SEPARATION AND DISTRIBUTION AGREEMENT
This SEPARATION AND DISTRIBUTION AGREEMENT (this "Agreement"), dated
as of September 10, 1997, is made by and between BIOMUNE SYSTEMS, INC., a
Nevada corporation ("Biomune") and VOLU-SOL, INC., a wholly owned subsidiary
of Biomune and a Utah corporation ("Volu-Sol").
R E C I T A L S :
A. The Board of Directors of Biomune ("Biomune Board") has determined
that it is appropriate and desirable to separate Volu-Sol from Biomune by
distributing as a dividend to the holders of shares of common stock, par value
$.0001 per share, of Biomune (the "Biomune Common Stock") all outstanding
shares of common stock, par value $.0001 per share, of Volu-Sol (the "Volu-Sol
Common Stock") such transaction, as hereinafter described, being sometimes
referred to as the "Distribution."
B. Biomune and Volu-Sol have determined that it is necessary and
desirable to set forth the principal corporate transactions required to effect
such separation and dividend distribution and to set forth other agreements
that will govern certain other matters following such distribution.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms have the following
meanings (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
1.1 Action. Any action, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
1.2 Add-on Volu-Sol Option. An option to acquire Volu-Sol Common
Stock granted as provided in Section 3.03(a).
1.3 Adjusted Biomune Option. A Biomune Stock Option, adjusted as
provided in Section 3.03(a)
1.4 Affiliate. As defined in Rule 12b-2 promulgated under the
Exchange Act, as such Rule is in effect on the date hereof.
1.5 Biomune 401(k) Plan. The Biomune Systems, Inc. Savings and
Investment Plan.
1.6 Biomune Business. The pharmaceutical and nutrition research and
development business and any other businesses conducted by Biomune or any
Biomune Subsidiary other than the Volu-Sol Business, in the past, at the date
hereof or in the future.
1.7 Biomune Employee. Any individual employed (or retained as a
consultant, agent, advisor or independent contractor) by Biomune or a Biomune
Subsidiary on, before or following the Distribution Date, but only during the
time such individual was or is employed (or retained) by Biomune or a Biomune
Subsidiary.
1.8 Biomune Liabilities. Collectively, (i) all the Liabilities of
Biomune under this Agreement, (ii) all the Liabilities, whenever arising
(whether prior to, on or following the Effective Time), arising out of or in
connection with or otherwise relating to the management or conduct of the
Biomune Business, including, without limitation, the products made, sold or
distributed by any Biomune Subsidiary prior to, on or following the
Distribution Date, the former, present or future assets of Biomune or any
Biomune Subsidiary (other than assets of Volu-Sol) or the former, present or
future Biomune Employees (but only with respect to the time any such
individual was a Biomune Employee) and (iii) all the Liabilities arising out
of or based upon any untrue statement of material fact contained in the
Information Statement, or the omission or alleged omission to state a material
fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading, other than liabilities arising out of or based upon the
incorporation of any document in the Information Statement and the description
of the Volu-Sol Business or otherwise relating to Volu-Sol in the Information
Statement.
1.9 Biomune Policies. All insurance policies and insurance contracts
of any kind, including, without limitation, primary and excess policies,
comprehensive general liability policies, workers' compensation insurance
policies, and self-insurance and captive insurance company arrangements,
together with the rights, benefits and privileges thereunder, in effect for
periods prior to the Effective Time which are owned or maintained by or on
behalf of Biomune or any of its predecessors which relate to both the Biomune
Business and the Volu-Sol Business.
1.10 Biomune Stock Option Plans. The Biomune Stock Incentive Plans,
as amended, for the years 1992, 1993, 1995 and 1996.
1.11 Biomune Stock Option. An option to purchase shares of Biomune
Common Stock granted pursuant to any of the Biomune Stock Option Plans.
1.12 Biomune Subsidiary. Any subsidiary of Biomune on or before the
Distribution Date and any subsidiary of Biomune which may thereafter be
organized or acquired, other than Volu-Sol.
1.13 Code. The Internal Revenue Code of 1986, as amended, and the
Treasury Regulations promulgated thereunder, including any successor
legislation.
1.14 Commission. The Securities and Exchange Commission.
1.15 Distribution Agent. American Stock Transfer & Trust Company, or
other entity appointed by Biomune to distribute shares of Volu-Sol Common
Stock pursuant to the Distribution.
1.16 Distribution Date. The date determined by Biomune Board as of
which the Distribution will be effected.
1.17 Distribution Record Date. March 5, 1997, the date determined by
Biomune Board as the record date for determining the holders of Biomune Common
Stock who are entitled to participate in the Distribution.
1.18 Effective Time. The time on the Distribution Date when Biomune
delivers to the Distribution Agent instructions directing the Distribution
Agent to effect the Distribution.
1.19 ERISA. The Employee Retirement Income Security Act of 1974, as
amended, or any successor legislation.
1.20 Exchange Act. The Securities Exchange Act of 1934, as amended,
together with the rules and regulations promulgated thereunder.
1.21 Indemnifiable Losses. Any and all losses, Liabilities, claims,
damages, costs or expenses (including, without limitation, reasonable
attorneys' fees and any and all expenses whatsoever reasonably incurred in
investigating, preparing or defending against any Actions or threatened
Actions).
1.22 Information Statement. The information statement to be sent to
the holders of shares of Biomune Common Stock and Preferred Stock as of the
Distribution Record Date in connection with the Distribution.
1.23 Insurance Proceeds. Those monies (i) received by an insured
from an insurance carrier or (ii) paid by an insurance carrier on behalf of
the insured, in either case net of any applicable premium adjustment,
retrospectively rated premium, deductible, retention, cost or reserve paid or
held by or for the benefit of such insured.
1.24 Insured Claims. Those Liabilities that, individually or in the
aggregate, are covered within the terms and conditions of any of the Biomune
Policies, whether or not subject to deductibles, co-insurance,
uncollectability or retrospectively rated premium adjustments, but only to the
extent that such Liabilities are within applicable policy limits, including
aggregates.
1.25 IRS. The Internal Revenue Service.
1.26 Liabilities. Any and all debts, liabilities and obligations,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
accrued or unaccrued, known or unknown, whenever arising, including, without
limitation, those debts, liabilities and obligations arising under any law,
rule, regulation, Action, threatened Action, order or consent decree of any
court, any governmental or other regulatory or administrative agency or
commission or any award of any arbitration tribunal, and those arising under
any contract, commitment or undertaking.
1.27 Nasdaq SmallCap Stock Market or SCM. The National Association of
Securities Dealers, Inc., SmallCap Stock Market.
1.28 Plan. Any plan, policy, arrangement or contract providing
benefits for any group of employees or former employees or individual employee
or former employee, or the beneficiary or beneficiaries of any such employee
or former employee, whether formal or informal, written or unwritten and
whether or not legally binding, including, without limitation, any means,
whether or not legally required, pursuant to which any benefit is provided by
an employer or any employee or former employee to the beneficiary or
beneficiaries of any such employee or former employee.
1.29 Qualified Plan. A Plan which is an employee pension benefit
plan (within the meaning of Section 3(2) of ERISA) and which constitutes or is
intended in good faith to constitute a qualified plan under Section 401(a) of
the Code, including, without limitation, the Plans listed on Schedule A.
1.30 Registration Statement. The Volu-Sol Registration Statement on
Form 10-SB relating to the registration of the Volu-Sol Common Stock under the
Exchange Act.
1.31 Securities Act. The Securities Act of 1933, as amended,
together with the rules and regulations promulgated thereunder.
1.32 Subsidiary. Any entity at least 51% of the total outstanding
voting interests of which are owned, directly or indirectly, by another
entity.
1.33 Volu-Sol Business. The medical diagnostic stain business and
any other businesses conducted by Volu-Sol in the past, at the date hereof or
in the future.
1.34 Volu-Sol Employee. Any individual employed (or retained as a
consultant, agent, advisor or independent contractor) by Volu-Sol on, before
or following the Distribution Date, but only during the time such individual
was or is employed (or retained) by Volu-Sol.
1.35 Volu-Sol Liabilities. Collectively, (i) all the Liabilities of
Volu-Sol under this Agreement, (ii) all the Liabilities, whenever arising
(whether prior to, on or following the Effective Time), arising out of or in
connection with or otherwise relating to the management or conduct of the
Volu-Sol Business, including without limitation, the products made, sold or
distributed by Volu-Sol prior to, on or following the Distribution Date, the
former, present or future assets of Volu-Sol or the former, present or future
Volu-Sol Employees (but only with respect to the time any such individual was
a Volu-Sol Employee), and (iii) all the Liabilities arising out of or based
upon any untrue statement of material fact contained in the Information
Statement or in the portion of the Proxy Statement/Prospectus describing the
Volu-Sol Business or otherwise relating to Volu-Sol, or the omission or
alleged omission to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
1.36 Volu-Sol Transition Plan. The Volu-Sol Transition Plan to be
adopted by Volu-Sol pursuant to which shares of Volu-Sol Common Stock may be
issued to holders of Add-on Volu-Sol Options and which is expected to provide
substantially identical benefits to the Biomune Stock Option Plans.
1.37 Welfare Plan. Any Plan, including, without limitation, the
Plans listed on Schedule B, which is not a Qualified Plan and which provides
medical, health, disability, accident, life insurance, death, dental,
severance or any other welfare benefit within the meaning of Section 3(1) of
ERISA.
References to an "Exhibit" or to a "Schedule" are, unless otherwise
specified, to one of the Exhibits or Schedules attached to this Agreement, and
references to a "Section" are, unless otherwise specified, to one of the
Sections of this Agreement.
ARTICLE II
DISTRIBUTION AND RELATED TRANSACTIONS
2.1 Biomune Board Action. The Biomune Board shall, in its
discretion, establish the Distribution Record Date and the Distribution Date
and any procedures necessary or appropriate to effect the Distribution. Such
action shall not create any obligation on the part of Biomune to effect the
Distribution or in any way limit Biomune's power of termination set forth in
Section 8.7 or alter the consequences of any such termination from those
specified in such Section.
2.2 The Distribution. Subject to the conditions contained in this
Agreement, including without limitation, those set forth in Section 2.14
below, immediately prior to the Effective Time on the Distribution Date,
Volu-Sol will effect a reverse split of its issued and outstanding shares to
that number of shares of Volu-Sol Common Stock equal to one share of Volu-Sol
Common Stock for each ten (10) shares of Biomune Common Stock outstanding at
the Effective Time. At the Effective Time, subject to the conditions and
rights of termination set forth in this Agreement, Biomune will deliver to the
Distribution Agent a certificate representing all the then outstanding shares
of Volu-Sol Common Stock and will deliver to the Distribution Agent
instructions to distribute on, or as soon as practicable following the
Distribution Date, one share of Volu-Sol Common Stock for each ten (10) shares
of Biomune Common Stock held by holders of record of shares of Biomune Common
Stock on the Distribution Record Date and the shares of Volu-Sol Common Stock
required by Section 2.3, below. Volu-Sol will provide all share certificates
that the Distribution Agent requires in order to effect the Distribution. The
Distribution will, for all purposes, be deemed to have been effected at the
time Biomune delivers such instructions to the Distribution Agent
notwithstanding that certificates may not be mailed for several days
thereafter. No certificates representing fractional shares of Volu-Sol Common
Stock will be distributed to holders of Biomune Common Stock. All fractional
share interests will be rounded up or down to the nearest whole share.
2.3 Certain Preferred Shareholder Rights. Biomune has two (2)
outstanding classes of Convertible Preferred Stock, i.e., Series A and Series
C Convertible Preferred Stock (collectively the "Preferred Shares"). The
statements which determined the rights and preferences of the Preferred Shares
include a provision which requires that Biomune issue upon conversion of the
Preferred Shares into Biomune Common Stock, the shares of Volu-Sol Common
Stock that would have been issued had the conversion of the Preferred Shares
occurred and the holders thereof become holders of Biomune Common Stock prior
to the Distribution Record Date. Volu-Sol agrees to reserve for issuance,
solely for the purpose of complying with this provision, a sufficient number
of shares of Volu-Sol Common Stock, to be issued to the holders of the
Preferred Shares as of the Distribution Record Date, if, when and as such
holders exercise their conversion rights under the Preferred Shares. No
shares of Volu-Sol Common Stock will be issued in respect of Preferred Shares
issued as dividends following March 4, 1997. No consideration shall be paid
to Volu-Sol for shares of Volu-Sol Common Stock issued pursuant to this
obligation.
2.4 Certain Warrants and Non-Plan Options. Certain warrants and
options granted by Biomune and unexercised as of March 5, 1997, provide for
Biomune to deliver Volu-Sol Common Stock if, when and as the warrants (or
options) to purchase Biomune Common Stock are exercised. Volu-Sol agrees to
make available and to sell to Biomune, solely for the purpose of meeting its
obligation under such instruments, that number of shares of Volu-Sol to Common
Stock representing 1/10th of the number of shares of Biomune Common Stock as
may be issued upon exercise of said warrants or options, as the case may be.
The purchase price to be paid by Biomune for such Volu-Sol Common Stock shall
be a sum equal to 1/10th of the consideration received by Biomune upon the
exercise of the related warrant or option, as the case may be.
2.5 Elimination of Intercompany Accounts. Except as provided in this
Section, the net amounts of all intercompany receivables, payables and
indebtedness between Volu-Sol, on the one hand, and Biomune or any Biomune
Subsidiary, on the other hand as of the Effective Time, will be satisfied in
full by dividend or capital contribution, as appropriate, and without the need
for any further documentation, as of the Effective Time. All advances made to
Volu-Sol by Biomune after March 5, 1997 through and including the Effective
Time will be evidenced by one or more promissory notes in the principal amount
of the aggregate of all such advances (the "Volu-Sol Notes").
2.6 Transfer of Assets. Prior to the Effective Time, Biomune will
transfer to Volu-Sol all of its interest in Volu-Sol or any assets used in the
Volu-Sol Business not previously transferred to Volu-Sol.
2.7 Assumption and Satisfaction of Liabilities. Except as otherwise
set forth herein, from and after the Effective Time, (a) Biomune will, and
will cause the Biomune Subsidiaries to assume and pay, perform or discharge in
due course all Biomune Liabilities and (b) Volu-Sol will assume and pay,
perform or discharge in due course all the Volu-Sol Liabilities.
2.8 Resignations. Biomune will use its best efforts to cause all
Biomune Employees, except for Xxxxxxx X. Xxxxx, to resign, at or before the
Effective Time, from all positions as officers or directors of Volu-Sol in
which they serve. Volu-Sol will use its best efforts to cause all Volu-Sol
Employees, except for Xxxxxxx X. Xxxxx, to resign, at or before the Effective
Time, from all positions as directors or officers of Biomune or any Biomune
Subsidiary in which they serve. Following the Distribution, the Volu-Sol board
of directors ("Volu-Sol Board") will consist of Xxxxxxx X. Xxxxx, Xxxx X. Job
and Xxxxx X. Xxxxxxx.
2.9 Further Assurances. If after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement
or to vest Biomune or Volu-Sol with full title to all properties, assets,
rights, approvals, immunities and franchises pertaining to the Biomune
Business or the Volu-Sol Business, as the case may be, the proper officers and
each party to this Agreement will take all such necessary action. Without
limiting the foregoing, Biomune and the Biomune Subsidiaries and Volu-Sol
will use their best efforts to obtain all consents and approvals, to enter
into all amendatory agreements and to make all filings and applications and
take all other actions which may be required for the consummation of the
transactions contemplated by this Agreement, including, without limitation,
all applicable regulatory filings.
2.10 No Representations or Warranties. Each of the parties hereto
understands and agrees that no party hereto is, in this Agreement or in any
other agreement or document contemplated by this Agreement or otherwise,
making any representation or warranty whatsoever, including, without
limitation, as to title, value or legal sufficiency.
2.12 Guaranties. Except as otherwise provided in Article III hereof
with respect to employee benefit matters, Biomune and Volu-Sol will each use
their best efforts to have, on or prior to the Distribution Date, or as soon
as practicable thereafter, Biomune or any Biomune Subsidiary removed as
guarantor of or obligor for indebtedness or obligations for which Volu-Sol is
primarily liable and Volu-Sol removed as guarantor of or obligor for
indebtedness or obligations for which Biomune or any Biomune Subsidiary is
primarily liable. Without limiting the generality of the foregoing, Biomune
will use its best efforts to have the assets of Volu-Sol released as
collateral under Biomune's bank line of credit and Volu-Sol will use its best
efforts to have Biomune released as a guarantor of the lease relating to
Volu-Sol's principal office. Biomune will indemnify, defend and hold harmless
Volu-Sol from and against any and all Liabilities of Volu-Sol arising from a
guarantee or other obligation of Volu-Sol in respect of indebtedness or
obligations for which Biomune (or any Biomune Subsidiary) is primarily liable.
Volu-Sol will indemnify and hold harmless Biomune from and against any and all
Liabilities of Biomune arising from a guarantee or other obligation of Biomune
in respect of indebtedness or obligations for which Volu-Sol is primarily
liable.
2.11 Litigation.
(a) With respect to all Actions now pending or which may
hereafter be commenced or threatened which may result in a Biomune Liability,
Biomune and Volu-Sol will each use their best efforts to have Biomune or a
Biomune Subsidiary substituted as parties to such Action in the place of and
for Volu-Sol or any Volu-Sol Employee and to have Volu-Sol and any Volu-Sol
Employee removed as parties to such Action following the Distribution Date.
(b) With respect to all Actions now pending or which may
hereafter be commenced or threatened which may result in a Volu-Sol Liability,
Biomune and Volu-Sol will each use their best efforts to have Volu-Sol
substituted as parties to such Action in the place of and for Biomune, any
Biomune Subsidiary or any Biomune Employee and to have Biomune, any Biomune
Subsidiary and any Biomune Employee removed as parties to such Action
following the Distribution Date.
(c) At all times from and after the Distribution Date, each of
Volu-Sol and Biomune will use reasonable efforts to make available to the
other upon written request its and its Subsidiaries' officers, directors,
employees and agents as witnesses to the extent that such persons may
reasonably be required in connection with any Actions in which the requesting
party may from time to time be involved (without reimbursement for such
persons' salaries).
(d) The provisions of this Section 2.12 will be in addition to,
and not in limitation of, the provisions of Article V, and compliance with the
provisions of this Section 2.12 will not affect the obligations of the parties
under Article V.
2.13 Publicity. Any existing printed material implicitly or
explicitly showing any affiliation or connection between Biomune and Volu-Sol
as of the date such material is used may be used by Biomune and Volu-Sol only
for a period ending six months after the Distribution Date. After the
Distribution Date, neither party hereto will otherwise represent to third
parties that it has a present business affiliation with the other.
2.14 Conditions to the Distribution. The Biomune Board shall have
the sole discretion to determine the Distribution Record Date and the
Distribution Date, and all appropriate procedures in connection with the
Distribution; provided that the Distribution shall not occur prior to such
time as each of the following conditions shall have been satisfied or shall
have been waived by the Biomune and Volu-Sol Boards:
(a) Any material governmental approvals and consents necessary
to consummate the Distribution shall have been obtained and be in full force
and effect;
(b) No order injunction or decree issued by any court or agency
of competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Distribution shall be in effect and no other event
shall have occurred or failed to occur that prevents the consummation of the
Distribution; and
(c) The Registration Statement shall have been declared
effective by the Commission.
2.15 Qualification as Tax-Free Distribution.
(a) The parties have determined they will not seek a private
letter ruling from the IRS concerning the tax-free status of the
Distribution. Based on the counsel of their tax advisors, the parties believe
the transaction would qualify as a tax-free distribution within the meaning of
Section 355 of the Code. After the Distribution Date, neither Volu-Sol nor
Biomune will take, or permit any member of its respective corporate group to
take, any action which could reasonably be expected to prevent the
Distribution from qualifying as a tax-free distribution under Code Section 355
or any other transaction contemplated by this Agreement which is intended by
the parties to be tax-free from failing so to qualify.
(b) Notwithstanding the foregoing, nothing in this Section will
prohibit either party from taking any action or entering into any transaction
in the ordinary course of business or in the ordinary course of business
dealing, or in connection with the settlement of any audit issue or the filing
of any tax return.
ARTICLE III
EMPLOYEE BENEFITS
3.1 401(k) Plan. Presently no Biomune Employees who will become
Volu-Sol Employees participate under the Biomune 401(k) Plan. Therefore,
Volu-Sol does not intend to adopt a similar 401(k) Plan at this time.
3.2 Welfare Plans.
(a) Biomune and the Biomune Subsidiaries will assume or retain all
Liabilities and obligations whatsoever for benefits of Biomune Employees and
their spouses and dependents under any Welfare Plan. Except as provided in
Section 3.2(b), as of the Effective Time or as soon thereafter as may be
agreed upon by Biomune, Volu-Sol and the applicable insurance carriers, but no
later than December 31, 1997, Volu-Sol will cease to cosponsor any Welfare
Plans with Biomune or any Biomune Subsidiary; provided, however, that Volu-Sol
Employees and their spouses and dependents participating in Biomune Welfare
Plans cosponsored by Volu-Sol will remain entitled to benefits under (and in
accordance with the terms of) such Welfare Plans for covered expenses incurred
and benefits accrued prior to the time at which their participation in such
Welfare Plans ceases. With respect to the insured medical and dental plan(s)
cosponsored by Biomune and Volu-Sol for eligible employees and their spouses
and dependents, Volu-Sol agrees to pay a pro rata share (based on number of
participants) of any claims runoff for benefits incurred prior to the time
Volu-Sol Employees and their spouses and dependants cease to participate in
such plan(s) that requires additional payments to the insurance company over
and above the amount reserved on Biomune's books for such purpose at the
Effective Time, and Biomune agrees that it will refund to Volu-Sol, at such
time as such reserve is no longer subject to runoff claims for benefits
incurred prior to the time Volu-Sol Employees and their spouses and dependants
cease to participate in such plan(s), a pro rata share (based on number of
participants) of any portion of such reserve that is not utilized to pay such
benefits. Volu-Sol will also be responsible for providing COBRA coverage under
Code Section 4980B for former Volu-Sol Employees and their covered dependents
who are entitled to COBRA coverage on and after the date Volu-Sol ceases to
cosponsor the Biomune medical and dental plan(s). Volu-Sol will also be liable
for any retiree medical coverage liabilities to retired Volu-Sol Employees and
their dependents, and for any severance benefits payable to any Volu-Sol
Employee under a severance pay plan or policy.
(b) Biomune will permit Volu-Sol and any Volu-Sol Subsidiaries
to cosponsor any Biomune Welfare Plan(s) (except for any severance pay plan)
for such period following the Effective Time as may be agreed upon by Biomune,
Volu-Sol and the applicable insurance carriers, but not later than December
31, 1997; provided that Volu-Sol and any Volu-Sol Subsidiaries will pay the
costs associated with such co-sponsorship for Volu-Sol Employees and their
spouses and dependants on the same basis as Biomune pays the costs associated
with such co-sponsorship for Biomune Employees and their spouses and
dependants.
3.3 Stock Option Plans.
(a) The parties will cooperate and take all action necessary to
amend or otherwise provide for adjustments to outstanding awards under the
Biomune Stock Option Plans, to adopt the Volu-Sol 1997 Transition Plan and to
grant the Add-on Volu-Sol Options, so that effective as of the Distribution
Date, each Biomune Stock Option that is outstanding and exercisable, but not
then exercised, will have been adjusted immediately prior to the Distribution
Date so as to represent two separate options, one to purchase Biomune Common
Stock for the same number of shares as the related Biomune Stock Option and
the other to purchase Volu-Sol Common Stock for one-tenth (1/10) of the number
of shares as the related Biomune Stock Option (rounded down to the nearest
whole share) (an "Adjusted Biomune Option" and an "Add-on Volu-Sol Option,"
respectively). Each Add-on Volu-Sol Option will have substantially the same
terms as the related Biomune Stock Option except for the number of shares of
Volu-Sol Common Stock to be purchased and except that Add-on Volu-Sol Options
will be administered pursuant to the Volu-Sol 1997 Transition Plan. The
exercise price per share and all other terms and conditions of each Biomune
Option will not be changed in the Adjusted Biomune Option. The exercise price
per share of each Add-on Volu-Sol Option shall be the same as the per-share
exercise price of the Biomune Option to which it relates.
(b) Biomune shall cause the Biomune Stock Option Plans to be
interpreted so that employment of the Volu-Sol Employees with Volu-Sol shall
be treated as employment with Biomune for purposes of the provisions of such
plans causing outstanding Adjusted Biomune Options to expire upon the
termination of employment of the option holder. Volu-Sol agrees to promptly
notify Biomune of the termination of employment for any reason of each
Volu-Sol Employee who is a holder of Adjusted Biomune Options for Biomune's
use in administering the Biomune Stock Option Plans with respect to
outstanding Adjusted Biomune Options. Biomune agrees to promptly notify
Volu-Sol of the termination of employment for any reason of each of its
employees who is a holder of Add-on Volu-Sol Options for Volu-Sol's use in
administering the Volu-Sol 1997 Transition Plan. For so long as any Adjusted
Biomune Options remain outstanding, Biomune shall provide to Volu-Sol, and
Volu-Sol shall deliver to the Volu-Sol Employees who are holders of Adjusted
Biomune Options, copies of the prospectus or prospectuses and all amendments
and supplements thereto prepared in accordance with the Securities Act
relating to the Adjusted Biomune Options. For so long as any Add-on Volu-Sol
Options remain outstanding, Volu-Sol shall provide to Biomune, and Biomune
shall deliver to its employees who are holders of Add-on Volu-Sol Options,
copies of the prospectus or prospectuses and all amendments and supplements
thereto prepared in accordance with the Securities Act relating to the Add-on
Volu-Sol Options.
(c) If the exercise of an Adjusted Biomune Option by a Volu-Sol
Employee would have qualified for incentive stock option treatment under the
Code if such person had at all times through the time of such exercise
remained an employee of Biomune, Volu-Sol shall pay to the Volu-Sol Employee
an amount in cash intended to compensate such person for the loss of such
treatment as a result of failing to satisfy the employment requirements of
Section 422(a)(2) of the Code with respect to such option, such amount to be
determined by Volu-Sol in its discretion, but not to exceed the value of the
corresponding tax benefit to Volu-Sol. If the exercise of an Add-on Volu-Sol
Option by a Biomune employee would have qualified for incentive stock option
treatment under the Code if such person had at all times through the time of
such exercise been an employee of Volu-Sol, Biomune shall pay to the employee
an amount in cash intended to compensate such person for the loss of such
treatment as a result of failing to satisfy the employment requirements of
Section 422(a)(2) of the Code with respect to such option, such amount to be
determined by Biomune in its discretion, but not to exceed the value of the
corresponding tax benefit to Biomune. In either of the foregoing cases,
payment will be made no later than three months following the date of
exercise, and will be conditioned upon the receipt of an undertaking from the
holder not to dispose of the stock underlying the option in a disposition
described in Section 422(a)(1) of the Code (in each case treating the date of
grant of the related Biomune Stock Option as the date of grant of such
option).
(d) Any and all tax withholding and employment taxes (including
the paying over of such taxes to the government) and related reporting
required in connection with the exercise of an Adjusted or Add-on Option or
in connection with a payment described in subsection (d) hereof shall be the
responsibility of the employer (Biomune or Volu-Sol, as the case may be) of
the individual to whom the Adjusted or Add-on Option was granted, and the
employer shall be entitled to claim any tax deduction arising in connection
with such Adjusted or Add-on Option. The issuer of the shares subject to the
Adjusted or Add-on Option shall promptly notify the employer of the exercise
and shall not be required to deliver any such shares upon exercise of the
option until it shall have received satisfactory evidence that the person
exercising the option has received the payment required by (d), above.
3.4 Other Balance Sheet Adjustments. To the extent not otherwise
provided in this Agreement, Biomune and Volu-Sol will take such action as is
necessary to effect an adjustment to the books of Biomune and Volu-Sol so
that, as of the Effective Time, the prepaid expense balances and accrued
employee liabilities with respect to any employee liability or obligation
assumed or retained as of the Effective Time (except to the extent a later
time is agreed upon as provided in this Agreement) by Biomune and the Biomune
Subsidiaries, on the one hand, and Volu-Sol, on the other hand, are
appropriately reflected on the respective consolidated balance sheets as of
the Effective Time, respectively, of Biomune and Volu-Sol.
3.5 Preservation of Rights to Amend or Terminate Plans. No provision
of this Agreement, including, without limitation, the agreement of Biomune or
Volu-Sol that it, or any Biomune Subsidiary, will make a contribution or
payment to or under any Plan herein referred to for any period, will be
construed as a limitation on the right of Biomune or Volu-Sol or any Biomune
Subsidiary or to amend or terminate such Plan which Biomune or Volu-Sol or
any Biomune Subsidiary or would otherwise have under the terms of such Plan
or otherwise, and no provision of this Agreement will be construed to create a
right in any employee or former employee or beneficiary of such employee or
former employee under a Plan which such employee or former employee or
beneficiary would not otherwise have under the terms of the Plan itself.
ARTICLE IV
INSURANCE
4.1 Biomune shall keep in effect all Biomune Policies in effect as of
the date hereof insuring the Biomune Business and the Volu-Sol Business and
the operations of Biomune, the Biomune Subsidiaries and Volu-Sol until the end
of the day on the Distribution Date, unless Volu-Sol shall have earlier
obtained appropriate coverage and notified Biomune in writing to that effect.
4.2 Commencing at 12:01 a.m. on the day following the Distribution
Date, Volu-Sol will cease to be covered under the Biomune Policies with
respect to any loss, injury, damage, expense or liability that is incurred or
asserted by a third party to have been incurred after the Distribution Date
in, or in connection with, the conduct of the Volu-Sol Business.
4.3 If, subsequent to the Effective Time, any person, corporation,
firm or entity asserts such a claim against Volu-Sol, Biomune shall at the
time such claim is asserted be deemed to assign, without need of further
documentation, to Volu-Sol any and all rights of an insured party under the
applicable Biomune Policy with respect to such asserted claim, specifically
including rights of indemnity, if any, and the right, if any, to be defended
by or at the expense of the insurer; provided, however, that nothing in this
paragraph will be deemed to constitute (or to reflect) the assignment of the
Biomune Policies, or any of them, to Volu-Sol.
4.4 Agreement for Shared Defense. In the event that Insured Claims
of both Volu-Sol and Biomune exist relating to the same occurrence, Volu-Sol
and Biomune agree to jointly defend such Insured Claim; provided, that, if, in
the reasonable judgment of one party, a conflict of interest between Biomune
and Volu-Sol exists in respect of such Insured Claim or if the other party
assumes responsibility for such Insured Claim with any reservations or
exceptions, the party which concludes that a conflict exists or that has not
assumed responsibility for such Insured Claim will have the right to employ
separate counsel reasonably satisfactory to the other party. In that event,
the fees and expenses of such separate counsel will be paid by the party
retaining such counsel unless the other party will have indemnified such party
against such fees and expenses pursuant to this Agreement or otherwise.
Nothing in this Section 4.4 will be construed to limit or otherwise alter in
any way the indemnity obligations of the parties to this Agreement, by
operation of law or otherwise.
ARTICLE V
INDEMNIFICATION
5.1 Indemnification by Biomune. Except as otherwise set forth
herein, Biomune will indemnify, defend and hold harmless Volu-Sol, each of its
directors, officers, employees and agents, each Affiliate of Volu-Sol and each
of the heirs, executors, successors and assigns of any of the foregoing (the
"Volu-Sol Indemnitees") from and against any and all Indemnifiable Losses of
the Volu-Sol Indemnitees arising out of, by reason of or otherwise in
connection with the Biomune Liabilities.
5.2 Indemnification by Volu-Sol. Except as otherwise set forth
herein, Volu-Sol will indemnify, defend and hold harmless Biomune, each of its
directors, officers, employees and agents, each Affiliate of Biomune and each
of the heirs, executors, successors and assigns of any of the foregoing (the
"Biomune Indemnitees") from and against any and all Indemnifiable Losses of
the Biomune Indemnitees arising out of, by reason of or otherwise in
connection with the Volu-Sol Liabilities.
5.3 Limitations on Indemnification Obligations. The amount which any
party (an "Indemnifying Party") is or may be required to pay to any other
party (an "Indemnitee") pursuant to Section 5.1 or Section 5.2 will be reduced
(retroactively or prospectively) by any insurance proceeds or other amounts
actually recovered by or on behalf of such Indemnitee, in reduction of the
related Indemnifiable Loss. If an Indemnitee will have received the payment
required by this Agreement from an Indemnifying Party in respect of an
Indemnifiable Loss and will subsequently actually receive insurance proceeds
or other amounts in respect of such Indemnifiable Loss, then such Indemnitee
will pay to such Indemnifying Party a sum equal to the amount of such
insurance proceeds or other amounts actually received, up to the aggregate
amount of any payments received from such Indemnifying Party pursuant to this
Agreement in respect of such Indemnifiable Loss.
5.4 Procedure for Indemnification.
(a) If an Indemnitee shall receive notice or otherwise learn of
the assertion by a person (including, without limitation, any governmental
entity) who is not a party to this Agreement of any claim or of the
commencement by any such person of any Action (a "Third Party Claim") with
respect to which an Indemnifying Party may be obligated to provide
indemnification pursuant to this Agreement, such Indemnitee shall give such
Indemnifying Party written notice thereof promptly after becoming aware of
such Third Party Claim; provided, however, that the failure of any Indemnitee
to give notice as provided in this Section 5.4 shall not relieve the
applicable Indemnifying Party of its obligations under this Article V, except
to the extent that such Indemnifying Party is prejudiced by such failure to
give notice. Such notice shall describe the Third Party Claim in reasonable
detail and will indicate the amount (estimated if necessary) of the
Indemnifiable Loss that has been or may be sustained by such Indemnitee.
(b) Subject to the proviso of the following sentence, an
Indemnifying Party shall defend or seek to settle or compromise, at such
Indemnifying Party's own expense and by such Indemnifying Party's own counsel,
any Third Party Claim. Within thirty (30) days of the receipt of notice from
an Indemnitee in accordance with Section 5.4(a) (or sooner, if the nature of
such Third Party Claim so requires), the Indemnifying Party will notify the
applicable Indemnitee whether the Indemnifying Party will assume
responsibility for defending such Third Party Claim, which notice must specify
any reservations or exceptions with respect to such assumption of
responsibility; provided, however, that an Indemnifying Party may elect not to
assume responsibility for defending a Third Party Claim only in the event of a
good faith dispute that a claim was appropriately tendered under Section 5.1
or 5.2, as the case may be, in which case the Indemnitee may defend or seek to
compromise or settle such Third Party Claim. After notice from an Indemnifying
Party to an Indemnitee of its election to assume the defense of a Third Party
Claim, such Indemnifying Party will not be liable to such Indemnitee under
this Article V for any legal or other expenses (except expenses approved in
advance by the Indemnifying Party) subsequently incurred by such Indemnitee in
connection with the defense thereof; provided, that, if the defendants in any
such claim include both the Indemnifying Party and one or more Indemnitees and
in such Indemnitees' reasonable judgment a conflict of interest between such
Indemnitees and such Indemnifying Party exists in respect of such claim or if
the Indemnifying Party will assume responsibility for such claim with any
reservations or exceptions, such Indemnitees will have the right to employ
separate counsel reasonably satisfactory to the Indemnifying Party to
represent such Indemnitees, and in that event the reasonable fees and expenses
of such separate counsel (but not more than one separate counsel) will be paid
by such Indemnifying Party.
(c) If an Indemnifying Party elects to defend or to seek to
compromise any Third Party Claim, the appropriate Indemnitee will (i)
cooperate in all reasonable respects with the Indemnifying Party in connection
with such defense, (ii) not admit any liability with respect to, or settle,
compromise or discharge, such Third Party Claim without the Indemnifying
Party's prior written consent and (iii) agree to any settlement, compromise or
discharge of such Third Party Claim which the Indemnifying Party may recommend
and which by its terms obligates the Indemnifying Party to pay the full amount
of the liability in connection with such Third Party Claim and which releases
the Indemnifying Party completely in connection with such Third Party Claim.
(d) In the event of payment by an Indemnifying Party to any
Indemnitee in connection with any Third Party Claim, such Indemnifying Party
will be subrogated to and will stand in the place of such Indemnitee as to any
events or circumstances with respect to which such Indemnitee may have any
right or claim relating to such Third Party Claim against any claimant or
plaintiff asserting such Third Party Claim. Such Indemnitee will cooperate
with such Indemnifying Party in a reasonable manner, and at the cost and
expense of such Indemnifying Party, in prosecuting any subrogated right or
claim.
(e) With respect to any Third Party Claim for which the
Indemnifying Party assumes responsibility for defense, the Indemnifying Party
will inform the Indemnitee, upon the reasonable written request of the
Indemnitee, of the status of efforts to resolve such Third Party Claim. With
respect to any Third Party Claim for which the Indemnifying Party does not
assume such responsibility, the Indemnitee will inform the Indemnifying Party,
upon the reasonable written request of the Indemnifying Party, of the status
of efforts to resolve such Third Party Claim.
5.5 Survival of Indemnities. The obligations of Biomune and Volu-Sol
under this Article V will survive the sale or other transfer by it of any
assets or businesses or the assignment by it of any Liabilities, with respect
to any Indemnifiable Loss of the other related to such assets, businesses or
Liabilities. All obligations of Biomune and Volu-Sol under this Article V will
terminate five years after the Distribution Date, except with respect to
claims for which one party has provided notice to the other prior to the end
of such five-year period.
ARTICLE VI
ACCESS TO INFORMATION
6.1 Provision of Corporate Records. Biomune will use its best
efforts to arrange, as soon as practicable following the Distribution Date,
for the transportation to Volu-Sol of all original agreements, documents,
books, records and files relating to or affecting Volu-Sol, any or the
Volu-Sol Business (collectively "Records"), to the extent such items are not
already in the possession of Volu-Sol, subject to the following exceptions:
(a) Volu-Sol recognizes that certain Records may contain
incidental information relating to Biomune and the Biomune Subsidiaries or may
relate primarily to Subsidiaries or divisions of Biomune other than Volu-Sol,
and that Biomune may retain such Records and provide copies of the relevant
portions thereof to Volu-Sol; and
(b) Biomune may retain any tax returns, reports, forms or work
papers, and Volu-Sol will be provided with copies of such returns, reports,
forms or work papers only to the extent that they relate to or affect
Volu-Sol's returns or tax liability.
6.2 Access to Information. From and after the Distribution Date,
each of Biomune and Volu-Sol will afford to the other and its authorized
accountants, counsel and other designated representatives reasonable access
during normal business hours, subject to appropriate restrictions for
classified information, to the personnel, properties, books and records of
such party and its subsidiaries insofar as such access is reasonably required
by the other party.
6.3 Confidentiality. Each of Biomune and the Biomune Subsidiaries on
the one hand, and Volu-Sol on the other hand, will hold, and will cause its
respective consultants and advisors to hold, in strict confidence, all
information concerning the other in its possession (except to the extent that
such information has been (a) in the public domain through no fault of such
party or (b) later lawfully acquired from other sources by such party) to the
extent such information (i) relates to the period up to the Effective Time,
(ii) relates to this Agreement or (iii) is obtained from the other party
pursuant to this Agreement, and each party will not release or disclose such
information to any other person, except its auditors, attorneys, financial
advisors, bankers and other consultants and advisors, unless compelled to
disclose by judicial or administrative process or, as advised by its counsel,
by other requirements of law.
ARTICLE VII
TAX MATTERS
7.1 Tax Returns. Biomune shall file all consolidated Federal income
tax returns (and combined or consolidated state and local tax returns) for
each member of the Biomune Group comprising Biomune and its Subsidiaries
(excluding Volu-Sol) that are required to be filed for periods beginning
before (or beginning and ending on) the Distribution Date. All returns with
respect to Other Taxes for a period beginning before (or beginning and ending
on) the Distribution Date shall be filed or caused to be filed by the party
that under Section 7.3(b) is responsible for paying the tax to which the
return relates. For all other taxable periods relating to taxes other than
Transaction Taxes (a) Biomune shall be responsible for filing tax returns
relating to members of the Biomune Group and (b) Volu-Sol shall be responsible
for filing tax returns relating to members of the Volu-Sol Group, comprising
Volu-Sol and its Subsidiaries, if any. Biomune shall file or cause to be
filed all tax returns relating to Transfer Taxes.
7.2 Income Tax Return Positions. Biomune and Volu-Sol agree that,
except as otherwise required by a Final Determination, the transactions
contemplated in this Agreement, except those transactions described in Section
2.3 hereof and transfers of stock in any foreign corporations, shall be
treated by Biomune and Volu-Sol as being described in Section 355 of the
Code.
7.3 Responsibility for Taxes Generally.
(a) Pre-Distribution Income Taxes. Except as otherwise provided
herein, the Biomune Group shall pay, and shall indemnify and hold harmless
each member of the Volu-Sol Group from, all Pre-Distribution Income Tax
Liabilities, and the Biomune Group shall be entitled to receive and retain all
refunds of Income Taxes for which the Biomune Group would have been
responsible hereunder in the absence of the refund.
(b) Other Taxes. Except as otherwise provided herein, the
Biomune Group shall pay, and shall indemnify and hold harmless each member of
the Volu-Sol Group from, all Other Taxes (and shall be entitled to receive and
retain all refunds of Other Taxes) attributable to the operation of the
Biomune Business immediately after the Distribution Date. Except as otherwise
provided herein, Volu-Sol shall pay, and shall indemnify and hold harmless
each member of the Biomune Group from, all Other Taxes (and shall be entitled
to receive and retain all refunds of Other Taxes) attributable to the Volu-Sol
Business immediately after the Distribution.
(c) Carrybacks. Volu-Sol agrees that, to the extent that any
carryback period for a Carryback Item would include any taxable period
beginning on or before the Distribution Date, Volu-Sol shall elect (under Code
section 172(b)(3) and any other applicable Code provision relating to the
carry back of any Carryback Item and, to the extent feasible, any similar
provision of any applicable state or local Income Tax law) to relinquish such
carryback period as to any Carryback Item which can thereby be used to create
or carry forward a tax benefit. In no event shall Biomune have any obligation
to pay to Volu-Sol any amount in respect of a Carryback Item.
(d) Transaction Taxes. The Biomune Group shall pay, and shall
indemnify and hold harmless each member of the Volu-Sol Group from, all
liabilities for Transaction Taxes, and the Biomune Group shall be entitled to
receive and retain all refunds of Transaction Taxes for which the Biomune
Group would have been responsible hereunder in the absence of the refund.
7.4 Responsibility for an Event of Loss.
(a) Volu-Sol Responsibility. Volu-Sol and any successor shall be
responsible for, and shall indemnify and hold harmless Biomune and each member
of the Biomune Group from, Income Taxes, Other Taxes and all reasonable
out-of-pocket costs and expenses directly caused by an Event of Loss which is
attributable to one or more of the following described events or transaction
occurring after the Distribution Date and within two years after the
Distribution Date with respect to Volu-Sol or any successor: a reorganization,
consolidation, merger or acquisition by any person of a fifty percent (50%) or
greater interest in Volu-Sol as determined under Section 355(d)(4) of the
Code, applying the aggregation and attribution rules under subparagraphs
(d)(7) and (8) of that Section, which is in any way solicited or approved by
the Volu-Sol Board (other than in connection with a hostile takeover); the
sale or disposition of Volu-Sol's assets other than those assets relating to
the Volu-Sol Business and other than in the ordinary course of business;
Volu-Sol's ceasing to conduct its business as an active trade or business
within the purview of Section 355 of the Code; the issuance, redemption or
repurchase of shares of Volu-Sol Common Stock by Volu-Sol or any successor or
any subsidiary of the foregoing; the purchase of Biomune Common Stock by
Volu-Sol or any successor or any subsidiary of the foregoing; the
recapitalization or other reclassification of the shares of Volu-Sol or any
successor; or the complete or partial liquidation of Volu-Sol or any
successor.
(b) Biomune Responsibility. Biomune and any successor shall be
responsible for, and shall indemnify and hold harmless Volu-Sol and each
member of the Volu-Sol Group from, Income Taxes, Other Taxes and all
reasonable out-of-pocket costs and expenses directly caused by an Event of
Loss which is attributable to one or more of the following described events or
transactions occurring within two years of the Distribution Date with respect
to Biomune or any successor; a reorganization, consolidation, merger or
acquisition by any person of a fifty percent (50%) or greater interest in
Biomune as determined under Section 355(d)(4) of the Code, applying the
aggregation and attribution rules under subparagraphs (d)(7) and (8) of that
Section, which is in any way solicited or approved by the Biomune Board (other
than in connection with a hostile takeover); the sale or disposition of assets
of any member of Biomune, other than in the ordinary course of business;
Biomune's ceasing to conduct its digital media business as an active trade or
business within the purview of Section 355 of the Code; the issuance,
redemption or repurchase of shares of Biomune Common Stock by Biomune or any
successor or any subsidiary of the foregoing; the purchase of Volu-Sol Common
Stock by Biomune or any successor or any subsidiary of the foregoing; the
recapitalization or other reclassification of the shares of Biomune or any
successor; or the complete or partial liquidation of Biomune or any
successor.
(c) Shared Responsibility. If an Event of Loss shall occur and
responsibility for the Event of Loss under Section 7.4(a) and 7.4(b) rests
either with both parties or neither party, each party shall share the Income
Taxes, Other Taxes and reasonable out-of-pocket costs and expenses directly
caused by such Event of Loss in the ratio of fifty percent (50%) for Biomune
and fifty percent (50%) for Volu-Sol, and each party shall indemnify and hold
harmless the other party for its share of that liability.
(d) Payments. If Biomune is required to make a payment to
Volu-Sol under this Section 7, such payment shall be made to Volu-Sol or any
successor, and any payment due under this Section 7 from Volu-Sol to Biomune
shall be made by Volu-Sol to Biomune or any successor. The payment shall be
made by the earlier of (a) twenty (20) days after Biomune (or a member of
Volu-Sol, as applicable) makes a tax payment (including without limitation any
payment made in connection with either an estimated or annual tax liability)
or (b) twenty (20) days after a Final Determination with respect to such
tax. The amount of any payment required to be made by any party to another
under this Section 7 shall be an amount which, after subtraction of any
additional federal, state or local taxes payable by the recipient in respect
of the receipt of such payment (the "Gross-Up Amount"), is equal to the amount
payable hereunder; provided, however, if a payment is made pursuant to Section
7.4(c) hereof and if a Gross-Up Amount is includable in the payment, the
Gross-Up Amount so includable in the payment shall be reduced by fifty percent
(50%) in the case of payments from Volu-Sol to Biomune or fifty percent (50%)
in the case of payments from Biomune to Volu-Sol. Biomune and Volu-Sol agree
that, without limiting the ultimate payment obligation of the payor set forth
in the preceding sentence, any payment shall be reported for U.S. Federal
income tax purposes as non-deductible and non-taxable unless, by reason of
changes in the law or new interpretations of the law by the Internal Revenue
Service, there is not substantial authority (within the meaning Code section
6662(d)(2)(B)(i)) for such position or such position is otherwise not
permissible under applicable law.
7.5 Cooperation and Exchange of Information.
(a) Matters Giving Rise to Indemnity.
(1) Notice. If during the course of an audit any tax
authority indicates an intention to propose an Adjustment to the tax liability
of either the Volu-Sol Group or the Biomune Group ("Indemnitee") which would
result, if such Adjustment were to be confirmed by a Final Determination, in a
loss against which the other party ("Indemnitor") may be required to indemnify
Indemnitee pursuant to this Agreement, Indemnitee shall promptly notify
Indemnitor thereof in writing. Such notice to Indemnitor shall include
sufficient information with respect to the issues as to which indemnity may be
sought to enable Indemnitor to determine whether to request Indemnitee to
contest the Adjustment.
(2) Contest Rights and Conditions. If Indemnitor shall
request that Indemnitee contest the Adjustment in writing within 20 days of
the receipt of the notification referred to in Section 7.5(a)(1) hereof,
Indemnitee will contest the Adjustment, provided that: in no event shall
Indemnitee be required to contest any Adjustment unless coincident with
Indemnitor's request (A) Indemnitee shall have received (i) a written
acknowledgment from Indemnitor of its obligation to indemnify Indemnitee
hereunder in the event it does not prevail in such contest and (ii) an
opinion of independent tax counsel to Indemnitor (which counsel shall be
reasonably acceptable to Indemnitee) to the effect that a reasonable basis
exists for contesting the Adjustment; and (B) if such contest is to be
conducted in a manner requiring payment of a proposed tax deficiency,
Indemnitor shall have advanced to Indemnitee, on an interest-free basis, an
amount sufficient to make payment of the amount attributable to the issues
being contested, together with any required interest or penalties. If any
funds are advanced by Indemnitor in connection with any tax contest, any
refund received to the extent fairly attributable to such advance shall be
returned to Indemnitor, together with any interest thereon paid by the
relevant taxing authority, promptly upon Biomune's receipt of such funds. If
Indemnitor shall have requested Indemnitee to contest an Adjustment and
complied with each of the terms and conditions set forth above, such contest
shall be conducted, at the direction of the Indemnitor, by independent tax
counsel selected by Indemnitor and reasonably acceptable to Indemnitee. If
Indemnitor or counsel selected by Indemnitor shall advocate, propose to
advocate or fail to protest before any taxing authority a position with would
result in a tax detriment to Indemnitee not subject to indemnification in
order to reduce Indemnitor's obligation hereunder, Indemnitee may replace such
counsel with counsel of its own selection and any tax detriment suffered by
Indemnitee attributable to such position shall be included among the Income
Taxes, Other Taxes and related expenses for which Indemnitee is entitled to
indemnification hereunder.
(3) Settlement: Release of Indemnification. If Indemnitor
shall have requested Indemnitee to contest an Adjustment and complied with
each of the terms and conditions set forth above, Indemnitee shall not settle
or compromise any Adjustment for which indemnity is sought hereunder without
the consent of Indemnitor unless it simultaneously releases Indemnitor from
its obligations to indemnify and reimburse Indemnitee with respect to the
issues so settled or comprised. If Indemnitor shall fail to request Indemnitee
to contest any Adjustment or shall fail to comply with the terms and
conditions entitling it to make such request as set forth in subparagraph (b),
Indemnitee may in its sole discretion elect to contest (or not contest) such
Adjustment with counsel selected by it and may at any time settle or
compromise the matter without the consent of Indemnitor and without releasing
its rights to indemnity from Indemnitor.
(4) Joint Responsibility. If for the reasons described in
Section 7.4(c) an Event of Loss shall occur or is proposed by the IRS (or
other taxing authority) to have occurred, the notice provisions in paragraph
(1) above shall apply, and notwithstanding paragraphs (2) or (3) above,
Biomune shall have sole control over all decisions regarding any contest,
dispute, litigation or settlement relating to the Event of Loss (the
"Proceedings") and the incurrence of related reasonable expenses; provided,
however, that Biomune shall keep Volu-Sol informed of the Proceedings and
shall consult with Volu-Sol regarding the material issues relating to the
Event of Loss raised in the Proceedings and that the Biomune's decisions
regarding the choice of forum of the Proceedings, any decision to appeal and
any settlement relating to the Event of Loss by Biomune with any tax authority
shall each be subject to the approval of Volu-Sol, which approval shall not be
unreasonably withheld.
(b) Notice. If during the course of an audit any tax authority
indicates an intention to propose an Adjustment to the tax liability of either
the Volu-Sol Group or the Biomune Group (the "Tax Indemnitee") which would
result, if such Adjustment were to be confirmed by a Final Determination, in a
loss against which the other party (the "Tax Indemnitor") may be required to
indemnify the Tax Indemnitee pursuant to this Section 7, the Tax Indemnitee
shall promptly notify the Tax Indemnitor thereof in writing. Such notice to
the Tax Indemnitor shall include sufficient information with respect to the
issues as to which indemnity may be sought to enable Tax Indemnitor to
determine whether to request the Tax Indemnitee to contest the Adjustment.
(c) Contest Rights and Conditions. If the Tax Indemnitor shall
request that the Tax Indemnitee contest the Adjustment in writing within
twenty (20) days of the receipt of the notification referred to in Section
7.5(b) hereof, the Tax Indemnitee will contest the Adjustment; provided that
in no event shall the Tax Indemnitee be required to contest any Adjustment
unless coincident with the Tax Indemnitor's request (a) the Tax Indemnitee
shall have received (i) a written acknowledgment from the Tax Indemnitor of
its obligation to indemnify the Tax Indemnitee hereunder in the event it does
not prevail in such contest and (ii) an opinion of independent tax counsel to
the Tax Indemnitor (which counsel shall be reasonably acceptable to the Tax
Indemnitee) to the effect that a reasonable basis exists for contesting the
Adjustment; and (b) if such contest is to be conducted in a manner requiring
payment of a proposed tax deficiency, the Tax Indemnitor shall have advanced
to the Tax Indemnitee, on an interest-free basis, an amount sufficient to make
payment of the amount attributable to the issues being contested, together
with any required interest or penalties. If any funds are advanced by the Tax
Indemnitor in connection with any tax contest, any refund received to the
extent fairly attributable to such advance shall be returned to the Tax
Indemnitor, together with any interest thereon paid by the relevant taxing
authority, promptly upon Biomune's receipt of such funds. If the Tax
Indemnitor shall have requested the Tax Indemnitee to contest an Adjustment
and complied with each of the terms and conditions set forth above, such
contest shall be conducted, at the direction of the Indemnitor, by independent
tax counsel selected by the Tax Indemnitor and reasonably acceptable to the
Tax Indemnitee. If the Tax Indemnitor or counsel selected by the Tax
Indemnitor shall advocate, propose to advocate or fail to protest before any
taxing authority a position which would result in a tax detriment to the Tax
Indemnitee not subject to indemnification in order to reduce the Tax
Indemnitor's obligation hereunder, the Tax Indemnitee may replace such counsel
with counsel of its own selection and any tax detriment suffered by the Tax
Indemnitee attributable to such position shall be included among Income Taxes,
Other Taxes and related expenses for which the Tax Indemnitee is entitled to
indemnification hereunder.
(d) Settlement; Release of Indemnification. If the Tax
Indemnitor shall have requested the Tax Indemnitee to contest an Adjustment
and complied with each of the terms and conditions set forth above, the Tax
Indemnitee shall not settle or compromise any Adjustment for which indemnity
is sought hereunder without the consent of the Tax Indemnitor unless it
simultaneously releases the Tax Indemnitor from its obligations to indemnify
and reimburse the Tax Indemnitee with respect to the issues so settled or
compromised. If the Tax Indemnitor shall fail to request the Tax Indemnitee
to contest any Adjustment or shall fail to comply with the terms and
conditions entitling it to make such request as set forth in Section 7.5(c)
hereof, the Tax Indemnitee may in its sole discretion elect to contest (or not
contest) such Adjustment with counsel selected by it and may at any time
settle or compromise the matter without the consent of the Tax Indemnitor and
without releasing its rights to indemnity from the Tax Indemnitor.
(e) Joint Responsibility. If for the reasons described in
Section 7.4(c) hereof an Event of Loss shall occur or is proposed by the IRS
(or other taxing authority) to have occurred, the notice provisions in Section
7.5(b) hereof shall apply, and notwithstanding Sections 7.5(b) and 7.5(c)
hereof, Biomune shall have control over decisions regarding any contest,
dispute, litigation or settlement relating to the Event of Loss (the
"Proceeding") and the incurrence of related reasonable expenses, including
without limitation the choice of tax counsel to represent it before any tax
authority in matters relating to the Event of Loss; provided, however, that
Biomune shall keep Volu-Sol informed of the Proceedings and shall consult with
Volu-Sol regarding the material issues relating to the Event of Loss raised in
the Proceedings; and provided, further, that (a) the choice of forum for such
Proceeding, and any decision to appeal, (b) any settlement relating to the
Event of Loss by Biomune with any tax authority shall each be subject to the
approval of Volu-Sol, which approval shall not be unreasonably withheld.
(f) Tax Return Information. Without limiting Section 7.5(e)
hereof, Biomune and Volu-Sol agree to cooperate fully with each other in
connection with the preparation of any tax return or claim for refund or in
defending any audit or other proceeding in respect of taxes for all open
taxable periods. Such cooperation shall include making personnel and records
available promptly and within thirty (30) days (or such other period as may be
reasonable under the circumstances) after a request for such personnel or
records is made by the tax-imposing authority or the other party. If Biomune
or Volu-Sol, as the case may be, fails to provide any information requested
pursuant to this Section 7.5(f), then the requesting party shall have the
right to engage a public accountant of its choice to gather such information.
Biomune and Volu-Sol public accountant full access to all appropriate records
or other information in the possession of any member of the Biomune Group or
the Volu-Sol Group, as the case may be, during reasonable business hours, and
to reimburse or pay directly all costs and expenses in connection with the
engagement of such public accountant. Biomune agrees to indemnify and hold
harmless each member of the Volu-Sol Group and its officers and employees, and
Volu-Sol agrees to indemnify and hold harmless each member of the Biomune
Group and its officers and employees against any cost, fine, penalty or other
expense of any kind attributable to the negligence or misconduct of a member
of the Biomune Group or the Volu-Sol Group, as the case may be, in supplying a
member of the other group with inaccurate or incomplete information; provided,
that, nothing set forth in this Section 7.5(f) shall require either party to
permit the other to participate in any audit even though issues are raised for
which an indemnity may be sought if such issues result in an Adjustment at the
conclusion of such audit.
(g) Record Retention. Biomune and Volu-Sol agree to retain all
records which may contain information or provide evidence relevant to the
determination of the Income Tax liability of the Biomune Group or the Volu-Sol
Group or the stockholders of either for any taxable period until such time as
a Final Determination occurs with respect to such taxable period; provided,
however, that such records need not be retained longer than fifteen (15) years
after the end of the latest taxable period to which they relate so long as
such records do not relate to an ongoing contest.
ARTICLE VIII
MISCELLANEOUS
8.1 Complete Agreement; Construction. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter
thereof, and supersedes all previous negotiations, commitments and writings
with respect to such subject matter.
8.2 Survival of Agreements. Except as otherwise contemplated by this
Agreement, all covenants and agreements of the parties contained in this
Agreement will survive the Distribution Date.
8.3 Governing Law. This Agreement will be governed by and construed
in accordance with the laws of the State of Utah, without regard to the
principles of conflicts of laws thereof.
8.4 Notices. All notices and other communications hereunder must be
in writing and must be delivered by hand, mailed by registered or certified
mail (return receipt requested) or sent by facsimile transmission to the
parties at the following addresses (or at such other addresses for a party as
may be specified by like notice) and will be deemed given on the date on which
such notice is received:
If to Biomune:
Biomune Systems, Inc.
0000 Xxxxx Xxxxxxxx Xxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Attn: Chief Executive Officer
Facsimile: (000) 000-0000
If to Volu-Sol:
Volu-Sol, Inc.
0000 Xxxx 0000 Xxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Attn: Chief Executive Officer
Facsimile: (000) 000-0000
8.5 Amendments. This Agreement may not be modified or amended except
by an agreement in writing signed by the parties.
8.6 Successors and Assigns. Except in connection with a merger or
consolidation or the sale of all or substantially all the assets of a party
hereto, this Agreement will not be assignable, in whole or in part, directly
or indirectly, by either party hereto without the prior written consent of the
other, and any attempt to assign any rights or obligations arising under this
Agreement without such consent will be void; provided, however, that the
provisions of this Agreement will be binding upon, inure to the benefit of and
be enforceable by the parties and their respective successors and permitted
assigns.
8.7 Termination. This Agreement may be terminated and the
Distribution abandoned at any time prior to the Distribution Record Date by
and in the sole discretion of the Biomune Board without the approval of
Volu-Sol or of Biomune's shareholders. In the event of such termination, no
party will have any liability of any kind to any other party.
8.8 No Third Party Beneficiaries. Except for the provisions of
Article V relating to Indemnitees and as otherwise expressly provided herein,
this Agreement is solely for the benefit of the parties hereto and their
respective successors and permitted assigns and should not be deemed to confer
upon third parties any remedy, claim, liability, reimbursement, claim of
action or other right in excess of those existing without reference to this
Agreement.
8.9 Title and Headings. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
8.10 Legal Enforceability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction will, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction will not invalidate or render
unenforceable such provision in any other jurisdiction. Without prejudice to
any rights or remedies otherwise available to any party hereto, each party
hereto acknowledges that damages would be an inadequate remedy for any breach
of the provisions of this Agreement and agrees that the obligations of the
parties hereunder are specifically enforceable.
8.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, but all of which
together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed effective September 10, 1997.
BIOMUNE SYSTEMS, INC.,
a Nevada corporation
By:
Its:
VOLU-SOL, INC., a wholly owned subsidiary
of Biomune Systems, Inc. and a Utah corporation
By:
Its:
LIST OF SCHEDULES AND EXHIBITS
A.List of Biomune's Qualified Plans
B.List of Biomune's Welfare Plans
