnership Estate that remains after payment of, or provision for, expenses, liabilities, obligations, and reserves for contingent claims arising hereunder, including, without limitation, any retention amounts pursuant to Section 7.5 herein, and for potential claims of unlocated Partners, as provided herein and after the withholding of the taxes or charges, if any, as provided herein. Such distributions shall be made in proportion to the respective Percentage Interests of the Partners. (b)If any conflicting claims or demands are made or asserted to any interest of any Partner herein, the General Partner shall be entitled, at its sole election, to refuse to comply with any such conflicting claims or demands. The General Partner shall be entitled to refrain and refuse to act until (i) the rights of the adverse claimants have been adjudicated by a final judgment of a court of competent jurisdiction, or (ii) all differences have been adjusted by valid written agreement between all of such parties, and the General Partner shall have been furnished with an executed counterpart of such agreement; 8 the General Partner may, in its absolute discretion, require that there be furnished a surety bond or other security satisfactory to the General Partner to fully indemnify the General Partner as between all conflicting claims or demands. (c) Any portion of the Partnership Estate which shall be available to, but unclaimed or refused by, any Partner shall be deemed to be subject to applicable escheat laws, and the General Partner is expressly authorized to pay and/or deliver such portion of the Partnership Estate at such time or times as may be consonant with such laws and in accordance with the provisions thereof. (d) The General Partner shall make such reports in writing to each of the Partners as the General Partner deems appropriate. ARTICLE VI RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS 6.1 Limited Liability. No Limited Partner shall be personally liable for any of the debts, liabilities, obligations or contracts of the Partnership, nor shall a Limited Partner be required to lend any funds to the Partnership. 6.2 No Control. The Limited Partners shall not participate in the control of the management of the business of, or transact any business for, the Partnership. No Limited Partner shall have the power to sign for or bind the Partnership. 6.3 Examination of Partnership Records. The Limited Partners and their agents may, at any reasonable time, examine, audit and obtain copies of the books, records and accounts of the Partnership, inspect its properties or otherwise make reasonable inquiry as to Partnership affairs. ARTICLE VII RIGHTS AND OBLIGATIONS OF THE GENERAL PARTNER 7.1 Transfer to the General Partner. The General Partner agrees to accept the assets constituting the Partnership Estate, subject to the Interfilm Liabilities. However, the General Partner shall be responsible only for the assets delivered to it or registered in the Partnership's name and shall have no duty to make, nor incur any liability for failing to make, any search for unknown assets. The General Partner shall be responsible for only 9 those liabilities of which it is informed, and shall have no duty to make, nor incur any liability for failing to make, any search for unknown liabilities. The General Partner shall hold the Partnership Estate without provision for or the payment of any interest thereon to any Partner except that i nterest earned on any assets of the Partnership shall become a part of the Partnership Estate. 7.2 Payment of Liabilities. Prior to any distribution to the Partners the General Partner shall pay from the Partnership Estate, or otherwise discharge or provide for, all expenses, charges, liabilities, and obligations of the Partnership, including the Interfilm Liabilities and any taxes imposed on the Partnership and any taxes imposed on Interfilm or RhoMed with respect to the transfer of the Interfilm Assets to the Partnership. The General Partner may, in its sole discretion, make provisions by reserve or otherwise out of the Partnership Estate, for such amount as the General Partner may determine to be necessary to meet present or future liabilities of the Partnership, whether fixed or contingent. 7.3 Taxes. Subject to Section 7.2 above, the General Partner shall withhold from time to time from that portion of the Partnership Estate otherwise distributable to the Partners such sums as may be sufficient to pay any taxes or other charges which have been or may be imposed on the Partners under the income tax laws or other laws of the United States or any state or political subdivision by reason of distributions which have been or will be made to the Partners, and the General Partner may, in its discretion, enter into agreements with taxing or other authorities for the payment of such amounts as may be withheld in accordance with the provisions of this Section. 7.4 Limitation of Responsibility. It is expressly understood that neither Interfilm nor any affiliate of Interfilm, including RhoMed, shall be obligated to provide any funds whatsoever with respect to payment of the Interfilm Liabilities or in connection with the collection of the Partnership Receipts, including the Sony Litigation. By way of example, any expenses pertaining to the Sony Litigation shall be the responsibility of the Partnership and not Interfilm. Accordingly, any and all Partnership Receipts and the Partnership Assets shall be reserved for the period(s) set forth in Section 7.5 and paid by the General Partner for purposes of reimbursing Interfilm and any of its affiliates, including RhoMed, for all liabilities, expenses, costs and reasonable fees and expenses of their professional advisors, including attorneys and accountants that they may incur as a result of the Sony Litigation, and for payment of the Interfilm Liabilities. 10 7.5 Retention of Amounts. (a) Any and all proceeds generated by the Partnership shall be held in trust by the Partnership for purposes of indemnifying Interfilm or any affiliate of Interfilm, including RhoMed, for all liabilities, expenses and costs that it may incur, including tax and related claims and expenses and the reasonable fees and expenses of its professional advisors, including attorneys and accountants, as a result of the Sony Litigation and any obligations of Interfilm and InSub under Section 8.1(b) of the Merger Agreement (collectively, the "Claims"). Further, in the event that, prior to the second anniversary of the Effective Time, any proceeds shall be generated by the Partnership arising out of the Sony Litigation or a sale or other transfer of the intellectual property included within the Interfilm Assets which exceed the amounts payable to RhoMed pursuant to Section 5.18(b) of the Merger Agreement, then such sum as shall be reasonably necessary to secure any Claims as to which RhoMed shall have given the Partnership notice prior to such second anniversary, plus $100,000, shall continue to be held by the Partnership pending resolution of the Claims. (b) Notwithstanding anything to the contrary in this Agreement or in the Merger Agreement, the Partnership shall hold all of the proceeds of the Sony Litigation (the "Proceeds") unless and until permitted to distribute to the Partners or disburse such Proceeds pursuant to the provisions of Section 5.18(c) of the Merger Agreement. (i) Upon the request of and at the expense of the Partnership, Interfilm shall request from the Internal Revenue Service a private letter ruling (the "Private Letter Ruling") confirming that the Proceeds will not be treated as the income of Interfilm or any member of its consolidated group for federal income tax purposes. If Interfilm receives the Private Letter ruling confirming such treatment, Interfilm shall give written notice to the Partnership and the General Partner may immediately distribute to the Partners so much of the aggregate Proceeds up to Ten Million Dollars ($10,000,000.00) as exceed the amount, if any, required to be held by the Partnership pursuant to Section 5.18(b) of the Merger Agreement. If (A) neither the Partnership nor Interfilm do not receive the Private Letter Ruling confirming such treatment or (B) the Internal Revenue Service provides notice to Interfilm that it will not provide Interfilm with the Private Letter Ruling confirming such treatment, then the Partnership shall continue to hold (unless disbursed pursuant to Section 5.18(c)(iii) of the Merger Agreement) that portion of the aggregate Proceeds up to Ten Million Dollars 11 ($10,000,000.00) which is equal to forty percent (40%) of the amount by which the aggregate Proceeds up to Ten Million Dollars ($10,000,000.00) exceeds Two Million Dollars ($2,000,000.00) (the "Forty Percent Holdback") until the date which is thirty (30) days after the earlier of (1) the sixth anniversary of the due date (including any extensions) of the federal income tax return of Interfilm for its taxable year in which the Partnership receives the Proceeds (or the date on which Interfilm files such return for such year, if later than such sixth anniversary) and (2) the date of a determination (as defined in Section 1313(a) of the Code, a "Determination") of the amount of all taxes, if any, payable by Interfilm in connection with the transactions contemplated by the Merger Agreement. (ii) In addition to any amounts withheld pursuant to Section 5.18(c)(i) of the Merger Agreement, the Partnership shall continue to hold (unless disbursed pursuant to Section 5.18(c)(iii) of the Merger Agreement) and shall not distribute to the Partners, fifty percent (50%) of the amount by which the aggregate Proceeds exceed Ten Million Dollars ($10,000,000.00) until the date which is thirty (30) days after the earlier of (1) the sixth anniversary of the due date (including any extensions) of the federal income tax return of Interfilm for its taxable year which includes the Effective Time (or the date on which Interfilm files such return for such year, if later than such sixth anniversary) and (2) the date of a Determination of the amount of all taxes, if any, payable by Interfilm in connection with the transactions which are contemplated by the Merger Agreement. (iii) Upon notice to the Partnership by Interfilm of any assessment by the Internal Revenue Service against Interfilm of any taxes, penalties or interest payable in connection with the transactions which are contemplated by this Agreement, the Partnership shall immediately pay to Interfilm all such taxes, penalties and interest so assessed (the "Tax Assessment"), and any reasonable attorney's and accountant's fees and expenses incurred in connection therewith. Interfilm shall immediately pay the amount of the Tax Assessment to the Internal Revenue Service in payment thereof or, upon the written request of the Partnership and at the Partnership's sole expense, Interfilm shall decline to pay the amount of the Tax Assessment and shall file a petition in United States Tax Court asserting any available defenses to the assessment. If Interfilm pays the amount of the Tax Assessment to the Internal Revenue Service, at the request of the Partnership and at 12 the Partnership's sole expense, Interfilm shall file a refund claim with respect to the Tax Assessment and, if so requested by the Partnership and at the Partnership's sole expense, shall pursue such claim until a Determination is obtained. If Interfilm receives a refund with respect to the Tax Assessment, it shall, after deducting its reasonable expenses incurred in connection with obtaining such refund, promptly pay the amount so refunded plus any interest received thereon to the Partnership. (iv) All Proceeds other than those required to be held by the Partnership pursuant to Section 5.18(b) and Section 5.18(c) of the Merger Agreement may be distributed to the Partners following the second anniversary of the Effective Time. 7.6 Claims Procedure. If Interfilm receives notice of any Claim or other commencement of any action or proceeding with respect to which the Partnership is obligated to provide indemnification pursuant to the Merger Agreement or this Agreement, Interfilm shall promptly give the General Partner written notice thereof which notice shall specify, if known, the amount or an estimate of the amount of the liability arising therefrom. Such notice shall be a condition precedent to any liability of the Partnership for indemnification hereunder. Interfilm shall not settle or compromise any claim by a third party for which it is entitled to indemnification hereunder, without the prior written consent of the General Partner which consent shall not be unreasonably withheld or delayed, unless suit shall have been instituted against it and the General Partner shall not have taken control of such suit after notification thereof as provided herein. 7.7 Defense of Claims. In connection with any Claim giving rise to indemnity under this Agreement or the Merger Agreement resulting from or arising out of any claim or legal proceeding by a third party, the Partnership, at its sole cost and expense, may, upon written notice to Interfilm, assume the defense of any such claim or legal proceeding (including claims where Interfilm or RhoMed is named as a defendant) using counsel of its choice (subject to the approval of Interfilm, which approval may not be unreasonably withheld or delayed) if it acknowledges to Interfilm in writing its obligations to indemnify Interfilm with respect to all elements of such claim. Interfilm shall be entitled to participate in (but not control) the defense of any such action, with its counsel and at its own expense; provided, however, that if Interfilm, in its reasonable discretion, determines that there exists a conflict of interest between the Partnership and Interfilm, Interfilm shall have the right to engage separate counsel, the reasonable costs and expenses of which shall be paid by the Partnership, but in no event shall the Partnership be liable 13 to pay for the costs and expenses of more than one such separate counsel; and, provided further, that if Interfilm is named as a defendant in any legal proceeding, Interfilm shall have the right, at its own expense, upon written notice to the Partnership, to assume the defense thereof, subject to the right of the Partnership to participate (but not control) such defense at its own cost. If the Partnership does not assume the defense of any claim or litigation resulting therefrom as set forth in the first proviso clause of the immediately preceding sentence, Interfilm may defend or settle against such claim or litigation, after giving notice of the same to the Partnership, on such terms as Interfilm may deem appropriate in its reasonable judgment, and the Partnership shall be entitled to participate in (but not control) the defense of such action, with its counsel and at its own expense. In connection with any Claim made by RhoMed pursuant to Article 8 of the Merger Agreement, the Partnership shall immediately reserve such sums as shall be reasonably necessary to secure its obligation to provide indemnification for such claims pursuant to the Merger Agreement (as they may be amended from time to time by notice to the Partnership by RhoMed) and shall promptly pay to RhoMed all amounts expended by RhoMed relating to such claims upon presentation of an invoice therefor. 7.8 Management. Except as otherwise specifically provided in this Agreement, the General Partner shall have full responsibility and exclusive and complete discretion in the management and control of the business and affairs of the Partnership for the purposes herein stated, shall make all decisions affecting the Partnership's affairs and business, and shall have full, complete and exclusive discretion to take any and all action that the Partnership is authorized to take and to make all decisions with respect thereto. 7.9 Authority of the General Partner. Except as otherwise specifically provided in this Agreement, the General Partner shall have full and complete power to do any and all things necessary or incidental to carrying out the purposes of the Partnership and to manage and conduct the Partnership business, and shall possess and enjoy all of the rights and powers of partners in a partnership without limited partners under the Delaware Act. The General Partner shall have the authority to execute on behalf of the Partnership such agreements, contracts, instruments and other documents as it shall from time to time approve, such approval to be conclusively evidenced by its execution and delivery of any of the foregoing. The signature of the General Partner on all such instruments, agreements, contracts, leases, conveyances or documents, and upon any 14 checks, drafts, notes and other negotiable instruments, shall be sufficient to bind the Partnership in respect thereof and no third person need look to the application of funds or authority to act or require joinder of any other party. 7.10 Title to Assets. The General Partner shall have the power to hold, and shall hold, the legal and equitable title to all assets which at any time constitute the Partnership Estate, and the General Partner shall hold and administer such assets and property in trust, pursuant to the terms of this Partnership. 7.11 Powers of the General Partner. Subject to the limitations imposed herein, the General Partner shall have the following specific powers: (a) To sell, transfer, assign, convey, or invest the Partnership Estate or any part thereof. (b) To collect and receive any and all property and assets due to or owing or belonging to Interfilm as of the Effective Time or the Partnership, to give full discharge and release therefor. (c) To collect, liquidate or otherwise convert into cash all property, assets and rights in the Partnership Estate, and to pay, discharge and satisfy all remaining liabilities, expenses and obligations of, and claims against, Interfilm, the Partnership and the General Partner, with the right to prosecute and defend litigation, including all claims against Sony and enter into settlements and compromises in connection therewith. (d) To retain or receive on behalf of, and for the benefit of, those Partners who have not been located or have refused payment, all liquidating distributions, unclaimed dividends, and other payments to which they may be entitled hereunder, and to make disposition thereof in accordance with applicable laws. (e) To do and perform any acts or things reasonable or appropriate for the continued operation and the conservation, protection and orderly administration of the Partnership Estate, and, in connection therewith, to employ such agents, attorneys and counsel, and to confer upon them such authority as the General Partner may deem expedient, and to pay reasonable compensation therefor. (f) The exercise of any discretionary power vested in the General Partner shall be final and conclusive upon all Partners hereunder and upon all persons whomsoever. 15 (g)The General Partner shall, to the extent necessary, prepare and file appropriate federal and state income tax returns and other returns and reports required by applicable law on behalf of the Partnership. The enumeration of powers in this Section shall not be considered in any way to limit or control the power of the General Partner to act as specifically authorized by any other Section or provision of this Agreement and to act in such manner as the General Partner may in its absolute discretion deem reasonable or appropriate to conserve, protect and administer the Partnership Estate or to confer on the Partners the benefits intended to be conferred upon them by this Agreement. 7.12 Limitation of Liability. The General Partner shall act in all matters in its absolute discretion and shall be liable only for its own willful misconduct. Without prejudice to the generality of the foregoing provisions of this Section 7.12, it is further provided that: (a) No successor General Partner shall be in any way responsible for the acts or omissions of the General Partner in office prior to the date on which it became a General Partner. (b) The General Partner shall not be deemed bound by any duties or obligations other than those specifically set forth in this Agreement and no implied covenants or obligations shall be read into this Partnership Agreement against the General Partner. (c) In the absence of bad faith or gross negligence on the part of the General Partner, the General Partner may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the General Partner. (d) The General Partner shall not be liable for any error of judgment made in good faith. (e) If any controversy arises between the parties hereto or with any third person with respect to the subject matter of this Agreement or its terms or conditions, the General Partner shall not be required to determine the same or take any action, but may await the settlement of any such controversy by final appropriate legal proceedings or otherwise as may be reasonably required by it. 16 7.13 Rights of General Partner. Except as otherwise provided in Section 7.12: (a) The General Partner may rely and shall be protected in acting upon any notice, resolution, certificate, credential, statement, instrument, opinion, report, notice, request, consent, order, or other paper or document believed by him to be genuine and to have been signed or presented by the proper party or parties. (b) The General Partner shall have the right to rely upon and shall be fully protected in acting upon the advice or opinion of any attorney, auditor or other expert at any time employed by him in connection with any matter concerning the Partnership or the Partnership Estate. (c) Persons dealing with the General Partner shall look only to the Partnership Estate to satisfy any liability incurred by the General Partner to such person in carrying out the terms of this Agreement, and the General Partner shall have no other obligation to satisfy any such liability except in the event of the General Partner's willful misconduct hereunder. 7.14 No Bond. No bond shall be required of the General Partner. 7.15 Indemnification. The General Partner shall be indemnified by and receive reimbursement from the Partnership Estate against and for any and all loss, lability, expense, or damage, including without limitation its attorneys' fees and costs, which the General Partner may incur or sustain in the exercise and performance of any of its powers and duties under this Agreement in accordance with the terms hereof. 7.16 Payment of Distributions. Notwithstanding anything herein to the contrary, all amounts to be paid hereunder except for the payment of Partnership expenses of $3,000 or less or as set forth on Exhibit B attached hereto shall be made pursuant to instructions by the General Partner through a third party paying agent reasonably acceptable to Interfilm. 7.17 Compensation. The General Partner shall be entitled to reasonable compensation for his services hereunder, in the amount of $10,000 per year out of the first proceeds of the Partnership Receipts or from the amounts paid to the Partnership pursuant to Section 7.19 hereof. 17 7.18 Reimbursement. The General Partner shall be reimbursed monthly first from the Partnership Receipts and then from the Partnership Estate for all expenses reasonably incurred by it in the exercise of powers or in the performance of his duties in accordance with the Partnership Agreement. 7.19 Responsibility of Interfilm. Interfilm shall be responsible for up to $7,500 per annum for the first full three years of the term hereof to be applied first to the payment of Partnership expenses and then to the fees set forth in Section 7.17 hereof, and shall make payment therefor to the General Partner upon an invoice from the General Partner. ARTICLE VIII FILING OF RETURNS AND OTHER WRITINGS; ELECTIONS; ACCOUNTING AND REPORTING 8.1 Filing of Returns and Other Writings; Tax Elections; Tax Matters Partner. The General Partner shall cause the preparation and timely filing of all Partnership tax returns and shall, on behalf of the Partnership, make such tax elections and determinations as it, in its reasonable business judgment, deems will be most favorable to the Partners generally, and, in addition, the General Partner shall timely file all other writings required by any governmental authority having jurisdiction to require such filing. At the request of the transferee of a Limited Partner, the General Partner, its discretion, may make the election provided in Section 754 of the Code on behalf of the Partnership; provided, that such transferee agree to reimburse the Partnership for all reasonable expenses incurred by the Partnership in connection therewith. The Tax Matters Partner shall be entitled to take such actions on behalf of the Partnership in any and all proceedings with the Internal Revenue Service as it, in its reasonable business judgment, deems to be most favorable to the Limited Partners generally. The Tax Matters Partner shall be entitled to be reimbursed by the Partnership for all costs and expenses incurred by it in connection with any such proceeding and to be indemnified by the Partnership (and solely out of Partnership assets) with respect to any action brought against it in connection with the settlement of any such proceeding. As used herein, the term "Tax Matters Partner" shall mean the General Partner. 8.2 Accounting. The General Partner shall keep or cause to be kept at the Partnership's expense full, 18 accurate, complete and proper books and accounts of all operations of the Partnership. ARTICLE IX TRANSFER OF GENERAL PARTNER INTEREST; REMOVAL OF GENERAL PARTNER; SUCCESSOR GENERAL PARTNER 9.1 Retirement and Removal of the General Partner. (a) The General Partner may Retire from the Partnership by giving notice to the Partners and Interfilm. The General Partner shall cease to be a General partner forthwith upon Retirement. Notwithstanding any such Retirement, the transfer, sale, alienation, assignment or other disposition of all or any part of the interest of the General Partner shall be subject to the provisions of Section 9.2. (b)The General Partner may be removed at any time by the Limited Partners (acting by Consent of the Limited Partners). 9.2 Effects of Retirement or Removal of General Partner. Upon the Retirement of a General partner or the removal of a General Partner pursuant to Section 9.1(b), the capital account and Capital Contribution shall thereupon be treated for all purposes as the capital account and Capital Contribution as the case may be, of a Limited Partner hereunder. All other right, title and interest of the General Partner in and to the Partnership shall automatically be transferred, without further action on the part of the Retired or removed General Partner, to a successor General Partner if any admitted in accordance with this Article IX for an aggregate purchase price of One Dollar ($1.00). For purposes of this Agreement, a Retired or removed General Partner shall have the rights of a Limited Partner. 9.3 Successor General Partner. A successor General Partner shall, upon Consent to his or its admission by the Limited Partners be admitted as a General Partner to the Partnership upon his or its agreeing to be bound by the provisions of this Agreement to the same extent and on the same terms and conditions as the General Partner most recently Retired. Any such successor General partner shall, as a condition of receiving any interest in the Partnership, also agree to be bound by the Delaware Act, and any agreements, contracts, instruments or other documents theretofore executed and delivered on behalf of the 19 Partnership to the same extent and on the same terms and conditions as the General Partner most recently Retired. ARTICLE X TRANSFER OF LIMITED PARTNERSHIP INTERESTS 10.1 Transfer by Limited Partners. Subject to Section 10.2, a Limited Partner may assign or otherwise transfer all or any portion of its economic interest in the Partnership to another person (an "Assignee"). No person shall be admitted to the Partnership as a Substitute Limited Partner other than an Assignee, and no Assignee shall have the right to become a Substitute Limited Partner unless all of the following conditions are satisfied: (a)The duly executed and acknowledged written instrument of assignment shall have been filed with the Partnership; (b) The transferring Limited Partner and such Assignee shall have executed and acknowledged such other instruments and taken such other action as the General Partner shall deem necessary or desirable to effect such substitution. (c) The conditions set forth in Section 10.3 have been satisfied, and, if requested by the General Partner, the transferring Limited Partner or such Assignee shall have obtained an opinion of counsel reasonably satisfactory to the General Partner as to the legal matters set forth therein; and (d) The General Partner shall have consented in writing to the admission of such Assignee to the Partnership as a Substitute Limited Partner, which consent may be withheld in the sole discretion of the General Partner. 10.2 Certain Restrictions on Transfers. Notwithstanding any other provision of this Agreement, no Partner may assign or otherwise transfer in any manner all or any part of its interest in the Partnership, and no attempted or purported assignment or transfer of such interest shall be effective, unless (a) after giving effect thereto, the aggregate of all such assignments or transfers by the Partners within the twelve (12) months preceding the proposed date of such assignment or transfer would not equal or exceed fifty percent (50%) of the total interests of the Partners in the capital or profits of the Partnership, and such assignment or transfer would not otherwise terminate the Partnership for the purposes of Section 708 of the Code; (b) such assignment or transfer would not result in a violation of 20 applicable law, including the Federal securities laws, or any or term or condition of this Agreement; and (c) if such assignment or transfer is to an employee benefit plan within the meaning of ERISA, the General Partner shall have consented thereto. 10.3 Documents. No sale, assignment, transfer or other disposition by a Limited Partner of an interest in the Partnership (by conveyance, operation or law or otherwise) shall be effective to convey the subject matter thereof until the assignee or other successor thereto executes all necessary certificates or other documents and performs all acts required by the laws of the State of Delaware and any other states in which the Partnership is then doing business and executes any and all documents as shall be required from time to time by the rules and regulations of any regulatory body or commission having jurisdiction over the Partnership, to the full extent the same may be necessary to constitute such assignee or successor a Substitute Limited Partner and to preserve the status of the Partnership as a limited partnership after the completion of such sale, assignment or transfer in accordance with such laws. Each assignee, whether or not he becomes a Substitute Limited Partner, shall by his acceptance of such assignment, be deemed to be bound by all of the terms and conditions of this Agreement, including, without limitation, this Article X. Each assignee or successor agrees upon the request of the General Partner to execute such certificates or other documents and to perform such acts as the General Partner may, from time to time, reasonably request in connection with the foregoing. ARTICLE XI DISSOLUTION OF THE PARTNERSHIP 11.1 Dissolution. (a) Except as otherwise provided in Section 11.1(b), the Partnership shall be dissolved upon the Retirement or removal of the General Partner as set forth in Section 9.1 above. The Partnership shall not dissolve upon the death, incompetency, dissolution, liquidation, bankruptcy or assignment for the benefit of creditors of any Limited Partner. (b) In the case of a Retirement or removal of the General Partner, the Partnership shall dissolve unless the Limited Partners elect by Consent a successor General Partner. The election to continue the Partnership as a limited partnership (or, if necessary, as a successor limited partnership) shall be exercisable only within ninety 21 (90) days after the occurrence of the Retirement or removal of the General Partner. (c) Upon the dissolution of the Partnership or any reconstituted or successor partnership, as applicable, the General Partner (or, if there shall not be any remaining General Partner(s), a special liquidator (herein called the "Liquidator") appointed by the Limited Partners (acting by Consent of the Limited Partners) shall proceed with the liquidation of the Partnership, including, without limitation, the sale or other disposition of the assets of the Partnership. The gain or loss on any sale of Partnership assets shall be credited or charged to the capital accounts of all Partners in accordance with the provisions of Section 5.1. The General Partner shall then apply and distribute the proceeds of such liquidation (including the proceeds of the sale of all or substantially all of the assets of the Partnership, which sale shall have caused the dissolution of the Partnership) in the following order of priority: (i) To the payment of any debts and liabilities of the Partnership; (ii) To the setting up of any reserve which the General Partner (or the Liquidator, where applicable) shall reasonably deem advisable to provide for any contingent or unforeseen liabilities or obligations of the Partnership, including, without limitation, any indemnification reserves pursuant to Section 8.1(b) of the Merger Agreement; (iii) To each of the Partners the amount, if any, by which the aggregate distributions to them pursuant to Section 5.2 is less than their aggregate Capital Contributions paid to the Partnership (which amounts shall be charged against their respective capital accounts) which amounts will be distributed to the Partners only after such Partners agree in writing that such distribution be held by each of the Partners pursuant to the obligations of the Limited Partnership pursuant to Section 7.5 hereof, if such Section then applies; and (iv) To the Partners in payment of the balance of their respective capital accounts which amounts will be distributed to the Partners only after such Partners agree in writing that such distribution be held by each of the Partners pursuant to the obligations of the Limited Partnership pursuant to Section 7.5 hereof, if such Section then applies. 22 At the expiration of such period of time as the General Partner(s) (or, where applicable, the Liquidator) shall deem advisable, the remaining balance of any reserve established in accordance with clause (ii) shall be distributed in the manner set forth in clause (iii). 11.2 Distributions in Kind. In the event the Partnership shall, at any time, whether pursuant to the dissolution of the Partnership or otherwise, distribute any property in kind, the difference, if any, between the fair market value of such property and the value at which such property is carried on the books of the Partnership shall be credited (or charged) to the capital accounts of the Partners in accordance with the manner in which the Partners would have shared in the gain or loss from the sale of such property prior to such distribution; provided, however, that notwithstanding the foregoing no such distribution in kind shall be made by the Partnership without the Consent of the Limited Partners and of the General Partner. ARTICLE XII POWER OF ATTORNEY Each of the Limited Partners hereby constitutes and appoints the General Partner as its true and lawful attorney-in-fact, with full power of substitution, and with power to act in its name and on its behalf, to make, execute and deliver, swear to, acknowledge, file and record (a) copies of the Certificate pursuant to which the Limited Partners shall be admitted as Limited Partners and any amendments thereto or restatements thereof adopted pursuant to the provisions hereof (including without limitation any such amendment required upon the admission of a substituted or additional Limited Partner, as additional Limited Partners of a different class or a successor or additional general partner, the continuation of the Partnership, the formation of a successor limited partnership or the doing of any act requiring the amendment of this Agreement under the laws of the State of Delaware or under the applicable laws of any other jurisdiction, or by any regulatory agency, in which the General Partner deems said filing to be necessary or desirable and any such amendment relating to a successor limited partnership, (b) any certificate of fictitious name, if required by law, (c) such other certificates or instruments as may be required under the laws of the State of Delaware or any other jurisdiction, or by any regulatory agency, as the General Partner may deem necessary or advisable, and (d) such other instruments as the General Partner may deem necessary or desirable fully to carry out the provisions hereof in accordance with the terms hereof; provided, however, that none of the foregoing acts shall 23 increase the liability of any Limited Partner beyond that expressly set forth in this Agreement; and provided further, however, that such attorney-in-fact shall, as such, not have any right, power or authority to act in such capacity, except as specifically provided in this Agreement. The power of attorney granted in this Section is a special power of attorney coupled with an interest and is irrevocable, shall not be affected by the subsequent disability or incapacity of the principal, may be exercised by the attorney-in-fact by its signature on behalf of all Limited Partners, and shall survive the delivery of an assignment by a Limited Partner of the whole or any portion of its economic interest, except that where the assignee of any such interest has been approved, pursuant to the provisions of Section 10.1, for admission to the Partnership as a Substitute Limited Partner, the power of attorney shall survive the delivery of such assignment solely for the purpose of enabling the attorney-in-fact to execute, acknowledge and file any instrument necessary to effect such substitution. ARTICLE XIII GENERAL PROVISIONS 13.1 Amendment. This Agreement may be amended only by a written instrument executed by the General Partner and approved by the Consent of the Limited Partners, provided that this Agreement shall not be amended (a) to increase the Limited Partners' liability or to change the contributions required of Limited Partners, their rights and interests, as a class, in net profits, net losses, cash flow and income tax allocations of the partnership, or their rights, as a class, upon liquidation here thereof, without the written consent of the General Partner and any Limited Partner adversely affected thereby, or (b) to amend any provision of this Agreement to change a voting requirement of Limited Partners without the written consent of all Limited Partners. 13.2 Partition. Each Partner irrevocably waives, on behalf of himself, his successors, heirs and permitted assigns, during the term of the Partnership, any right that it may have to maintain any action for a partition with respect to Partnership property. 13.3 Enforcement and Specific Performance. If any Partner proposes to transfer all or any part of such Partner's interest in the Partnership by sale, assignment, encumbrance, or other transfer in violation of the terms of 24 this Agreement, the Partnership or any other Partner may apply to any court of competent jurisdiction for an injunctive order prohibiting such proposed disposition except upon compliance with the terms of this Agreement. The Partnership or any other Partner may institute and maintain any action or proceeding against the Partner proposing to make such transfer, to compel the specific performance of this Agreement. Any attempted transfer in violation of this Agreement shall be void and have no force or effect. Similar injunctive relief and specific performance may be obtained by the Partnership or any Partner against any third party to compel compliance with the terms of this Agreement. The party against whom such action or proceeding is brought hereby waives the claim or defense that an adequate remedy at law exists, and such party shall not urge in any such action or proceeding the claim or defense that such remedy at law exists. 13.4 Notices. All notices given under this Agreement shall be made in writing. All periods of time shall begin or end on the day such notice is personally delivered to any recipient or five days after being sent by certified mail, return receipt requested, postage prepaid (with a postmark no later than the day specified for such notice), addressed to the Partnership at its principal business office as set forth in Section 1.4 or to any Partner at the address set forth in Schedule A (or at such other address as such Partner may provide to the other Partners in writing). Any Partner may waive, in writing, any notice required to be given pursuant to this Agreement, whether before or after such required notice. 13.5 Binding Effect. Except as otherwise provided in this Agreement, this Agreement shall be binding upon, and shall inure to the benefit of, the Partners and their respective personal representatives, successors and permitted assignees, and any such personal representative, successor in interest or assignee shall succeed to the benefits and burdens of such person's predecessor in interest in proportion to the interest transferred. 13.6 Waiver. Neither the failure nor any delay on the part of any party hereto to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by 25 or on behalf of the party asserted to have granted such waiver. 13.7 Severability. If any provision of this Agreement shall be held or deemed to be, or shall in fact be, invalid, inoperative or unenforceable as applied to any particular case in any jurisdiction, or in all jurisdictions or in all cases, because of the conflicting of any provision with any constitution or statute or rule of public policy or for any other reason, such circumstance shall not have the effect of rendering the provision or provisions in question invalid, inoperative or unenforceable in any other jurisdiction or in any other case or circumstance or of rendering any other provision or provisions herein contained invalid, inoperative or unenforceable to the extent that such other provision or provisions are not themselves actually in conflict with such constitution, statute or rule of public policy. This Agreement shall, in such event, be reformed and construed in any such jurisdiction or case as if such invalid, inoperative or unenforceable provision had never been contained herein and such provision reformed so that it would be valid operative and enforceable to the maximum extent permitted. in such jurisdiction or in such case. 13.8 Entire Agreement. This Agreement contains the entire understanding among the Partners and supersedes any prior understandings, inducements or conditions, expressed or implied, written or oral, among them respecting the subject matter contained herein. There are no representations, agreements, arrangements or understandings, oral or written, between and among the parties hereto relating to the subject matter of this Agreement which are not fully expressed or referred to herein. The express terms hereof control and supersede any course of performance or usage of the trade inconsistent with any of the terms hereof. 13.9 Agreement in Counterparts; Execution. This Agreement may be executed in several counterparts, and all such counterparts, as so executed, shall constitute one agreement binding upon all the parties hereto, notwithstanding that all the parties are not signatories to the original or the same sign counterpart. It sh all not be necessary that any counterpart be signed by all of the parties hereto so long as each counterpart be signed by the General Partner, and the General Partner and one or more Limited Partners sign at least one counterpart. 13.10 Amendments to Certificate. Upon the admission of a new Limited Partner in accordance with the provisions of this Agreement, any certificate of amendment to the Certificate, reflecting such admission, and all other 26 appropriate documents which are required by law or this Agreement, shall be filed by the General Partner on behalf of the Partnership. 13.11 Trustee Liability; Status of Successor Trustees as Partners. When this Agreement is executed by the Trustee of any trust, including the Trust, such execution is by the trustee, not individually, but solely as trustee in the exercise of and under the power and authority conferred upon and invested in such trustee. It is expressly understood and agreed that nothing herein contained shall be construed as creating any liability on any such trustee personally to pay any amounts required to be paid hereunder, or to perform any covenant, either express or implied, contained herein, all such liability, if any, being expressly waived by the parties hereto by their execution hereof. For Partners which are trusts, any liability of any such Partner to the Partnership or to any third person shall be only that of such trust to the extent of its trust estate and shall not be a personal liability of any trustee, grantor or beneficiary thereof. Any successor trustee or trustees of any trust as a Partner of the Partnership shall be entitled to exercise the same rights and privileges and be subject to the same duties and obligations of his predecessor trustee. As used in this Agreement, the term "trustee" shall include any and all such successor trustees. 13.12 Headings. The section and other headings contained in this Agreement are inserted only as a matter of convenience and for reference and in no way shall affect, -define or limit the scope, meaning, intent or interpretation of the text of this Agreement. 13.13 Miscellaneous. The laws of the State of Delaware, including the Delaware Act, shall govern this Agreement and the construction of its terms. In the event of any conflict between any provision of this Agreement and any non-mandatory provision of the Delaware Act, the provision of this Agreement shall control and take precedence. If any provision is unenforceable or invalid for any reason, the remainder of this Agreement shall continue in effect. Any pronoun used in the masculine, feminine, or neuter shall be interpreted as the context requires, words used in the 27 singular shall denote the plural and words used in the plural shall denote the singular when the context so requires. IN WITNESS WHEREOF, each of the undersigned has caused this Agreement of Limited Partnership to be executed, to be effective as of the date first above written. GENERAL PARTNER: FAB FIVE, INC. By: /s William Franzblau ----------------------- Name: William Franzblau Title: President Agreed as to Sections 7.4, 7.5, 7.6, 7.7 and 7.19 INTERFILM, INC. By: /s/ William Franzblau ----------------------- LIMITED PARTNERS: THE INTERFILM STOCKHOLDERS TRUST By: /s/ William Franzblau ----------------------- Name: William Franzblau Title: Trustee 28 /s/ Bob Bejan - --------------------------- Bob Bejan 29 singular shall denote the plural and words used in the plural shall denote the singular when the context so requires. IN WITNESS WHEREOF, each of the undersigned has caused this Agreement of Limited Partnership to be executed, to be effective as of the date first above written. GENERAL PARTNER: FAB FIVE, INC. By: ----------------------- Name: William Franzblau Title: President Agreed as to Sections 7.4, 7.5, 7.6, 7.7 and 7.19 INTERFILM, INC. By: ----------------------- LIMITED PARTNERS: THE INTERFILM STOCKHOLDERS TRUST By: ----------------------- Name: William Franzblau Title: Trustee Vivaldi Ltd. By: /s/ Larry Kuppin ----------------- General Partner 30 /s/ Bob Rehme - --------------------------- Bob Rehme 31 /s/ Brian T. Cooper - --------------------------- Brian T. Cooper 32 /s/ David L. Goret - --------------------------- David L. Goret 33 /s/ Paul Selwyn - --------------------------- Paul Selwyn 34 Fuller Family Trust By:/s/ Irv Fuller ----------------- Trustee 35 SCHEDULE A No. of Shares Percentage Name and Address (pre-reverse split) Interest - ---------------- ------------------- -------- Bob Bejan 395,612 9,142 4015 South Court Street Seattle, WA 98144 Vivaldi Ltd. 670,311 15,490 c/o Fifth Avenue Entertainment 9615 Brighton Way Beverly Hills, CA 90210 Bob Rehme 213,437 4,932 c/o Neufeld Rehme Productions 5555 Melrose Avenue Dressing Room Bldg. 112 Los Angeles, CA 90038 Brian T. Cooper 83,903 1,939 15 West 11th Street Apt 9E New York, New York 10011 David Goret 97,653 2,257 44 Kayser Lane West Orange, NJ 07052 Paul Selwyn 141,290 3,264 300 North Swall Drive Beverly Hills, CA 90211 Fuller Family Trust 282,580 6,530 c/o Fullvest Corp. 8727 West 3rd Street Los Angeles, CA The Interfilm Stockholders Trust 2,047,102 47,304 c/o William Franzblau 110 Greene Street, Suite 601 New York, NY 10012 No. of Shares Percentage Name and Address (pre-reverse split) Interest - ---------------- ------------------- -------- Fab Five, Inc. 395,612 9,142 c/o William Franzblau 110 Greene Street, Suite 601 New York, NY 10012 EXHIBIT A --------- ASSETS --------- 1. All of the rights and responsibilities in connection with the litigation captioned "Interfilm, Inc. and Interfilm Technologies, Inc. against Advanced Exhibition Corporation, et. al.," Index No. 601990/96, in the Superior Court of the State of New York, including, but not limited to, the right to receive all net proceeds of any judgment or settlement thereof, and the responsibility to pay any out-of-pocket expenses in excess of the amount that has been escrowed for such expenses. 2. U.S. Patent No. 5,465,384 and U.S. Patent No. 4,746,994. 3. All IT Systems located in various theaters owned by Seller and any revenue received from the sale thereof. 4. Any refund to Seller of an insurance premium by Sedgewick Insurance Company. 5. Any refund of bond posted with the State of California relating to sales tax. 6. Any net proceeds generated by the enforcement of any judgment or settlement relating to the litigation between Interfilm, Inc. and Ground Control. 7. the cash balance contained in Account No. 266011809 with the Republic National Bank of New York, 415 Madison Avenue, New York, New York 10017. Sony Electronics ............................................$1,587.73 Sony Theatres ...............................................$2,221.84 EX-99.3 35 THE INTERFILM STOCKHOLDERS TRUST THE INTERFILM STOCKHOLDERS TRUST INTERFILM, INC. a Delaware corporation ("Interfilm") and Interfilm Technologies, Inc., a New York corporation, hereby establish this Trust as of this 11th day of June, 1996, (the "Trust") with reference to the following: A. Pursuant to that certain Agreement and Plan of Reorganization dated as of April 12, 1996 (the "Merger Agreement") by and among RhoMed Incorporated, ("RhoMed"), Interfilm, Inc. ("Interfilm") and Interfilm Acquisition Corp. ("InSub"), concurrently herewith, InSub will merge (the "Merger") with and into RhoMed and each issued and outstanding share of the Preferred Stock and Common Stock of RhoMed will be converted into shares of Interfilm Series A Preferred Stock and Interfilm Series B Preferred Stock. B. In connection with the Merger and pursuant to the Merger Agreement, the assets of Interfilm and Interfilm Technologies, Inc. ("ITI") set forth on Exhibit A attached hereto (the "Interfilm Assets") are being transferred herewith to a limited partnership (the "Limited Partnership") effective immediately after the effective time of the Merger (the "Effective Time") to hold, liquidate and distribute the same as set forth in that certain Agreement of Limited Partnership dated as of June 11, 1996 between Fab Five, Inc., as general partner, and certain other persons as limited parties. The Trust is being established herein to receive a limited partnership interest in the Partnership (the "Limited Partnership Interest"). NOW, THEREFORE, pursuant to the Merger Agreement, Interfilm and ITI hereby establish this Trust, and Interfilm and ITI irrevocably assign, set over and deliver to the Trust the Trust Assets (as hereinafter defined). 1 ARTICLE 1. NAME AND DEFINITIONS 1.1 The Trust shall be known as The Interfilm Stockholders Trust. 1.2 For purposes of the Trust, unless the context otherwise requires: (a) "Beneficiaries" shall mean the holders of record of the shares of Common Stock of Interfilm as of the close of Interfilm's stock transfer books on June 21, 1996 (the "Record Date"), and/or such other persons not holders of record of such shares who can establish valid title to the liquidating distributions payable hereunder in view of their beneficial interest in such shares as of the Record Date, and the respective successors in interest of any of the foregoing; provided, however, that no partner of the Limited Partnership shall be deemed to be a Beneficiary hereunder. (b) "Trust Estate" shall mean the Limited Partnership Interest. (c) "Trust Receipts" shall mean all rents, royalties, income proceeds and other receipts of or from the Trust Estate. (d) "Trustee" shall mean William Franzblau or his successor(s) appointed pursuant to Article 9 hereof. ARTICLE 2. PURPOSE AND LIMITATIONS OF THE TRUST AND THE TRUST AGREEMENT. 2.1 The Trust has been organized pursuant to the Merger Agreement for the primary purpose of receiving, liquidating and distributing the Trust Estate, and, subject to the limitations set forth herein, its activities shall be limited to those reasonably necessary to, and consistent with, the accomplishment of such purpose. The Trust shall not be an organization having as its purpose the carrying on of a profit-making business. 2.2 Except as provided herein, in no event shall any part of the Trust Estate revert or be distributed to 2 Interfilm, ITI or to any stockholder of Interfilm or ITI as such other than a Beneficiary entitled thereto under the terms of this Trust. Any unclaimed part of the Trust Estate shall be subject to disposition in accordance with applicable laws. 2.3 No part of the Trust Estate or the Trust Receipts shall be used or disposed of by the Trustee for any purpose other than (i) for the purposes for which this Trust was created as set forth in Section 2.1 hereof, and (ii) the distribution thereof to the Beneficiaries in accordance with the terms of this Trust. In order to preserve and protect the Trust Estate pending disposition or distribution thereof, the Trustee shall not invest monies forming a part of the Trust Estate except in demand and time deposits in federally insured banks or savings institutions or short term certificates of deposit. ARTICLE 3. TRANSFER TO THE TRUSTEE. The Trustee agrees to accept the Trust and the assets constituting the Trust Estate. However, the Trustee shall be responsible only for the assets delivered to him or registered in the Trust's name and shall have no duty to make, nor incur any liability for failing to make, any search for unknown assets. The Trustee shall be responsible for only those liabilities of which it is informed, and shall have no duty to make, nor incur any liability for failing to make, any search for unknown liabilities. The Trustee shall hold the Trust Estate without provision for or the payment of any interest thereon to any Beneficiary, except that interest earned on any assets of the Trust shall become a part of the Trust Estate. 3 ARTICLE 4. PAYMENT OF LIABILITIES AND EXPENSES. 4.1 Prior to any distribution to the Beneficiaries, the Trustee shall pay from the Trust Estate, or otherwise discharge or provide for, all expenses, charges, liabilities, and obligations of the Trust, and any taxes imposed on the Trust. The Trustee may, in his sole discretion, make provisions by reserve or otherwise out of the Trust Estate, for such amount as the Trustee may determine to be necessary to meet present or future liabilities of the Trust, whether fixed or contingent. 4.2 Subject to Section 4.1 above, the Trustee shall withhold from time to time from that portion of the Trust Estate otherwise distributable to the Beneficiaries such sums as may be sufficient to pay any taxes or other charges which have been or may be imposed on the Bene ficiaries under the income tax laws or other laws of the United States or any state or political subdivision by reason of distributions which have been or will be made to the Beneficiaries, and the Trustee may, in his discretion, enter into agreements with taxing or other authorities for the payment of such amounts as may be withheld in accordance with the provisions of this Section. ARTICLE 5. DISTRIBUTIONS TO BENEFICIARIES. 5.1 Subject to Article 4 hereof, the Trustee shall, as the Trustee in his sole discretion deems appropriate, distribute and pay, or cause to be distributed and paid, to the Beneficiaries on a date set by the Trustee, all or part of the Trust Estate that remains after payment of, or provision for, expenses, liabilities, obligations, and reserves for contingent claims arising hereunder and for potential claims of unlocated Beneficiaries, as provided herein and after the withholding of the taxes or charges, if any, as provided herein. Such distributions shall be made in proportion to the respective interest of the 4 Beneficiaries in the Trust, based on the percentage that the number of shares of Interfilm Common Stock beneficially owned by each Beneficiary (or such Beneficiary's predecessor in interest) bears to the total number of shares of Interfilm Common Stock outstanding, each determined as of the Record Date (as to each Beneficiary, the "Pro Rata Interest"). 5.2 If any conflicting claims or demands are made or asserted to any interest of any Beneficiary herein, the Trustee shall be entitled, at his sole election, to refuse to comply with any such conflicting claims or demands. The Trustee shall be entitled to refrain and refuse to act until (i) the rights of the adverse claimants have been adjudi cated by a final judgment of a court of competent jurisdic tion, or (ii) all differences have been adjusted by valid written agreement between all of such parties, and the Trustee shall have been furnished with an executed counterpart of such agreement; the Trustee may, in his absolute discretion, require that there be furnished a surety bond or other security satisfactory to the Trustee to fully indemnify him as between all conflicting claims or demands. 5.3 Any portion of the Trust Estate which shall be available to, but unclaimed or refused by, any Bene ficiary shall be deemed to be subject to applicable escheat laws, and the Trustee is expressly authorized to pay and/or deliver such portion of the Trust Estate at such time or times as may be consonant with such laws and in accordance with the provisions thereof. 5.4 The Trustee shall make such reports in writing to each of the Beneficiaries as the Trustee deems appropriate. 5 ARTICLE 6. TERM AND TERMINATION. 6.1 The Trust will terminate as soon as practicable following liquidation of substantially all the known assets of the Trust Estate and the satisfaction of all probable transferee liabilities of the Trust or the Bene ficiaries known to exist at the time of such termination. 6.2 After the termination of the Trust, and for the purpose of liquidating and winding up the affairs of the Trust, the Trustee shall continue to act as such until his duties have been fully performed. Upon the distribution of all of the Trust Estate to the Beneficiaries and the payment and discharge of, or other adequate provision for, all debts, liabilities, and obligations of the Trust, the Trustee shall have no further duties or obligations hereunder. ARTICLE 7. POWERS OF THE TRUSTEES. 7.1 The Trustee shall have the power to hold, and shall hold, the legal and equitable title to all assets which at any time constitute the Trust Estate, and the Trustee shall hold and administer such assets and property in trust, pursuant to the terms of this Trust. 7.2 Subject to the limitations imposed by Articles 2 and 4 herein, the Trustee shall have the following specific powers: (a) To sell, transfer, assign, convey, or invest the Trust Estate or any part thereof. (b) To collect and receive any and all property and assets due to or owing or belonging to Interfilm as of the Effective Time or the Trust, to give full discharge and release therefor. (c) To collect, liquidate or otherwise convert into cash all property, assets and rights in the Trust Estate, and to pay, discharge and satisfy all remaining liabilities, expenses and obligations of, and claims against the Trust and the Trustee. 6 (d) To retain or receive on behalf of, and for the benefit of, those Beneficiaries who have not been located or have refused payment, all liquidating distributions, unclaimed dividends, and other payments to which they may be entitled hereunder, and to make disposition thereof in accordance with applicable laws. (e) To do and perform any acts or things reasonable or appropriate for the continued operation and the conservation, protection and orderly adminis tration of the Trust Estate, and, in connection therewith, to employ such agents, attorneys and counsel, and to confer upon them such authority as the Trustee may deem expedient, and to pay reasonable compensation therefor. (f) The exercise of any discretionary power vested in the Trustee shall be final and conclusive upon all Beneficiaries hereunder and upon all persons whomsoever. (g) The Trustee shall, to the extent neces sary, cause the preparation and filing of appropriate federal and state income tax returns and other returns and reports required by applicable law on behalf of the Trust. The enumeration of powers in this Section shall not be considered in any way to limit or control the power of the Trustee to act as specifically authorized by any other Section or provision of this Agreement and to act in such manner as the Trustee may in his absolute discretion deem reasonable or appropriate to conserve, protect and administer the Trust Estate or to confer on the Bene ficiaries the benefits intended to be conferred upon them by this Trust. 7 ARTICLE 8. DUTY OF CARE AND LIABILITIES OF TRUSTEE. 8.1 The Trustee hereby agrees to accept and undertake to discharge the Trust created hereby, upon the terms and conditions hereof. In so doing it shall act in all matters in his absolute discretion and shall be liable only for his own willful misconduct. Without prejudice to the generality of the foregoing provisions of this Section 8.1, it is further provided that: (a) No successor Trustee shall be in any way responsible for the acts or omissions of the Trustee in office prior to the date on which it became a Trustee. (b) The Trustee shall not be deemed bound by any duties or obligations other than those specifically set forth in this Trust, and no implied covenants or obligations shall be read into this Trust against the Trustee. (c) In the absence of bad faith or gross negligence on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee. (d) The Trustee shall not be liable for any error of judgment made in good faith. (e) If any controversy arises between the parties hereto or with any third person with respect to the subject matter of this Trust or its terms or condi tions, the Trustee shall not be required to determine the same or take any action, but may await the settle ment of any such controversy by final appropriate legal proceedings or otherwise as may be reasonably required by it. 8.2 Except as otherwise provided in Section 8.1: 8 (a) The Trustee may rely and shall be protected in acting upon any notice, resolution, certificate, credential, statement, instrument, opinion, report, notice, request, consent, order, or other paper or document believed by him to be genuine and to have been signed or presented by the proper party or parties. (b) The Trustee shall have the right to rely upon and shall be fully protected in acting upon the advice or opinion of any attorney, auditor or other expert at any time employed by him in connection with any matter concerning the Trust or the Trust Estate. (c) Persons dealing with the Trustee shall look only to the Trust Estate to satisfy any liability incurred by the Trustee to such person in carrying out the terms of this Trust, and the Trustee shall have no other obligation to satisfy any such liability except in the event of the Trustee's willful misconduct hereunder. 8.3 No bond shall be required of the Trustee. 8.4 The Trustee shall be indemnified by and receive reimbursement from the Trust Estate against and for any and all loss, lability, expense, or damage, including without limitation his attorneys' fees and costs, which the Trustee may incur or sustain in the exercise and performance of any of its powers and duties under this Trust in accordance with the terms hereof. 8.5 Notwithstanding anything herein to the contrary, all amounts to be paid hereunder except for the payment of Trust expenses of $3,000 or less or as set forth on Exhibit B attached hereto shall be made pursuant to instructions by the Trustee through a third party paying agent reasonably acceptable to Interfilm. 9 ARTICLE 9. SUCCESSOR TRUSTEE. 9.1 The Trustee may resign, and be discharged from the Trust hereby created by giving written notice. Such resignation shall become effective upon the appointment of the Trustee's successor and such successor's acceptance of such appointment. 9.2 In case at any time a Trustee shall resign or be removed by a majority vote of the Beneficiaries (based on their Pro Rata Interest), a vacancy shall be deemed to exist in the office of such Trustee, and a successor shall be appointed by majority vote (based on their Pro Rata Interest) of the Beneficiaries upon written notice to the Trustee and the consent (not to be unreasonably withheld or delayed) of Interfilm. 9.3 Any successor Trustee appointed hereunder shall execute counterparts of this Trust. Thereupon such successor Trustee shall, without any further act, be deemed to have accepted its appointment, and become vested with all the estates, properties, rights, powers, trusts, and duties of its predecessor in the Trust hereunder with like effect as if originally named therein; but the retiring Trustee shall nevertheless, when requested in writing by the successor Trustee and upon payment of any expenses in connection therewith, execute and deliver an instrument or instruments conveying and transferring to such successor Trustee upon the trusts herein expressed, all the estates, properties, rights, powers, and trust of such retiring Trustee and shall duly assign, transfer, and deliver to such successor Trustee all property and money held by it hereunder. 10 ARTICLE 10. COMPENSATION AND EXPENSES OF TRUSTEE. 10.1 The Trustee shall be entitled to reasonable compensation for his services hereunder, in the amount of $10,000 per year out of the first proceeds of the Trust Receipts. 10.2 The Trustee shall be reimbursed monthly first from the Trust Receipts and then from the Trust Estate for all expenses reasonably incurred by him in the exercise of powers or in the performance of his duties in accordance with the Trust. ARTICLE 11. AMENDMENT OF TRUST. This Trust may be amended by the Trustee without a vote of the Beneficiaries solely for the purpose of qualifying or continuing to qualify the Trust as a "liquidating trust" as distinguished from an "association" for purposes of the Internal Revenue Code, as amended from time to time. In all other cases, the Trust may be amended only by a majority vote of the Beneficiaries (in accordance with their Pro Rata Interest) with the consent of Interfilm which shall not be unreasonably withheld or delayed. ARTICLE 12. MISCELLANEOUS. 12.1 This Trust shall be administered in, and under the laws of, the State of Delaware, and this Trust and the validity thereof shall be governed by and construed in accordance with the laws of that State. 12.2 In the event any provision of this Trust or the application thereof to any person or in any circum stances shall be finally determined by a court of proper jurisdiction to be invalid or unenforceable to any extent, the remainder of this Trust, or the application of such provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each remaining provision of this Trust 11 shall be valid and enforced to the fullest extent permitted by law. 12.3 Any notice required or provided for in this Trust shall be in writing and be deemed to have been given when deposited in a United States Post Office or letter box, first class postage prepaid registered or return receipt, or personally delivered. 12.4 Each Beneficiary's interest in the Trust and/or the Trust Estate, and his rights thereto, shall not be assignable or transferable in any manner, except by will, intestate succession, or operation of law. 12.5 Except as provided in Article 11 above, the Trust created hereunder shall be irrevocable and no person shall have the right or power, whether alone or in conjunction with others, in whatever capacity, to alter, amend, revoke or terminate this Trust, or any of the terms of this Trust in whole or in party, or to designate the persons who shall possess or enjoy the trust property or the income therefrom. 12.6 For purposes of this Trust, unless the context shall indicate or require otherwise, words of the masculine gender shall be deemed and construed to include correlative words of the feminine and neuter gender, words of the neuter gender shall be deemed and construed to 12 include correlative words of the masculine and feminine gender, and words of the singular shall be deemed and construed to mean words of the plural and vice versa. IN WITNESS WHEREOF, Interfilm and the Trustee have executed this Trust at New York, New York on the day and year first above written. INTERFILM, INC. By: /s/ William Franzblau ------------------------------------ An Authorized Officer /s/ William Franzblau ------------------------------------- William Franzblau, Trustee INTERFILM TECHNOLOGIES, INC. By: /s/ William Franzblau ------------------------------------ An Authorized Officer 13 EXHIBIT A --------- ASSETS --------- 1. All of the rights and responsibilities in connection with the litigation captioned "Interfilm, Inc. and Interfilm Technologies, Inc. against Advanced Exhibition Corporation, et. al.," Index No. 601990/96, in the Superior Court of the State of New York, including, but not limited to, the right to receive all net proceeds of any judgment or settlement thereof, and the responsibility to pay any out-of-pocket expenses in excess of the amount that has been escrowed for such expenses. 2. U.S. Patent No. 5,465,384 and U.S. Patent No. 4,746,994. 3. All IT Systems located in various theaters owned by Seller and any revenue received from the sale thereof. 4. Any refund to Seller of an insurance premium by Sedgewick Insurance Company. 5. Any refund of bond posted with the State of California relating to sales tax. 6. Any net proceeds generated by the enforcement of any judgment or settlement relating to the litigation between Interfilm, Inc. and Ground Control. 7. the cash balance contained in Account No. 266011809 with the Republic National Bank of New York, 415 Madison Avenue, New York, New York 10017. EX-99.4 36 GENERAL BILL OF SALE ASSIGNMENT AND ASSUMPTION AGREEMENT GENERAL BILL OF SALE ASSIGNMENT AND ASSUMPTION AGREEMENT This General Bill of Sale, Assignment and Assumption Agreement is made and entered into as of the 25th day of June, 1996, by and between, on the one hand, Interfilm, Inc., a Delaware corporation ("IFI"), and Interfilm Technologies, Inc., a New York corporation (collectively, "Seller"), and, on the other hand, the Interfilm Stockholders Limited Partnership, a Delaware limited partnership ("Buyer") with reference to the following: A. IFI has entered into that certain Agreement and Plan of Reorganization, dated as of April 12, 1996, as amended, by and among IFI, Interfilm Acquisition Corp., a New Mexico corporation and wholly-owned subsidiary of Interfilm, Inc., and RhoMed Incorporated, a New Mexico corporation (the "Agreement"). B. Pursuant to the Agreement, IFI has agreed to transfer to Buyer certain interests and assets of IFI and its subsidiaries (the "Assets") described on Exhibit A, which Exhibit A is attached hereto and incorporated herein by this reference. C. Buyer has agreed to assume from Seller, certain "Obligations" of Seller defined below. D. Buyer and Seller desire to consummate the transfer of the Assets and the assumption of the Obligations immediately after the "Effective Time" as such term is defined in the Agreement. NOW, THEREFORE, in consideration of the foregoing recitals and of the mutual agreements hereinafter set forth, the parties hereto agree as follows: 1. Assignment. For valuable consideration, the receipt and sufficiency of which Seller hereby acknowledges, Seller, pursuant to and in compliance with the Agreement, does hereby sell, convey, transfer, assign and deliver to Buyer, and Buyer does hereby accept from Seller, all of Seller's right, title and interest in and to all of the Assets: TO HAVE AND TO HOLD all such Assets hereby assigned, transferred and conveyed unto Buyer, its successors and assigns, to its and their own use and behalf forever. 2. Assumption. In consideration of such transfer, and subject in each case to the provisions of the Agreement with respect thereto, Buyer hereby agrees to assume those liabilities set forth on Exhibit B attached hereto (the "Obligations"). 3. Benefits of Agreement. This General Bill of Sale, Assignment and Assumption Agreement shall not constitute an assignment of any claim, contract, permit, franchise or license if the attempted assignment thereof without the consent of the other party thereto would constitute a breach thereof. If such consent is not obtained, or if any attempted assign ment thereof would be ineffective so that Buyer would not in fact receive all such rights, then, upon reasonable notice to Seller, Buyer may act as the attorney-in-fact of Seller in order to obtain for Buyer the benefits thereunder, as provided in the following Paragraph 3. 4. Further Assurances. Seller shall, at any time and from time to time after the date hereof, upon the request of Buyer, execute, acknowledge and deliver all such further acts, deeds, assignments, transfers, conveyances, powers of attorney and assurances, and take all such further actions, as shall be necessary or desirable to give effect to the transactions hereby consummated and to collect and reduce to the possession of Buyer any and all of the interests and assets hereby transferred to Buyer. Subject to the terms of the Agreement and without limiting the generality of the foregoing, Seller hereby appoints Buyer, and its successors and assigns, the true and lawful attorney of Seller, in the name of Buyer or in the name of Seller but for the benefit and at the expense of Buyer, to demand and receive any and all interests and assets hereby transferred; to give releases and acquittances for or in respect of the same or any part thereof; to endorse, collect and deposit any checks, drafts or other instruments payable to Seller which constitute accounts receivable hereby assigned or which relate to payments for goods and/or services provided by Seller or Buyer in connection with the accounts or rights under contract hereby assigned; to institute and prosecute at Buyer's expense, in the name of Seller or otherwise, any and all proceedings at law, in equity or otherwise, which Buyer, or its successors and assigns, may deem necessary or advisable to collect, assert or enforce any claim, right, title, debt or account hereby assigned; and to defend and compromise any and all actions, suits or proceedings in respect of any of the interests and assets hereby assigned that Buyer, or its successors or assigns, shall deem necessary or advisable. Assignor hereby declares that the foregoing powers are coupled with an interest and shall be irrevocable. Buyer shall keep Seller regularly and promptly informed of all of its actions taken herein with respect to the litigation described on Exhibit A, Section 1, the Patents described on Exhibit A, Section 2, 2 any equipment described on Exhibit A, Section 3 (provided any such equipment is sold for a minimum of $5,000) and any litigation involving any of the assets set forth on Exhibit A or any of the liabilities set forth on Exhibit B. 5. Other Instruments. It is understood that Seller, contemporaneously with the execution and delivery of this General Bill of Sale, Assignment and Assumption Agreement, is further executing and delivering to Buyer certain other assign ments and instruments of transfer which in particular cover certain of the interests and assets hereinabove assigned, the purpose of which is to supplement, facilitate and other wise implement the transfers intended hereby. 3 6. Successors and Assigns. This Instrument and the covenants and agreements herein contained shall inure to the benefit of and shall bind the respective parties hereto and their respective successors and assigns. IN WITNESS WHEREOF, the parties hereto have executed this General Bill of Sale, Assignment and Assumption Agreement as of the date set forth above. "Seller" Interfilm, Inc. By: /s/ William Franzblau ------------------------------- Its: COO/EVP --------------------------- Interfilm Technologies, Inc. By: /s/ William Franzblau ------------------------------- Its: EVP --------------------------- "Buyer" Interfilm Stockholders Limited Partnership By: Fab Five, Inc., general partner By: /s/ William Franzblau ------------------------------- Its: President ------------------------------- 4 EXHIBIT A --------- ASSETS ------ 1. All of the rights and responsibilities in connection with the litigation captioned "Interfilm, Inc. and Interfilm Technologies, Inc. against Advanced Exhibition Corporation, et. al.," Index No. 601990/96, in the Superior Court of the State of New York, including, but not limited to, the right to receive all net proceeds of any judgment or settlement thereof, and the responsibility to pay any out-of-pocket expenses in excess of the amount that has been escrowed for such expenses. 2. U.S. Patent No. 5,465,384 and U.S. Patent No. 4,746,994. 3. All IT Systems located in various theaters owned by Seller and any revenue received from the sale thereof. 4. Any refund to Seller of an insurance premium by Sedgewick Insurance Company. 5. Any refund of the bond posted with the State of California relating to sales tax. 6. Any net proceeds generated by the enforcement of any judgment or settlement relating to the litigation between Interfilm, Inc. and Ground Control. 7. The cash balance contained in Account No. 266011809 with the Republic National Bank of New York, 415 Madison Avenue, New York, New York 10017. EXHIBIT B --------- Sony Electronics 1,587.73 Sony Theaters 2,221.84 Loeb & Loeb LLP all unpaid bills, if any Contingent Liabilities - ---------------------- Pioneer Electronics 13,000 (approximate) CFI 5,000 (approximate) Amounts due under Employment Contracts dated October 28, 1993 between Interfilm, Inc. and each of William Franzblau, Bob Bejan, Brian Cooper, Jim Sorensen and David Goret, all as revised by Amendments dated March, 1996 with respect to payment of accrued compensation as reflected on the February 28, 1996 Consolidated Balance Sheet. Note to Irv Fuller - Principal Amount: 176,000 plus accrued interest Note to Paul Selwyn - Principal Amount: 88,000 plus accrued interest PATENT ASSIGNMENT WHEREAS, Interfilm, Inc., a Delaware corporation, having a principal place of business at 110 Greene Street, Suite 601, New York, New York 10012, hereinafter referred to as the Assignor, is the owner of the entire right, title and interest in and to U.S. Patent No. 4,746,994, hereinafter referred to as the Patent; WHEREAS, the Interfilm Stockholders Limited Partnership, a Delaware limited partnership, having a general partner Fab Five, Inc. located at 110 Greene Street,Suite 601, New York, New York 10012, hereinafter referred to as the Assignee, is desirous of acquiring the entire right, title and interest in and to said Patent; NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged, Assignor hereby presents, sells, transfers, conveys and assigns to Assignee, its successors and assigns, its entire right, title, and interest in and to the patent and inventions described and claimed therein, and in and to any divisions or continuations or continuations-in-part or reissues of said Patent, together with, but not limited to, all rights to profits and damages for past infringements of said Patent, the same to be held and enjoyed by Assignee for its own use and for the use of its successors and assigns as fully and entirely as the same would have been held and enjoyed by Assignor if this assignment and sale had not been made. Signed and sealed this 25 day of June, 1996. INTERFILM, INC. By: /s/ William Franzblau ------------------------------- Name: /s/ William Franzblau -------------------------- Title: COO/EVP ------------------------- County of New York ) ------------ ) ss. State of New York ) ------------ Subscribed and sworn before me this day of June, 1996 /s/Robert P. Wessely - -------------------- Notary Public (OFFICIAL SEAL) [NOTARY STAMP] PATENT ASSIGNMENT WHEREAS, Technologies, Inc., a New York corporation, having a principal place of business at 110 Greene Street, Suite 601, New York, New York 10012, hereinafter referred to as the Assignor, is the owner of the entire right, title and interest in and to U.S. Patent No. 35,465,384, hereinafter referred to as the Patent; WHEREAS, the Interfilm Stockholders Limited Partnership, a Delaware limited partnership, having a general partner Fab Five, Inc. located at 110 Greene Street,Suite 601, New York, New York 10012, hereinafter referred to as the Assignee, is desirous of acquiring the entire right, title and interest in and to said Patent; NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged, Assignor hereby presents, sells, transfers, conveys and assigns to Assignee, its successors and assigns, its entire right, title, and interest in and to the patent and inventions described and claimed therein, and in and to any divisions or continuations or continuations-in-part or reissues of said Patent, together with, but not limited to, all rights to profits and damages for past infringements of said Patent, the same to be held and enjoyed by Assignee for its own use and for the use of its successors and assigns as fully and entirely as the same would have been held and enjoyed by Assignor if this assignment and sale had not been made. Signed and sealed this 25 day of June, 1996. INTERFILM, TECHNOLOGIES, INC. By: /s/ William Franzblau ------------------------------- Name: /s/ William Franzblau -------------------------- Title: EVP ------------------------- County of New York ) ------------ ) ss. State of New York ) ------------ Subscribed and sworn before me this day of June, 1996 /s/Robert P. Wessely - -------------------- Notary Public (OFFICIAL SEAL) ROBERT P. WESSELY NOTARY PUBLIC, State of New York No. 4624535 Qualified in New York County Commission Expires Oct. 31, 1996 -----END PRIVACY-ENHANCED MESSAGE-----