EXHIBIT 6.1
NATIONAL MARKETING AND DISTRIBUTION AGREEMENT
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This National Marketing and Distribution Agreement (this "Agreement") is
made as of May 2, 2000 (the "Effective Date") by and between Retractable
Technologies, Inc., a Texas corporation, with its principal offices at 000 Xxxx
Xxxx, Xxxxxx Xxx, Xxxxx 00000 ("Manufacturer"), and Xxxxxx Laboratories, an
Illinois corporation ("Marketer"), with its principal offices at 000 Xxxxxx Xxxx
Xxxx, Xxxxxx Xxxx, Xxxxxxxx 00000. The term "Marketer" as used herein shall
include both Marketer and Marketer's Affiliates (as hereinafter defined).
RECITALS
WHEREAS, Manufacturer has developed and incorporated automated retraction
technology to needle products;
WHEREAS, Manufacturer desires to collaborate with Marketer with respect to
the marketing and distribution of such needle products throughout all
possessions, territories and commonwealths of the United States of America.; and
WHEREAS, Marketer desires to collaborate with Manufacturer with respect to
such needle products.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and undertakings contained herein, the parties hereto agree as follows:
1. Definitions
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In addition to the other terms defined elsewhere herein, the following
terms shall have the following meanings when used in this Agreement (and any
term defined in the singular shall have the same meaning when used in the
plural, and vice versa, unless stated otherwise):
1.1 "Affiliate" shall mean any corporation or other business entity
controlled by, controlling of or under common control with a Party (as
hereinafter defined). For this purpose, "control" of any corporation or other
business entity shall mean direct or indirect beneficial ownership of at least
fifty (50%) percent of the voting interests of such corporation or other
business entity, or such other relationship that constitutes actual control of
such corporation or other business entity.
1.2 "Business Combination Transaction" shall mean any transaction or
series of related transactions involving (a) any merger, consolidation, share
exchange, reorganization, recapitalization, business combination or similar
transaction unless, immediately following the consummation of such transaction
or series of related transactions, the common shareholders of Manufacturer
immediately prior thereto will continue to be holders of at least a majority of
the common equity securities of the ultimate parent entity surviving such
transaction or series of related transactions or (b) any sale or other transfer
(other than to a directly or indirectly wholly-owned subsidiary of Manufacturer)
of all or a substantial amount of the assets of Manufacturer or its
subsidiaries, taken as a whole.
1.3 "Calendar Quarter" shall mean a period of three (3) consecutive
calendar months commencing on January 1, April 1, July 1 or October 1 of any
Calendar Year (as hereinafter defined).
1.4 "Calendar Year" shall mean, for the first Calendar Year, that time
period that commences on the Effective Date and ends on the following December
31, and for all subsequent Calendar Years, the twelve-month period commencing on
January 1 and ending on December 31.
1.5 "Confidential Information" shall mean the existence and terms of this
Agreement, any and all technical data, information, materials and other know-how
including, but not limited to, trade secrets presently owned by or developed by,
or on behalf of either Party and/or its Affiliates during the term of this
Agreement, which relate to the Products (as hereinafter defined), their
development, manufacture, regulatory filings, promotion, marketing,
distribution, sale or use and any and all financial data and information
relating to the business of either of the Parties and/or of their Affiliates,
which a Party and/or its Affiliates discloses to the other Party and/or its
Affiliates in writing and identifies as being confidential, or if disclosed
orally, visually or through some other media, is identified as confidential at
the time of disclosure and is summarized in writing within thirty (30) days of
such disclosure and identified as confidential, except any portion thereof
which:
(a) is known to the receiving Party and/or its Affiliates at the time
of the disclosure, as evidenced by its written records;
(b) is disclosed to the receiving Party and/or its Affiliates by a
Third Party having a right to make such disclosure;
(c) becomes patented, published or otherwise part of the public domain
through no fault of the receiving Party and/or its Affiliates;
(d) is independently developed by or for the receiving Party and/or
its Affiliates without use of Confidential Information disclosed
hereunder as evidenced by its written records; or
(e) is required by law to be disclosed.
1.6 "Current Good Manufacturing Practices" or "cGMPs" shall mean the
current Good Manufacturing Practices as described in 21 CFR 211, as amended or
updated from time to time.
1.7 "Demonstration Product" shall mean Product provided by Manufacturer to
Marketer at no charge for use in demonstrating the features and benefits of the
Product to customers.
1.8 "Distribution Margin" shall mean Net ASP (as hereinafter defined) minus
Net Cost (as hereinafter defined).
1.9 "Distribution Margin Percentage" shall mean the percentage derived from
the following calculation: (Net ASP - Transfer Price + Marketer Fee)/ Net ASP.
An example of such calculation is provided in Exhibit 1.9.
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1.10 "Distributor" means a natural person, corporation, partnership,
trust, joint venture, or other business entity or organization that is not a
Wholesaler (as hereinafter defined), and that primarily sells or resells
Products to end users.
1.11 "Distributor Reversal" means, with respect to a Product, the
difference between the Distributor's acquisition cost for a Product and the
contract price at which the Distributor sold such Product to an end user.
1.12 "Hospital Market" shall mean (a) all customers in the Territory (as
hereinafter defined) with a minimum of ten (10) in-patient beds; (b) all other
customers in the Territory purchasing any Product (or eligible to purchase any
Product) under purchasing contracts entered into by customers referenced in
Section 1.12 (a); and (c) any group purchasing organization in which customers
referenced in Section 1.12 (a) and (b) form a majority of the members.
1.13 "Marketer Fee" shall mean the payment due to Marketer from
Manufacturer per unit of Product sold by Marketer.
1.14 "Net ASP" shall mean the net average sales price which is determined
by dividing the Net Sales (as hereinafter defined) by the number of Saleable
Units of each Product attributable to such Net Sales.
1.15 "Net Cost" shall mean the Transfer Price minus Marketer Fee.
1.16 "Net Sales" shall mean the gross sales of a particular Product billed
to customers by Marketer in the Territory, less: (a) allowances and adjustments
separately and actually credited or payable to customers, including credit for
damaged, outdated and returned products; (b) trade discounts booked; (c) cash
discounts booked; (d) transportation charges (including transportation insurance
costs), handling charges, sales taxes, excise taxes and duties and other similar
charges invoiced to customers; (e) rebates, management/administrative fees, and
(f) wholesaler/distributor reversals paid or payable, if any. Any discount
allowance or rebate or management/administrative fee for the Product which is
given to a customer due to the purchase of a product other than the Product or
due to the purchase of any service (whether or not relating to the Product),
shall not be taken into consideration for the calculation of Net Sales.
Distribution of Samples also shall not be taken into consideration for the
calculation of Net Sales. As used herein, "management/administrative fee" shall
mean a fee paid to a customer or Third Party (as hereinafter defined) with
respect to the provision of services to such customer or Third Party.
1.17 "Patent Rights" shall mean all United States patents and patent
applications owned or controlled by, or licensed to Manufacturer with a right to
sublicense, during the term of this Agreement, which relate to the Products
including, but not limited to, the patents and patent applications listed in
Exhibit 1.17, and all substitutions, extensions, reissues, renewals, divisions,
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continuations, improvements or continuations-in-part therefor or thereof.
1.18 "Party" shall mean Xxxxxx Laboratories or Retractable Technologies,
Inc., and "Parties" shall mean Xxxxxx Laboratories and Retractable Technologies,
Inc.
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1.19 "Person" shall mean a natural person, a corporation, a partnership, a
trust, a joint venture, any governmental authority, and any other entity or
organization.
1.20 "Product" or "Products" shall mean one, several, or all of the
products listed on Exhibit 1.20, including any subsequent versions of such
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Products.
1.21 "Purchase Forecast" shall mean a written forecast which estimates,
in accordance with Section 3.1 of this Agreement, the amount of each Product
Marketer shall purchase from Manufacturer.
1.22 "Purchase Order" shall mean a firm order specifying the amount of each
Product to be purchased by and delivered to Marketer.
1.23 "Saleable Unit" shall mean the smallest amount of each Product that
can be purchased and sold by Marketer as specified on Exhibit 1.20.
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1.24 "Sample(s)" shall mean Product provided to a Third Party at no charge
for use in evaluating the performance of the Product.
1.25 "Territory" shall mean all possessions, territories and commonwealths
of the United States of America.
1.26 "Third Party" shall mean any Person that is not a Party or an
Affiliate of a Party.
1.27 "Transfer Price" shall mean the price paid by Marketer for a Product.
Transfer prices are listed on Exhibit 1.20.
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1.28 "Wholesaler" shall mean a natural person, corporation, partnership,
trust, joint venture, or other business entity or organization that purchases
products from Marketer and primarily sells or resells Products to end users
which end users have contracts with the Parties at a price less than the price
at which Marketer invoices such Products to such entity, and who customarily
processes a reversal based upon the differences between such prices.
1.29 "Wholesale Acquisition Cost" or "WAC" means, with respect to a
Product, the price at which Marketer invoices such Product to a Wholesaler.
1.30 "Wholesaler Network" is the aggregate of the Wholesalers.
1.31 "Wholesaler Reversal" means, with respect to a Product, the difference
between the WAC for a Product and the contract price at which the Wholesaler
sold such Product to an end user in the Hospital Market.
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2. Marketing and Distribution
2.1 Marketer/Distributor Appointment. As of the Effective Date,
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Manufacturer appoints Marketer, and Marketer accepts appointment, as the
non-exclusive marketer and distributor of the Products (as listed on Exhibit
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1.20) to the Hospital Market in the Territory, with the right to commercially
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distribute the Product to customers in the Hospital Market the Territory,
including all activities ancillary thereto (including, without limitation,
warehousing, order entry, shipping, billing and collection, promotional,
advertising, marketing and sales activities), provided, however, that if any
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customer in the Hospital Market agrees in writing to a purchasing agreement with
Marketer and actually purchases a Product through said purchasing agreement then
Marketer shall have the sole and exclusive right to distribute to such customer.
Marketer may appoint sub-distributors in the Territory. Marketer's efforts to
market and distribute the Products in the Territory shall be at least
commensurate with those used to market and distribute its own products of
similar nature and comparable market potential and Marketer shall to the extent
possible add Products to Marketer's group purchasing contracts. Manufacturer and
Marketer shall be the only marketers of the Products in the Hospital Market in
the Territory and Manufacturer shall not appoint another marketer in the
Hospital Market in the Territory during the term of this Agreement.
2.2 Marketing Plans and Promotional Materials. Marketer shall draft a
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marketing plan for the Products on an annual basis, provided, however, that such
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marketing plan shall not be implemented without the prior written consent of
Manufacturer, which consent shall not be unreasonably withheld. Marketer has the
right to use Manufacturer's Proprietary Marks (as defined in 8.1) and to create
promotional materials for the Products, provided, however, such proprietary and
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promotional materials shall not be used by Marketer to promote the Products
without the prior written consent of Manufacturer, which consent shall not be
unreasonably withheld.
2.3 Coordination/Transition Efforts.
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(a) General. Designated representatives of Marketer and Manufacturer
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shall meet once per Calendar Quarter at Manufacturer's facility in Little Elm,
Texas, or other designated place, during the term of this Agreement to
coordinate sales, marketing, and distribution efforts for the Products.
(b) Research and Development. Within thirty (30) days of the Effective
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Date of this Agreement, Manufacturer and Marketer shall form a team composed of
not less than two (2) members from each of Manufacturer and Marketer (the "New
Product Team"). Within ninety (90) days of the Effective Date, the New Product
Team shall have drafted a proposed plan for bringing to market new products
using retractable technology (the "New Product Plan"). The New Product Plan
shall be subject to the written approval of both the Manufacturer and Marketer
before implementation of such plan.
(c) Inventory. Within thirty (30) days of the Effective Date, the
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Parties shall use reasonable commercial efforts to complete an inventory
assessment of all Products held by Wholesalers and Distributors as of the
Effective Date; the results of such inventory assessment shall be used to
determine appropriate Wholesaler or Distributor Reversal adjustments as
described in Section 2.3(d) hereof. Marketer, for its sole account, shall pay
for all costs and expenses, including
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without limitation transportation costs, associated with conducting the
inventory assessment described in the preceding sentence.
(d) Wholesaler and Distributor Reversal Adjustment. Marketer shall assume
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Manufacturer's liability for all Wholesaler and Distributor Reversals for
Products Manufacturer sold to the Wholesaler Network and Distributors prior to
the date of Marketer's first sale of the Products. (the "First Sales Date"). As
compensation for Marketer assuming such Wholesaler and Distributor Reversal
liability for Products Manufacturer sold to the Wholesaler Network and
Distributors, Manufacturer shall pay to Marketer within sixty (60) days after
the Parties complete the inventory assessment described in Section 2.3(c)
hereof, the actual amount of Wholesaler Reversals paid by Marketer to the
Wholesaler Network with respect to Products sold by Manufacturer prior to the
First Sales Date. In the event that not all Product inventory held by
Wholesalers and Distributors as of the date the Parties complete the inventory
assessment described in Section 2.3(c) hereof is sold to end users sixty (60)
days after such date, Manufacturer shall pay to Marketer, at the end of each
subsequent thirty (30) day period, the actual amount of Wholesaler Reversals
paid by Marketer to the Wholesaler Network with respect to sales to end users in
the Hospital Market during each such thirty (30) day period of any such.
In the event Manufacturer elects or is requested by Marketer to issue a
credit to the Wholesaler Network for Wholesaler Reversals with respect to
Products sold by Manufacturer prior to the First Sales Date, Manufacturer will
be entitled to offset the amount of any such credit against its liability to
Marketer for the Wholesaler Reversals calculated pursuant to this Section
2.3(d).
2.4 Customer List. Within ninety (90) days of the Effective Date,
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Manufacturer shall meet with Marketer to review Manufacturer's existing
contracts, including group purchasing contracts, and supply Marketer with a list
of all of Manufacturer's customers within the Territory.
2.5 Contract Delegation. Within ninety (90) days of the Effective Date,
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Manufacturer shall designate Marketer as Manufacturer's marketing, sales, and
distribution representative under all of Manufacturer's existing group
purchasing contracts.
2.6 Reservation of Rights. Manufacturer reserves the right to appoint
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other authorized distributors or resellers outside the Hospital Market or
Territory without restriction. Marketer shall have no right to directly solicit
sales of, promote, advertise, market, buy, or sell Product outside the
Territory. Marketer shall use commercially reasonable efforts to ensure that
Products sold within the Territory are not used outside the Territory. If
Marketer discovers that Products sold by Marketer to a Third Party are being
used outside the Territory, then Marketer shall discontinue sales of Products to
such Third Party until such time as such Third Party discontinues using Products
outside the Territory. When Marketer notifies Manufacturer that Products sold by
Manufacturer to a Distributor are being resold inside Marketer's Hospital Market
within the Territory, then Manufacturer shall discontinue sales of Products to
such Distributor until such time as such Distributor discontinues selling
Products inside the Hospital Market within the Territory.
2.7 Notice of Business Combination Transaction Proposals. Until the
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expiration or termination of this Agreement pursuant to Section 9 of this
Agreement, Manufacturer shall notify Marketer in writing (a "Proposal Receipt
Notice") promptly, and in any event no later than five (5) business days after
the receipt by Manufacturer of any proposal to enter into any agreements or
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understandings regarding any Business Combination Transaction. Each Proposal
Receipt Notice shall include, to the extent possible, a detailed explanation of
the nature of such proposal, including the proposed terms and conditions of any
proposed transaction, and the identity of the Person or Persons making such
proposal or on whose behalf such proposal is made.
2.8 Right of First Negotiation. Prior to the expiration or termination
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of this Agreement, Manufacturer shall not enter into any agreements, or
understandings with any Person, other than (i) discussions with Manufacturer's
financial, legal, accounting or other advisors and (ii) customary financial,
legal or accounting advisory, consulting or similar agreements, that relate to
or provide for any Business Combination Transaction, unless Manufacturer first:
(a) provides Marketer with written notice of its intention to
enter into any such agreements or understandings, which notice shall include a
detailed explanation of the nature of the agreements, or understandings that
Manufacturer proposes to enter into, including the proposed terms and conditions
of any such agreements or understandings, and the identity of any Persons and
classes of Persons with whom Manufacturer intends to enter into any such
agreement or understanding (a "Business Combination Notice"); and
(b) negotiates solely, exclusively and in good faith with Marketer for
a period of not less than sixty (60) days from the date of Marketer's receipt of
the corresponding Business Combination Notice (the "Exclusive Negotiating
Period") regarding entering into a Business Combination Transaction with
Marketer on terms at least as favorable to Manufacturer as the proposed terms
and mutually acceptable to Marketer and Manufacturer.
3. Forecasts, Orders, and Deliveries
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3.1 Forecasts. At least thirty (30) days prior to the end of each Calendar
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Quarter during the term of this Agreement, Marketer shall provide to
Manufacturer a rolling twelve (12) month Purchase Forecast which shall specify
firm orders of Products to be delivered by Manufacturer to Marketer for the
first Calendar Quarter and an estimated forecast for the following three
Calendar Quarters. Attached as Exhibit 3.1 is a Purchase Forecast for the first
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twelve (12) months following the Effective Date and an estimated forecast for
the following four (4) years.
3.2 Purchase Orders. Each Purchase Order for Product shall be governed
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by the terms of this Agreement, and none of the provisions of such Purchase
Order shall be applicable except those specifying quantity ordered, delivery
dates, special shipping instructions and invoice information. Each Purchase
Order shall specify quantities consistent with quantities forecasted on the
applicable Purchase Forecast.
3.3 Minimum and Maximum Orders. Marketer shall have the right to order
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each Product in amounts which range from ninety percent (90%) to one-hundred ten
percent (110%) of the firm order amounts specified in the Purchase Forecast for
the applicable Calendar Quarter. If Marketer places Purchase Orders for
additional quantities of any Product above one-hundred ten percent (110%) of the
quantity forecasted, then Manufacturer shall use commercially reasonable efforts
to produce and deliver to Marketer said additional quantities within ninety (90)
days of issuance of the Purchase Order. Marketer acknowledges that Manufacturer
is not obligated to meet all of Marketer's
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demands for any Product, provided, however, that in the event that demand for
Products exceeds Manufacturer's production capabilities, Manufacturer shall
allocate production resources based on forecasted orders specified in Marketer's
Purchase Forecast.
3.4 Delivery and Shipping. Manufacturer shall deliver all Product F.O.B.
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the Manufacturer's facility in Little Elm, Texas to any of the five (5)
distribution centers designated by Marketer as set forth in Exhibit 3.4. Title
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and risk of loss shall pass to Marketer at such time that Product is loaded onto
a carrier designated by Marketer. Shipment shall be via such carrier. Marketer
shall be responsible for all shipping costs. If Marketer does not provide
monthly shipping instructions, then Marketer shall pay a Twenty-Five Dollar
($25.00) per month per pallet storage fee.
3.5 Return of Defective Shipment. Marketer shall notify Manufacturer in
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writing of any defect or shortage in the quantity of any shipment of Product no
later than ten (10) business days following receipt of the Product. In the event
of any such defect or shortage, Manufacturer shall, at Manufacturer's choice,
replace the defective Product or make up the shortage if replacement stock is
available in the next shipment of Product, but in any case no later than twenty
(20) days or, if no such replacement stock is available, as soon as reasonably
practical after receiving such notice, at no additional cost to Marketer.
3.6 Product Returns to Marketer. All Products shipped to Marketer from
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Manufacturer shall have a Marketer lot number. Marketer will not accept any
Product without a Marketer lot number. Marketer shall only be responsible for
processing customer returns that have a Marketer lot number and that are
returned in accordance with Marketer's Returned Goods Policy, which is attached
hereto as Exhibit 3.6. Promptly after the Effective Date, Marketer shall supply
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Manufacturer with lot number suffices and lot number blocks.
3.7 Samples. Manufacturer and Marketer shall meet within thirty (30) days
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from the Effective Date to develop by mutual agreement a program for Samples
whereby Manufacturer shall provide Samples to Marketer at no charge in
accordance with a monthly forecast (the "Sample Forecast"). If Marketer requires
Samples in excess of the Sample Forecast, then Marketer must pay for each Sample
the Transfer Price minus the Marketer Fee. Sample programs and Sample Forecasts
shall be updated quarterly to reflect new Products as they are launched.
3.8 Demonstration Product. Manufacturer and Marketer shall meet within
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thirty (30) days from the Effective Date to develop by mutual agreement a
program for Demonstration Product, whereby Manufacturer shall provide
Demonstration Product to Marketer in order for Marketer's sales representatives
to demonstrate the features and benefits of the Products to the end-user
customer. Demonstration Product shall be supplied in accordance with a quarterly
forecast (the "Demonstration Product Forecast"). If Marketer requires
Demonstration Product in excess of the Demonstration Product Forecast, then
Marketer must pay for each Demonstration Product the Transfer Price minus the
Marketer Fee. Demonstration Product programs and Demonstration Product Forecasts
shall be updated quarterly.
4. Quality Assurance.
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4.1 Compliance. Manufacturer shall comply with all applicable local or
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municipal, state, and federal laws, and regulations concerning the manufacture
of the Products. Manufacturer shall
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promptly notify Marketer of any impending visit or inspection, or significant
inquiry, by a regulatory authority with regards to any Product.
4.2 Product Requirements. Manufacturer must comply with all product
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specifications, quality assurance procedures, and labeling specifications
provided to Marketer and attached hereto as Exhibit 4.2. Such specifications and
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procedures may not be modified, changed or added to without prior written
notification to Marketer ("Product Change Notification"). Any subsequent or
replacement versions of Products listed on Exhibit 1.20 developed and
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manufactured by Manufacturer may be added to the Products marketed and
distributed by Marketer under the general terms and conditions of this
Agreement.
4.3 Complaint Handling and Customer Service. Any and all product
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complaints of which Marketer becomes aware relating to the Products during the
term of the Agreement shall promptly be forwarded to Manufacturer. Notification
shall be given by telephone, with a facsimile confirmation following within (1)
business day. Marketer shall be responsible for addressing all product
complaints related to Marketer's distribution, order processing, shipping and
handling of Products. Manufacturer shall be responsible for addressing all other
product complaints.
4.4 Recalls. In the event Manufacturer shall be required (or shall
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voluntarily decide) to initiate a recall, withdrawal or field correction of, or
field alert report with respect to, any Product manufactured by Manufacturer and
distributed by Marketer pursuant to this Agreement, whether or not such recall,
withdrawal, field correction or field report has been requested or ordered by
FDA, Manufacturer shall notify Marketer, and Marketer shall fully co-operate
with Manufacturer to implement the same. Manufacturer shall make all contacts
with the FDA and shall be responsible for coordinating all of the necessary
activities in connection with any such recall, withdrawal, field correction or
field alert report, and Manufacturer shall make all statements to the media,
including press releases and interviews for publication or broadcast. Marketer
agrees to make no statement to the media, except to refer the media to the
Manufacturer for comment, unless otherwise required by law, and in any such
event, Marketer shall cooperate with Manufacturer on the content of any such
statement. Manufacturer shall indemnify Marketer against all reasonable and
necessary costs and expenses which Marketer may incur as a result of any recall,
withdrawal, field correction or field alert to the extent that it is the direct
result of any fault or omission attributable to Manufacturer. Marketer shall
indemnify Manufacturer against all reasonable and necessary costs and expenses
which Manufacturer may incur as a result of any recall, withdrawal, field
correction or field alert to the extent that it is the direct result of any
fault or omission attributable to Marketer.
5. Pricing and Payments.
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5.1 Transfer Prices.
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(a) The Transfer Prices for the Products set forth in Exhibit 1.20
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shall be firm for the first Calendar Year of this Agreement. Thereafter, the
Parties shall meet annually to discuss changes to Transfer Prices for the
Products. Any adjustment to the Transfer Prices of the Products shall be agreed
upon in writing by both Parties.
(b) In addition, Manufacturer shall be allowed an annual inflationary
adjustment to the
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Transfer Prices for demonstrable increases in raw material and/or labor costs.
Such annual inflationary increases shall be limited to the lesser of the annual
percentage increase for the most recent twelve (12) month period for which
figures are available in the Consumer Price Index (CPI), issued by the Bureau of
Labor Statistics, U.S. Department of Labor, or Marketer's annual inflationary
price increase to end user customers.
5.2 Invoice and Payment. Manufacturer shall invoice Marketer upon shipment
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of Product. Marketer shall make payment by wire transfer net thirty (30) days
from the date of Manufacturer's invoice. Manufacturer's invoice may be
accompanied by copies of receipts or any other supporting information.
5.3 Monthly Sales Reports. Not later than twenty (20) days after the last
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day of each month Marketer shall provide to Manufacturer Net Sales information
for each Product for the preceding month. Such report shall also detail for each
purchase: i) the purchaser's name and identification number, and ii) the
quantity and net price of each Product sent to the purchaser. Each Calendar
Quarter, the Marketer shall provide a report of product sales by contract, if
any, under which each purchase was made.
5.4 Quarterly Payments
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(a) Within thirty (30) days of the end of each Calendar Quarter, Marketer
shall issue to Manufacturer a quarterly sales report ("Quarterly Sales Report")
identifying the amount of Product sold by Marketer during the preceding Calendar
Quarter. Manufacturer shall pay to Marketer a Marketer Fee of ten cents ($.10)
per unit of Product sold in the preceding Calendar Quarter. Such Marketer Fee is
due and payable within forty-five (45) days after receipt of the Quarterly Sales
Report.
(b) If the Distribution Margin does not exceed $.25, then Marketer shall
retain the portion of the Distribution Margin which is less than or equal to
$.25. If the Distribution Margin does exceed $.25, then Marketer and
Manufacturer shall divide equally any portion of the Distribution Margin which
exceeds $.25 and is equal to or less than $.35, and Marketer shall retain any
portion of the Distribution Margin which is less than or equal to $.25 and any
portion of the Distribution Margin which exceeds $.35. Marketer and Manufacturer
shall split profits in accordance with this Section 5.4(b) on a quarterly basis.
An example of this profit splitting arrangement is attached hereto as Exhibit
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5.4(b).
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5.5 Resale Product Prices. Marketer shall have sole discretion to set
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resale prices for Products purchased from Manufacturer, however, Marketer's Net
ASP of a Product shall not be less than the Marketer's Net Cost of said Product.
5.6 Taxes. Any federal, state, county or municipal sales or use tax,
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excise, customs charges, duties or similar charge, or any other tax assessment
(other than taxes assessed against Manufacturer's income), license, fee, or
other similar charge lawfully assessed or charged on the sale or transportation
of Product sold shall be paid by Marketer.
5.7 Audit of Marketer. Marketer shall keep and maintain books and
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records reasonably required to determine accurately Net Sales and amounts
payable to Manufacturer hereunder. Once
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per Calendar Year, Manufacturer shall have the right, at its cost, to have
audited Marketer's books and records kept pursuant to this Agreement to
determine whether there was any mistake or impropriety in determining amounts
payable to Manufacturer by Marketer during the current or previous Calendar
Year. Such audits shall be conducted by an independent auditing or accounting
firm chosen by the auditing party and agreed to by the audited party, such
agreement not to be unreasonably withheld. Any audit hereunder shall be preceded
by no less than thirty (30) days' prior written notice of intent to audit, and
shall be conducted during normal business hours, at an agreed upon date and
time. The independent auditing or accounting firm may reveal to Manufacturer
only the existence and the amount of any discrepancy. If an audit reveals any
underpayment or overpayment by Marketer, the Parties shall reconcile such
discrepancy within fifteen (15) days from date of audit completion. If an audit
reveals an underpayment greater than five (5%) between amounts due and amounts
paid to Manufacturer, then Marketer shall reimburse Manufacturer for the cost of
such audit. Marketer's books and records and any audit report shall be
considered Confidential Information by Manufacturer. If Manufacturer decides to
employ the use of an independent auditing or accounting firm pursuant to the
terms of this Section 5.7, then such auditor shall execute a written
confidentiality agreement with Marketer, which confidentiality agreement shall
be at least as stringent as that provided herein. The scope of such auditor's
report to the Manufacturer shall be strictly limited to the scope of the audit
permitted pursuant to the terms of this Agreement and a copy of such report
shall be delivered to both Parties.
6. Equity Investment
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As of the Effective Date, Marketer shall invest Five Million Dollars
(US$5,000,000) in Manufacturer's Series IV Class B Convertible Preferred Stock
in accordance with the terms and conditions of the Subscription Agreement under
Manufacturer's Private Placement Memorandum dated January 11, 2000, attached
hereto as Exhibit 6.
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7. Loan Documents
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Marketer and Manufacturer agree to negotiate in good faith the terms and
conditions of a credit agreement and a security agreement pursuant to which
Marketer shall loan to Manufacturer Five Million Dollars (US$5,000,000) within
five (5) business days of the Effective Date. The loan shall (1) accrue interest
from the date the loan is granted, (2) bear interest at an annual rate equal to
one percent (1%) plus the Prime Rate (as hereinafter defined), and (3) interest
shall be repayable no earlier than June 30, 2001. "Prime Rate" means that rate
of interest per year announced from time to time by The Northern Trust Company
called its prime rate.
8. Intellectual Property
---------------------
8.1 Proprietary Marks and Good Will. "Manufacturer's Proprietary Marks"
-------------------------------
include all trademarks, trade names, and logotype employed by Manufacturer and
include, but are not limited to: i) the name "VanishPoint", ii) the letters "RT"
surrounded by an oval; and iii) the graphic depiction of a needle surrounded by
a spring.
Marketer agrees that its use of Manufacturer's Proprietary Marks shall
enure to the benefit of Manufacturer. Marketer hereby: i) acknowledges the
validity of Manufacturer's Proprietary Marks; ii) acknowledges that Manufacturer
is the owner of Manufacturer's Proprietary Marks and of all
-11-
goodwill associated with Manufacturer's Proprietary Marks or with the Products;
iii) agrees not to acquire any interest in, infringe upon, contest, or take any
other action to injure or to assist another to injure Manufacturer's rights in
Manufacturer's Proprietary Marks; and iv) agrees that any interest which may be
acquired by Marketer during the term of this Agreement or within one year
thereafter in Manufacturer's Proprietary Marks or in goodwill associated with
Manufacturer's Proprietary Marks or the Products, whether in the Territory or
elsewhere, shall be acquired on behalf of and for the benefit of Manufacturer
and shall be assigned to Manufacturer upon request at no charge.
Marketer shall use Manufacturer's Proprietary Marks only in connection
with Manufacturer's Products, and only during the term of this Agreement.
Marketer shall seek to benefit from the goodwill associated with Manufacturer's
Proprietary Marks or the Products only during the term of this Agreement and
only within the Territory. Marketer shall promptly report to Manufacturer any
violation of Manufacturer's rights in Manufacturer's Proprietary Marks or
goodwill of which Marketer becomes aware.
9. Term and Termination
--------------------
9.1 Term and Termination. Marketer's distribution obligations under
--------------------
this Agreement shall commence on the Effective Date and the initial term shall
expire five (5) years from the end of the first month in which Marketer records
commercial sales of a Product, provided, however, that in no event shall the
initial term extend beyond June 30, 2005. The Agreement shall renew
automatically for a subsequent three (3) year term (the "Second Term" ) if,
twelve (12) months prior to the expiration of the initial term, Marketer has
achieved total sales of at least eighty-five (85) percent of the cumulative
forecasted sales as described in Exhibit 9.1. Upon renewal Marketer shall
-----------
provide Manufacturer with a five (5) year sales forecast which shall be at least
equal to Marketer's annual sales level at the time of the renewal. Following the
expiration of the subsequent three (3) year term the Agreement shall renew
automatically for additional one (1) year terms unless terminated earlier by
either Party pursuant to the terms of this Agreement.
9.2 Termination By Manufacturer. If Marketer fails to achieve the sales
---------------------------
required for automatic renewal as described in Section 9.1, Manufacturer may
terminate this Agreement with twelve (12) months prior written notice. Twelve
(12) months prior to the expiration of the Second Term, or anytime thereafter,
Manufacturer may terminate this Agreement with twelve (12) months prior written
notice.
9.3 Termination by Marketer. Marketer may terminate this Agreement upon
-----------------------
one hundred eighty (180) days prior written notice to Manufacturer if Marketer's
Distribution Margin Percentage decreases below ten percent (10%) for two (2)
consecutive Calendar Quarters for the Products then distributed. Distribution
Margin Percentage shall be calculated as described in Exhibit 1.9.
-----------
9.4 Termination for Breach. Either Party may terminate this Agreement
----------------------
upon sixty (60) days written notice of the other Party's breach of a material
term or condition of this Agreement, provided that such termination shall not
take effect if the other Party remedies such breach, to the terminating Party's
reasonable satisfaction, within such sixty (60) day notice period.
-12-
9.5 Termination for Insolvency. Either Party may terminate this
--------------------------
Agreement by giving the other at least sixty (60) days prior written notice upon
the bankruptcy or insolvency of the other Party.
9.6 Termination Upon Acquisition. Either Party may terminate this
----------------------------
Agreement by giving the other Party at least one hundred and twenty (120) days
prior written notice following the acquisition by the other Party of a Third
Party which makes, has made, uses, offers for sale, and/or sells products which
directly compete with the Products. In addition, either Party may terminate this
Agreement by giving the other Party at least one hundred and twenty (120) days
prior written notice following the acquisition of the other Party by a Third
Party which makes, has made, uses, offers for sale, and/or sells products which
directly compete with the Products.
9.7 Effect of Termination.
---------------------
(a) Accrued Obligations. Except as otherwise provided, expiration
-------------------
or termination of this Agreement for any reason shall not release any party
hereto from liability accrued under this Agreement prior to such expiration or
termination, nor preclude either party hereto from pursuing any rights or
remedies accrued prior to such expiration or termination or accrued at law or in
equity with respect to any breach of this Agreement.
(b) Inventory. Within thirty (30) days after the expiration or
---------
termination of this Agreement, Marketer shall use its reasonable efforts to
provide Manufacturer with a complete inventory list of Products in Marketer's
possession or control. Within thirty (30) days after Manufacturer's receipt of
such inventory list, Manufacturer may inspect Marketer's Product inventory and
audit Marketer's records with respect to Product inventory during normal
business hours and upon at least two (2) weeks prior notice. Marketer's records
with respect to Product inventory shall be considered Confidential Information
of Marketer by Manufacturer.
(c) Return of Materials. All trademarks, trade names, patents,
-------------------
formulas or other data, photographs, samples, literature, and sales and
promotional aids of every kind provided by Manufacturer shall remain the
property of Manufacturer. Within thirty (30) days after the effective date of
termination of this Agreement, Marketer shall destroy all tangible items
bearing, containing, or contained in, any of the foregoing, in its possession or
control and provide written certification of such destruction, or prepare such
tangible items for shipment to Manufacturer, as Manufacturer may direct, at
Manufacturer's expense. Marketer shall not make or retain any copies of any
confidential items or information which may have been entrusted to it; however,
Marketer may retain one copy of each such item or information received by it
hereunder and notes regarding the same, provided that said copy shall be
retained and used solely for compliance purposes and shall be held in Marketer's
confidential file. Effective upon the termination of this Agreement, Marketer
shall cease to use all trademarks and trade names of Manufacturer related to
Product in the Territory. During the term of this Agreement and after any
termination or expiration of this Agreement, Manufacturer shall have the right
to continue to use and disclose for any purpose customer lists, customer data
and other customer information and any and all clinical trial results and other
data relating to the Product and provided by Marketer to Manufacturer during the
term of this Agreement.
(d) Products. Upon termination of this Agreement, Manufacturer
--------
shall have the option to repurchase from Marketer all or any portion of Products
remaining in Marketer's
-13-
inventory, FOB Marketer's facility, at the Transfer Prices paid by Marketer for
those Products under first-in first-out accounting principles. Any Products
tendered for repurchase by Marketer to Manufacturer shall be in new and original
condition and in Saleable Unit sizes. If this Agreement is terminated pursuant
to Section 9.5, then Marketer shall have the right to market and distribute all
remaining inventory in Marketer's possession as of the date of termination of
this Agreement.
(e) Transition. Upon termination of this Agreement, Marketer
----------
and Manufacturer shall diligently cooperate to effect a smooth and orderly
transition in the distribution of the Product in the Territory. From the time
that a notice of termination is received by either party until the effective
termination date, Marketer shall refer all Product inquiries to Manufacturer and
shall cooperate fully with any newly-appointed distributors.
(f) No Renewal, Extension or Waiver. Acceptance of any order
-------------------------------
from, or sale of, any Product to Marketer after the date of termination of this
Agreement shall not be construed as a renewal or extension hereof, or as a
waiver of termination by Manufacturer.
9.8 Survival. The provisions of Sections 5.1, 5.4, 8.1 and 9.7, and
--------
Articles 4, 6, 7, 10, 11 and 12 shall survive the expiration or termination of
this Agreement for any reason. Any other provisions of this Agreement
contemplated by their terms to pertain to the period of time following
termination or expiration of this Agreement shall survive.
10 Guarantees, Warranties and Indemnification.
------------------------------------------
10.1 Manufacturer Guarantees. Manufacturer guarantees to Marketer that
-----------------------
Products delivered to Marketer pursuant to this Agreement shall have been
manufactured in accordance with all applicable state and federal laws and
regulations, including cGMPs.
10.2 Marketer Warranties.
-------------------
(a) Marketer warrants that it has full power and authority to enter
into this Agreement and shall carry out the distributorship granted hereunder in
good faith. Marketer further warrants that it has made no commitments
inconsistent with this Agreement.
(b) Marketer shall sell Products only in Saleable Units. Marketer shall
not make any warranties or representations regarding the Products beyond those
warranties and representations which are expressly issued or approved by
Manufacturer in writing or which are included in Manufacturer's promotional or
informational materials.
(c) Marketer shall pass on to customers Manufacturer's standard limited
warranties and disclaimers. Marketer further agrees not to represent the
Products in a manner that is inconsistent with the Products' label claims or the
Product literature or to otherwise misrepresent the Products.
(d) Marketer warrants that in the event that Marketer, during the term
of this Agreement, obtains rights to needle technology by purchase,
amalgamation, merger, or Business Combination Transaction, which rights would be
infringed by the manufacture, use, offer for sale, or sale of Products by
Manufacturer, Marketer shall not assert such rights against Manufacturer during
the
-14-
term of this Agreement and Marketer shall continue to meet its obligations
under the terms of this Agreement.
10.3 Manufacturer Warranties.
-----------------------
(a) Manufacturer warrants that, it has full power and authority to
enter into this Agreement and grant to Marketer the distributorship granted
hereunder. Manufacturer further warrants that it has made and shall make no
commitments inconsistent with this Agreement.
(b) Manufacturer warrants that, to the best of its knowledge,
it is unaware of any Third Party intellectual property rights, including but not
limited to, patent, trademark, copyright, and/or trade secret rights that would
be infringed as a result of the making, using, offering for sale, and/or selling
of Products in the Territory. Manufacturer further warrants that it does not
have current communications from Third Parties alleging that the making, using,
offering for sale, and/or selling of Products in the Territory is an
infringement of any Third Party's intellectual property right.
(c) Manufacturer warrants that after due inquiry and to its
best knowledge and belief, it has the right to make, use, offer for sale, and/or
sell products that are within the scope of the Patent Rights.
(d) Any warranty for the Products shall run directly from
Manufacturer to customers, notwithstanding the fact that customers may return
Products to Marketer and not to Manufacturer. Marketer shall not make any
warranty or representation to any customer which is more protective of such
customer than the warranties and/or representations provided by Manufacturer.
For purposes of clarification, the sole remedy of customers in the case of
defective Product shall be that Manufacturer shall replace such returned
defective Product.
(e) Manufacturer's liability for failure of the Products to
conform with any other implied warranty, express warranty or specification
required for conformance with this Agreement shall be limited to a return of the
purchase price paid by Marketer.
10.4 Marketer Indemnification. Marketer shall indemnify, defend and
------------------------
hold Manufacturer and its Affiliates and their officers, directors, employees,
and representatives harmless from and against any and all Third Party claims,
causes of action, suits, proceedings, losses, damages, demands, fees, expenses,
fines, penalties and costs (including reasonable attorney's fees) arising out
of, related to or in connection with: (a) the breach of Marketer's warranties,
representations or covenants set forth in this Agreement; (b) any claim alleging
noncompliance by Marketer with the Food, Drug and Cosmetic Act and the
regulations promulgated thereunder; and/or (c) any wrongful or negligent acts or
omissions on the part of Marketer's employees, agents or representatives, except
to the extent caused by any wrongful or negligent acts or omissions on the part
of Manufacturer's employees, agents or representatives.
10.5 Manufacturer Indemnification. Manufacturer shall indemnify, defend
----------------------------
and hold Marketer and its Affiliates and their officers, directors, employees,
and representatives harmless from and against any and all Third Party claims,
causes of action, suits, proceedings, losses, damages, demands, fees, expenses,
fines, penalties and costs (including reasonable attorney's fees)
-15-
arising out of, related to or in connection with: (a) the manufacture and
shipment of Products to Marketer or the use or sale of Products including
product liability claims, product recalls and government regulatory actions; (b)
the breach of Manufacturer's warranties, representations or covenants set forth
in this Agreement; (c) the termination by Manufacturer of any distributor of
Products in the Territory (other than Marketer and any sub-distributor appointed
by Marketer hereunder); and/or (d) the wrongful or negligent acts or omissions
on the part of Manufacturer's employees, agents or representatives except to the
extent caused by wrongful or negligent acts or omissions on the part of
Marketer's employees, agents or representatives.
Manufacturer shall: i) carry liability insurance with a minimum
limit of five million dollars ($5,000,000); ii) list Marketer as an additional
insured of the policy throughout the Term of this Agreement; and iii) provide
Marketer with a certificate evidencing such insurance within thirty (30) days
after execution of this Agreement.
10.6 Conditions of Indemnification. When seeking indemnification under
-----------------------------
this Agreement the Party seeking indemnification must, as a condition of
indemnification, provide the indemnifying Party with: i) prompt notice of the
reported or alleged defect, infringement, injury or claim; ii) the opportunity
to investigate such claim, control the defense of such claim, and settle such
claim at its discretion; iii) all information obtained by the Party seeking
indemnification relating to any complaint or to any claimed or actual defect or
deficiency regarding any Product, including, but not limited to, information
relating to any legal proceeding involving Manufacturer, involving any Product,
or involving Marketer in connection with Marketer's relationship with
Manufacturer; and iv) such additional information and assistance as the
indemnifying Party may reasonably require to defend against such claim. The
indemnifying Party shall have the option to assume the other Party's defense in
any such claim or suit with counsel reasonably satisfactory to the other Party.
No settlement or compromise shall be binding on a Party hereto without its prior
written consent, which consent shall not be unreasonably withheld. Each Party
shall, to the extent allowed by law, regard as Confidential Information all
matters referenced in this paragraph
Except as otherwise provided, neither Party shall be liable for any
special, incidental, indirect or consequential damages arising out of or
relating to this Agreement; provided, however, this limitation shall not apply
-------- -------
to losses arising from Third Party claims for which a party is indemnified under
the terms of this agreement.
11 Confidentiality and Public Announcements.
----------------------------------------
11.1 Confidentiality. The Parties acknowledge and agree that during the
---------------
term of this Agreement, each of them and their Affiliates may exchange
Confidential Information, and the disclosure and use of any such Confidential
Information shall be governed by the provisions of this Article 11. Each Party
shall use the Confidential Information of the other Party only for the purpose
of the activities contemplated by this Agreement and shall not disclose such
Confidential Information to a Third Party except in accordance with the
provisions of this Agreement. The Parties shall ensure that their Affiliates
keep all Confidential Information exchanged hereunder confidential in accordance
with the provisions hereof as though the Affiliates were parties hereto. This
provision shall remain in effect for a period of five (5) years after
termination or expiration of this Agreement for all Confidential Information
excluding trade secrets. Trade secrets shall be kept
-16-
confidential by the Receiving Party (as defined in Section 11.2 hereof)
according to the terms set forth in Section 11.2.
11.2 Handling of Trade Secrets. During the course of its performance
-------------------------
hereunder, a Party (the "Disclosing Party") may desire or be requested to
disclose Confidential Information to the other Party (the "Receiving Party"),
which the Disclosing Party considers a trade secret. In such event, the
Disclosing Party first shall inform the Receiving Party, on a non-confidential
basis, the general nature of the trade secret information. The Receiving Party
shall have ten (10) days to decide whether it wishes to have such trade secrets
disclosed to it and to inform the Disclosing Party in writing that it wishes to
receive such a disclosure. Any trade secrets so disclosed between the Parties
shall be marked "Trade Secret," and the Receiving Party shall not disclose or
use such trade secret for the term of this Agreement and for a period of five
(5) years after the expiration or termination of this Agreement except as
expressly permitted under this Agreement. In the event the Disclosing Party
discloses the trade secrets to the Receiving Party without written approval of
the Receiving Party and/or without appropriately marking such information as
"Trade Secret" that trade secret shall be handled as Confidential Information
under Section 11.1.
11.3 Public Announcements. Marketer and Manufacturer agree to mutually
--------------------
approve the text of an initial press release to be jointly issued announcing the
execution of this Agreement or the consummation of the transactions contemplated
hereby and to consult with each other prior to making any other public statement
concerning this Agreement and the transactions contemplated by this Agreement
which approval shall not be unreasonably withheld. However, following the
approval of any such press release, the facts and matters contained in such
press release shall no longer be deemed Confidential Information. The foregoing
shall not be deemed to prevent either party from making any public disclosure
which may be required of either party or its Affiliates under the federal
securities laws or by the rules and regulations of any national securities
exchange upon which the securities of either party or its Affiliates are traded.
However, if a party is required to make such a disclosure, the disclosing party
shall notify the other party and provide the disclosure and the rationale for it
in writing to the other party at least thirty (30) days prior to making such
disclosure. The other party shall have the opportunity to review that portion of
the disclosure which references such party or this Agreement or the subject
matter of this Agreement and suggest changes or deletions to protect the
Confidential Information, competitive position or sensitive commercial
information of such party. The disclosing party shall implement such suggested
changes to the extent allowed by applicable law or regulation.
12. Miscellaneous.
-------------
12.1 Applicable Law. This Agreement shall be construed, interpreted
---------------
and governed by the laws of the State of Texas, except for choice of law rules.
12.2 Alternative Dispute Resolution. The Parties agree that any dispute
------------------------------
that arises in connection with this Agreement shall first be presented to the
respective presidents of Manufacturer and the Hospital Products Division of
Marketer, or their designees, for resolution. If no resolution is reached, then
such dispute may be resolved by Alternative Dispute Resolution ("ADR") in the
manner described in Exhibit 12.2.
------------
-17-
12.3 Force Majeure. Any delay in the performance of any of the duties
-------------
or obligations of either Party hereto (except the payment of money) shall not be
considered a breach of this Agreement and the time required for performance
shall be extended for a period equal to the period of such delay, provided that
such delay has been caused by or is the result of any acts of God, acts of the
public enemy, insurrections, riots, embargoes, labor disputes, including
strikes, lockouts, job actions, boycotts, fires, explosions, floods, shortages
of qualified equipment, material or energy, or other unforeseeable causes beyond
the control and without the fault or negligence of the Party so affected. The
affected Party shall give prompt notice to the other Party of such cause, and
shall take promptly whatever reasonable steps are necessary to relieve the
effect of such cause. If such event prevents or will prevent performance of a
material provision of this Agreement by one Party for more than six (6) months,
then the other party may immediately terminate this Agreement upon written
notice to the non-performing Party.
12.4 Independent Contractors. The relationship of Manufacturer to
-----------------------
Marketer established by this Agreement is that of an independent contractor.
Nothing contained in this Agreement shall be construed to constitute
Manufacturer as a partner, agent or joint venturer with Marketer or as a
participant in a joint or common undertaking with Marketer. Neither party has
any express or implied right under this Agreement to assume or create any
obligation on behalf of or in the name of the other party, or to bind the other
party to any contract, agreement or undertaking with any Third Party, and no
conduct of the parties shall be deemed to infer such right.
12.5 Notices. All notices hereunder shall be delivered personally, or
-------
by registered or certified mail (postage prepaid), or by recognized private mail
carrier or by facsimile with a confirmation copy sent by registered or certified
mail (postage prepaid), to the following addresses of the respective Parties:
If to Manufacturer:
Retractable Technologies, Inc.
000 Xxxx Xxxx
Xxxxxx Xxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxx
Chief Executive Officer and President
With a copy to:
Legal Department
000 Xxxx Xxxx
Xxxxxx Xxx, Xxxxx 00000
Attention: Xxxxxxx Xxxxxx
If to Marketer:
Senior Vice President
Hospital Products Division
-00-
Xxxxxx Xxxxxxxxxxxx
000 Xxxxxx Xxxx Xxxx
Xxxxxx Xxxx, Xxxxxxxx 00000-0000
With a copy to:
Divisional Vice President, D-322
Xxxxxx Laboratories
000 Xxxxxx Xxxx Xxxx
Xxxxxx Xxxx, Xxxxxxxx 00000-0000
Notices shall be effective upon receipt if personally delivered or delivered by
facsimile, or on the third business day following the date of mailing or the
carrier receipt date if by private mail carrier. A Party may change its address
listed above by notice to the other Party.
12.6 Assignment. The Parties shall not assign this Agreement or any
----------
part thereof without the prior written consent of the other Party; provided,
however, a Party may assign this Agreement to an Affiliate of such Party without
consent of the other Party. Any permitted assignee shall assume all obligations
of its assignor under this Agreement. No assignment shall relieve any Party of
responsibility for the performance of any accrued obligation which such Party
then has hereunder.
12.7 Entire Agreement. This terms and conditions contained herein
----------------
constitute the entire agreement between the Parties relating to the subject
matter hereof and thereof and shall supersede all previous communications and/or
agreements between the Parties with respect to the subject matter hereof and
thereof, respectively. No course of dealing or usage of trade shall be used to
modify the terms and conditions hereof.
12.8 Severability. This Agreement is subject to the restrictions,
------------
limitations, terms and conditions of all applicable laws, governmental
regulations, approvals and clearances. If any term or provision of this
Agreement shall for any reason be held invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other term or provision hereof, and this Agreement shall be interpreted and
construed as if such term or provision, to the extent the same shall have been
held to be invalid, illegal or unenforceable, had never been contained herein
12.9 Waiver - Modification of Agreement. No waiver or modification of
----------------------------------
any of the terms of this Agreement shall be valid unless in writing and signed
by authorized representatives of both Parties. Failure by either Party to
enforce any rights under this Agreement shall not be construed as a waiver of
such rights nor shall a waiver by a Party in one or more instances be construed
as constituting a continuing waiver or as a waiver in other instances.
[Signature page follows]
-19-
The Parties intending to be bound by the terms and conditions hereof
have caused this Agreement to be signed by their duly authorized representatives
on the date first above written.
XXXXXX LABORATORIES RETRACTABLE TECHNOLOGIES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx By: /s/ Xxxxxx X. Xxxx
------------------------------ -----------------------------
Senior Vice President,
Title: Hospital Products Title: CEO
--------------------------- -------------------------
Date: May 2, 2000 Date: 5/4/00
---------------------------- ---------------------------
-20-
RETRACTABLE TECHNOLOGIES, INC.
AND
XXXXXX LABORATORIES
National Marketing and Distribution Agreement
Exhibit 1.9
-----------
Distribution Margin Percentage
------------------------------
Calculation made as follows:
(Net ASP - Transfer Price + Marketer Fee)/ Net ASP
Example:
3cc Syringe
-----------
Net ASP = $.42
Transfer Price = $.45
Marketer Fee = $.10
(.42 - .45 + .10)/.42 = 16.6%
RETRACTABLE TECHNOLOGIES, INC.
AND
XXXXXX LABORATORIES
National Marketing and Distribution Agreement
Exhibit 1.17
------------
Manufacturer's Patents
----------------------
Syringe Patents Issue Date
6,015,438 Full Displacement Retractable Syringe 01/18/00
5,637,092 Syringe Plunger Locking Assembly 06/10/97
5,632,733 Tamperproof Retractable Syringe 05/27/97
5,578,011 Tamperproof Retractable Syringe 11/26/96
5,389,076 Single Use Medical Device with Retraction Mechanism 02/14/95
5,385,551 Nonreusable Medical Device with Front Retraction 01/31/95
5,267,961 Nonreusable Syringe with Safety Indicator 12/07/93
5,188,613 Nonreusable Syringe with Safety Indicator 02/23/93
5,120,310 Nonreusable Syringe 06/09/92
Blood Collection Tube Holder Issue Date
5,810,775 Cap Operated Retractable Medical Device 09/22/98
5,423,758 Retractable Fluid Collection Device 06/13/95
RETRACTABLE TECHNOLOGIES, INC.
AND
XXXXXX LABORATORIES
National Marketing and Distribution Agreement
Exhibit 1.20
------------
Product and Price List
----------------------
------------------------------------------------------------------------------------------------------------------------------------
Product Description Saleable Unit Transfer Price
------------------------------------------------------------------------------------------------------------------------------------
3cc VanishPoint(R) syringe 25G x 5/8" 100/bx $45.00/bx
------------------------------------------------------------------------------------------------------------------------------------
3cc VanishPoint(R) syringe 25G x 1" 100/bx $45.00/bx
------------------------------------------------------------------------------------------------------------------------------------
3cc VanishPoint(R) syringe 23G x 1" 100/bx $45.00/bx
------------------------------------------------------------------------------------------------------------------------------------
3cc VanishPoint(R) syringe 22G x 1" 100/bx $45.00/bx
------------------------------------------------------------------------------------------------------------------------------------
3cc VanishPoint(R) syringe 22G x 1 1/2" 100/bx $45.00/bx
------------------------------------------------------------------------------------------------------------------------------------
3cc VanishPoint(R) syringe 21G x 1" 100/bx $45.00/bx
------------------------------------------------------------------------------------------------------------------------------------
3cc VanishPoint(R) syringe 21G x 1 1/2" 100/bx $45.00/bx
------------------------------------------------------------------------------------------------------------------------------------
3cc VanishPoint(R) syringe 20G x 1" 100/bx $45.00/bx
------------------------------------------------------------------------------------------------------------------------------------
3cc VanishPoint(R) syringe 20G x 1 1/2" 100/bx $45.00/bx
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
5cc VanishPoint(R) syringe 22G x 1" 100/bx $75.00/bx
------------------------------------------------------------------------------------------------------------------------------------
5cc VanishPoint(R) syringe 22G x 1 1/2" 100/bx $75.00/bx
------------------------------------------------------------------------------------------------------------------------------------
5cc VanishPoint(R) syringe 21G x 1" 100/bx $75.00/bx
------------------------------------------------------------------------------------------------------------------------------------
5cc VanishPoint(R) syringe 21G x 1 1/2" 100/bx $75.00/bx
------------------------------------------------------------------------------------------------------------------------------------
5cc VanishPoint(R) syringe 20G x 1" 100/bx $75.00/bx
------------------------------------------------------------------------------------------------------------------------------------
5cc VanishPoint(R) syringe 20G x 1 1/2" 100/bx $75.00/bx
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
10cc VanishPoint(R) syringe 22G x 1" 100/bx $85.00/bx
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Sales Margin Split
Product Description Net Cost 50/50 for Net ASP:
------------------------------------------------------------------------------------------------------------------------------------
3cc VanishPoint(R) syringe 25G x 5/8" $35.00/bx more than $60/bx and less than or equals to $70/bx
------------------------------------------------------------------------------------------------------------------------------------
3cc VanishPoint(R) syringe 25G x 1" $35.00/bx more than $60/bx and less than or equals to $70/bx
------------------------------------------------------------------------------------------------------------------------------------
3cc VanishPoint(R) syringe 23G x 1" $35.00/bx more than $60/bx and less than or equals to $70/bx
------------------------------------------------------------------------------------------------------------------------------------
3cc VanishPoint(R) syringe 22G x 1" $35.00/bx more than $60/bx and less than or equals to $70/bx
------------------------------------------------------------------------------------------------------------------------------------
3cc VanishPoint(R) syringe 22G x 1 1/2" $35.00/bx more than $60/bx and less than or equals to $70/bx
------------------------------------------------------------------------------------------------------------------------------------
3cc VanishPoint(R) syringe 21G x 1" $35.00/bx more than $60/bx and less than or equals to $70/bx
------------------------------------------------------------------------------------------------------------------------------------
3cc VanishPoint(R) syringe 21G x 1 1/2" $35.00/bx more than $60/bx and less than or equals to $70/bx
------------------------------------------------------------------------------------------------------------------------------------
3cc VanishPoint(R) syringe 20G x 1" $35.00/bx more than $60/bx and less than or equals to $70/bx
------------------------------------------------------------------------------------------------------------------------------------
3cc VanishPoint(R) syringe 20G x 1 1/2" $35.00/bx more than $60/bx and less than or equals to $70/bx
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
5cc VanishPoint(R) syringe 22G x 1" $65.00/bx more than $90/bx and less than or equals to $100/bx
------------------------------------------------------------------------------------------------------------------------------------
5cc VanishPoint(R) syringe 22G x 1 1/2" $65.00/bx more than $90/bx and less than or equals to $100/bx
------------------------------------------------------------------------------------------------------------------------------------
5cc VanishPoint(R) syringe 21G x 1" $65.00/bx more than $90/bx and less than or equals to $100/bx
------------------------------------------------------------------------------------------------------------------------------------
5cc VanishPoint(R) syringe 21G x 1 1/2" $65.00/bx more than $90/bx and less than or equals to $100/bx
------------------------------------------------------------------------------------------------------------------------------------
5cc VanishPoint(R) syringe 20G x 1" $65.00/bx more than $90/bx and less than or equals to $100/bx
------------------------------------------------------------------------------------------------------------------------------------
5cc VanishPoint(R) syringe 20G x 1 1/2" $65.00/bx more than $90/bx and less than or equals to $100/bx
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
10cc VanishPoint(R) syringe 22G x 1" $75.00/bx more than $100/bx and less than or equals to $110/bx
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
10cc VanishPoint(R) syringe 22G x 1 1/2" 100/bx $85.00/bx
------------------------------------------------------------------------------------------------------------------------------------
10cc VanishPoint(R) syringe 21G x 1" 100/bx $85.00/bx
------------------------------------------------------------------------------------------------------------------------------------
10cc VanishPoint(R) syringe 21G x 1 1/2" 100/bx $85.00/bx
------------------------------------------------------------------------------------------------------------------------------------
10cc VanishPoint(R) syringe 20G x 1" 100/bx $85.00/bx
------------------------------------------------------------------------------------------------------------------------------------
10cc VanishPoint(R) syringe 20G x 1 1/2" 100/bx $85.00/bx
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
VanishPoint(R) blood collection tube holder 250/cs $87.50/cs
------------------------------------------------------------------------------------------------------------------------------------
VanishPoint(R) small diameter tube adapter 25/bx $6.25/bx
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
1cc VanishPoint(R) tuberculin syringe 25G x 100/bx $50.00/bx
5/8"
------------------------------------------------------------------------------------------------------------------------------------
1cc VanishPoint(R) tuberculin syringe 27G x 100/bx $50.00/bx
1/2"
------------------------------------------------------------------------------------------------------------------------------------
1cc VanishPoint(R) U-100 insulin syringe 100/bx $50.00/bx
29G x 1/2"
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
10cc VanishPoint(R) syringe 22G x 1 1/2" $75.00/bx more than $100/bx and less than or equals to $110/bx
------------------------------------------------------------------------------------------------------------------------------------
10cc VanishPoint(R) syringe 21G x 1" $75.00/bx more than $100/bx and less than or equals to $110/bx
------------------------------------------------------------------------------------------------------------------------------------
10cc VanishPoint(R) syringe 21G x 1 1/2" $75.00/bx more than $100/bx and less than or equals to $110/bx
------------------------------------------------------------------------------------------------------------------------------------
10cc VanishPoint(R) syringe 20G x 1" $75.00/bx more than $100/bx and less than or equals to $110/bx
------------------------------------------------------------------------------------------------------------------------------------
10cc VanishPoint(R) syringe 20G x 1 1/2" $75.00/bx more than $100/bx and less than or equals to $110/bx
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
VanishPoint(R) blood collection tube holder $62.50/cs more than $125/cs and less than or equals to $150/cs
------------------------------------------------------------------------------------------------------------------------------------
VanishPoint(R) small diameter tube adapter $3.75/bx more than $10/bx and less than or equals to $12.50/bx
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
1cc VanishPoint(R) tuberculin syringe 25G x $40.00/bx more than $65/bx and less than or equals to $75/bx
5/8"
------------------------------------------------------------------------------------------------------------------------------------
1cc VanishPoint(R) tuberculin syringe 27G x $40.00/bx more than $65/bx and less than or equals to $75/bx
1/2"
------------------------------------------------------------------------------------------------------------------------------------
1cc VanishPoint(R) U-100 insulin syringe $40.00/bx more than $65/bx and less than or equals to $75/bx
29G x 1/2"
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
RETRACTABLE TECHNOLOGIES, INC.
AND
XXXXXX LABORATORIES
National Marketing and Distribution Agreement
Exhibit 3.1
-----------
Purchase Forecast
-----------------
RTI PURCHASE FORECAST
(000's of UNITS)
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6
July 2000 Aug Sept Oct Nov Dec
--------- --- ---- --- --- ---
3 cc syringe XXXX XXXX XXXX XXXX XXXX XXXX
5 cc syringe X XXX XXX XXX XXX XXX
10 cc syringe X XXX XXX XXX XXX XXX
1 cc syringe X X X X X X
BCTH XXXX XXXX XXXX XXXX XXXX XXXX
Adaptor X XXX XXX XXX XXX XXX
Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Jan. 2001 Feb March April May June
--------- --- ----- ----- --- ----
3 cc syringe XXXX XXXX XXXX XXXX XXXX XXXX
5 cc syringe XXX XXX XXX XXX XXX XXX
10 cc syringe XXX XXX XXX XXX XXX XXX
1 cc syringe XXXX XXXX XXXX XXXX XXXX XXXX
BCTH XXXX XXXX XXXX XXXX XXXX XXXX
Adaptor X X X X X X
Confidential treatment has been requested for portions of this exhibit. The
copy filed herewith omits the information subject to the confidentiality
request. Omissions are designated as "xxxxx". The redacted information was
separately filed with the Commission.
RETRACTABLE TECHNOLOGIES, INC.
AND
XXXXXX LABORATORIES
National Marketing and Distribution Agreement
Exhibit 3.4
-----------
Distribution Centers
--------------------
1. Atlanta Distribution Center, 0000 Xxxxx Xxxxx Xxxxx, Xxxxx Xxxxxxxx,
XX 00000, Phone: (000) 000-0000, Fax: (000) 000-0000
2. Chicago Distribution Center, Attn: D-209, AP5, Xxx Xxxxxx Xxxx Xxxx,
Xxxxxx Xxxx, XX 00000-0000, Phone: (000) 000-0000, Fax: (000) 000-0000
3. Dallas Distribution Center, 0000 Xxxx Xxxx, Xxxxxx'x Xxxxxx, XX 00000-
4618, Phone: (000) 000-0000, Fax (000) 000-0000
4. King of Prussia Distribution Center, 000 Xxxxxx Xxxxxx Xxxx, Xxxx xx
Xxxxxxx, XX 00000, Phone: (000) 000-0000, Fax (000) 000-0000
5. Los Angeles Distribution Center, 00000 Xxxxxx Xxxxxx, (XX Xxx 00000
Xxxxxxxx Xxxxx, XX 00000), Xxxxx Xx Xxxxxxx, XX 00000, Phone: (562)
000-0000, Fax (000) 000-0000
RETRACTABLE TECHNOLOGIES, INC.
AND
XXXXXX LABORATORIES
National Marketing and Distribution Agreement
Exhibit 3.6
-----------
Returned Goods Policy
---------------------
GENERAL INFORMATION
TERMS OF SALE AND RETURN GOODS POLICY
DRUG WHOLESALERS & MED/SURG DISTRIBUTORS & RADIOLOGY SUPPLIERS
EFFECTIVE DECEMBER 1, 1997
Return Goods Policy
-------------------
. It is the intention of the Hospital Products Division of Xxxxxx
Laboratories to issue full credit for all Return Goods, provided the
minimal conditions of this policy are met.
. Authorization for returns must be obtained from an Abbott Trade Sales
----
Specialist. Call your Hospital Products Division Sales Specialist or
Customer Service at 1-800-ABBOTT3 (0-000-000-0000) to arrange a
representative visit. The Returned Goods Authorization (RGA) form must
be completed and signed by the customer in accordance with FDA good
manufacturing practices. No credit is granted without an authorized and
signed RGA. Returns must be shipped to the assigned Abbott Distribution
Center or other location designated by an Abbott Trade Sales Specialist
or customer service and shipped freight prepaid. Collect shipments will
be charged back to the customer. Product must be returned within thirty
(30) days from the date the RGA was initiated.
. Shortages/Damaged product. Shortages or damaged must be reported to
Customer Service at 0-000-000-0000 upon receipt of product. To insure
credit for damaged product, please provide the carrier's damaged goods
report or other similar documentation.
. Credit for expiration-dated products will be allowed as follows:
Full Credit for products returned in salable condition with remaining dating or
not less than 3 months past expiration.
Exceptions:
. Controlled drugs and temperature sensitive products (e.g.
Liposyn(R), Quelicin(R), Atracurium, Lorazepam, Cenolate(R), and
Pancuronium Bromide) must have 6 or fewer months of dating or not
be less than three (3) months past expiration.
. Calcijex(R) is not returnable for credit except in the event of an
ordering or shipping error reported within ten (10) days of
delivery. Expired product is not eligible for credit.
. Full credit granted for non-expiration-dated products returned in full
-----------------------------
salable cases within one (1) year of purchase from Abbott.
. Schedule II product returns must be arranged by calling Xxxxxx
Laboratories at 0-000-000-0000, extension 6868 so that appropriate forms
and labels can be mailed.
. Products are ineligible for credit which were:
1. returned in less than a full salable unit.
2. returned opened, marked, or not in original packaging.
3. acquired from Abbott as nonreturnable.
4. previously sold by Drug Wholesalers, Radiology Suppliers, or
Med/Surg Distributors to end customers.
5. manufactured to customer specification.
6. not shipped and billed to Drug Wholesalers, Radiology Suppliers,
or Med/Surg Distributors by Abbott.
7. involved in a deal, or bankruptcy sale, or have deteriorated due
to conditions beyond Xxxxxx'x control, such as from improper
storage, heat, cold, humidity, water, dust, dirt, smoke, or fire.
. Abbott reserves the right to destroy products which are returned outside
the above policy, or which are considered unfit or unsafe for use; to
reduce or refuse credit when inadequate inventory controls cause
excessive product returns; and to revise or make exceptions to this
policy at Xxxxxx'x discretion.
. Customers are encouraged to return only full, unopened cases of product
unless product is expired or nearly expired. Prior to returning
overstocked product to Abbott, multi-location
wholesalers/distributors/suppliers are encouraged to employ
interdivisional transfers when possible.
RETRACTABLE TECHNOLOGIES, INC.
AND
XXXXXX LABORATORIES
National Marketing and Distribution Agreement
Exhibit 4.2
-----------
Product Specifications
----------------------
See Attached
Confidential treatment has been requested for portions of this exhibit. The copy
filed herewith omits the information subject to the confidentiality request.
Omissions are designated as "xxxxx". The redacted information was separately
filed with the Commission. The request for confidential treatment covers 47
pages of redacted documents.
RETRACTABLE TECHNOLOGIES, INC.
AND
XXXXXX LABORATORIES
National Marketing and Distribution Agreement
Exhibit 5.4(b)
--------------
Profit Split Example
--------------------
Example 1
1. Assume
Net ASP = XXXXX/Unit
Profit Split begins when Distribution Margin is greater than XXXXX and up to
XXXXX
Abbott keeps all margin XXXX above Net ASP
2. Calculation:
Abbott Pays RTI Transfer Price of: XXXXX/Unit
Marketer Fee: XXXXX/Unit
Net Cost to Abbott is: XXXXX/Unit
Distribution Margin: XXXXX - XXXXX = XXXXX
Share of Distribution Margin to Abbot = XXXXX
Example 2
1. Assume:
Net ASP = XXXXX/Unit
Profit Split begins when Distribution Margin is greater than XXXXX and up to
XXXXX
Abbott keeps all margin XXXX above Net ASP
2. Calculation:
Abbott Pays RTI Transfer Price of: XXXXX/Unit
Marketer Fee: XXXXX/Unit
Net Cost to Abbott is: XXXXX/Unit
Distribution Margin: XXXXX - XXXXX = XXXXX
Share of Distribution Margin to RTI: (XXXX - XXXX) x XXX = XXXXXX
Share of Distribution Margin to Abbott: XXXXX - XXXXX = XXXXXX
Example 3
1. Assume:
Net ASP = XXXXX/Unit
Profit Split begins when Distribution Margin is greater than XXXXX and up to
XXXXX
Abbott keeps all margin XXXX above Net ASP
Confidential treatment has been requested for portions of this exhibit. The
copy filed herewith omits the information subject to the confidentiality
request. Omissions are designated as "xxxxx". The redacted information was
separately filed with the Commission.
2. Calculation:
Abbott Pays RTI Transfer Price of: XXXXX/Unit
Marketer Fee: XXXXX/Unit
Net Cost to Abbott is: XXXXX/Unit
Distribution Margin: XXXXX - XXXXX = XXXXX
Share of Distribution Margin to RTI: (XXXX-XXXX) x XXX = XXXXX
Share of Distribution Margin to Abbott: XXXXX - XXXXX = XXXXX
Confidential treatment has been requested for portions of this exhibit. The
copy filed herewith omits the information subject to the confidentiality
request. Omissions are designated as "xxxxx". The redacted information was
separately filed with the Commission.
RETRACTABLE TECHNOLOGIES, INC.
AND
XXXXXX LABORATORIES
National Marketing and Distribution Agreement
Exhibit 6
---------
Subscription Agreement under Private Placement Memorandum dated January 11, 2000
--------------------------------------------------------------------------------
See Attached
Exhibit 4.2
Packaging Specification - PK271
-------------------------------------------------------------------------------
Description : Packaging VanishPoint Small Tube Adapter
Revision : 00
ECN : 106
Date : 02/02/1999
Ref. Drawing : PK271
-------------------------------------------------------------------------------
4.1 Class I Defects
None
4.2 Class II Defects
4.2.1 Incorrect Lot Number
Lot No. on Carton Label does not match product inside.
4.2.2 Missing Shelf Carton Label
4.3 Class III Defects
None
4.4 Class IV Defects
None
4.5 Class V Defects
None
5.0 Other Requirements
Non applicable.
--------------------------------------------------------------------------------
End of Document Page 3
RETRACTABLE TECHNOLOGIES, INC.
AND
XXXXXX LABORATORIES
National Marketing and Distribution Agreement
Exhibit 9.1
-----------
Forecasted Sales
----------------
See Attached
Confidential treatment has been requested for portions of this exhibit. The
copy filed herewith omits the information subject to the confidentiality
request. Omissions are designated as "xxxxx". The redacted information was
separately filed with the Commission.
Exhibit 9.1
Five Year Sales Forecast
(In Thousands of Dollars)
2000 2001 2002 2003 2004 2005
3 cc syringe XXXXXXX XXXXXXX XXXXXXX XXXXXXX XXXXXXX XXXXXXX
5 cc syringe XXXXXXX XXXXXXX XXXXXXX XXXXXXX XXXXXXX XXXXXXX
10cc syringe XXXXXXX XXXXXXX XXXXXXX XXXXXXX XXXXXXX XXXXXXX
1 cc syringe XXXXXXX XXXXXXX XXXXXXX XXXXXXX XXXXXXX XXXXXXX
BCTH XXXXXXX XXXXXXX XXXXXXX XXXXXXX XXXXXXX XXXXXXX
Tube Adapter XXXXXXX XXXXXXX XXXXXXX XXXXXXX XXXXXXX XXXXXXX
Total VanishPoint Sales $ XXXXXXX XXXXXXX XXXXXXX XXXXXXX XXXXXXX XXXXXXX
Confidential treatment has been requested for portions of this exhibit. The
copy filed herewith omits the information subject to the confidentiality
request. Omissions are designated as "xxxxx". The redacted information was
separately filed with the Commission.
RETRACTABLE TECHNOLOGIES, INC.
AND
XXXXXX LABORATORIES
National Marketing and Distribution Agreement
Exhibit 12.2
------------
Alternative Dispute Resolution
------------------------------
The parties recognize that bona fide disputes as to certain matters may
arise from time to time during the term of this Agreement which relate to either
party's rights and/or obligations. To have such a dispute resolved by this
Alternative Dispute Resolution ("ADR") provision, a party first must send
written notice of the dispute to the other party for attempted resolution by
good faith negotiations between their respective presidents (or their designees)
of the affected subsidiaries, divisions, or business units within twenty-eight
(28) days after such notice is received (all references to "days" in this ADR
provision are to calendar days).
If the matter has not been resolved within twenty-eight (28) days of
the notice of dispute, or if the parties fail to meet within such twenty-eight
(28) days, either party may initiate an ADR proceeding as provided herein. The
parties shall have the right to be represented by counsel in such a proceeding.
1. To begin an ADR proceeding, a party shall provide written notice
to the other party of the issues to be resolved by ADR. Within fourteen (14)
days after its receipt of such notice, the other party may, by written notice to
the party initiating the ADR, add additional issues to be resolved within the
same ADR.
2. Within twenty-one (21) days following receipt of the original ADR
notice, the parties shall select a mutually acceptable neutral to preside in the
resolution of any disputes in this ADR proceeding. If the parties are unable to
agree on a mutually acceptable neutral within such period, either party may
request the President of the CPR Institute for Dispute Resolution ("CPR"), 000
Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, to select a neutral
pursuant to the following procedures:
(a) The CPR shall submit to the parties a list of not less than
five (5) candidates within fourteen (14) days after receipt of the request,
along with a Curriculum Vitae for each candidate. No candidate shall be an
employee, director, or shareholder of either party or any of their subsidiaries
or affiliates.
(b) Such list shall include a statement of disclosure by each
candidate of any circumstances likely to affect his or her impartiality.
(c) Each party shall number the candidates in order of preference
(with the number one (1) signifying the greatest preference) and shall deliver
the list to the CPR within seven (7) days following receipt of the list of
candidates. If a party believes a conflict of interest exists regarding any of
the candidates, that party shall provide a written explanation of the conflict
to the
CPR along with its list showing its order of preference for the candidates. Any
party failing to return a list of preferences on time shall be deemed to have no
order of preference.
(d) If the parties collectively have identified fewer than three
(3) candidates deemed to have conflicts, the CPR immediately shall designate as
the neutral the candidate for whom the parties collectively have indicated the
greatest preference. If a tie should result between two candidates, the CPR may
designate either candidate. If the parties collectively have identified three
(3) or more candidates deemed to have conflicts, the CPR shall review the
explanations regarding conflicts and, in its sole discretion, may either (i)
immediately designate as the neutral the candidate for whom the parties
collectively have indicated the greatest preference, or (ii) issue a new list of
not less than five (5) candidates, in which case the procedures set forth in
subparagraphs 2(a) - 2(d) shall be repeated.
3. No earlier than twenty-eight (28) days or later than fifty-six
(56) days after selection, the neutral shall hold a hearing to resolve each of
the issues identified by the parties. The ADR proceeding shall take place at a
location agreed upon by the parties. If the parties cannot agree, the neutral
shall designate a location other than the principal place of business of either
party or any of their subsidiaries or affiliates.
4. At least seven (7) days prior to the hearing, each party shall
submit the following to the other party and the neutral:
(a) a copy of all exhibits on which such party intends to rely in
any oral or written presentation to the neutral;
(b) a list of any witnesses such party intends to call at the
hearing, and a short summary of the anticipated testimony of each witness;
(c) a proposed ruling on each issue to be resolved, together
with a request for a specific damage award or other remedy for each issue. The
proposed rulings and remedies shall not contain any recitation of the facts or
any legal arguments and shall not exceed one (1) page per issue.
(d) a brief in support of such party's proposed rulings and
remedies, provided that the brief shall not exceed twenty (20) pages. This page
limitation shall apply regardless of the number of issues raised in the ADR
proceeding.
Except as expressly set forth in subparagraphs 4(a) - 4(d),
no discovery shall be required or permitted by any means, including depositions,
interrogatories, requests for admissions, or production of documents.
5. The hearing shall be conducted on two (2) consecutive days and
shall be governed by the following rules:
(a) Each party shall be entitled to five (5) hours of hearing
time to present its case. The neutral shall determine whether each party has had
the five (5) hours to which it is entitled.
(b) Each party shall be entitled, but not required, to make an
opening statement, to present regular and rebuttal testimony, documents or other
evidence, to cross-examine witnesses, and to make a closing argument.
Cross-examination of witnesses shall occur immediately after their
direct testimony, and cross-examination time shall be charged against the party
conducting the cross-examination.
(c) The party initiating the ADR shall begin the hearing and,
if it chooses to make an opening statement, shall address not only issues it
raised but also any issues raised by the responding party. The responding party,
if it chooses to make an opening statement, also shall address all issues raised
in the ADR. Thereafter, the presentation of regular and rebuttal testimony and
documents, other evidence, and closing arguments shall proceed in the same
sequence.
(d) Except when testifying, witnesses shall be excluded from the
hearing until closing arguments.
(e) Settlement negotiations, including any statements made
therein, shall not be admissible under any circumstances. Affidavits prepared
for purposes of the ADR hearing also shall not be admissible. As to all other
matters, the neutral shall have sole discretion regarding the admissibility of
any evidence.
6. Within seven (7) days following completion of the hearing, each
party may submit to the other party and the neutral a post-hearing brief in
support of its proposed rulings and remedies, provided that such brief shall not
contain or discuss any new evidence and shall not exceed ten (10) pages. This
page limitation shall apply regardless of the number of issues raised in the ADR
proceeding.
7. The neutral shall rule on each disputed issue within fourteen (14)
days following completion of the hearing. Such ruling shall adopt in its
entirety the proposed ruling and remedy of one of the parties on each disputed
issue but may adopt one party's proposed rulings and remedies on some issues and
the other party's proposed rulings and remedies on other issues. The neutral
shall issue a written ruling which shall contain the findings of fact and
conclusions of law.
8. The neutral shall be paid a reasonable fee plus expenses. These
fees and expenses, along with the reasonable legal fees and expenses of the
prevailing party (including all expert witness fees and expenses), the fees and
expenses of a court reporter, and any expenses for a hearing room, shall be paid
as follows:
(a) If the neutral rules in favor of one party on all disputed
issues in the ADR, the losing party shall pay 100% of such fees and expenses.
(b) If the neutral rules in favor of one party on some issues
and the other party on other issues, the neutral shall issue with the rulings a
written determination as to how such fees and expenses shall be allocated
between the parties. The neutral shall allocate fees and expenses in a way that
bears a reasonable relationship to the outcome of the ADR, with the party
prevailing on more issues, or on issues of greater value or gravity, recovering
a relatively larger share of its legal fees and expenses.
9. The rulings of the neutral and the allocation of fees and expenses
shall be binding, non-reviewable, and non-appealable, and may be entered as a
final judgment in any court having jurisdiction.
10. The rulings of the neutral shall be subject to judicial review
only to the extent that such review shall be limited to the findings of fact and
conclusions of law to establish whether the
ruling was arbitrary and capricious and/or clearly erroneous.
11. Except as provided in paragraph 10 or as required by law, the
existence of the dispute, any settlement negotiations, the ADR hearing, any
submissions (including exhibits, testimony, proposed rulings, and briefs), and
the rulings shall be deemed Confidential Information. The neutral shall have the
authority to impose sanctions for unauthorized disclosure of Confidential
Information.
EXHIBIT C
SUBSCRIPTION DOCUMENTS
SUBSCRIPTION AGREEMENT
Xx. Xxxxxxx X. Xxxxx Memorandum No. _________
Chief Financial Officer and Treasurer
Retractable Technologies, Inc.
000 Xxxx Xxxx, X. X. Xxx 0
Xxxxxx Xxx, Xxxxx 00000
Dear Xx. Xxxxx:
The undersigned hereby tenders this subscription and applies for the purchase of
Series IV Class B Convertible Preferred Stock (the "Preferred Stock"), $10.00
per share, of Retractable Technologies, Inc., a Texas corporation (the
"Company").
1. Purchase: Terms of Offering.
----------------------------
Subject to the terms and conditions of this Subscription Agreement, the
undersigned irrevocably agrees to purchase $________________ of the
Series IV Class B Convertible Preferred Stock at $10.00 per share and
tenders herewith the cash contribution as set forth on Page 4 below.
2. Tender of Subscription.
----------------------
The undersigned is delivering to the Company at the address set forth
above the following:
(i) One signed copy of this Subscription Agreement;
(ii) One Suitability Questionnaire with Sections A and D completed
and Sections B (Determination of Accredited Investor Status)
and C (Agent Account Information) completed where appropriate;
and
(iii) A check payable to Retractable Technologies Escrow Account in
the amount set forth on page 4 below.
Upon receipt and acceptance of this Subscription Agreement, the Company
will deposit any check tendered herewith and promptly deliver the
subscribed Preferred Stock after receipt of the minimum subscription of
$500,000. The undersigned acknowledges that the Company may, at its
sole discretion, terminate the offering of Preferred Stock for any
reason. If for any reason the subscription is rejected, all amounts
received hereunder shall be returned without interest or deductions,
together with this Subscription Agreement. The Company may accept
subscriptions while continuing the offering until termination.
3. Representations and Warranties.
------------------------------
The undersigned hereby makes the following representations and
warranties to the Company and agrees to indemnify, hold harmless and
pay all judgments or any claims against the Company from any liability
or injury incurred (including all legal fees and expenses) as a result
of any misrepresentation herein or any warranties not performed by the
undersigned.
-1-
(c) If the undersigned is a corporation, partnership, trust or other
entity, (1) it is duly organized, validly existing, and in good
standing under the laws of its relevant jurisdiction and has all
the requisite power and authority to invest the shares as provided
herein, (2) such investment does not result in any violation of, or
conflict with, any term of the charter in or bylaws of the
undersigned or any instrument or regulation applicable to it; (3)
such investment has been duly authorized by all necessary action on
behalf of the undersigned; and (4) this Subscription Agreement has
been duly executed and delivered on behalf of the undersigned and
constitutes a legal, valid and binding agreement of the
undersigned, enforceable in accordance with its terms.
(e) I have consulted with the following advisor(s), if any (such
advisor[s]) are hereinafter collectively referred to as the
"Purchaser Representative") (if NONE, so indicate):
None
-------------------------------------------------------------------
___________________________________________________________________
(f) I and/or my Purchaser Representative have read and analyzed and are
familiar with the Confidential Private Placement Memorandum dated
January 11, 2000 (the "Private Placement Memorandum"), this
Subscription Agreement, and any other related documents, and I
confirm that all documents requested by me and/or my Purchaser
Representative have been made available to us, and that we have
been supplied with all of the additional information concerning
this investment that we have requested.
(g) I personally, or together with my Purchaser Representative, have
such knowledge and experience in financial, securities, investment
and business matters that I am, or we are, capable of evaluating
the merits and risks of this investment.
(h) I understand that an investment in the Preferred Stock is highly
speculative and subject to substantial risks, and I am capable of
bearing the high degree of economic risk and burdens of this
venture, including, but not limited to, the possibility of the
complete loss of all contributed capital, the lack of a public
market and limited transferability of the Preferred Stock, such
that it might not be possible to readily liquidate this investment.
(i) The solicitation of this offer to purchase Preferred Stock was
directly communicated to me by the Company through the Private
Placement Memorandum, to which this Subscription Agreement is
attached, in such a manner that I was able to ask questions and
receive answers from a person acting on behalf of the Company
concerning the terms and conditions of this transaction and, at no
time was I presented with or solicited by or through any leaflet,
public promotional meeting, television advertisement or any other
form of general advertising.
(j) No representations or promises have been made concerning the
marketability or value of the Preferred Stock. The undersigned
understands the restrictions on transfer described
-2-
in the Private Placement Memorandum. The undersigned further
acknowledges and agrees that, because the Preferred Stock has not
been registered under the Securities Act and is being offered and
sold pursuant to an exemption from registration, the Preferred
Stock cannot be sold unless it is subsequently registered under
said Act or an exemption from registration is available, and the
undersigned must continue to bear the economic risk of his or her
investment in the Preferred Stock for an indefinite period of time.
(k) The Preferred Stock will not be resold or otherwise disposed of,
unless the Preferred Stock is subsequently registered under the
Securities Act and appropriate state securities laws or unless the
Company receives an opinion of counsel satisfactory to it that an
exemption from registration is available.
(l) I am aware of the following:
(1) There are substantial restrictions on the transferability to
the Preferred Stock, the Preferred Stock will not be registered
under the Securities Act or the securities laws of any state
and any such registration is unlikely. In addition, investors
in the Company have no right to require that the Preferred
Stock be registered under the Securities Act or the securities
laws of any state.
(2) No federal or state agency has made any finding or
determination as to the fairness for public investment, nor any
recommendation nor endorsement, of the Preferred Stock.
(m) The representation, warranties, agreements and acknowledgments
contained herein and the information set forth in the Suitability
Questionnaire executed by me, are true and correct, and may be
relied on by the Company in determining whether to accept or reject
this subscription. The undersigned will promptly notify the Company
if the above-mentioned representations or information become no
longer accurate. In addition, all such representations, warranties,
agreements and acknowledgments shall survive the purchase of the
Preferred Stock.
(n) I have not distributed the Private Placement Memorandum to anyone
other than my Purchaser Representative and no persons other than
myself and my Purchaser Representative have used this Private
Placement Memorandum or any copies thereof.
(o) I hereby agree to indemnify the Company and hold the Company
harmless from and against any and all liability, damage, cost or
expense incurred on account of or arising out of:
(1) Any inaccuracy in my declaration, representations and
warranties herein above set forth;
(2) My disposition of any of the Shares contrary to my foregoing
declarations, representations and warranties.
(p) I understand that all investment funds accepted by the Company
pursuant to the sale of Preferred Stock through this offering shall
be made immediately available to the Company for use as described
in the Private Placement Memorandum.
4. Title.
-----
The undersigned desires to take title to this interest as follows
(check one):
X
---- (a) Separate Property;
____ (b) Joint Tenancy;
____ (c) Community Property;
____ (d) Tenancy in Common;
____ (e) Other: _________________________________ (please describe)
-3-
The exact spelling of the name(s) under the title to the Shares shall
be taken is (please print):
Xxxxxx Laboratories
---------------------------------------------------------------------
---------------------------------------------------------------------
5. No Transferability.
------------------
The undersigned agrees not to transfer or assign the obligations or
duties contained in this Subscription Agreement, or any of his or her
interest herein.
6. Regulation D.
------------
Notwithstanding anything contained herein to the contrary, every person
or entity who, in addition to or in lieu of the undersigned, is deemed
to be a purchaser pursuant to Regulation D promulgated under the
Securities Act makes and joins in making all of the covenants,
representations and warranties made by the undersigned.
7. Acceptance.
----------
Execution and delivery of this Subscription Agreement and tender of the
payment referenced in Paragraph 1 above shall constitute an irrevocable
offer to purchase the Preferred Stock indicated, which offer may be
accepted or rejected by the Company. Acceptance shall be only by
written acceptance executed by a duly authorized officer of the
Company.
TOTAL SHARES 500,00 OF PREFERRED STOCK SUBSCRIBED (at $10.00 per share):
DOLLAR AMOUNT: $5 Million
MAKE ALL CHECKS PAYABLE TO: "RETRACTABLE TECHNOLOGIES ESCROW ACCOUNT"
IN WITNESS WHEREOF, the undersigned has executed this Subscription Agreement
this 4th day of May, 2000.
May, 2000
-----------------------------------------
Xxxxxx Laboratories
by: Xxxxxxx X. Xxxxxxxx
-----------------------------------------
(Signature of Investor)
its Senior Vice President, Hospital Products FEIN 00-0000000
_________________________________________
Please print name (Investor)
_________________________________________
(Additional signature if joint ownership)
_________________________________________
Please print joint owner's name (if any)
000 Xxxxxx Xxxx Xxxx
-----------------------------------------
Street
-4-
Xxxxxx Park Illinois 40061 3537
-----------------------------------------------------------
City State Zip
Telephone No. (000) 000-0000
Please indicate if investor is a non-resident alien: Yes_____ No X
---
ACCEPTED BY:
RETRACTABLE TECHNOLOGIES, INC.
By: [SIGNATURE ILLEGIBLE]
----------------------------------
Date: 5/4/2000
--------------------------------
-5-
SUITABILITY QUESTIONNAIRE
Xx. Xxxxxxx X. Xxxxx
Chief Financial Officer and Treasurer
Retractable Technologies, Inc.
00 Xxxx Xxxx, X. X. Xxx 0
Xxxxxx Xxx, Xxxxx 00000-0000
Dear Xx. Xxxxx:
The following information is furnished to you in regard to an offer to purchase
shares of Series IV Class B Convertible Preferred Stock (the "Shares") of
Retractable Technologies, Inc., a Texas corporation (the "Company"), pursuant to
Sections 3(b) and 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"), and Regulation D promulgated thereunder ("Regulation D") or
Regulation S. I understand that you will rely upon the following information for
purposes of such determination, and that the Shares will not be registered under
the Securities Act in reliance upon the exemption from registration provided by
Sections 3(b) and 4(2) of the Securities Act and Regulation D and Regulation S.
I AM FURNISHING YOU THE FOLLOWING INFORMATION WITH THE UNDERSTANDING THAT ALL
INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED CONFIDENTIALLY. I
agree that you may present this questionnaire to such parties as you deem
appropriate if called upon to establish that the proposed offer and sale of the
Shares is exempt from registration under the Securities Act or meets the
requirements of applicable state securities laws.
I understand that this questionnaire is merely a request for information. I
understand that this questionnaire is not an offer to sell the Shares and that
no sale will occur prior to the acceptance of my subscription by the Company.
PLEASE ANSWER ALL QUESTIONS
If the appropriate answer is "None" or "Not applicable," please so state. Please
print or type your answer to all questions. Attach additional sheets if
necessary to complete your answers to any item.
-6-
N/A
SECTION A
GENERAL INFORMATION
(All Investors must Complete this Section)
COMPLETE ITEMS 4 AND 5 FOR TENANTS IN COMMON AND JOINT TENANTS ONLY IF THE
--------------------------------------------------------------------------
INFORMATION DIFFERS FROM THAT GIVEN ABOVE.
------------------------------------------
-7-
11 a. Federal income tax filing status for last year:
_____ Single _____ Married Filing Jointly
X Corporation _____ Married Filing Separately
-----
b. Expected Federal income tax status for current year:
_____ Single _____ Married Filing Jointly
X Corporation _____ Married Filing Separately
-----
c. Not applicable because I am not a U.S. Citizen _____
-8-
SECTION B
DETERMINATION OF ACCREDITED INVESTOR STATUS
This section is used to determine if the investor will qualify as an "accredited
investor" as that term is defined in Rule 501 of Regulation D promulgated under
the Securities Act. Item 1 of this Section B is for individuals who are
accredited investors, Item 2 is for partnerships, corporations or other entities
other than trusts who are accredited investors, and Item 3 is for trusts who are
accredited investors. Any investor who claims accredited status pursuant to
Items 1, 2 or 3 must also initial Item 4.
------
ITEM 1. ACCREDITED INDIVIDUAL INVESTOR MUST INITIAL ONE OR MORE OF THE
--------------------------------------------------------------
FOLLOWING STATEMENTS:
--------------------
N/A (a) I certify that I am an accredited investor because (1) I had
--- individual income (exclusive of any income attributable to my
spouse) of more than $200,000 in each of the most recent two
years, and I reasonably expect to have an individual income in
excess of $200,000 for the current year, or (2) I had joint
income (including income attributable to my spouse) of more
than $300,000 in each of the most recent two years, and I
reasonably expect to have joint income in excess of $300,000
for the current year.
N/A (b) I certify that I am an accredited investor because I have an
--- individual net worth, or my spouse and I have a combined
individual net worth, in excess of $1,000,000. For purposes of
this section, "individual net worth" means the excess of the
total assets at fair market value, including home and personal
property, over total liabilities.
N/A (c) I certify that I am an accredited investor because I am a
--- director or executive officer of the Company.
ITEM 2. ACCREDITED PARTNERSHIPS, CORPORATIONS OR OTHER ENTITIES WHICH
--------------------------------------------------------------
ARE NOT TRUSTS MUST INITIAL AT LEAST ONE OF THE FOLLOWING
---------------------------------------------------------
STATEMENTS:
----------
X (a) The investor hereby certifies that it has (1) total assets in
--- excess of $5,000,000, and (2) was not formed for the specific
purchase of investing in the Company.
N/A (b) The investor hereby certifies that all of the equity owners of
--- the investor are accredited individual investors as defined in
Item 1, above. All equity owners must complete page 11 if this
----
Item 2(b) is being utilized to claim accredited investor
status.
N/A (c) The investor hereby certifies that it is either (1) a bank as
--- defined in Section 3(a)(2) of the Securities Act, or a savings
and loan association or other institution as defined in
Section 3(a)(5)(A) of the Securities Act whether acting in its
individual or fiduciary capacity; (2) a broker or dealer
registered pursuant to Section 15 of the Securities Exchange
Act of 1934; (3) an insurance company as defined in Section
2(13) of the Securities Act; (4) an investment company
registered under the Investment Company Act of 1940, or a
business development company as defined in Section 2(a)(48) of
that Act; (5) a Small Business Investment Company licensed by
the U. S. Small Business Administration under Section 301(c)
or (d) of the Small Business Investment Act of 1958; or (6) an
employee benefit plan within the meaning of Title I of the
Employee Retirement Income Security Act of 1974, if the
investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such Act, which is either a bank, savings and
loan association, insurance company or registered investment
advisor, or if the employee benefit plan has total assets in
excess of $5,000,000 or, in a self-directed plan, with
investment decisions made solely by persons who are accredited
investors.
N/A (d) The undersigned hereby certifies that it is a private business
--- development company as defined in Section 202(a)(22) of the
Investment Advisor Act of 1940.
-9-
ITEM 3. ACCREDITED TRUSTS MUST INITIAL AT LEAST ONE OF THE FOLLOWING
------------------------------------------------------------
STATEMENTS:
----------
N/A (a) The investor hereby certifies that (1) it has total assets in
--- excess of $5,000,000, (2) the investor was not formed for the
specific purpose of investing in the Company, and (3) this
purchase has been directed by a person acting on behalf of the
investor who, ether alone or with his or her purchaser
representative(s) has such knowledge and experience in
financial and business matters that he or she is capable of
evaluating the merits and risks of this investment.
N/A (b) The investor hereby certifies that it is a revocable trust
--- that may be amended or revoked at any time by the grantors,
and all the grantors are accredited individual investors as
defined in Item 1, above. If this Item 3(b) is being utilized
to claim accredited investor status, page 11 must be completed
by each of the grantors of the trust.
ITEM 4. ALL ACCREDITED INVESTORS MUST INITIAL THE FOLLOWING LINE:
--------------------------------------------------------
X (a) I understand that the representations contained in this
--- Section B are made for the purpose of qualifying me as an
accredited investor as that term is defined by the Securities
and Exchange Commission for the purpose of inducing a sale of
securities to me. I hereby represent that the statement or
statements initialed above are true and correct in all
respects. I understand that a false representation may
constitute a violation of law, and that any person who suffers
damage as a result of a false representation may have a claim
against me for damages.
-10-
-11-
N/A
SECTION C
AGENT ACCOUNT INFORMATION
-12-
SECTION D
SIGNATURE PAGE TO BE COMPLETED BY ALL INVESTORS
I represent that:
(a) I am aware that any Preferred Stock purchased by me will be
"restricted securities," thereby requiring my investment to be
maintained for an indefinite period of time and that the Company is
under no obligation to register the Preferred Stock for resale under
the federal or state securities laws.
(b) I acknowledge that all information that I have provided anywhere in
this Suitability Questionnaire concerning me and my financial
position is correct and complete as of the date set forth below, and
if there should be any material change in such information prior to
the acceptance of any subscription, I will immediately provide such
information to the Company.
(c) I purchased the Preferred Stock:
(i) directly from the Company; or
IN WITNESS WHEREOF, the undersigned has executed this questionnaire this 4/th/
-------
day of May in the City of Xxxxxx Park and State or Country of Illinois.
AIS:
__________________________________________________
Signature
__________________________________________________
Print or Type Name
__________________________________________________
Additional Investor Signature (i.e., joint tenant)
ENTITIES: Xxxxxx Laboratories
--------------------------------------------------
Print or Type Name of Entity
By: Xxxxxxx X. Xxxxxxxx
-----------------------------------------------
Signature
Xxxxxxx X. Xxxxxxxx
Senior Vice President, Hospital Products
--------------------------------------------------
Title and Name of Person Making Investment
Decision
-13-
CREDIT AGREEMENT
This Credit Agreement (this "Agreement"), is entered into as of May 4,
2000, by and between Xxxxxx Laboratories, an Illinois corporation ("Abbott"), as
lender, and Retractable Technologies, Inc., a Texas corporation (the "Company"),
as borrower.
W I T N E S S E T H:
WHEREAS, the Company and Abbott have agreed to enter into this Agreement,
which provides that Abbott, as lender, shall loan to the Company, as borrower at
the Company's request, an amount not to exceed an aggregate of Five Million
Dollars ($5,000,000).
NOW, THEREFORE, the Company and Abbott hereby agree as follows:
1. Interpretation of Agreement; Definitions.
----------------------------------------
1.1 Definitions. Unless the context otherwise requires, whenever
-----------
used in this Agreement, the following terms shall have the
following definitions and those definitions shall be equally
applicable to both the singular and plural forms of any of the
terms defined in this Agreement:
(a) "Acceleration" means that the Loan (as defined in Section
2.1): (i) shall not have been paid at the Maturity Date,
or (ii) shall have become due and payable prior to its
stated maturity pursuant to Section 7.2.
(b) "Affiliate" means any Person (other than a Subsidiary):
(i) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under
common control with, the Company, (ii) which beneficially
owns or holds ten percent (10 %) or more of any class of
the Voting Stock of the Company, or (iii) ten percent
(10%) or more of the Voting Stock or in the case of a
Person which is not a corporation, ten percent (10 %) or
more of the equity interest of which is beneficially owned
or held by the Company or a Subsidiary. The term "control"
means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and
policies of a Person, whether through the ownership of
Voting Stock, by contract or otherwise.
(c) "Agreement" means this Credit Agreement.
(d) "Board of Directors" means either the board of directors
of the Company or any duly authorized committee thereof.
(e) "Business Day" means any day other than a Saturday,
Sunday, legal holiday or other day on which commercial
banks located in Dallas, Texas or Chicago, Illinois are
authorized or required by law to be closed.
(f) "Collateral" shall have the meaning set forth in the
Security Agreement.
(g) "Commission" means the Securities and Exchange Commission,
or successor regulatory entity.
(h) "Common Stock" means the Common Stock, no par value, of
the Company.
(i) "Company" means Retractable Technologies, Inc., a Texas
corporation, and any Person who in accordance with the
terms of this Agreement succeeds to all, or substantially
all, of the assets or business of Retractable
Technologies, Inc.
(j) "Disbursement Date" means any date on or prior to June 30,
2005, on which a disbursement of the Loan is made. Each
Disbursement Date shall be on the date designated in a
written notice from the Company to Abbott; provided,
however, that (i) Abbott shall not be required to make any
disbursement if the conditions hereto are not satisfied,
and (ii) Abbott shall in no event be required to make any
disbursement after June 30, 2005.
(k) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, and any successor statute of similar
import, together with the regulations thereunder, in each
case as in effect from time to time. References to
sections of ERISA shall be construed to also refer to any
successor sections.
(l) "Event of Default" shall have the meaning set forth in
Section 7.
(m) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(n) "GAAP" means generally accepted accounting principles at
the time in the United States.
(o) "Holder" means the registered holder of the Note,
initially Abbott.
-2-
(p) "Interest Payment Date" means the last day of each March,
June, September and December commencing with the later of
(i) June 30, 2001 or (ii) the first such date after the
initial Disbursement Date.
(q) "Lien" means any interest in property securing an
obligation owed to, or a claim by, a Person other than the
owner of the property, whether such interest is based on
the common law, statute or contract, and including but not
limited to the security interest or lien arising from a
mortgage, encumbrance, pledge, conditional sale or trust
receipt or a lease, consignment or bailment for security
purposes. The term "Lien" shall include reservations,
exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases, and other
title exceptions and encumbrances (including, with respect
to stock, stockholder agreements, voting trust agreements,
buy-back agreements and all similar arrangements)
affecting property. For the purposes of this Agreement,
the Company shall be deemed to be the owner of any
property which it has acquired or holds subject to a
conditional sale agreement, capitalized lease or other
arrangement pursuant to which title to the property has
been retained by or vested in some other Person for
security purposes and such retention or vesting shall
constitute a Lien.
(r) "Maturity" means any date on which the Loan or any portion
thereof becomes due and payable, whether as stated or by
virtue of mandatory prepayment, by acceleration or
otherwise.
(s) "Maturity Date" means June 30, 2005.
(t) "Nasdaq" and "Nasdaq National Market" shall have the
meanings specified in paragraph 9.5(f).
(u) "National Marketing and Distribution Agreement" means the
Marketing and Distribution Agreement governing
collaboration between the Company and Abbott on the
marketing and distribution of needles using automated
retraction technology developed by the Company of even
date herewith.
(v) "Note" means the note described in Section 2.6.
(w) "Obligations" means all loans, advances, debts,
liabilities, obligations, covenants and duties owing to
Abbott by the Company, of any kind or nature, present or
future, whether or not evidenced by any note, guaranty or
other instrument, arising under this Agreement.
-3-
(x) "Person" means an individual, partnership, corporation,
limited liability company, trust or unincorporated
organization, and a government or agency or political
subdivision thereof.
(y) "Prime Rate" means that rate of interest per year
announced from time to time by The Northern Trust Company
called its prime rate, which may not at any time be the
lowest rate of interest charged by The Northern Trust
Company. Changes in the rate of interest resulting from a
change in the Prime Rate shall take effect on the date set
forth in each announcement.
(z) "Preferred Stock" means stock of the Company of any class
or series ranking prior to any other class or series of
stock of the Company with respect to the payment of
dividends or the distribution of assets upon the
liquidation, dissolution or winding up of the Company.
(aa) "Registration Rights Agreement" means the Registration
Rights Agreement by and between Abbott and the Company of
even date herewith a copy of which is attached hereto as
Exhibit A.
(bb) "Securities Act" means the Securities Act of 1933, as
amended.
(cc) "Security Agreement" means a security agreement, in form
satisfactory to Abbott, dated the date hereof of the
Company, as amended, modified or restated from time to
time.
(dd) "Stated Maturity," when used with respect to the Note or
any installment of interest hereon, means the date
specified in the Note as the fixed date on which the
principal of the Note or any installment of interest is
due and payable.
(ee) "Subsidiary" means a corporation, partnership or other
entity at least a majority of whose Voting Stock is owned
directly or indirectly by the Company.
(ff) "Voting Stock" means securities of any class or classes,
the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the
corporate directors (or Persons performing similar
functions).
1.2 Accounting Principles. Where the character or amount of any
---------------------
asset or liability or item of income or expense is required to
be determined or any consolidation or other accounting
computation is required to be made for the purposes of this
Agreement, the same shall be done in accordance with GAAP, to
the extent
-4-
applicable, except where such principles are inconsistent with
the requirements of this Agreement. Each accounting term not
defined herein and each accounting term partly defined herein
to the extent not defined shall have the meaning given to it
under generally accepted accounting principles.
1.3 Directly or Indirectly. Where any provision in this Agreement
----------------------
refers to action to be taken by any Person, or which such
Person is prohibited from taking, such provision shall be
applicable whether the action in question is taken directly or
indirectly by such Person.
1.4 Legal Holidays. In any case where any Interest Payment Date or
--------------
Stated Maturity of the Note or the last date on which Abbott
has the right to convert the Note is not a Business Day, then
(notwithstanding any other provision of this Agreement or of
the Note) payment of interest or principal or conversion of the
Note, as the case may be, need not be made on such date, but
may be made on the next succeeding Business Day with the same
force and effect as if made on the Interest Payment Date, or at
the Stated Maturity, or on such last day for conversion.
2. Loan.
----
2.1 Procedure for Loan. Subject to all of the terms and conditions
------------------
of this Agreement, Abbott agrees to make periodic loans (the
"Loan") prior to June 30, 2005, to the Company in an aggregate
amount of up to Five Million Dollars ($5,000,000) to be
governed by the terms and conditions of, and repaid in
accordance with, this Agreement. The Company shall provide
Abbott with fifteen (15) Business Days written notice of a
requested disbursement. Disbursement amounts shall be in
multiples of One Million Dollars ($1,000,000). Subject to the
satisfaction of the terms and conditions set forth in this
Agreement, Abbott shall disburse up to Five Million Dollars
($5,000,000) to the Company at the Company's request. Amounts
repaid may not be reborrowed.
2.2 Interest.
--------
(a) Interest. The Loan shall bear interest from the
--------
Disbursement Date on the unpaid principal amount thereof
until the earlier of an Event of Default or the date upon
which such amount shall become due and payable (whether
upon Maturity, by Acceleration or otherwise) at a rate per
annum equal to one percent (1 %) plus the Prime Rate.
(b) Accrual And Computation of Interest. Interest shall accrue
-----------------------------------
daily and shall be computed on the basis of a year of 360
days for the actual number of days elapsed.
-5-
2.3 Maximum Interest Rate. Nothing in this Agreement shall require
---------------------
the Company to pay interest at a rate exceeding the maximum
amount permitted by applicable law to be charged by Abbott.
2.4 Repayment.
---------
(a) Interest Payments. On each Interest Payment Date until the
-----------------
Maturity Date, and on the Maturity Date, the Company shall
pay Abbott all interest then accrued.
(b) Loan Payment. The Company shall repay the entire
------------
outstanding principal amount of the Loan in full on the
Maturity Date.
(c) Optional Prepayment. The Company may at any time prepay
-------------------
the entire outstanding principal amount of the Loan or any
portion thereof without penalty.
2.5 Post-maturity Interest. After the earlier of an Event of
----------------------
Default or Maturity (whether by Acceleration or otherwise) of
the Loan, the Loan shall bear interest, payable on demand, at a
rate per annum equal to the greater of (i) ten percent (10%) or
(ii) three percent (3%) plus the Prime Rate, subject to Section
2.3.
2.6 Note. The Loan made by Abbott pursuant to this Agreement shall
----
be evidenced by the note (the "Note") of the Company in the
form of Annex A hereto, payable to the order of Abbott on the
Maturity Date in the principal amount of up to Five Million
Dollars ($5,000,000) in accordance with Section 2.1. The
Company hereby authorizes Abbott to indicate upon a schedule
attached to the Note all disbursements made by Abbott pursuant
to this Agreement and all payments of principal and interest
thereon. Absent manifest error, such notations shall be
presumptive evidence as to the aggregate unpaid principal
amount of the Loan, and interest due thereon, but the failure
by Abbott to make such notations or the inaccuracy or
incompleteness of any such notations shall not affect the
obligations of the Company hereunder or under the Note.
2.7 Payments by the Company. All payments (including prepayments)
-----------------------
to be made by the Company shall be made without set-off or
counterclaim and shall be made to Abbott by wire transfer in
United States dollars and in immediately available funds to the
following Abbott account: Citibank, N.A., New York, ABA
#000000000 for credit to Xxxxxx Laboratories Account 0000-1329
(or to such other account as may be designated by written
notice to the Company), no later than 12:00 noon, Central time,
of the business day on which payment is
-6-
due. Any payment which is received in Xxxxxx'x account later
than 12:00 noon, Central time, shall be deemed to have been
received on the immediately succeeding Business Day. Whenever
any payment hereunder shall be stated to be due on a day other
than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in
such case be included in the computation of interest.
3. Representations and Warranties of The Company and Its Subsidiaries.
------------------------------------------------------------------
Except as otherwise set forth in the Disclosure Schedule attached to
this Agreement as Exhibit B (the "Disclosure Schedule") or in any
document expressly referenced in the Disclosure Schedule, the Company
represents and warrants to Abbott as of the date set forth above as
follows:
3.1 Subsidiaries of the Company. The Company has no Subsidiaries.
---------------------------
3.2 Corporate Organization And Authority. The Company:
------------------------------------
(a) is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of
incorporation;
(b) has all requisite power and authority and all necessary
licenses and permits to own and operate its properties and
to carry on its business as now conducted and as presently
proposed to be conducted; and
(c) is duly licensed or qualified and is in good standing as a
foreign corporation in each jurisdiction wherein the nature
of the business transacted by it or the nature of the
property owned or leased by it makes such licensing or
qualification necessary.
3.3 Capitalization.
--------------
(a) The Company's authorized capital stock consists of:
(1) one hundred million (100,000,000) shares of Common
Stock, no par value, of which fourteen million
(14,000,000) shares are issued and outstanding as of
the date hereof;
(2) five million (5,000,000) shares of $1 par value Class A
Preferred Stock, of which five million (5,000,000)
shares are issued and outstanding as of the date
hereof, and which are convertible into five million
(5,000,000) shares of Common Stock; and
(3) five million (5,000,000) shares of $1 par value Class B
Preferred Stock, par value, of which:
-7-
(A) one million (1,000,000) shares have been designated Series I
Class B Preferred Stock, of which one million (1,000,000)
shares are issued and outstanding as of the date hereof, and
which are convertible into one million (1,000,000) shares of
Common Stock,
(B) one million (1,000,000) shares have been designated Series
II Class B Preferred Stock, of which one million (1,000,000)
shares are issued and outstanding as of the date hereof, and
which are convertible into one million (1,000,000) shares of
Common Stock,
(C) one million one hundred sixty thousand, two hundred
(1,160,200) shares have been designated Series III Class B
Preferred Stock, of which one million one hundred sixty
thousand, two hundred (1,160,200) shares are issued and
outstanding as of the date hereof, and which are convertible
into one million one hundred sixty thousand, two hundred
(1,160,200) shares of Common Stock, and
(D) one million three hundred thousand (1,300,000) shares have
been designated Series IV Class B Preferred Stock, of which
one hundred sixty three thousand, seven hundred (163,700)
shares are issued and outstanding as of the date hereof, and
which are convertible into one million one hundred sixty
three thousand, seven hundred (163,700) shares of Common
Stock.
(b) All of the issued and outstanding shares of Common Stock, Series
A Preferred Stock, and Series B Preferred Stock have been duly
authorized and validly issued and are fully paid and
nonassessable. As of the date hereof, the Company had outstanding
options to purchase an aggregate of one million four hundred
thousand (1,400,000) shares of Common Stock.
(c) Except as otherwise set forth in Exhibit B Disclosure Schedule,
there are no preemptive or other outstanding rights, options,
warrants, voting agreements, conversion rights, or agreements for
the purchase or acquisition from the Company of any shares of its
capital stock or other securities of the Company.
3.4 Equity Investments. The Company does not own any equity stock or
------------------
interest, directly or indirectly, in any corporation, partnership,
joint venture, firm or other entity.
-8-
3.5 Authority.
---------
(a) The Company has all requisite corporate power and authority to
enter into this Agreement and the Security Agreement and will
have all requisite corporate power and authority to issue the
Note and, subject to satisfaction of the conditions set forth
herein and therein, to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement
and the Security Agreement and the consummation of the
transactions contemplated hereby and thereby have been, and the
execution and delivery of the Note and the consummation of the
transactions contemplated thereby will be, duly authorized by all
necessary corporate action on the part of the Company. This
Agreement and the Security Agreement have been, and the Note will
be, duly executed and delivered by the Company, and constitute
the valid and binding obligation of the Company, enforceable in
accordance with their respective terms, subject to the effect of
applicable bankruptcy, insolvency, reorganization, or other
similar laws affecting the rights of creditors and the effect or
availability of rules of law governing specific performance,
injunctive relief, or other equitable remedies. Provided the
conditions set forth in Section 6 are satisfied, the execution
and delivery of this Agreement, the Security Agreement, and the
Note do not or will not, and the consummation of the transactions
contemplated hereby or thereby will not, conflict with, or result
in any violation of or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination,
cancellation, or acceleration of any obligation under (i) any
provision of the Articles of Incorporation or Bylaws of the
Company, or (ii) any material agreement or instrument, permit,
franchise, license, judgment or order, applicable to the Company
or its properties or assets.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or
commission or other governmental authority (a "Governmental
Entity") or other Person or entity, is required by, or with
respect to, the Company in connection with the execution and
delivery of this Agreement or the Security Agreement or the
consummation by the Company of the transactions contemplated
hereby or thereby, except for such consents, approvals, orders,
authorizations, registrations, declarations, and filings as may
be required under applicable federal and state securities laws
and the laws of any foreign country.
3.6 Financial Statements. The Company has furnished to Xxxxxx its audited
--------------------
statement of operations, statement of stockholders' equity and
statement of
-9-
cash flows for the fiscal year ended December 31, 1998 and the
Company's audited balance sheet at December 31, 1998; and the
unaudited statement of operations and statement of cash flows for the
nine (9) months ended September 30, 1999 and the unaudited balance
sheet at December 31, 1999. The balance sheet at December 31, 1999 is
hereinafter referred to as the "Company Balance Sheet," and all such
financial statements are hereinafter referred to collectively as the
"Company Financial Statements." The Company Financial Statements have
been and will be prepared in accordance with GAAP applied on a
consistent basis, except for any change due to the adoption of an
accounting principle established by the FASB, AICPA, SEC or any other
accounting standard setting board, during the periods involved, and
fairly present and will present the consolidated financial position of
the Company and the results of its operations as of the date and for
the periods indicated thereon. At the date of the Company Balance
Sheet (the "Company Balance Sheet Date"), the Company had no
liabilities or obligations, secured or unsecured (whether accrued,
absolute, contingent or otherwise) not reflected on the Company
Balance Sheet or the accompanying notes thereto.
3.7 Business Changes. As of the date of execution, since December 31,
----------------
1999, except as otherwise contemplated by this Agreement or as
disclosed in Exhibit B Disclosure Schedule, the Company has conducted
its business only in the ordinary and usual course and, without
limiting the generality of the foregoing:
(a) There have been no changes in the condition (financial or
otherwise), business, net worth, assets, properties, employees,
operations, obligations or liabilities of the Company which, in
the aggregate, have had or may be reasonably expected to have a
materially adverse effect on the condition, business, net worth,
assets, prospects, properties or operations of the Company.
(b) The Company has not issued, or authorized for issuance, or
entered into any commitment to issue, any equity security, bond,
note, or other security of the Company.
(c) The Company has not incurred debt for borrowed money, nor
incurred any obligation or liability except in the ordinary and
usual course of business and in any event not in excess of Fifty
Thousand Dollars ($50,000) for any single occurrence.
(d) The Company has not paid any obligation or liability, or
discharged, settled or satisfied any claim, lien or encumbrance,
except for current liabilities in the ordinary and usual course
of business and in any event
-10-
not in excess of Fifty Thousand Dollars ($50,000) for any single
occurrence.
(e) The Company has not declared or made any dividend, payment, or
other distribution on or with respect to any share of capital
stock of the Company.
(f) The Company has not purchased, redeemed or otherwise acquired or
committed itself to acquire, directly or indirectly, any share or
shares of capital stock of the Company.
(g) The Company has not mortgaged, pledged, or otherwise encumbered
any of its assets or properties.
(h) The Company has not disposed of, or agreed to dispose of, by
sale, lease, license or otherwise, any asset or property,
tangible or intangible, except, in the case of such other assets
and property, in the ordinary and usual course of business, and
in each case for a consideration believed to be at least equal to
the fair value of such asset or property and in any event not in
excess of Fifty Thousand Dollars ($50,000) for any single item or
One Hundred Thousand Dollars ($100,000) in the aggregate other
than inventory sold or returned in the normal course of business.
(i) The Company has not purchased or agreed to purchase or otherwise
acquire any securities of any corporation, partnership, joint
venture, firm, or other entity; the Company has not made any
expenditure or commitment for the purchase, acquisition,
construction or improvement of a capital asset, except in the
ordinary and usual course of business and in any event not in
excess of Fifty Thousand Dollars ($50,000) for any single item or
One Hundred Thousand Dollars($100,000) in the aggregate.
(j) The Company has not entered into any transaction or contract, or
made any commitment to do the same, except in the ordinary and
usual course of business.
(k) The Company has not sold, assigned, transferred or conveyed, or
committed itself to sell, assign, transfer or convey, any
Proprietary Rights (as defined in Section 3.14).
(l) The Company has not adopted or amended any bonus, incentive,
profit-sharing, stock option, stock purchase, pension,
retirement, deferred-compensation, severance, life insurance,
medical or other benefit plan, agreement, trust, fund or
arrangement for the benefit of
-11-
employees of any kind whatsoever, nor entered into or amended
any agreement relating to employment, services as an
independent contractor or consultant, or severance or
termination pay, nor agreed to do any of the foregoing.
(m) The Company has not effected or agreed to effect any change in
its directors, officers or key employees.
(n) The Company has not effected or committed itself to effect any
amendment or modification in its Articles of Incorporation or
Bylaws, except as contemplated by this Agreement.
(o) The Company has not modified its accounting principles in any
material respect, except for those changes required by the
adoption of an accounting principle promulgated by the FASB,
the AICPA, the Securities and Exchange Commission, or any other
accounting standards setting bodies.
3.8 Indebtedness. Exhibit B Disclosure Schedule, correctly describes all
------------
debt of the Company in excess of Two Hundred Fifty Thousand
Dollars($250,000) outstanding on the date of this Agreement.
3.9 Litigation. There is no claim, dispute, action, proceeding, notice,
----------
order, suit, appeal or investigation, at law or in equity, pending
against the Company, or involving any of its assets or properties,
before any court, agency, authority, arbitration panel or other
tribunal (other than those, if any, with respect to which service of
process or similar notice has not yet been made on the Company), and
none have been threatened. The Company is aware of no facts which,
if known to stockholders, customers, governmental authorities or
other Persons, would result in any such claim, dispute, action,
proceeding, suit or appeal or investigation which would have a
material adverse effect on the condition (financial or otherwise),
business, net worth, assets, prospects, properties or operations of
the Company. The Company is not subject to any order, writ,
injunction or decree of any court, agency, authority, arbitration
panel or other tribunal, nor is it in default with respect to any
notice, order, writ, injunction or decree.
3.10 Compliance With Law. All material licenses, franchises, permits,
-------------------
clearances, consents, certificates and other evidences of authority
of the Company which are necessary to the conduct of the Company's
business ("Permits") are in full force and effect and the Company is
not in violation of any Permit in any material respect. Except for
possible exceptions, the curing or non-curing of which would not
have a material adverse effect on the condition (financial or
otherwise), business, net worth, assets, prospects, properties or
operations of
-12-
the Company, the business of the Company has been conducted in
accordance with all applicable laws, regulations, orders and other
requirements of governmental authorities.
3.11 Title to Properties. The Company has good and marketable title in
-------------------
fee simple (or its equivalent under applicable law) to all material
parcels of real property and has good title to all the other
material items of property it purports to own, except as sold or
otherwise disposed of in the ordinary course of business. None of
the Collateral is subject to any Lien, except Liens for the benefit
of Xxxxxx.
3.12 Licenses, Etc. The Company owns or possesses all the material trade
-------------
names, service marks, licenses, governmental approvals, and rights
with respect to the foregoing necessary for the present conduct of
its business, without any known conflict with the rights of others.
3.13 No Default.
----------
(a) Each of the Company's material agreements or contracts is a
legal, binding and enforceable obligation by or against the
Company, subject to the effect of applicable bankruptcy,
insolvency, reorganization, moratorium or other similar federal
or state laws affecting the rights of creditors and the effect
or availability of rules of law governing specific performance,
injunctive relief or other equitable remedies (regardless of
whether any such remedy is considered in a proceeding at law or
in equity). To the Company's knowledge, no party with whom the
Company has an agreement or contract is in default thereunder
or has breached any term or provision thereof which is material
to the conduct of the Company's business.
(b) The Company has performed, or is now performing, the
obligations of, and the Company is not in material default (or
would by the lapse of time and/or the giving of notice be in
material default) in respect of, any contract, agreement or
commitment binding upon it or its assets or properties and
material to the conduct of its business. No third party has
raised any claim, dispute, or controversy with respect to any
of the contracts of the Company, whether fully performed or
currently being performed, nor has the Company received written
notice or warning of alleged nonperformance, delay in delivery
or other noncompliance by the Company with respect to its
obligations under any of those contracts, nor are there any
facts which exist indicating that any of those contracts may be
totally or partially terminated or suspended by the other
parties thereto.
-13-
3.14 Proprietary Rights.
------------------
(a) The Company has provided Xxxxxx with a complete list in writing
of all patents and applications for patents, trademarks, trade
names, service marks, and copyrights, and applications therefor,
owned or used by the Company or in which it has any rights or
licenses, except for software used by the Company and generally
available on the commercial market. The Company has disclosed to
Xxxxxx all material agreements of the Company with each officer,
employee or consultant of the Company providing the Company with
title and ownership to patents, patent applications, trade
secrets and inventions developed or used by the Company in its
business. All of such agreements so described are valid,
enforceable and legally binding, subject to the effect of
applicable bankruptcy, insolvency, reorganization or other
similar laws affecting the rights of creditors or availability
of rules of law governing specific performance, injunctive
relief or other equitable remedies (regardless of whether any
such remedy is considered in a proceeding at law or in equity).
(b) The Company owns or possesses licenses or other rights to use
all patents, patent applications, trademarks, trademark
applications, trade secrets, service marks, trade names,
copyrights, inventions, drawings, designs, customer lists,
proprietary know-how or information, or other rights with
respect thereto (collectively referred to as "Proprietary
Rights"), used in the business of the Company, and the same are
sufficient to conduct the Company's business as it has been and
is now being conducted.
(c) The operations of the Company do not conflict with or infringe,
and no one has asserted to the Company that such operations
conflict with or infringe, on any Proprietary Rights, owned,
possessed or used by any third party. There are no claims,
disputes, actions, proceedings, suits, or appeals pending
against the Company with respect to any Proprietary Rights
(other than those, if any, with respect to which service of
process or similar notice may not yet have been made on the
Company), and, none has been threatened against the Company. To
the knowledge of the Company, there are no facts or alleged
facts which would reasonably serve as a basis for any claim that
the Company does not have the right to use, free of any rights
or claims of others, all Proprietary Rights in the development,
manufacture, use, sale, or other disposition of any or all
products or services presently being used, furnished, or sold in
the conduct of the business of the Company as it has been and is
now being conducted.
-14-
(d) To the Company's knowledge, no employee of the Company is in
violation of any term of any employment contract, proprietary
information and inventions agreement, non-competition agreement,
or any other contract or agreement relating to the relationship
of any such employee with the Company or any previous employer.
3.15 Taxes. All tax returns required to be filed by the Company in any
-----
jurisdiction have, in fact, been filed, and all taxes, assessments,
fees and other governmental charges upon the Company or upon any of
its properties, income or franchises, which are shown to be due and
payable in such returns have been paid. For all taxable years ending
on or before December 31, 1999, the federal income tax liability of
the Company has been satisfied. The Company does not know of any
proposed additional tax assessment against it for which adequate
reserves have not been made on its balance sheet, and no material
controversy in respect of additional federal or state income taxes
due since said date is pending or, to the knowledge of the Company,
threatened. The reserves for taxes on the books of the Company are
adequate in all material respects for all open years, and for its
current fiscal period.
3.16 Use of Proceeds. The net proceeds from the Loans will be used to for
---------------
equipment and manufacturing operations.
3.17 Private Offering. Neither the Company, directly or indirectly, nor
----------------
any agent on its behalf has offered or will offer the Note or any
similar security or has solicited or will solicit an offer to
acquire the Note or any similar security from or has otherwise
approached or negotiated or will approach or negotiate in respect of
the Note or any similar security with any Person other than Xxxxxx.
Neither the Company, directly or indirectly, nor any agent on its
behalf has offered or will offer the Note or any similar security or
has solicited or will solicit an offer to acquire the Note or any
similar security from any Person so as to require registration of
the Note under section 5 of the Securities Act.
3.18 Employee Plans And Relations.
----------------------------
(a) The Company does not have, and is not liable with respect to,
any employee benefit plans, multi-employer plans and employee
benefit plans (as defined in section 3(2) or section 3(3) of
the Employee Retirement Income Security Act of 1974, as
amended).
(b) The Company has no liabilities with respect to any of the
following which would have a reasonable likelihood of having a
material adverse effect on the condition (financial or
otherwise), business, net worth, assets, prospects, properties
or operations of the Company:
-15-
(i) bonus, deferred compensation, incentive, restricted stock,
stock purchase, stock option, stock appreciation right,
phantom stock, debenture, supplemental pension, profit-
sharing, royalty pool, commission or similar plan or
arrangement;
(ii) employment, consulting or termination agreement; or
(iii) other plan, program, agreement, procedure, policy, commitment,
understanding or other arrangement relating to employee
benefits, executive compensation, fringe benefits, severance
pay, terms of employment or services as a director, officer,
employee or independent contractor.
(c) The Company has not been and is not a party to, or subject to,
or affected by, any collective bargaining agreement or other
labor contract. The Company has complied in all respects with
all laws, rules and regulations relating to employment, equal
employment opportunity, nondiscrimination, immigration, wages,
hours, benefits, collective bargaining, the payment of social
security and similar taxes, occupational safety and health and
plant closing.
3.19 Environmental Matters. The Company is, and at all times during the
---------------------
period prior to the date set forth above the Company has been, in
compliance with all applicable local, state and federal statutes,
orders, rules, ordinances and regulations relating to pollution or
protection of the environment ("Environmental Laws"), including,
without limitation, laws relating to zoning and land use and to
emissions, discharges, releases or threatened releases of
pollutants, contaminants, hazardous or toxic materials or wastes
into or on land, ambient air, surface water, ground water, personal
property or structures (including the protection, cleanup, removal,
remediation or damage thereof), or otherwise related to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport, discharge or handling of pollutants,
contaminants or hazardous or toxic substances, materials, or wastes.
The Company has no liability with respect to any Environmental Laws.
3.20 Brokers or Finders. The Company has not dealt with any broker or
------------------
finder in connection with the transactions contemplated by this
Agreement. The Company has not incurred, and shall not incur,
directly or indirectly, any liability for any brokerage or finders'
fees or agents' commissions or any similar charges in connection
with this Agreement or any transaction contemplated hereby.
3.21 Full Disclosure. Neither the Company Financial Statements referred
---------------
to in Section 3.6 nor this Agreement, or any other written statement
furnished by
-16-
the Company to Xxxxxx in connection with the negotiation of the
sale of the Note, contains any untrue statement of a material
fact or omits a material fact necessary to make the statements
contained herein or therein not misleading. There is no fact
peculiar to the Company which the Company has not disclosed to
Xxxxxx in writing which materially adversely affects nor, so far
as the Company can now foresee, will materially adversely affect,
the properties, business, profits, or condition (financial or
otherwise) of the Company.
4. Representations And Warranties of Xxxxxx. Except as contemplated by
----------------------------------------
this Agreement, Xxxxxx represents and warrants to the Company as of
the date set forth above as follows:
4.1 Corporate Organization. Xxxxxx is a corporation duly
----------------------
incorporated, validly existing and in good standing under the
laws of Illinois.
4.2 Authority. Xxxxxx has all requisite corporate power and authority
---------
to enter into this Agreement and the related agreements
contemplated herein, and, subject to satisfaction of the
conditions set forth herein, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the
part of Xxxxxx. This Agreement has been duly executed and
delivered by Xxxxxx and constitutes the valid and binding
obligation of Xxxxxx enforceable in accordance with its terms,
subject to the effect of applicable bankruptcy, insolvency,
reorganization or other similar federal or state laws affecting
the rights of creditors and the effect or availability of rules
of law governing specific performance, injunctive relief or other
equitable remedies.
4.3 Restricted Note. Xxxxxx represents and agrees, and in entering
---------------
into this Agreement the Company understands, that
(a) Xxxxxx is acquiring the Note for Xxxxxx'x own account, and
for the purpose of investment and not with a view to the
distribution thereof, and that Xxxxxx has no present
intention of selling, negotiating, or otherwise disposing of
the Note; it being understood, however, that the disposition
of Xxxxxx'x property shall at all times be and remain within
its control, and
(b) the Note has not been registered under section 5 of the
Securities Act and that Xxxxxx will only re-offer or resell
the Note purchased by Xxxxxx under this Agreement pursuant
to an effective registration statement under the Securities
Act or in accordance with an available exemption from the
requirements of section 5 of the Securities Act.
-17-
4.4 No Conflict. The execution and delivery of this Agreement by
-----------
Xxxxxx and the performance of Xxxxxx'x obligations hereunder,
(a) are not in violation or breach of, and will not conflict
with or constitute a default under, any of the terms of the
Articles of Incorporation or Bylaws of Xxxxxx or any of its
Subsidiaries, or any material contract, agreement or
commitment binding upon Xxxxxx or any of its assets or
properties;
(b) will not result in the creation or imposition of any Lien,
equity or restriction in favor of any third party upon any
of the assets or properties of Xxxxxx; and
(c) will not conflict with or violate any applicable law, rule,
regulation, judgment, order or decree of any government,
governmental instrumentality or court having jurisdiction
over Xxxxxx or any of its assets or properties.
4.5 Brokers or Finders. Xxxxxx has not dealt with any broker or
------------------
finder in connection with the transactions contemplated by this
Agreement. Xxxxxx has not incurred, and shall not incur, directly
or indirectly, any liability for any brokerage or finders' fees
or agents commissions or any similar charges in connection with
this Agreement or any transaction contemplated hereby.
5. Covenants of the Company. From and after the date of this Agreement
------------------------
and continuing so long as any amount remains unpaid on the Note, the
Company covenants and agrees with Xxxxxx that:
5.1 Corporate Existence. The Company shall do or cause to be done all
-------------------
things necessary to preserve and keep in full force and effect
the existence, rights and franchises of the Company.
5.2 Conduct of Business in Normal Course. The Company shall carry on
------------------------------------
its business and activities diligently and in the ordinary course
and shall not make 1or institute any unusual or novel methods of
purchase, sale, lease, management, accounting, or operation that
will vary materially from the methods used by the Company as of
April 28, 2000. The Company shall maintain its business and
activities in a normal and customary manner consistent with prior
practice.
5.3 Maintenance. The Company will maintain, preserve and keep, its
-----------
material properties which are used or useful in the conduct of
its business (whether owned in fee or a leasehold interest) in
good repair and working order and from time to time will make all
necessary repairs, replacements, renewals and
-18-
additions so that at all times the efficiency thereof shall be
maintained in all material respects.
5.4 Preservation of Business And Relationships. The Company will not
------------------------------------------
engage in any business if, as a result, the general nature of the
business, which would then be engaged in by the Company would be
substantially changed from the general nature of the business
engaged in by the Company on the date of this Agreement.
5.5 Merger; Acquisitions: The Company shall not:
--------------------
(a) consolidate with or merge into any other Person,
(b) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets
of, or by any other manner, any business or any Person or
division thereof,
(c) otherwise acquire or agree to acquire any assets which are
material to the Company except in the ordinary course of
business consistent with prior practice; or
(d) acquire any stock or other equity securities of any Person.
5.6 Sale or Lease of Assets; Dispositions. The Company shall not
-------------------------------------
sell, lease, transfer, or otherwise dispose of any of its assets
(other than the sale of inventory in the ordinary course of
business), except in the ordinary course of business consistent
with prior practice.
5.7 Indebtedness. The Company shall not incur any indebtedness for
------------
borrowed money other than customary Senior Indebtedness (as
defined in Section 8.1) in amounts not in excess of the Company's
stockholders' equity (i.e., not to exceed a one to one debt to
equity ratio) in the aggregate at any time outstanding or
guarantee any such indebtedness or issue or sell any debt
securities of the Company or guarantee any debt securities of
others.
5.8 Insurance. The Company shall at all times during the term of this
---------
Agreement maintain product liability insurance covering the
products with minimum annual limits of Five Million Dollars
($5,000,000) per occurrence and Five Million Dollars ($5,000,000)
in the aggregate. The Company shall maintain such insurance for a
minimum of five (5) years after termination of this Agreement.
Within thirty (30) days of the first Disbursement Date, the
Company shall deliver to Xxxxxx a certificate of insurance
evidencing such insurance and stating that the policy will not be
canceled or modified without at least thirty(30) days prior
written notice to Xxxxxx.
-19-
5.9 Taxes, Claims For Labor And Materials, Compliance With Laws. The
-----------------------------------------------------------
Company will promptly pay and discharge, all lawful taxes,
assessments, and governmental charges or levies imposed upon the
Company, or upon or in respect of all or any part of the property
or business of the Company, all trade accounts payable in
accordance with usual and customary business terms, and all
claims for work, labor, or materials, which if unpaid might
become a Lien upon any property of the Company; provided,
however, that the Company shall not be required to pay any such
tax, assessment, charge, levy, account payable or claim if:
(a) the validity, applicability, or amount thereof is being
contested in good faith by appropriate actions or
proceedings which will prevent the forfeiture or sale of any
property of the Company or any material interference with
the use thereof by the Company, and
(b) the Company shall set aside, in accordance with GAAP, on its
books, reserves deemed by it to be adequate with respect
thereto. The Company will promptly comply with all laws,
ordinances, or governmental rules and regulations to which
it is subject including, without limitation, the
Occupational Safety and Health Act of 1970, as amended,
ERISA, and all laws, ordinances, governmental rules and
regulations relating to environmental protection in all
applicable jurisdictions, the violation of which could
materially and adversely affect the properties, business,
profits or condition of the Company.
5.10 Notice of Claims and Litigation. The Company will give prompt
-------------------------------
notice to Xxxxxx of any claim or action at law or in equity, or
before any governmental, administrative or regulatory body or
arbitration panel instituted against the Company, or disputes
that have a high probability of resulting in a suit of
significance against the Company involving a claim against the
Company, for damages in excess of Two Hundred Fifty Thousand
Dollars ($250,000) or which, if concluded adversely to the
Company, would materially and adversely affect the business or
assets of the Company.
5.11 Liens. The Company will not create, or permit to exist, any Lien
-----
on any of the Collateral property, except Liens for the benefit
of Xxxxxx.
5.12 Transactions With Affiliates. Except for transactions and
----------------------------
arrangements with employee Affiliates, the Company will not enter
into or be a party to any material transaction or arrangement
with any Affiliate (including, without limitation, the purchase
from, sale to or exchange of property with, or the rendering of
any service by or for, any Affiliate), except pursuant to the
reasonable requirements of the Company's business and upon fair
and
-20-
reasonable terms no less favorable to the Company than would be
obtained in a comparable arm's-length transaction with a Person
other than an Affiliate. The Company, has properly disclosed all
transactions with its Affiliates on Exhibit B, Disclosure
Schedule.
5.13 Reports and Access to Information. The Company shall furnish
---------------------------------
promptly to Xxxxxx:
(a) a copy of each report, schedule and other document filed or
received by the Company during such period pursuant to the
requirements of federal and state securities laws, if any,
(b) all other material information concerning the business,
properties and personnel of the Company and any other
materials as Xxxxxx may reasonably request. Xxxxxx will not
use such information for purposes other than this Agreement
and will otherwise hold all confidential material contained
in such information in confidence (and Xxxxxx will cause its
consultants and advisors to also hold such information in
confidence), and
(c) within 120 days after the end of each fiscal year of the
Company, an audited balance sheet of the Company as at the
end of such year and audited statements of income and of
cash flows of the Company for such year, certified by
certified public accountants of established national
reputation selected by the Company, and prepared in
accordance with GAAP. The foregoing financial statements
shall be prepared on consolidated basis, if the Company then
has any subsidiaries.
To the extent such information is publicly available on the Internet,
the Company shall have fulfilled its obligations under this Section
5.13.
5.14 Rule 144 Reporting. With a view to making available the benefits
------------------
of certain rules and regulations of the Commission which ma1y
permit the sale of the restricted Common Stock to the public
without registration, as long as a public market exists for the
Common Stock, the Company agrees to use its best efforts to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities
Act;
(b) file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities
Act and the Exchange Act;
-21-
(c) so long as a Holder owns any restricted Common Stock,
furnish to the Holder forthwith upon request a written
statement by the Company as to its compliance with the
reporting requirements of Rule 144, and of the Securities
Act and the Exchange Act, a copy of the most recent annual
or quarterly report of the Company, and such other reports
and documents of the Company and other information in the
possession of or reasonably obtainable by the Company as a
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.
6. Conditions Precedent to Obligations of Xxxxxx. The obligation of
---------------------------------------------
Xxxxxx to make any disbursement of the Loan shall be subject to the
prior or contemporaneous satisfaction of each of the following
conditions:
6.1 Authorizations. Xxxxxx shall have received such instruments or
--------------
documents as Xxxxxx may reasonably request relating to the
existence and good standing of the Company and the authority for
execution, delivery and performance of this Agreement, in full
force and effect on the Disbursement Date.
6.2 Security Agreement. Xxxxxx shall have received a duly executed
------------------
Security Agreement, together with such financing statements and
other documents as Xxxxxx may require to provide for the
perfection of its security interest.
6.3 Opinion of Counsel. Xxxxxx shall have received an opinion of
------------------
counsel from counsel to the Company in form satisfactory to
Xxxxxx.
6.4 No Existing Default. No Event of Default (as defined in Section
-------------------
7.1) or event which, upon the lapse of time or the giving of
notice or both, would constitute an Event of Default by the
Company (an "Incipient Default") shall exist on the Disbursement
Date.
6.5 Representations And Warranties Correct. Each of the
--------------------------------------
representations and warranties made by the Company shall be true
and correct in all material respects on the Disbursement Date
with the same effect as though made on and as of such date; and
the Company shall have performed and complied with all
agreements, covenants and conditions required by this Agreement
to be performed and complied with by the Company on or prior to
the Disbursement Date.
6.6 Other Agreements. The National Marketing and Distribution
----------------
Agreement and the Registration Rights Agreement shall be in full
force and effect, and the Company shall not be in breach or
default of any material covenant, condition or other provision
thereof.
-22-
6.7 Equipment. The Company shall have identified to Xxxxxx in writing
---------
any equipment to be financed, in whole or in part, with proceeds
of the Loan.
7. Events of Default. If any of the events specified in this Section 7
-----------------
shall occur (herein individually referred to as an "Event of
Default"), the Holder of the then outstanding Note issued pursuant to
this Agreement may, so long as such condition exists, declare the
entire principal and unpaid accrued interest hereon immediately due
and payable, by notice in writing to the Company:
7.1 Payments. Default in the payment of the principal and unpaid accrued
--------
interest of the Note when due and payable if such default is not cured
by the Company within ten (10) days after the Holder has given the
Company written notice of such default.
7.2 Bankruptcy. The institution by the Company of proceedings to be
----------
adjudicated as bankrupt or insolvent, or the consent by it to
institution of bankruptcy or insolvency proceedings against it or the
filing by it of a petition or answer or consent seeking reorganization
or release under the federal Bankruptcy Code, or any other applicable
federal or state law, or the consent by it to the filing of any such
petition or the appointment of a receiver, liquidator, assignee,
trustee, or other similar official of the Company, or of any
substantial part of its property, or the making by it of an assignment
for the benefit of creditors, or the taking of corporate action by the
Company in furtherance of any such action.
7.3 Commencement of an Action. If, within sixty (60) days after the
-------------------------
commencement of an action against the Company (and service of process
in connection therewith on the Company) seeking any bankruptcy,
insolvency, reorganization, liquidation, dissolution, or similar
relief under any present or future statute, law, or regulation, such
action shall not have been resolved in favor of the Company or all
orders or proceedings thereunder affecting the operations or the
business of the Company stayed, or if the stay of any such order or
proceeding shall thereafter be set aside, or if, within sixty (60)
days after the appointment without the consent or acquiescence of the
Company of any trustee, receiver or liquidator of the Company or of
all or any substantial part of the properties of the Company, such
appointment shall not have been vacated.
7.4 Default of Senior Indebtedness. Any default of the Company under any
------------------------------
Senior Indebtedness (as defined in Section 8) that gives the holder
thereof the right to accelerate such Senior Indebtedness, or any such
Senior Indebtedness shall not be paid when due.
-23-
7.5 Covenants And Agreements. The Company shall default in the
------------------------
performance of any of its material covenants and agreements set forth
in any provision of this Agreement or the Security Agreement and the
continuance of such default for ten (10) days after the Holder has
given the Company written notice of such default.
7.6 Default Under Other Agreements. The Company breaches or defaults on
------------------------------
any covenant, condition or other provision of the National Marketing
and Distribution Agreement and such breach or default continues after
the applicable grace period, if any, specified therein but in no
event more than thirty (30) days after the Holder has given the
Company written notice of such breach or default or such National
Marketing and Distribution Agreement shall cease to be in full force
and effect.
7.7 Change of Control of The Company. Any change in control of the
--------------------------------
Company which includes any consolidation of the Company with, or
merger of the Company into, any other Person, any merger of another
Person into the Company (other than a merger which does not result in
any reclassification, conversion, exchange, or cancellation of
outstanding shares of Common Stock), any acquisition of at least a
majority of the Voting Stock of the Company or any sale or transfer
of all or substantially all of the business or assets of the Company
(a "Change of Control"), or Xxxxxx'x receipt of written notice from
the Company that a Change of Control will occur as described in
Section 9.11.
7.8 Monetary Judgments. One or more non-interlocutory judgments, non-
------------------
interlocutory orders, decrees or arbitration awards is entered
against the Company involving in the aggregate a liability (to the
extent not covered by independent third-party insurance as to which
the insurer does not dispute coverage) as to any single or related
series of transactions, incidents or conditions, of $250,000 or more,
and the same shall remain unsatisfied, unvacated and unstayed pending
appeal for a period of 10 days after the entry thereof.
7.9 Non-Monetary Judgments. Any non-monetary judgment, order or decree is
----------------------
entered against the Company which does or would reasonably be
expected to have a material adverse effect on its condition
(financial or otherwise), business, net worth, assets, properties or
operations, and there shall be any period of 10 consecutive days
during which a stay of enforcement of such judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect.
-24-
7.10 Other Remedies. If any Event of Default shall occur and be
--------------
continuing, Xxxxxx shall have, in addition to the remedies set forth
in Section 7, all other remedies otherwise available at law and
equity.
8. Subordination. The indebtedness evidenced by the Note is hereby expressly
-------------
subordinated except as otherwise provided in the Security Agreement
attached to this Agreement as Exhibit C, to the extent and in the manner
hereinafter set forth, in right of payment to the prior payment in full of
all the Company's Senior Indebtedness (as defined herein).
8.1 Senior Indebtedness. As used in the Note, the term "Senior
-------------------
Indebtedness" shall mean the principal of (in amounts not exceeding a
debt to equity ratio of one to one at any time outstanding) and unpaid
accrued interest on:
(a) all indebtedness of the Company to banks, insurance companies, or
other financial institutions regularly engaged in the business of
lending money, which is for money borrowed by the Company
(whether or not secured), and
(b) any such indebtedness or any debentures, notes or other evidence
of indebtedness issued in exchange for such Senior Indebtedness,
or any indebtedness arising from the satisfaction of such Senior
Indebtedness by a guarantor.
8.2 Default on Senior Indebtedness. If there should occur any
------------------------------
receivership, insolvency, assignment for the benefit of creditors,
bankruptcy, reorganization or arrangements with creditors (whether or
not pursuant to bankruptcy or other insolvency laws), sale of all or
substantially all of the assets, dissolution, liquidation or any other
marshalling of the assets and liabilities of the Company, or if the
Note shall be declared due and payable upon the occurrence of an Event
of Default with respect to any Senior Indebtedness, then (a) no amount
shall be paid by the Company in respect of the principal of or
interest on the Note at the time outstanding, unless and until the
principal of and interest on the Senior Indebtedness then outstanding
shall be paid in full, and (b) no claim or proof of claim shall be
filed with the Company by or on behalf of the Holder of the Note that
shall assert any right to receive any payments in respect of the
principal of and interest on the Note, except subject to the payment
in full of the principal of and interest on all of the Senior
Indebtedness then outstanding. If there occurs an Event of Default
that has been declared in writing with respect to any Senior
Indebtedness, or in the instrument under which any Senior Indebtedness
is outstanding, permitting the holder of such Senior Indebtedness to
accelerate the maturity thereof, then, unless and until such Event of
Default shall have been cured or waived or shall have ceased to exist,
or all Senior Indebtedness shall have been paid in full, no
-25-
payment shall be made in respect of the principal of or interest on
the Note, unless within three (3) months after the happening of such
Event of Default, the maturity of such Senior Indebtedness shall not
have been accelerated.
8.3 Effect of Subordination. Subject to the rights, if any, of the holders
-----------------------
of Senior Indebtedness under this Section 8 to receive cash,
securities or other properties otherwise payable or deliverable to the
Holder of the Note, nothing contained in this Section 8 shall impair,
as between the Company and the Holder, the obligation of the Company,
subject to the terms and conditions of this Agreement, to pay to the
Holder the principal hereof and interest hereon as and when the same
become due and payable, or shall prevent the Holder of the Note, upon
default hereunder, from exercising all rights, powers and remedies
otherwise provided herein or by applicable law.
8.4 Subrogation. Subject to the payment in full of all Senior Indebtedness
-----------
and until the Note shall be paid in full, the Holder shall be
subrogated to the rights of the holders of Senior Indebtedness (to the
extent of payments or distributions previously made to such holders of
Senior Indebtedness pursuant to the provisions of Section 8.2) to
receive payments or distributions of assets of the Company applicable
to the Senior Indebtedness. No such payments or distributions
applicable to the Senior Indebtedness shall, as between the Company
and its creditors, other than the holders of Senior Indebtedness and
the Holder, be deemed to be a payment by the Company to or on account
of the Note; and for the purposes of such subrogation, no payments or
distributions to the holders of Senior Indebtedness to which the
Holder would be entitled except for the provisions of this Section 8
shall, as between the Company and its creditors, other than the
holders of Senior Indebtedness and the Holder, be deemed to be a
payment by the Company to or on account of the Senior Indebtedness.
8.5 Security Agreement. Notwithstanding any provisions of this Section 8
------------------
to the contrary, proceeds of Collateral as defined in the Security
Agreement or payments received in consideration of the release of any
Collateral shall not be subject to the subordination set forth in this
Section 8.
8.6 Undertaking. By its acceptance of the Note, the Holder agrees to
-----------
execute and deliver such documents as may be reasonably requested from
time to time by the Company or the lender of any Senior Indebtedness
in order to implement the foregoing provisions of this Section 8.
9. Conversion of Note.
------------------
9.1 Conversion Privilege and Conversion Price. Subject to and upon
-----------------------------------------
compliance with the provisions of this Section 9 (including but not
limited to the limitation
-26-
on conversion contained in Section 9.4), at the option of Xxxxxx at
any time and from time to time at Xxxxxx'x sole discretion, the Note
may be converted at the principal amount thereof, into fully paid and
nonassessable shares of Common Stock at the Conversion Price, in
effect at the time of conversion. The price at which shares of Common
Stock shall be delivered upon conversion (the "Conversion Price")
shall be initially $10.00 per share of Common Stock. The Conversion
Price shall be adjusted in certain instances as provided in Section
9.5.
9.2 Exercise of Conversion Privilege. In order to exercise the conversion
--------------------------------
privilege, Xxxxxx shall surrender the Note duly endorsed or assigned
to the Company or in blank, at any office or agency of the Company
maintained for that purpose, accompanied by written notice of
conversion in the form provided on the Note (or such other notice as
is acceptable to the Company) at such office or agency that Xxxxxx
elects to convert such Note. Upon conversion the Company shall pay
interest accrued but unpaid on the Note surrendered for conversion
through the date of such conversion. The Note shall be deemed to have
been converted immediately prior to the close of business on the day
of surrender of the whole portion of the principal amount thereof for
conversion in accordance with the foregoing provisions, and at such
time the rights of Xxxxxx under the Note shall cease, and the Person
or Persons entitled to receive the Common Stock issuable upon
conversion shall be treated for all purposes as the record holder or
holders of such Common Stock at such time. As promptly as practicable
on or after the conversion date, the Company shall issue and shall
deliver at such office or agency a certificate or certificates for the
number of duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock issuable upon conversion,
together with payment in lieu of any fraction of a share, as provided
in Section 9.3.
9.3 Fractions of Shares. No fractional shares of Common Stock shall be
-------------------
issued upon conversion of the Note. Instead of any fractional share of
Common Stock which would otherwise be issuable upon the conversion of
the Note, the Company shall pay a cash adjustment in respect of such
fraction of a share of Common Stock in an amount equal to the
remaining principal amount of the Note which is not converted by
reason of this Section 9.3.
9.4 Limitation on Conversion Privilege. If the shares of Common Stock
----------------------------------
issuable upon conversion of the Note, together with the shares of
Common Stock then beneficially owned by Xxxxxx, would exceed 19% of
the then outstanding shares of Common Stock of the Company (giving
effect to such issuance upon conversion to Xxxxxx), then Xxxxxx may
only convert that portion of the principal amount of the Note that
would result in Xxxxxx holding 19% of the then outstanding shares of
Common Stock of the Company (in whole shares
-27-
rounded down) and the remaining unconverted principal amount of the
Note shall remain outstanding.
9.5 Adjustment of Conversion Price.
------------------------------
(a) In case the Company shall pay or make a dividend or other
distribution on any class of capital stock of the Company in the
form of Common Stock, the Conversion Price in effect at the
opening of business on the day following the date fixed for the
determination of stockholders entitled to receive such dividend
or other distribution shall be reduced by multiplying such
Conversion Price by a fraction the numerator of which shall be
the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination and the
denominator shall be the sum of such number of shares and the
total number of shares constituting such dividend or other
distribution, such reduction to become effective immediately
after the opening of business on the day following the date fixed
for such determination. For the purposes of this paragraph
9.5(a), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the
Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common
Stock. The Company will not pay any dividend or make any
distribution on shares of Common Stock held in the treasury of
the Company.
(b) In case the Company shall issue rights, options, or warrants to
all holders of its Common Stock (not being available on an
equivalent basis to Xxxxxx upon conversion) entitling them to
subscribe for or purchase shares of Common Stock at a price per
share less than the current market price per share of the Common
Stock, determined as provided in paragraph 9.5(f), on the date
fixed for the determination of stockholders entitled to receive
such rights, options, or warrants (other than pursuant to a
dividend reinvestment plan), the Conversion Price in effect at
the opening of business on the day following the date fixed for
such determination shall be reduced to a price (calculated to the
nearest cent) determined by multiplying such Conversion Price by
a fraction the numerator of which shall be the number of shares
of Common Stock outstanding at the close of business on the date
fixed for such determination plus the number of shares of Common
Stock which the aggregate consideration received by the Company
for the total number of additional shares of Common Stock so
offered for subscription or purchase would purchase at the
Conversion Price in effect immediately prior to the date fixed
for such determination and the denominator of which shall be the
number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination plus the
-28-
number of shares of Common Stock so offered for subscription or
purchase, such reduction to become effective immediately at the
opening of business on the day following the date fixed for such
determination. For purposes of this paragraph 9.5(b), the number
of shares of Common Stock at any time outstanding shall not
include shares held in the treasury of the Company but shall
include shares issuable in respect of scrip certificates issued
in lieu of fractions of shares of Common Stock. The Company will
not issue any rights, options, or warrants in respect of shares
of Common Stock held in the treasury of the Company.
(c) In case outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Conversion
Price in effect at the opening of business on the day following
the day upon which such subdivision becomes effective shall be
proportionately reduced, and, conversely, in case outstanding
shares of Common Stock shall each be combined into a smaller
number of shares of Common Stock, the Conversion Price in effect
at the opening of business on the day following the day upon
which such combination becomes effective shall be proportionately
increased, such reduction or increase, as the case may be, to
become effective immediately after the opening of business on the
day following the day upon which such subdivision or combination
becomes effective.
(d) In case the Company shall, by dividend, redemption, stock
purchase or otherwise, distribute to holders of its Common Stock
evidences of its indebtedness or assets (including securities,
but excluding any rights, options, or warrants referred to in
paragraph 9.5(b), any dividend or distribution paid exclusively
in cash and any dividend or distribution referred to in Section
9.5(d)), the Conversion Price shall be adjusted to equal the
price determined by multiplying the Conversion Price in effect
immediately prior to the close of business on the date fixed for
the determination of stockholders entitled to receive such
distribution by a fraction the numerator of which shall be the
current market price per share, determined as provided in
paragraph 9.5(f), of the Common Stock on the date fixed for such
determination less the then fair market value (as determined in
good faith by an independent majority of the Board of Directors)
of the portion of the assets or evidences of indebtedness so
distributed applicable to one share of Common Stock and the
denominator shall be the current market price per share,
determined as provided in paragraph 9.5(f), of the Common Stock,
such adjustment to become effective immediately prior to the
opening of business on the day following the date fixed for the
determination of stockholders entitled to receive such
distribution.
-29-
(e) The reclassification of Common Stock into securities including
securities other than Common Stock (other than any
reclassification upon a consolidation or merger to which Section
9.11 applies) shall be deemed to involve (i) a distribution of
such securities other than Common Stock to all holders of Common
Stock and the effective date of such reclassification shall be
deemed to be "the date fixed for the determination of
stockholders entitled to receive such distribution" and the "date
fixed for such determination" within the meaning of paragraph
9.5(c), and (ii) a subdivision or combination, as the case may
be, of the number of shares of Common Stock outstanding
immediately prior to such reclassification into the number of
shares of Common Stock outstanding immediately thereafter.
(f) For the purpose of any computation under paragraphs 9.5(c), (d),
and (e), the current market price per share of Common Stock on
any date shall be deemed to be the average of the daily Closing
Prices for the five (5) consecutive trading days selected by the
Company commencing not more than twenty (20) trading days before,
and ending not later than, the earlier of the day in question and
the day before the "ex" date with respect to the issuance or
distribution requiring such computation. The "Closing Price" for
each trading day shall be the reported last sale price regular
way or, in case no such reported sale takes place on such day,
the average of the reported closing bid and asked prices regular
way, in either case on the principal national securities exchange
on which the Common Stock is listed or admitted to trading or, if
not listed or admitted to trading on any national securities
exchange, on the National Association of Securities Dealers
Automated Quotations system ("Nasdaq") National Market System
("Nasdaq National Market") or, if not listed or admitted to
trading on Nasdaq National Market, on Nasdaq, or, if the Common
Stock is not listed or admitted to trading on any national
securities exchange or Nasdaq National Market or quoted on
Nasdaq, the average of the closing bid and asked prices in the
over-the-counter market as furnished by any New York Stock
Exchange member firm selected from time to time by the Company
for that purpose, or, if the Common Stock does not have any
closing bid and asked prices in the over-the-counter market
during the relevant period of time, the fair market value per
share as determined in good faith by an independent majority of
the Board of Directors as of the most recent available month-end
determined pursuant to GAAP. For purposes of this paragraph, the
term "`ex' date," when used with respect to any issuance or
distribution, shall mean the first date on which the Common Stock
trades regular way on such exchange or in such market without the
right to receive such issuance or distribution.
-30-
(g) The Company may make such reductions in the Conversion Price, in
addition to those required by paragraphs 9.5(a), (b), (c) and
(d), as it considers to be advisable in order to avoid or
diminish any income tax to any holders of shares of Common Stock
resulting from any dividend or distribution of stock or issuance
of rights or warrants to purchase or subscribe for stock or from
any event treated as such for federal income tax purposes or for
any other reasons.
9.6 Notice of Adjustments of Conversion Price. Whenever the Conversion
-----------------------------------------
Price is adjusted as herein provided:
(a) the Company shall compute the adjusted Conversion Price in
accordance with Section 9.5 and shall prepare a certificate
signed by the Chief Financial Officer of the Company setting
forth the adjusted Conversion Price and showing in reasonable
detail the facts upon which such adjustment is based, and such
certificate shall forthwith be filed at the offices of the
Company.
(b) a notice stating that the Conversion Price has been adjusted and
setting forth the adjusted Conversion Price shall forthwith be
required, and as soon as practicable after it is required, such
notice shall be mailed by the Company to the Holder in accordance
with the terms of Section 12.2 herein.
9.7 Notice of Certain Corporate Action. In case:
----------------------------------
(a) the Company shall declare a dividend (or any other distribution)
on its Common Stock payable otherwise than in cash out of its
earned surplus; or
(b) the Company shall authorize the granting to the holders of its
Common Stock of warrants to subscribe for or purchase any shares
of capital stock of any class or of any other rights, including
grants given under the Company Stock Option Plan; or
(c) of any reclassification of the Common Stock of the Company (other
than a subdivision or combination of its outstanding shares of
Common Stock), or of any consolidation, merger or share exchange
to which the Company is a party and for which approval of any
stockholders of the Company is required, or of the sale or
transfer of all or substantially all of the assets of the
Company; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; then the Company shall cause to be
filed at the offices of
-31-
the Company, and shall cause to be mailed to the Holder at its
last address as it shall appear in the Note Register, at least
twenty (20) days or ten (10) days in any case specified in
paragraph 9.7 (a) or (b) prior to the applicable record or
effective date hereinafter specified, a notice stating (x) the
date on which a record is to be taken for the purpose of such
dividend, distribution, rights or warrants, or, if a record is
not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distribution,
rights or warrants are to be determined, or (y) the date on
which such reclassification, consolidation, merger, share
exchange, sale, transfer, dissolution, liquidation or winding
up is expected to become effective, and the date as of which it
is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, share exchange, sale,
transfer, dissolution, liquidation or winding up. Neither the
failure to give such notice nor any defect therein shall affect
the legality or validity of the proceedings described in
paragraphs 9.7 (a) through (d).
9.8 Company to Reserve Common Stock. The Company shall at all times
-------------------------------
reserve and keep available out of its authorized but unissued Common
Stock, for the purpose of effecting the conversion of the Note, the
full number of shares of Common Stock then issuable upon the
conversion of the Note.
9.9 Taxes on Conversions. The Company will pay any and all taxes that
--------------------
maybe payable in respect of the issuance or delivery of shares of
Common Stock on conversion of the Note pursuant to this Agreement.
9.10 Covenant as to Common Stock. The Company covenants that all shares
---------------------------
of Common Stock which may be issued upon conversion of the Note will
upon issuance be fully paid and nonassessable and, except as
provided in Section 9.9, the Company will pay all taxes, liens and
charges with respect to the issue thereof.
9.11 Provisions in Case of Consolidation, Merger or Sale of Assets. In
-------------------------------------------------------------
case of any Change of Control of the Company, the Company will
notify Abbott at least thirty (30) days prior to the closing of the
transaction that will effect the Change of Control, and Abbott may
convert the Note in accordance with Section 9 prior to the
transaction or declare an Event of Default and accelerate the Note
and terminate this Agreement in accordance with Section 9.
9.12 Transfer And Exchange of Note. The Note may be freely transferred or
-----------------------------
assigned by Abbott with the written consent of the Company. Such
transfer and assignment shall be made in accordance with applicable
federal and state
-32-
securities laws. At any time and from time to time, upon not less
than twenty (20) days notice to that effect given by Abbott and,
upon surrender of the Note at the Company's office by Abbott, the
Company will deliver in exchange therefor, without expense to
Abbott, except as set forth below, one Note for the same aggregate
principal amount as the then unpaid principal amount of the Note so
surrendered, provided such Note shall be in the amount of the full
principal amount of the Note and there shall be no right to divide
the Note, dated as of the date to which interest has been paid on
the Note so surrendered or, if such surrender is prior to the
payment of any interest thereon, then dated as of the date of issue,
registered in the name of such Person as may be designated by
Abbott, and otherwise of the same form and tenor as the Note so
surrendered for exchange. The Company may require the payment of a
sum sufficient to cover any stamp tax or governmental charge imposed
upon such exchange or transfer.
9.13 Loss, Theft, Mutilation or Destruction of Note. Upon receipt of
----------------------------------------------
evidence satisfactory to the Company of the loss, theft, mutilation
or destruction of the Note, the Company will make and deliver
without expense to Abbott thereof, a new Note, of like tenor, in
lieu of such lost, stolen, mutilated or destroyed Note.
9.14 Expenses, Stamp Tax Indemnity. The Company agrees to pay duplicating
-----------------------------
and printing costs and charges for shipping the Note, adequately
insured to Xxxxxx'x home office or at such other place as Abbott may
designate, and all reasonable expenses of Abbott (including, without
limitation, the reasonable fees and expenses of any financial
advisor to Abbott) relating to any proposed or actual amendment,
waivers or consents pursuant to the provisions of this Agreement,
including, without limitation, any proposed or actual amendments,
waivers, or consents resulting from any work-out, re-negotiations,
or restructuring relating to the performance by the Company of its
obligations under this Agreement and the Note. The Company also
agrees that it will pay and hold Abbott harmless against any and all
liabilities with respect to stamp and other taxes, if any, which may
be payable or which may be determined to be payable in connection
with the execution and delivery of this Agreement or the Note,
whether or not the Note is then outstanding. The Company agrees to
protect and indemnify Abbott against any liability for any and all
brokerage fees and commissions payable or claimed to be payable to
any Person (other than any Person engaged by a Purchaser) in
connection with the transactions contemplated by this Agreement.
9.15 Cancellation of Converted Note. The Note delivered for conversion
------------------------------
shall be canceled by or at the direction of the Company.
-33-
10. Costs and Expenses. The Company shall:
------------------
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse Abbott within five Business Days
after demand for all costs and expenses incurred by Abbott in
connection with the development, preparation, delivery,
administration and execution of, and any amendment, supplement,
waiver or modification to (in each case, whether or not
consummated), this Agreement, and any other documents prepared
in connection herewith or therewith, and the consummation of the
transactions contemplated hereby and thereby, including
reasonable attorneys fees and expenses incurred by Abbott with
respect thereto; and
(b) pay or reimburse Abbot within five Business Days after demand
for all costs and expenses (including reasonable attorneys fees
and expenses) incurred by it in connection with the enforcement,
attempted enforcement, or preservation of any rights or remedies
under this Agreement or any other document delivered in
connection therewith during the existence of an Event of Default
or after acceleration of the loans (including in connection with
any "workout" or restructuring regarding the Loans).
11. Indemnification.
---------------
11.1 Indemnification by the Company.
------------------------------
The Company agrees to defend and indemnify Abbott, its subsidiaries,
affiliates, directors, officers, employees, and shareholders, and their
respective successors and assigns (collectively, the "Indemnitees"), harmless
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses and
disbursements (including reasonable attorneys fees and expenses of any kind
or nature whatsoever which may at any time (including at any time following
repayment of the Loans) be imposed on, incurred by or asserted against any
such Abbott Indemnitee in any way relating to or arising out of this
Agreement, or the transactions contemplated hereby, or any action taken or
omitted by any such Person under or in connection with any of the foregoing,
including with respect to any investigation, litigation or proceeding
(including any insolvency proceeding or appellate proceeding) related to or
arising out of this Agreement or the Loans or the use of the proceeds
thereof, whether or not any Indemnified Person is a party thereto (all the
foregoing, collectively, the "Indemnified Liabilities"); provided, that the
----------------------- --------
Company shall have no obligation hereunder to any Indemnitee with respect to
Indemnified Liabilities resulting solely from the gross negligence or willful
misconduct of such Indemnitee. The agreements in this Section shall survive
payment of all other obligations hereunder.
11.2 Indemnification Procedure. A party seeking indemnification
-------------------------
(the "Indemnitee") shall use its commercially reasonable best
efforts to
-34-
minimize any liabilities, damages, deficiencies, claims, judgments,
assessments, costs and expenses in respect of which indemnity may be
sought under this Agreement. The Indemnitee shall give prompt written
notice to the party from whom indemnification is sought (the
"Indemnitor") of the assertion of a claim for indemnification; provided,
however, that the Indemnitee's failure to notify the Indemnitor shall not
excuse the Indemnitor's obligation to indemnify the Indemnitee except to
the extent that such failure prejudices the Indemnitor's defense of any
such claim. No such notice of assertion of a claim shall satisfy the
requirements of this Section 11 unless it describes in reasonable detail
and in good faith the facts and circumstances upon which the asserted
claim for indemnification is based. If any action or proceeding shall be
brought in connection with any liability or claim to be indemnified
hereunder, the Indemnitee shall provide the Indemnitor twenty (20)
calendar days to decide whether to defend such liability or claim. During
such period, the Indemnitee shall take all necessary steps to protect the
interests of itself and the Indemnitor, including the filing of any
necessary responsive pleadings, the seeking of emergency relief or other
action necessary to maintain the status quo, subject to reimbursement
from the Indemnitor of its expenses in doing so. The Indemnitor shall
(with, if necessary, reservation of rights) defend such action or
proceeding at its expense, using counsel selected by the insurance
company insuring against any such claim and undertaking to defend such
claim, or by other counsel selected by it and approved by the Indemnitee,
which approval shall not be unreasonably withheld or delayed. The
Indemnitor shall keep the Indemnitee fully apprised at all times of the
status of the defense and shall consult with the Indemnitee prior to the
settlement of any indemnified matter. Indemnitee agrees to use reasonable
efforts to cooperate with Indemnitor in connection with its defense of
indemnifiable claims. In the event the Indemnitee has a claim or claims
against any third party growing out of or connected with the indemnified
matter, then upon receipt of indemnification, the Indemnitee shall fully
assign to the Indemnitor the entire claim or claims to the extent of the
indemnification actually paid by the Indemnitor and the Indemnitor shall
thereupon be subrogated with respect to such claim or claims of the
Indemnitee.
12. Miscellaneous.
-------------
12.1 Powers And Rights Not Waived; Remedies Cumulative. No delay or
-------------------------------------------------
failure on the part of Abbott in the exercise of any power or right
shall operate as a waiver thereof; nor shall any single or partial
exercise of the same preclude any other or further exercise thereof,
or the exercise of any other power or right, and the rights and
remedies of Abbott are cumulative to, and are not exclusive of, any
rights or remedies Abbott would otherwise have.
-35-
12.2 Notice. Except as otherwise expressly provided herein, any notice,
------
consent or document required or permitted hereunder shall be given
in writing and it or any certificates or other documents delivered
hereunder shall be deemed effectively given or delivered (as the
case may be) upon personal delivery (professional courier
permissible) or when mailed by receipted United States certified
mail delivery, or five (5) business days after deposit in the United
States mail. Such certificates, documents or notice may be
personally delivered to an authorized representative of the Company
or Abbott (as the case may be) at any address where such authorized
representative is present and otherwise shall be sent to the
following address:
If to the Company:
Retractable Technologies, Inc.
X.X. Xxx 0
000 Xxxx Xxxx
Xxxxxx Xxx, Xxxxx 00000-0000
Attention: Xxxxxx X. Xxxx
President and CEO
With a copy to:
Retractable Technologies, Inc.
Finance Department
X.X. Xxx 0
000 Xxxx Xxxx
Xxxxxx Xxx, Xxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxx
Chief Financial Officer and Treasurer
If to Xxxxxx:
Xxxxxx Laboratories
000 Xxxxxx Xxxx Xxxx
Xxxxxx Xxxx, XX 00000-0000
Attention: Senior Vice President,
Hospital Products Division
-36-
With a copy to:
Xxxxxx Laboratories
Legal Division
D-322, AP6D
000 Xxxxxx Xxxx Xxxx
Xxxxxx Xxxx, XX 00000-0000
Attn: Divisional Vice President,
D-322, 6049
12.3 Successors And Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the Company and its successors and assigns
and shall be binding upon and inure to the benefit of Abbott and its
successors and assigns; provided, however, that neither the Company
nor Abbott shall assign this Agreement or any of its rights, duties
or obligations hereunder without the prior written consent of the
other party which consent shall not be unreasonably withheld.
12.4 Survival of Covenants And Representations. All covenants,
-----------------------------------------
representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection
with the Disbursement Date, shall survive the closing and the
delivery of this Agreement and the Note.
12.5 Severability. Should any part of this Agreement for any reason be
------------
declared invalid or unenforceable, such decision shall not affect
the validity or enforceability of any remaining portion, which
remaining portion shall remain in force and effect as if this
Agreement had been executed with the invalid or unenforceable
portion thereof eliminated and it is hereby declared the intention
of the parties hereto that they would have executed the remaining
portion of this Agreement without including therein any such part,
parts or portion which may, for any reason, be hereafter declared
invalid or unenforceable.
12.6 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
12.7 Governing Law. This Agreement and the Note issued and sold hereunder
-------------
shall be governed by and construed in accordance with Illinois law
(except Section 9 which shall be governed by and contained in
accordance with Texas law), without regard to the conflict of laws
provisions thereof.
12.8 Captions. The descriptive headings of the various sections or parts
--------
of this Agreement are for convenience only and shall not affect the
meaning or construction of any of the provisions of this Agreement.
-37-
12.9 Dispute Resolution. Disputes shall be resolved as provided in Annex
------------------
B attached hereto.
12.10 Amendments and Waivers. No amendment or waiver of any provision of
----------------------
this Agreement, and no consent with respect to any departure by
the Company therefrom, shall be effective unless the same shall be
in writing and signed by Abbott and the Company, and then any such
waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
-38-
In Witness Whereof, the parties hereto have executed this Agreement as of
the date and year first above written.
XXXXXX LABORATORIES RETRACTABLE TECHNOLOGIES,
INC.
By: Xxxxxxx X. Xxxxxxxx By: Xxxxxx X. Xxxx
---------------------------- -----------------------
Xxxxxxx X. Xxxxxxxx
Its: Senior Vice President Its: CEO
--------------------------- ----------------------
Hospital Products
-39-
ANNEX A
-------
PROMISSORY NOTE
---------------
$5,000,000 _________, 2000
FOR VALUE RECEIVED, the undersigned, Retractable Technologies, Inc., a
Texas corporation (the "Company"), hereby promises to pay to the order of Xxxxxx
-------
Laboratories ("Abbott") the principal sum of Five Million Dollars ($5,000,000)
------
or, if less, the aggregate unpaid principal amount of all Loans made by Abbott
to the Company pursuant to the Credit Agreement dated as of _______________,
2000 (such Credit Agreement, as it may be amended, restated, supplemented or
otherwise modified from time to time, being hereinafter called the "Credit
------
Agreement"), between the Company and Abbott on the dates and in the amounts
---------
provided in the Credit Agreement. The Company further promises to pay interest
on the unpaid principal amount of the Loans evidenced hereby from time to time
at the rates, on the dates, and otherwise as provided in the Credit Agreement.
Abbott is authorized to endorse the amount and the date on which each Loan
is made, the maturity date therefor and each payment of principal with respect
thereto on the schedules annexed hereto and made a part hereof, or on
continuations thereof which shall be attached hereto and made a part hereof;
provided, that any failure to endorse such information on such schedule or
continuation thereof shall not in any manner affect any obligation of the
Company under the Credit Agreement and this Note).
This Note is the Note referred to in, and is entitled to the benefits of,
the Credit Agreement, which Credit Agreement, among other things, contains
provisions for acceleration of the maturity hereof upon the happening of certain
stated events and also for prepayments on account of principal hereof prior to
the maturity hereof upon the terms and conditions therein specified. This Note
is secured pursuant to the Security Agreement, as defined in the Credit
Agreement.
-40-
Terms defined in the Credit Agreement are used herein with their defined
meanings therein unless otherwise defined herein. This Note shall be governed
by, and construed and interpreted in accordance with, the laws of the State of
Illinois applicable to contracts made and to be performed entirely within such
State.
RETRACTABLE TECHNOLOGIES, INC.
By:_____________________________
Title:__________________________
-41-
Schedule to Note
LOANS AND REPAYMENT OF LOANS
----------------------------
(1) (2) (3) (4)
Date Amount Amount Notation
of of Made
Base Loan Loan Repaid By
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
-42-
ANNEX B
DISPUTE RESOLUTION
The parties recognize that a bona fide dispute as to certain matters may arise
from time to time during the term of this Agreement which relates to either
party's rights and/or obligations. To have such a dispute resolved by this
Alternative Dispute Resolution ("ADR") provision, a party first must send
written notice of the dispute to the other party for attempted resolution by
good faith negotiations between their respective presidents (or their
equivalents) of the affected subsidiaries, divisions, or business units within
twenty-eight (28) days after such notice is received (all references to "days"
in this ADR provision are to calendar days). If the matter has not been resolved
within twenty-eight (28) days of the notice of dispute, or if the parties fail
to meet within such twenty-eight (28) days, either party may initiate an ADR
proceeding as provided herein. The parties shall have the right to be
represented by counsel in such a proceeding.
1. To begin an ADR proceeding, a party shall provide written notice to the
other party of the issues to be resolved by ADR. Within fourteen (14) days after
its receipt of such notice, the other party may, by written notice to the party
initiating the ADR, add additional issues to be resolved within the same ADR.
2. Within twenty-one (21) days following receipt of the original ADR
notice, the parties shall select a mutually acceptable neutral to preside in the
resolution of any disputes in this ADR proceeding. If the parties are unable to
agree on a mutually acceptable neutral within such period, either party may
request the President of the CPR Institute for Dispute Resolution ("CPR"), 000
Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, to select a neutral
pursuant to the following procedures: (a) The CPR shall submit to the parties a
list of not less than five(5) candidates within fourteen (14) days after receipt
of the request, along with a CURRICULUM VITAE for each candidate. No candidate
shall be an employee, director, or shareholder of either party or any of their
subsidiaries or affiliates. (b) Such list shall include a statement of
disclosure by each candidate of any circumstances likely to affect his or her
impartiality. (c) Each party shall number the candidates in order of preference
(with the number one (1) signifying the greatest preference) and shall deliver
the list to the CPR within seven (7) days following receipt of the list of
candidates. If a party believes a conflict of interest exists regarding any of
the candidates, that party shall provide a written explanation of the conflict
to the CPR along with its list showing its order of preference for the
candidates. Any party failing to return a list of preferences on time shall be
deemed to have no order of preference. (d) If the parties collectively have
identified fewer than three (3) candidates deemed to have conflicts, the CPR
immediately shall designate as the neutral the candidate for whom the parties
collectively have indicated the greatest preference. If a tie should result
between two candidates, the CPR may designate either candidate. If the parties
collectively have identified three (3) or more candidates deemed to have
conflicts, the CPR shall review the explanations regarding conflicts and, in its
sole discretion, may either (i) immediately designate as the neutral the
candidate for whom the parties collectively have indicated the greatest
preference, or (ii) issue a new list of not
-43-
less than five (5) candidates, in which case the procedures set forth in
subparagraphs 2(a) - 2(d) shall be repeated.
3. No earlier than twenty-eight (28) days or later than fifty-six (56)
days after selection, the neutral shall hold a hearing to resolve each of the
issues identified by the parties. The ADR proceeding shall take place at a
location in the State of Illinois agreed upon by the parties. If the parties
cannot agree, the neutral shall designate a location in the State of Illinois
other than the principal place of business of either party or any of their
subsidiaries or affiliates.
4. At least seven (7) days prior to the hearing, each party shall submit
the following to the other party and the neutral: (a) a copy of all exhibits on
which such party intends to rely in any oral or written presentation to the
neutral; (b) a list of any witnesses such party intends to call at the hearing,
and a short summary of the anticipated testimony of each witness; (c) a proposed
ruling on each issue to be resolved, together with a request for a specific
damage award or other remedy for each issue. The proposed rulings and remedies
shall not contain any recitation of the facts or any legal arguments and shall
not exceed one (1) page per issue. (d) a brief in support of such party's
proposed rulings and remedies, provided that the brief shall not exceed twenty
(20) pages. This page limitation shall apply regardless of the number of issues
raised in the ADR proceeding. Except as expressly set forth in subparagraphs
4(a) - 4(d), no discovery shall be required or permitted by any means, including
depositions, interrogatories, requests for admissions, or production of
documents.
5. The hearing shall be conducted on two (2) consecutive days and shall be
governed by the following rules: (a) Each party shall be entitled to five (5)
hours of hearing time to present its case. The neutral shall determine whether
each party has had the five (5) hours to which it is entitled. (b) Each party
shall be entitled, but not required, to make an opening statement, to present
regular and rebuttal testimony, documents or other evidence, to cross-examine
witnesses, and to make a closing argument. Cross-examination of witnesses shall
occur immediately after their direct testimony, and cross-examination time shall
be charged against the party conducting the cross-examination. (c) The party
initiating the ADR shall begin the hearing and, if it chooses to make an opening
statement, shall address not only issues it raised but also any issues raised by
the responding party. The responding party, if it chooses to make an opening
statement, also shall address all issues raised in the ADR. Thereafter, the
presentation of regular and rebuttal testimony and documents, other evidence,
and closing arguments shall proceed in the same sequence. (d) Except when
testifying, witnesses shall be excluded from the hearing until closing
arguments. (e) Settlement negotiations, including any statements made therein,
shall not be admissible under any circumstances. Affidavits prepared for
purposes of the ADR hearing also shall not be admissible. As to all other
matters, the neutral shall have sole discretion regarding the admissibility of
any evidence.
6. Within seven (7) days following completion of the hearing, each party
may submit to the other party and the neutral a post-hearing brief in support of
its proposed rulings and remedies, provided that such brief shall not contain or
discuss any new evidence and shall not
-44-
exceed ten (10) pages. This page limitation shall apply regardless of the
number of issues raised in the ADR proceeding.
7. The neutral shall rule on each disputed issue within fourteen (14) days
following completion of the hearing. Such ruling shall adopt in its entirety the
proposed ruling and remedy of one of the parties on each disputed issue but may
adopt one party's proposed rulings and remedies on some issues and the other
party's proposed rulings and remedies on other issues. The neutral shall issue
a written opinion or otherwise explain the basis of the ruling.
8. The neutral shall be paid a reasonable fee plus expenses. These fees
and expenses, along with the reasonable legal fees and expenses of the
prevailing party (including all expert witness fees and expenses), the fees and
expenses of a court reporter, and any expenses for a hearing room, shall be paid
as follows: (a) If the neutral rules in favor of one party on all disputed
issues in the ADR, the losing party shall pay 100% of such fees and expenses.
(b) If the neutral rules in favor of one party on some issues and the other
party on other issues, the neutral shall issue with the rulings a written
determination as to how such fees and expenses shall be allocated between the
parties. The neutral shall allocate fees and expenses in a way that bears a
reasonable relationship to the outcome of the ADR, with the party prevailing on
more issues, or on issues of greater value or gravity, recovering a relatively
larger share of its legal fees and expenses.
9. The rulings of the neutral and the allocation of fees and expenses
shall be binding, non-reviewable, and non-appealable, and may be entered as a
final judgment in any court having jurisdiction.
10. Except as provided in paragraph 9 or as required by law, the existence
of the dispute, any settlement negotiations, the ADR hearing, any submissions
(including exhibits, testimony, proposed rulings, and briefs), and the rulings
shall be deemed Confidential Information. The neutral shall have the authority
to impose sanctions for unauthorized disclosure of Confidential Information.
EX-5 6 EXHIBIT 5
-45-
Credit Agreement
Exhibit A
Registration Rights Agreement
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is made as of May ___,
2000, by and between Retractable Technologies, Inc., a Texas corporation with
its principal office at 000 Xxxx Xxxx, Xxxxxx Xxx, Xxxxx 00000 ("RTI"), and
Xxxxxx Laboratories, an Illinois corporation with its principal office at 000
Xxxxxx Xxxx Xxxx, Xxxxxx Xxxx, Xxxxxxxx 60064-6400("Abbott").
RECITALS
WHEREAS, RTI and Abbott have entered into a Credit Agreement (the "Credit
Agreement") of even date herewith; and
WHEREAS, the execution and delivery of this Agreement are a condition to
the Closing of the Credit Agreement;
NOW, THEREFORE, RTI and Abbott agree as follows:
1. Definitions. All terms not otherwise defined in this Agreement shall have
-----------
the same meanings ascribed to them in the Credit Agreement. For purposes of
this Agreement:
1.1 Exchange Act. The term "Exchange Act" shall mean the Securities
-----------
Exchange Act of 1934, as amended.
1.2 Register, Registered, and Registration. The terms "register,"
--------------------------------------
"registered," and "registration" refer to a registration effected by
preparing and filing a registration statement or similar document in
compliance with the Securities Act, and the declaration or ordering
of effectiveness of such registration statement or document.
1.3 Registrable Securities. The term "Registrable Securities" means such
----------------------
portion of the Shares that has not previously been registered or
sold to the public.
1.4 Registration Statement. The term "Registration Statement" means a
----------------------
registration statement filed with the SEC under the Securities Act
to register the resale of the Registrable Securities by Abbott.
1.5 Rule 144. The term "Rule 144" shall mean Rule 144, or its successor
--------
rule, promulgated by the SEC.
1.6 SEC. The term "SEC" shall mean the Securities and Exchange
---
Commission.
-1-
1.7 Securities Act. The term "Securities Act" means the Securities Act of
--------------
1933, as amended.
1.8 Shares. The term "Shares" means the shares of common stock of RTI, no
------
par value, issuable or issued upon conversion of the Note issued
pursuant to the Credit Agreement, and any shares of common stock of
RTI issued as a dividend or other distribution with respect to such
capital stock.
2. Registration. RTI covenants and agrees as follows:
------------
2.1 S-3 Registration. At any time after RTI becomes eligible to file a
----------------
Registration Statement on Form S-3 (or any successor form relating to
secondary offerings), Abbott may request RTI, in writing, to effect a
registration on Form S-3 (or such successor form), of Registrable
Securities. Thereupon, RTI shall, as expeditiously as possible, use
its best efforts to effect the registration of Form S-3 (or such
successor form) of all Registrable Securities which RTI has been
requested to so register. The right to request registration on Form S-
3 pursuant to this Section 2.1 may not be exercised more than three
(3) times by Abbott. RTI shall not be required to include any
Registrable Securities in such registration unless Abbott accepts the
terms of the underwriting as agreed upon between RTI and the
underwriters selected by RTI (provided that such terms must be
consistent with this Agreement and are applicable to other
shareholders offering their shares in such registration).
2.2 Piggyback Registration. Whenever RTI proposes to register any of its
----------------------
securities under the Securities Act for a public offering for cash,
whether as a primary or secondary offering or pursuant to registration
rights granted to holders of other securities of RTI other than (a) a
registration relating solely to employee benefit plans on Form S-8 (or
a similar successor form), or (b) a registration on Form S-4 (or a
similar successor form) relating solely to a transaction subject to
Rule 145 under the Securities Act), RTI will promptly give Abbott
written notice thereof, and subject to the terms of Section 2.3 below,
use its reasonable efforts to include in such registration (and any
related qualification under blue sky laws or other compliance), and in
any underwriting involved therein, all Registrable Securities
specified in a written request to RTI made within fifteen (15)
business days after the receipt of such written notice by Abbott.
-2-
2.3 Underwriting.
------------
(a) If the registration of which RTI gives notice pursuant to Section
2.2 is for a registered offering involving an underwriting, then
Xxxxxx'x right to registration shall be conditioned upon Xxxxxx'x
participation in the underwriting and the inclusion of Xxxxxx'x
Registrable Securities in the underwriting to the extent provided
in this Agreement. Abbott [together with RTI and the holders of
other securities of RTI distributing their securities through
that underwriting (such other holders being termed the "Other
Holders")] shall enter into an underwriting agreement in
customary form with the representative of the underwriter or
underwriters selected by RTI.
(b) Notwithstanding any other provision of this Article 2, if the
representative of the underwriters advises RTI in writing that
marketing factors require a limitation on the number of shares to
be underwritten, then RTI shall so inform Abbott and the Other
Holders. The number of shares of RTI common stock being sold by
RTI for its own account shall not be reduced by operation of this
Section 2.3. The number of shares of Registrable Securities held
by Abbott and the Other Holder(s) that may be included in the
underwriting (in addition to those being sold by RTI for its own
account) shall be allocated among Abbott and the Other Holders in
proportion (as nearly as practicable) to the amount of
Registrable Securities owned by each such holder.
(c) Any holder which does not agree to the terms of the such
underwriting shall be excluded from that underwriting by written
notice from RTI or the underwriter. Any Registrable Securities or
other securities excluded or withdraw from that underwriting
shall be withdrawn from the registration.
2.4 Registration Expenses. RTI shall pay all "registration expenses" (as
---------------------
defined below) in connection with any registration, qualification or
compliance under this Agreement. Abbott shall pay all "selling
expenses" (as defined below). The term "registration expenses" shall
mean all expenses, except for selling expenses, incurred by RTI in
complying with the registration provisions of this Agreement,
including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and disbursements of
counsel for RTI, accounting fees, blue sky fees and expenses, and the
expense of any attest service incident to or required by any such
registration. The term "selling expenses" shall mean all selling
commissions, underwriting fees, and stock transfer taxes applicable to
the Shares and all fees and disbursements of counsel for Abbott.
2.5 Obligations of RTI. In the case of a registration effected by RTI
------------------
pursuant to this
-3-
Article 2, RTI will use reasonable efforts to:
(a) keep such registration effective until the earliest of:
(i) such date as all of the Shares have been sold, or
(ii) if RTI is not then eligible to effect such registration on Form
S-3 (or a similar successor form), one hundred and twenty (120)
days after the effective date of the Registration Statement, or
(iii) the termination of the registration rights pursuant to Section
2.9 of this Agreement.
(b) prepare and file with the SEC such amendments and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to comply with the provisions of
the Securities Act with respect to the disposition of all securities
covered by the Registration Statement;
(c) furnish such number of prospectuses, prospectus supplements, and other
documents incident thereto, including any amendment of or supplement to the
prospectus, as Abbott from time to time may reasonably request;
(d) cause all Shares registered as described in this Agreement to be listed on
any securities exchange or quoted on any quotation service on which similar
securities issued by RTI are then listed or quoted;
(e) provide a transfer agent and registrar for all Registrable Securities
registered pursuant to the Registration Statement and a CUSIP number for
all such Shares;
(f) otherwise use reasonable efforts to comply with all applicable rules and
regulations of the SEC; and
-4-
(g) file the documents required of RTI and otherwise use reasonable
efforts to maintain requisite blue sky clearance in:
(i) all jurisdictions in which any of the Shares are sold
originally; and
(ii) all other states specified in writing by Abbott, provided as
to this clause (ii), however, that RTI shall not be required
to qualify to do business or consent to service of process
in any state in which it is not now so qualified or has not
so consented.
2.6 Selling Procedures.
------------------
(a) In the event Abbott intends to resell Shares pursuant to a
Registration Statement, Abbott shall give RTI five (5) business
days notice of its intent to sell in reliance on such
Registration Statement (the "Notice of Sale"). RTI may refuse to
permit Abbott to resell any Shares pursuant to the Registration
Statement; provided, however, that in order to exercise this
right, RTI must deliver to Abbott a certificate in writing
within three (3) business days following its receipt of the
Notice of Sale from Abbott to the effect that a sale pursuant to
the Registration Statement in its then current form could
constitute a violation of the federal securities laws. In such an
event, RTI shall either (i) use commercially reasonable efforts
to amend promptly the Registration Statement, if necessary, and
take all other actions necessary to allow such sale under the
federal securities laws, and shall notify Abbott promptly after
it has determined that such sale has become permissible under the
federal securities laws, or (ii) exercise its right under
paragraph (b) below to delay the sale.
(b) If in the good faith judgment of the Board of Directors of RTI,
after consultation with counsel, the filing of a Registration
Statement or an amendment thereto or prospectus supplement so as
permit the proposed sale without a violation of securities laws
would materially adversely affect a pending or scheduled public
offering, or an acquisition, merger, or similar transaction, or
negotiations of either of the foregoing, or would require the
disclosure of another material development prior to the time it
would otherwise be required to be disclosed in a manner adverse
to the best interests of RTI, then it may decline to permit the
resale of any Shares pursuant to the Registration Statement for
up to a maximum of ninety (90) days, provided that it may not
exercise this right more than once in any twelve (12) month
period.
(c) If RTI has delivered a prospectus to Abbott and after having done
so the prospectus is amended to comply with the requirements of
the Securities
-5-
Act, RTI shall reasonably promptly notify Abbott and, if
requested, Abbott shall immediately cease making offers of
Registrable Securities and return all prospectuses to the
Company. The Company shall reasonably promptly provide
Abbott with revised prospectuses and, following receipt of
the revised prospectuses, Abbott shall be free to resume
making offers of the Registrable Securities.
(d) Abbott covenants and agrees that it will not sell any Shares
pursuant to a Registration Statement during the periods
sales in reliance upon the Registration Statement are
prohibited as set forth in this Section 2.6.
2.7 Information from Xxxxxx. It shall be a condition precedent to the
-----------------------
obligations of RTI to take any action pursuant to Article 2 of
this Agreement with respect to the Shares that Abbott shall
furnish to RTI such information as RTI may reasonably request,
including information regarding Abbott, the Shares held by it,
the intended method of disposition of such securities, and such
other information as required to effect the registration of the
Shares.
2.8 Assignment of Registration Rights. The right to cause RTI to
---------------------------------
register the Shares pursuant to this Agreement may be assigned by
Abbott to a transferee of the Shares only if:
(a) RTI is, prior to such transfer, furnished with written
notice of the name and address of such transferee and the
Shares with respect to which such registration rights are
being assigned and a copy of a duly executed written
instrument in form reasonably satisfactory to RTI by which
transferee assumes all of the obligations and liabilities
of its transferor hereunder and agrees itself to be bound
hereby;
(b) immediately following such transfer the disposition of the
Shares by the transferee is restricted under the Securities
Act;
(c) such assignment includes all of the Shares then held by
Abbott; provided, however, that such share limitation shall
-------- -------
not apply to transfers by Abbott to its affiliates if all
such transferees or assignees agree in writing to appoint
a single representative as their attorney-in-fact for the
purpose of receiving any notices and exercising their rights
under this Agreement; and
(d) Abbott guarantees the performance of the transferee of its
obligations under this Agreement.
2.9 Termination of Registration Rights. The registration rights
----------------------------------
provided in this Agreement shall terminate if Abbott may sell all
of the Shares pursuant to Rule 144 in any three (3) month period.
Upon the termination of registration rights
-6-
pursuant to this Section 2.9, RTI may withdraw the Registration
Statement, or any portion thereof, covering the Shares.
2.10 Reports Under Securities Exchange Act of 1934. With a view to making
---------------------------------------------
available to Abbott the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at
any time permit Abbott to sell securities of RTI to the public without
registration or pursuant to a registration on Form S-3, RTI agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety
(90) days after the effective date of the first registration
statement filed by RTI for the offering of its securities to the
general public;
(b) file with the SEC in a timely manner all reports and other
documents required of RTI under the Securities Act and the
Exchange Act; and
(c) furnish to Abbott, so long as Abbott owns any Shares, forthwith
upon request (i) a written statement by RTI that it has complied
with the reporting requirements of SEC Rule 144 (at any time
after ninety (90) days after the effective date of the first
registration statement filed by RTI), the Securities Act and the
Exchange Act (at any time after it has become subject to such
reporting requirements), or that it qualifies as a registrant
whose securities may be resold pursuant to Form S-3, (ii) a copy
of the most recent annual or quarterly report of RTI and such
other reports and documents so filed by RTI, and (iii) such other
information as may by reasonably requested in availing Abbott of
any rule or regulation of the SEC that permits the selling of any
such securities without registration or pursuant to such form.
2.12 "Lock-up" Agreement; Confidentiality of Notices.
-----------------------------------------------
(a) If requested by the managing underwriter of an underwritten
public offering by RTI of RTI common stock, Abbott hereby agrees
that, for a period of one hundred eighty (180) days following the
effective date of a Registration Statement, (i) it will not
offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any
shares of RTI common stock or any securities convertible into or
exercisable or exchangeable for RTI common stock; (ii) it will
not enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of
ownership of the RTI common stock, whether any such transaction
described in clause (i) or (ii) above is to be settled by
-7-
delivery of RTI common stock or such other securities, in cash or
otherwise; and (iii) it shall execute any other customary lock-up
agreements as may be requested by the managing underwriters,
provided that all stockholders holding not less than the number
of shares of RTI common stock held by Abbott (including the
shares of RTI common stock issuable upon conversion of the
Shares, or other convertible securities, or upon exercise of
options, warrants or rights) and all officers and directors of
RTI enter into similar agreements.
(b) RTI may impose stop-transfer instructions with respect to
Registrable Securities or other securities subject to the
foregoing restrictions until the end of the applicable lock-up
period.
(c) Abbott shall treat confidentially any written notice received by
Abbott from RTI regarding RTI's plans to file a Registration
Statement and shall not disclose such information to any person
other than as necessary to exercise its rights under this
Agreement.
3. Indemnification and Contribution.
--------------------------------
3.1 Indemnification by RTI. RTI agrees to indemnify and hold harmless
----------------------
Abbott, each of Xxxxxx'x directors, officers and U.S. wholly-owned
subsidiaries, and each person, if any, who controls Abbott within the
meaning of the Securities Act or the Exchange Act, from and against
any losses, claims, damages, or liabilities (or actions or proceedings
in respect thereof) to which they may become subject (under the
Securities Act or otherwise) insofar as such losses, claims, damages,
or liabilities (or actions or proceedings in respect thereof) arise
out of, or are based upon any untrue statements of a material fact
contained in (or upon the omission of a material fact from) a
Registration Statement delivered or circulated by Abbott in connection
with a sale of RTI securities by Abbott, or arise out of any failure
by RTI to fulfill any undertaking included in the Registration
Statement, and RTI will, as incurred reimburse Abbott and such persons
for any legal or other expenses reasonably incurred in investigating,
defending or preparing to defend any such action, proceeding, or
claim; provided, however, that RTI shall not be liable in any such
case to the extent that such loss, claim, damage, or liability arises
out of, or is based upon:
(a) an untrue statement made in (or upon the omission of a material
fact from) such Registration Statement in reliance upon and in
conformity with written information furnished to RTI by or on
behalf of Abbott specifically for use in preparation of the
Registration Statement,
(b) the failure of Abbott to comply with the covenants or agreements
contained in Section 2.6 hereof, or
-8-
(c) any untrue statement or omission in any prospectus that is
corrected in any subsequent prospectus that was delivered to
Abbott prior to the pertinent sale or sales by Abbott.
3.2 Indemnification by Xxxxxx. Xxxxxx agrees to indemnify and hold
-------------------------
harmless RTI, each of RTI's directors and officers, and each
person, if any, who controls RTI within the meaning of the
Securities Act or the Exchange Act, from and against any losses,
claims, damages or liabilities (or actions or proceedings in
respect thereof) to which they may become subject (under the
Securities Act or otherwise) insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect
thereof) arise out of, or are based upon:
(a) either an untrue statement made in or the omission of a
material fact from such Registration Statement in reliance
upon and in conformity with written information furnished to
RTI by or on behalf of Abbott specifically for use in
preparation of the Registration Statement,
(b) the failure of Abbott to comply with the covenants or
agreements contained in Section 2.6 hereof, or
(c) any untrue statement or omission in any prospectus that is
corrected in any subsequent prospectus that was delivered to
Abbott prior to the pertinent sale or sales by Abbott, and
Abbott will, as incurred, reimburse RTI and such persons for
any legal or other expenses reasonably incurred in
investigating, defending, or preparing to defend any such
action, proceeding, or claim;
provided, however, that in no event shall Xxxxxx'x cumulative
aggregate liability under this Section 3.2, or under Section 3.4,
or under Sections 3.2 and 3.4 together, exceed the net amount
received by Abbott from the sale of the Shares to which such loss
relates minus the amount of any damages which Abbott has
otherwise been required to pay by reason of such untrue or
allegedly untrue statement or omission or alleged omission.
-9-
3.3 Indemnification Procedures. Promptly after receipt by any indemnified party
--------------------------
of a notice of a claim or the beginning of any action in respect of which
indemnity is to be sought against an indemnifying person pursuant to this
Article 3, such indemnified person shall notify the indemnifying person in
writing of such claim or of the commencement of such action and, subject to
the provisions hereinafter stated, in case any such action shall be brought
against an indemnified person and the indemnifying person shall have been
notified thereof, the indemnifying person shall be entitled to participate
therein, and, to the extent that it shall wish, to assume the defense
thereof, with counsel reasonably satisfactory to the indemnified person.
After notice from the indemnifying person to such indemnified person of the
indemnifying person's election to assume the defense thereof, the
indemnifying person shall not be liable to such indemnified person for any
legal expenses subsequently incurred by such indemnified person in
connection with the defense thereof; provided, however, that if there
exists or shall exist a conflict of interest that would make it
inappropriate in the reasonable judgment of the indemnified person for the
same counsel to present both the indemnified person and such indemnifying
person or any affiliate or associate thereof, the indemnified person shall
be entitled to retain its own counsel at the expense of such indemnifying
person.
3.4 Contribution. If the indemnification provided for in this Article 3 is
------------
unavailable to or insufficient to hold harmless an indemnified party under
Section 3.1 or 3.2 above in respect of any losses, claims, damages, or
liabilities (or actions or proceedings in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, or liabilities (or actions in respect thereof) in such proportion
as is appropriate to reflect the relative fault of RTI on one hand and
Abbott on the other in connection with the statements or omissions which
resulted in such losses, claims, damages, or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact related to
information supplied by RTI on one hand or Abbott on the other and the
parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement or omission; provided, however, that
in no event shall Xxxxxx'x cumulative aggregate liability under this
Section 3.4, or under Section 3.2, or under Sections 3.2 and 3.4 together,
exceed the net amount received by Abbott from the sale of the Shares to
which such loss relates minus the amount of any damages which Abbott has
otherwise been required to pay by reason of such untrue or allegedly untrue
statement or omission or alleged omission. RTI and Abbott agree that it
would not be just and equitable if contribution pursuant to this Section
3.4 were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations
referred to above in this Section 3.4. The amount paid or payable
-10-
by an indemnified party as a result of the losses, claims,
damages, or liabilities (or actions in respect thereof) referred
to above in this Section 3.4 shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or
claim. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
3.5 Continuing Obligations. The obligations of RTI and Abbott under
----------------------
this Article 3 shall survive the completion of the offering of
the Shares pursuant to the Registration Statement and shall be in
addition to any liability that RTI and Abbott may otherwise have.
4. Miscellaneous.
-------------
4.1 Waiver. The failure on the part of RTI or Abbott to exercise or
------
enforce any right conferred upon it hereunder shall not be deemed
to be a waiver of any such right, nor operate to bar the exercise
or enforcement thereof at any time or times thereafter.
4.2 Notices. Any notice required or permitted to be given by the
-------
terms of this Agreement by a party shall be given by prepaid,
registered air mail or by express delivery service, such as
Federal Express or DHL, properly addressed to the address of the
other party set forth below, or to such other address as may,
from time to time, be designated in writing by such other party,
and shall be deemed to have been given upon receipt:
As to Abbott:
Senior Vice President
Hospital Products Division
Xxxxxx Laboratories
000 Xxxxxx Xxxx Xxxx
Xxxxxx Xxxx, Xxxxxxxx 00000-0000
With copy (which will not constitute notice) to:
Divisional Vice President, D-322
Xxxxxx Laboratories
000 Xxxxxx Xxxx Xxxx
XX0X X-000
Xxxxxx Xxxx, Xxxxxxxx 00000-0000
-11-
As to RTI:
Retractable Technologies, Inc.
000 Xxxx Xxxx
Xxxxxx Xxx, Xxxxx 00000
Attn: Xxxxxx X. Xxxx, Chief
Executive Officer and President
With copy (which will not constitute notice) to:
Retractable Technologies, Inc.
Legal Department
000 Xxxx Xxxx
Xxxxxx Xxx, Xxxxx 00000
Attn: Xxxxxxx Xxxxxx
4.3 Applicable Law. The corporate law of the State of Texas shall
--------------
govern all issues concerning the relative rights of RTI and its
stockholders. All other questions concerning the construction,
validity and interpretation of this Agreement shall be construed
and interpreted according to the law of the State of Illinois,
without giving effect to its conflict of law provisions.
4.4 Alternative Dispute Resolution. The parties shall attempt to
------------------------------
amicably resolve disputes arising between them regarding the
validity, construction, enforceability, or performance of the
terms of this Agreement and any differences or disputes in the
interpretation of the rights, obligations, liabilities and/or
remedies hereunder, which have been identified in a written
notice from one party to the other, by good faith settlement
discussions between the President of Xxxxxx'x Hospital Products
division and the President and Chief Executive Officer of RTI.
The parties agree that any dispute that arises in connection with
the Agreement, which cannot be amicably resolved by such
representative within thirty (30) days after the receipt of such
written notice, shall be resolved by binding Alternative Dispute
Resolution ("ADR") in the manner described in Annex B to the
Credit Agreement.
4.5 Captions. The captions to the Articles and Sections of this
--------
Agreement are for convenience only, and shall not be deemed of
any force or effect whatsoever in construing this Agreement.
4.6 Entire Agreement. The terms and provisions contained herein,
----------------
including the Annex hereto, and the Credit Agreement and the
exhibits and annexes thereto, constitute the entire agreement
between the parties and shall supersede all previous
communications, representations, agreements or understandings,
either oral or written, between the parties hereto with respect
to the subject matter hereof. No amendment to this Agreement
varying or extending the terms hereof will be binding upon either
party hereto unless in writing, signed by duly authorized
officers of the respective parties, and referencing this
Agreement.
-12-
4.7 Assignment. This Agreement shall not be assignable by the parties,
----------
except as permitted under section 2.9 or (a) to an Affiliate of such
party, provided the assigning party guarantees the performance of the
Affiliate, (b) as mutually agreed to in writing in advance, or (c) as
incident to the merger, consolidation, reorganization, or acquisition
of stock or assets affecting actual voting control of the assigning
party or affecting all or substantially all of the assets of such
party to which this Agreement relates. Any permitted assignment shall
be binding on the successors of the assigning party. Any assignment or
attempted assignment by any party in violation of the terms of this
Section 4.7, shall be null and void and of no legal effect. For
purposes of this Agreement, the term "Affiliate" shall mean, with
respect to any party hereto, any corporation or other form of
business organization, which directly owns, controls, is controlled
by, or is under common control with, such party. An entity shall be
regarded as being in control of another entity if the former entity
has the direct or indirect power to order or cause the direction of
the policies of the other entity whether (x) through the ownership of
more than fifty percent (50%) of the voting securities of the other
entity; or (y) by contract, statute, regulation, or otherwise.
4.8 Severability. In the event that any provision of this Agreement is
------------
held by a court of competent jurisdiction to be unenforceable because
it is invalid or in conflict with any law of any relevant
jurisdiction, (a) the validity of the remaining provisions shall not
be affected, (b) the particular provision shall to the extent
permitted by the law be reasonably construed and equitably reformed to
be valid and enforceable, and (c) the rights and obligations of the
parties shall be construed and enforced as if the Agreement did not
contain the unreformed, particular provisions held to be enforceable.
4.9 Counterparts. This agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their duly authorized officers as of the date first
above written.
XXXXXX LABORATORIES RETRACTABLE TECHNOLOGIES,
INC.
By:/s/Xxxxxxx X. Xxxxxxxx By:/s/ Xxxxxx X. Xxxx
---------------------- -------------------------
Xxxxxxx X. Xxxxxxxx
Title: Senior Vice President, Title: CEO
Hospital Products ----------------------
-13-
Credit Agreement
Exhibit B
Disclosure Schedule
(Confidential Private Placement
Memorandum Dated
January 11, 2000)
Credit Agreement
Exhibit C
Financial Statements and Reports
of Independent Accountants
for December 13, 1998, 1997, 1996
Credit Agreement
Exhibit D
Disclosure Statement
CREDIT AGREEMENT DISCLOSURE STATEMENT
RTI has raised additional capital in 1999 through issuance of its Series III
Convertible Preferred Stock in the amount of $11.6 million.
RTI has sold $1.6 million of its Series IV Convertible Preferred Stock in 2000.
RTI completed a loan and credit facility for $1.5 million and $.5 million,
respectively, in February 2000 through 1/st/ International Bank. These funds
were used to pay off an existing loan and provide additional funds for equipment
and working capital needs of RTI. The loan is secured by land, building, and
building improvements. It is the property located at 000 Xxxx Xxxx, Xxxxxx Xxx,
Xxxxx
The proceeds of the Credit Agreement will be used for equipment and
manufacturing operations.
RTI has no monetary judgments of $250,000 or more against it.
RTI currently has $3.7 million of long term debt, including current maturities.
RTI anticipates a debt to equity ratio no lower than 1:1 in five years. Current
projections are 1:20 in 2003.
Product liability insurance is $5 million each occurrence and $6 million
aggregate.
RTI currently has 1.4 million stock options and warrants outstanding.
RTI does provide Employee Benefits, such as medical, dental and life insurance
RTI Confidential
Retractable Technologies Inc.
Change Change
12/31/98 12/31/99 98 to 99 Apr-00 99 to Apr-00
Preferred Stock - Class A Series 1 5,000,000 5,000,000 -
Preferred Stock - Class B Series 1 1,000,000 1,000,000 -
Preferred Stock - Class B Series II 1,000,000 1,000,000 -
Preferred Stock - Class B Series III (note 1) - 1,160,200 1,160,200
Preferred Stock - Class B Series IV (note 2) - - - 1,615,000 1,615,000
Common Stock 1,000 1,000 -
Additional Paid in Capital 16,680,281 23,670,110 6,989,829
1. Sale of Series III Class B Convertible Stock
2. Sale of Series IV Class B Convertible Stock
Pledged Fixed Asset Listing (assumes Legacy Bank and Textron Financial are paid
off)
As of 4/19/2000
----------------------------------------------------------------------------------------------------------------------- -----------
Outstanding
Description Vendor/Mfg Acq Value Loan/Lease
Lender Asset Value Commitment
----------------------------------------------------------------------------------------------------------------------- -----------
Page 1 of 15
Confidential treatment has been requested for portions of this exhibit. The
copy filed herewith omits the information subject to the confidentiality
request. The request for confidential treatment covers 15 redacted pages. The
redacted information was separately filed with the Commission.
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") dated as of May 4, 2000,
--------- -
is between Retractable Technologies, Inc., a Texas corporation (the "Company"),
and Xxxxxx Laboratories, an Illinois corporation ("Abbott").
------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Abbott may from time to time make loans, advances or other
financial accommodations to the Company;
WHEREAS, the obligations of the Company to Abbott are to be secured
pursuant to this Agreement;
NOW, THEREFORE, for and in consideration of any loan, advance or other
financial accommodation heretofore or hereafter made to the Company by Abbott,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Definitions. When used herein, (a) the terms Equipment and
----------- ---------
Inventory shall have the respective meanings assigned to such terms in the
---------
Uniform Commercial Code (as defined below) and (b) the following terms have the
following meanings (such definitions to be applicable to both the singular and
plural forms of such terms):
Account Debtor means the party who is obligated on or under any Account
--------------
Receivable or Contract Right.
Account Receivable means any right of the Company to payment for goods
------------------
sold or leased or for services rendered.
Assignee Deposit Account - see Section 4.
------------------------ ---------
Collateral means all property and rights of the Company in which a
----------
security interest is granted hereunder.
Contract Right means any right of the Company to payment under a
--------------
contract for the sale or lease of goods or the rendering of services, which
right is at the time not yet earned by performance.
Credit Agreement means the credit agreement dated the date hereof
----------------
between Abbott and the Company and any amendment, modification or restatement
thereof.
Default means (i) an "Event of Default" is defined in the Credit
-------
Agreement or (ii) the occurrence of any default by the Company under any
agreement with the Abbott, including this Agreement.
Liabilities means all obligations (monetary or otherwise) of the
-----------
Company to Abbott, howsoever created, arising or evidenced, whether direct or
indirect, absolute or contingent, now or hereafter existing, or due or to become
due.
NMDA Payments - see Section 2.
-------------
Non-Tangible Collateral means, collectively, the Company's Accounts
-----------------------
Receivable with respect to which Abbott is the Account Debtor, Contract Rights
with respect to which Abbott is the Account Debtor and NMDA Payments.
Uniform Commercial Code means the Uniform Commercial Code as in effect
-----------------------
in the State of Illinois on the date of this Agreement; provided that, as used
in Section 8 hereof, "Uniform Commercial Code" shall mean the Uniform Commercial
Code as in effect from time to time in the applicable jurisdiction.
2. Grant of Security Interest. As security for the payment of all
--------------------------
Liabilities, the Company hereby assigns to Abbott, and grants to Abbott a
continuing security interest in, the following, whether now or hereafter
existing or acquired:
All of the Company's:
(i) Accounts Receivable; with respect to which Abbott is the Account
Debtor;
(ii) Contract Rights; with respect to which Abbott is the Account
Debtor;
(iii) right, title and interest in payments (the "NMDA Payments") owed
by Abbott to the Company under the National Marketing and
Distribution Agreement between the Company and Abbott dated the
date hereof;
(iv) finished goods manufactured pursuant to the terms of the
National Marketing and Distribution Agreement, allocated for
Abbott, and thereby identified with Abbott Lot Numbers; and
(v) unencumbered molds as listed in Schedule IV, and all additions,
improvements, substitutions and replacements thereto;
together with all books, records, writings, data bases,
information and other property relating to, used or useful in
connection with, or evidencing, embodying, incorporating or
referring to any of the foregoing, and all proceeds, products,
offspring, rents, issues, profits and returns of and from any of
the foregoing.
3. Warranties. The Company warrants that: (i) no financing statement
----------
covering any of the Collateral is on file in any public office, except for the
benefit of Abbott; (ii) the Company is and will be the lawful owner of all
Collateral, free of all liens and claims whatsoever, other than the security
interest hereunder with full power and authority to execute this Agreement and
-2-
perform its obligations hereunder, and to subject the Collateral to the security
interest hereunder; (iii) all information with respect to Collateral set forth
in any schedule, certificate or other writing at any time heretofore or
hereafter furnished by the Company to Abbott is and will be true and correct in
all material respects as of the date furnished; (iv) the Company's chief
executive office and principal place of business are as set forth on Schedule I
----------
hereto (and the Company has not maintained its chief executive office and
principal place of business at any other location at any time after July 1,
1999); (v) each other location where the Company maintains a place of business
is set forth on Schedule II hereto; (vi) except as set forth on Schedule III
----------- ------------
hereto, the Company is not now known and during the five years preceding the
date hereof has not previously been known by any trade name; (vii) except as set
forth on Schedule III hereto, during the five years preceding the date hereof
------------
the Company has not been known by any legal name different from the one set
forth on the signature pages of this Agreement nor has the Company been the
subject of any merger or other corporate reorganization; (viii) the Company is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation; (ix) the execution and delivery of this
Agreement and the performance by the Company of its obligations hereunder are
within the Company's corporate powers, have been duly authorized by all
necessary corporate action, have received all necessary governmental approval
(if any shall be required), and do not and will not contravene or conflict with
any provision of law or of the charter or by-laws of the Company or of any
material agreement, indenture, instrument or other document, or any material
judgment, order or decree, which is binding upon the Company; (x) this Agreement
is a legal, valid and binding obligation of the Company, enforceable in
accordance with its terms, except that the enforceability of this Agreement may
be limited by bankruptcy, insolvency, fraudulent conveyance, fraudulent
transfer, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and by general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity or
at law); and (xi) the Company is in compliance with the requirements of all
applicable laws (including the provisions of the Fair Labor Standards Act),
rules, regulations and orders of every governmental authority, the non-
compliance with which would reasonably be expected to result in a material
adverse effect on the Company's business, condition (financial or otherwise),
properties or prospects.
4. Collections, etc. Until such time during the existence of a
----------------
Default as Abbott shall notify the Company of the revocation of such power and
authority, the Company may, in the ordinary course of its business, at its own
expense, sell, lease or furnish under contracts of service any of the Inventory
normally held by the Company for such purpose, use and consume, in the ordinary
course of its business, any raw materials, work in process or materials normally
held by the Company for such purpose, and use, in the ordinary course of its
business (but subject to the terms of any agreement with Abbott), the cash
proceeds of Collateral and other money which constitutes Collateral. Abbott,
however, may, at any time that a Default exists, whether before or after any
revocation of such power and authority or the maturity of any of the
Liabilities, make payments directly to Abbott of any amounts due or to become
due in respect of the Collateral.
Upon request by Abbott during the existence of a Default, the Company
will forthwith, upon receipt, transmit and deliver to Abbott, in the form
received, all cash, checks, drafts and other instruments or writings for the
payment of money (properly endorsed, where required, so that such items may be
collected by Abbott) which may be received by the Company at any time in full or
partial payment or otherwise as proceeds of any of the Collateral. Except as
Abbott may otherwise consent in writing, any such items which may be so received
by the Company
-3-
will not be commingled with any other of its funds or property, but will be held
separate and apart from its own funds or property and upon express trust for
Abbott until delivery is made to Abbott. The Company will comply with the terms
and conditions of any consent given by Abbott pursuant to the foregoing
sentence.
During the existence of a Default, all items or amounts which are
delivered by the Company to Abbott on account of partial or full payment or
otherwise as proceeds of any of the Collateral shall be deposited to the credit
of a deposit account (the "Assignee Deposit Account") of the Company with a
------------------------
financial institution selected by Abbott over which Abbott has sole dominion
and control, as security for payment of the Liabilities. The Company shall not
have any right to withdraw any funds deposited in the Assignee Deposit Account.
Abbott may, from time to time, in its discretion, and shall upon request of the
Company made not more than once in any week, apply all or any of the then
balance, representing collected funds, in the Assignee Deposit Account toward
payment of the Liabilities, whether or not then due, in such order of
application as Abbott may determine, and Abbott may, from time to time, in its
discretion, release all or any of such balance to the Company.
Abbott (or any designee thereof) is authorized to endorse, in the name
of the Company, any item, howsoever received by Abbott, representing any
payment on or other proceeds of any of the Collateral.
5. Certificates, Schedules and Reports. The Company will from time
-----------------------------------
to time, as Abbott may request, deliver to Abbott such schedules, certificates
and reports respecting all or any of the Collateral at the time subject to the
security interest hereunder, and the items or amounts received by the Company
in full or partial payment of any of the Collateral, as Abbott may reasonably
request. Any such schedule, certificate or report shall be executed by a duly
authorized officer of the Company and shall be in such form and detail as
Abbott may specify. The Company shall immediately notify Abbott of the
occurrence of any event causing any loss or depreciation in the value of its
Inventory pledged hereunder which is material to the Company, and such notice
shall specify the amount of such loss or depreciation.
6. Agreements of the Company. The Company (a) will, upon request of
-------------------------
Abbott, execute such financing statements and other documents (and pay the cost
of filing or recording the same in all public offices reasonably deemed
appropriate by Abbott) and do such other acts and things, all as Abbott may
from time to time reasonably request, to establish and maintain a valid
security interest in the Collateral (free of all other liens, claims and rights
of third parties whatsoever) to secure the payment of the Liabilities; (b) will
keep all its Inventory at, and will not maintain any place of business at any
location other than, its address(es) shown on Schedules I and II hereto or at
----------- --
such other addresses of which the Company shall have given Abbott not less than
10 days' prior written notice, (c) will keep its records concerning the
Non-Tangible Collateral in such a manner as will enable Abbott or its designees
to determine at any time the status of the Non-Tangible Collateral; (d) will
furnish Abbott such information concerning the Company, the Collateral and the
Account Debtors as Abbott may from time to time reasonably request; (e) will
permit Abbott and its designees, from time to time, on reasonable notice and at
reasonable times and intervals during normal business hours (or at any time
without notice during the existence of a Default) to inspect the Company's
Inventory pledged hereunder, and to inspect, audit and make copies of and
extracts from all records and other papers in the possession of the Company
pertaining to the Collateral, and will, upon request of Abbott during the
existence of a Default, deliver to Abbott all of such records and papers;(f)
except for the sale or
-4-
lease of Inventory in the ordinary course of its business and sales of Equipment
which is no longer useful in its business or which is being replaced by similar
Equipment, will not sell, lease, assign or create or permit to exist any lien or
security interest on any Collateral; (g) will at all times keep all of its
Inventory pledged hereunder insured under policies maintained with reputable,
financially sound insurance companies against loss, damage, theft and other
risks to such extent as is customarily maintained by companies similarly
situated, and cause all such policies to provide that loss thereunder shall be
payable to Abbott as its interest may appear (it being understood that (A) so
long as no Default exists, Abbott shall deliver any proceeds of such insurance
which may be received by it to the Company and (B) whenever a Default exists,
Abbott may apply any proceeds of such insurance which may be received by it
toward payment of the Liabilities, whether or not due, in such order of
application as Abbott may determine), and such policies or certificates thereof
shall, if Abbott so requests, be deposited with or furnished to Abbott; (h) will
take such actions as are reasonably necessary to keep its Inventory pledged
hereunder in good repair and condition; (i) will take such actions as are
reasonably necessary to keep its Equipment pledged hereunder in good repair and
condition and in good working order, ordinary wear and tear excepted; (j) will
promptly pay when due all license fees, registration fees, taxes, assessments
and other charges which may be levied upon or assessed against the ownership,
operation, possession, maintenance or use of its Equipment pledged hereunder and
other Goods; (k) will, upon request of Abbott, (i) cause to be noted on the
applicable certificate, in the event any of its Equipment is covered by a
certificate of title, the security interest of Abbott in the Equipment covered
thereby, and (ii) deliver all such certificates to Abbott or its designees; (l)
will take all steps reasonably necessary to protect, preserve and maintain all
of its rights in the Collateral; (m) will keep all of the tangible Collateral in
the United States; and (n) will reimburse Abbott for all expenses, including
reasonable attorney's fees and charges, incurred by Abbott in seeking to collect
or enforce any rights in respect of the Collateral.
Any expenses incurred in protecting, preserving or maintaining any
Collateral shall be borne by the Company.
7. Default. Whenever a Default shall be existing, Abbott may
-------
exercise from time to time any right or remedy available to it under applicable
law. The Company agrees, in case of Default, (i) to assemble, at its expense,
all its Inventory pledged hereunder at a convenient place or places acceptable
to Abbott. Any notification of intended disposition of any of the Collateral
required by law shall be deemed reasonably and properly given if given at least
ten days before such disposition. Whenever a Default shall be existing, any
proceeds of any disposition by Abbott of any of the Collateral and any NMDA
Payments or payments under Accounts Receivable or Contract Right, may be applied
directly by Abbott to payment of expenses in connection with the Collateral,
including reasonable attorney's fees and charges (including time charges of
attorneys who are employees of Abbott), and any balance of such proceeds, NMDA
Payments and payments may be applied by Abbott toward the payment of such of the
Liabilities, and in such order of application, as Abbott may from time to time
elect. After proceeds in an amount equal to $1,000,000 for Collateral described
in Section 2(v) are applied pursuant to this Section 7, Abbott shall return all
remaining Collateral described in Section 2(v) and all remaining proceeds
thereof to the Company.
8. General. Abbott shall be deemed to have exercised reasonable care
-------
in the custody and preservation of any of the Collateral in its possession if it
takes such action for that purpose as the Company requests in writing, but
failure of Abbott to comply with any such request shall not of itself be deemed
a failure to exercise reasonable care, and no failure of
-5-
Abbott to preserve or protect any right with respect to such Collateral against
prior parties, or to do any act with respect to the preservation of such
Collateral not so requested by the Company, shall be deemed of itself a failure
to exercise reasonable care in the custody or preservation of such Collateral.
Any notice shall be given in the manner provided under the Credit
Agreement.
The Company agrees to pay all expenses, including reasonable attorney's
fees and charges paid or incurred by Abbott in endeavoring to collect the
Liabilities, or any part thereof, and in enforcing this Agreement, and such
obligations will themselves be Liabilities.
No delay on the part of Abbott in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by Abbott
of any right or remedy shall preclude other or further exercise thereof or the
exercise of any other right or remedy.
This Security Agreement shall remain in full force and effect until all
Liabilities have been paid in full and all commitments by Abbott to make loans,
advances or other financial accommodations to the Company have terminated. If
at any time all or any part of any payment theretofore applied by Abbott to any
of the Liabilities is or must be rescinded or returned by Abbott for any reason
whatsoever (including the insolvency, bankruptcy or reorganization of the
Company), such Liabilities shall, for the purposes of this Agreement, to the
extent that such payment is or must be rescinded or returned, be deemed to have
continued in existence, notwithstanding such application by Abbott, and this
Agreement shall continue to be effective or be reinstated, as the case may be,
as to such Liabilities, all as though such application by Abbott had not been
made.
This Agreement shall be construed in accordance with and governed by
the laws of the State of Illinois applicable to contracts made and to be fully
performed in such State, subject, however, to the applicability of the Uniform
Commercial Code of any jurisdiction in which any Goods may be located at any
given time. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
The rights and privileges of Abbott hereunder shall inure to the
benefit of its successors and assigns.
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, and each such counterpart
shall be deemed to be an original, but all such counterparts shall together
constitute one and the same Agreement.
This Agreement and the Collateral shall not be subject to the
subordination agreement set forth in Section 9 of the Credit Agreement.
-6-
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
XXXXXX LABORATORIES
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------------------
Title: Senior Vice President, Hospital Products
----------------------------------------
RETRACTABLE TECHNOLOGIES, INC.
By: /s/ Xxxxxx X. Xxxx
---------------------------------------------
Title: CEO
-----------------------------------------
-7-
SCHEDULE I
----------
The Company's chief executive office is located at:
000 Xxxx Xxxx
Xxxxxx Xxx, XX 00000
-8-
SCHEDULE II
-----------
The Company also has a location at:
000 Xxxxx Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
-9-
SCHEDULE III
None
-10-
SCHEDULE IV
-----------
Security Agreement
Unencumbered Molds
---------------------------------------------------------------------------------------
Category Description Vendor
---------------------------------------------------------------------------------------
Production Molds Magor Mold 10cc Family from CIP Magor Mold
---------------------------------------------------------------------------------------
Magor Mold 5cc Family from CIP Magor Mold
---------------------------------------------------------------------------------------
8 cavity Tubeholder Housing mold Magor Mold
---------------------------------------------------------------------------------------
Magor Mold 8 cavity Tubeholder-Small Tube Adapter Magor Mold
---------------------------------------------------------------------------------------
Magor Mold cavity Tubeholder Activation Tube Magor Mold
---------------------------------------------------------------------------------------
Magor Mold 8 cavity Tubeholder - Threaded Disk Magor Mold
---------------------------------------------------------------------------------------
Magor Mold/Mold #1522 (cavities match Mold 1498) Magor Mold
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
Molds on Order Magor Mold 32 cavity housing for 1cc line Magor Mold
---------------------------------------------------------------------------------------
Magor Mold 16 cavity runner for 1cc line Magor Mold
---------------------------------------------------------------------------------------
-11-
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is made as of May 4,
2000, by and between Retractable Technologies, Inc., a Texas corporation with
its principal office at 000 Xxxx Xxxx, Xxxxxx Xxx, Xxxxx 00000 ("RTI"), and
Xxxxxx Laboratories, an Illinois corporation with its principal office at 000
Xxxxxx Xxxx Xxxx, Xxxxxx Xxxx, Xxxxxxxx 00000-0000 ("Abbott").
RECITALS
WHEREAS, RTI and Abbott have entered into a Credit Agreement (the
"Credit Agreement") of even date herewith; and
WHEREAS, the execution and delivery of this Agreement are a condition
to the Closing of the Credit Agreement;
NOW, THEREFORE, RTI and Abbott agree as follows:
1. Definitions. All terms not otherwise defined in this Agreement shall
-----------
have the same meanings ascribed to them in the Credit Agreement. For purposes of
this Agreement:
1.1 Exchange Act. The term "Exchange Act" shall mean the Securities
------------
Exchange Act of 1934, as amended.
1.2 Register, Registered, and Registration. The terms "register,"
--------------------------------------
"registered," and "registration" refer to a registration effected
by preparing and filing a registration statement or similar
document in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such registration
statement or document.
1.3 Registrable Securities. The term "Registrable Securities" means
----------------------
such portion of the Shares that has not previously been
registered or sold to the public.
1.4 Registration Statement. The term "Registration Statement" means a
----------------------
registration statement filed with the SEC under the Securities
Act to register the resale of the Registrable Securities by
Abbott.
1.5 Rule 144. The term "Rule 144" shall mean Rule 144, or its
--------
successor rule, promulgated by the SEC.
1.6 SEC. The term "SEC" shall mean the Securities and Exchange
---
Commission.
RTI - Reg. Rights Agmt
May 2, 2000 -1-
1.7 Securities Act. The term "Securities Act" means the Securities
--------------
Act of 1933, as amended.
1.8 Shares. The term "Shares" means the shares of common stock of
------
RTI, no par value, issuable or issued upon conversion of the Note
issued pursuant to the Credit Agreement, and any shares of common
stock of RTI issued as a dividend or other distribution with
respect to such capital stock.
2. Registration. RTI covenants and agrees as follows:
------------
2.1 S-3 Registration. At any time after RTI becomes eligible to file
----------------
a Registration Statement on Form S-3 (or any successor form
relating to secondary offerings), Abbott may request RTI, in
writing, to effect a registration on Form S-3 (or such successor
form), of Registrable Securities. Thereupon, RTI shall, as
expeditiously as possible, use its best efforts to effect the
registration on Form S-3 (or such successor form) of all
Registrable Securities which RTI has been requested to so
register. The right to request registration on Form S-3 pursuant
to this Section 2.1 may not be exercised more than three (3)
times by Abbott. RTI shall not be required to include any
Registrable Securities in such registration unless Abbott accepts
the terms of the underwriting as agreed upon between RTI and the
underwriters selected by RTI (provided that such terms must be
consistent with this Agreement and are applicable to other
shareholders offering their shares in such registration).
2.2 Piggyback Registration. Whenever RTI proposes to register any of
----------------------
its securities under the Securities Act for a public offering for
cash, whether as a primary or secondary offering or pursuant to
registration rights granted to holders of other securities of RTI
other than (a) a registration relating solely to employee benefit
plans on Form S-8 (or a similar successor form), or (b) a
registration on Form S-4 (or a similar successor form) relating
solely to a transaction subject to Rule 145 under the Securities
Act), RTI will promptly give Abbott written notice thereof, and
subject to the terms of Section 2.3 below, use its reasonable
efforts to include in such registration (and any related
qualification under blue sky laws or other compliance), and in
any underwriting involved therein, all Registrable Securities
specified in a written request to RTI made within fifteen (15)
business days after the receipt of such written notice by Abbott.
RTI - Reg. Rights Agmt
May 2, 2000 -2-
2.3 Underwriting.
------------
(a) If the registration of which RTI gives notice pursuant to
Section 2.2 is for a registered offering involving an
underwriting, then Xxxxxx'x right to registration shall be
conditioned upon Xxxxxx'x participation in the underwriting
and the inclusion of Xxxxxx'x Registrable Securities in the
underwriting to the extent provided in this Agreement.
Abbott [together with RTI and the holders of other
securities of RTI distributing their securities through that
underwriting (such other holders being termed the "Other
Holders")] shall enter into an underwriting agreement in
customary form with the representative of the underwriter or
underwriters selected by RTI.
(b) Notwithstanding any other provision of this Article 2, if
the representative of the underwriters advises RTI in
writing that marketing factors require a limitation on the
number of shares to be underwritten, then RTI shall so
inform Abbott and the Other Holders. The number of shares of
RTI common stock being sold by RTI for its own account shall
not be reduced by operation of this Section 2.3. The number
of shares of Registrable Securities held by Abbott and the
Other Holder(s) that may be included in the underwriting (in
addition to those being sold by RTI for its own account)
shall be allocated among Abbott and the Other Holders in
proportion (as nearly as practicable) to the amount of
Registrable Securities owned by each such holder.
(c) Any holder which does not agree to the terms of the such
underwriting shall be excluded from that underwriting by
written notice from RTI or the underwriter. Any Registrable
Securities or other securities excluded or withdrawn from
that underwriting shall be withdrawn from the registration.
2.4 Registration Expenses. RTI shall pay all "registration expenses"
---------------------
(as defined below) in connection with any registration,
qualification or compliance under this Agreement. Abbott shall
pay all "selling expenses" (as defined below). The term
"registration expenses" shall mean all expenses, except for
selling expenses, incurred by RTI in complying with the
registration provisions of this Agreement, including, without
limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel
for RTI, accounting fees, blue sky fees and expenses, and the
expense of any attest service incident to or required by any such
registration. The term "selling expenses" shall mean all selling
commissions, underwriting fees, and stock transfer taxes
applicable to the Shares and all fees and disbursements of
counsel for Abbott.
2.5 Obligations of RTI. In the case of a registration effected by RTI
------------------
pursuant to this
RTI - Reg. Rights Agmt
May 2, 2000 -3-
Article 2, RTI will use reasonable efforts to:
(a) keep such registration effective until the earliest of:
(i) such date as all of the Shares have been sold, or
(ii) if RTI is not then eligible to effect such
registration on Form S-3 (or a similar successor
form), one hundred and twenty (120) days after the
effective date of the Registration Statement, or
(iii) the termination of the registration rights pursuant to
Section 2.9 of this Agreement.
(b) prepare and file with the SEC such amendments and
supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be
necessary to comply with the provisions of the Securities
Act with respect to the disposition of all securities
covered by the Registration Statement;
(c) furnish such number of prospectuses, prospectus supplements,
and other documents incident thereto, including any
amendment of or supplement to the prospectus, as Abbott from
time to time may reasonably request;
(d) cause all Shares registered as described in this Agreement
to be listed on any securities exchange or quoted on any
quotation service on which similar securities issued by RTI
are then listed or quoted;
(e) provide a transfer agent and registrar for all Registrable
Securities registered pursuant to the Registration Statement
and a CUSIP number for all such Shares;
(f) otherwise use reasonable efforts to comply with all
applicable rules and regulations of the SEC; and
RTI - Reg. Rights Agmt
May 2, 2000 -4-
(g) file the documents required of RTI and otherwise use
reasonable efforts to maintain requisite blue sky clearance
in:
(i) all jurisdictions in which any of the Shares are sold
originally; and
(ii) all other states specified in writing by Abbott,
provided as to this clause (ii), however, that RTI
shall not be required to qualify to do business or
consent to service of process in any state in which it
is not now so qualified or has not so consented.
2.6 Selling Procedures.
------------------
(a) In the event Abbott intends to resell Shares pursuant to a
Registration Statement, Abbott shall give RTI five (5)
business days notice of its intent to sell in reliance on
such Registration Statement (the "Notice of Sale"). RTI may
refuse to permit Abbott to resell any Shares pursuant to the
Registration Statement; provided, however, that in order to
exercise this right, RTI must deliver to Abbott a
certificate in writing within three (3) business days
following its receipt of the Notice of Sale from Abbott to
the effect that a sale pursuant to the Registration
Statement in its then current form could constitute a
violation of the federal securities laws. In such an event,
RTI shall either (i) use commercially reasonable efforts to
amend promptly the Registration Statement, if necessary, and
take all other actions necessary to allow such sale under
the federal securities laws, and shall notify Abbott
promptly after it has determined that such sale has become
permissible under the federal securities laws, or (ii)
exercise its right under paragraph (b) below to delay the
sale.
(b) If in the good faith judgment of the Board of Directors of
RTI, after consultation with counsel, the filing of a
Registration Statement or an amendment thereto or prospectus
supplement so as permit the proposed sale without a
violation of securities laws would materially adversely
affect a pending or scheduled public offering, or an
acquisition, merger, or similar transaction, or negotiations
of either of the foregoing, or would require the disclosure
of another material development prior to the time it would
otherwise be required to be disclosed in a manner adverse to
the best interests of RTI, then it may decline to permit the
resale of any Shares pursuant to the Registration Statement
for up to a maximum of ninety (90) days, provided that it
may not exercise this right more than once in any twelve
(12) month period.
(c) If RTI has delivered a prospectus to Abbott and after having
done so the prospectus is amended to comply with the
requirements of the Securities
RTI - Reg. Rights Agmt
May 2, 2000 -5-
Act, RTI shall reasonably promptly notify Abbott and, if
requested, Abbott shall immediately cease making offers of
Registrable Securities and return all prospectuses to the
Company. The Company shall reasonably promptly provide
Abbott with revised prospectuses and, following receipt of
the revised prospectuses, Abbott shall be free to resume
making offers of the Registrable Securities.
(d) Abbott covenants and agrees that it will not sell any Shares
pursuant to a Registration Statement during the periods
sales in reliance upon the Registration Statement are
prohibited as set forth in this Section 2.6.
2.7 Information from Abbott. It shall be a condition precedent to the
-----------------------
obligations of RTI to take any action pursuant to Article 2 of
this Agreement with respect to the Shares that Abbott shall
furnish to RTI such information as RTI may reasonably request,
including information regarding Abbott, the Shares held by it,
the intended method of disposition of such securities, and such
other information as required to effect the registration of the
Shares.
2.8 Assignment of Registration Rights. The right to cause RTI to
---------------------------------
register the Shares pursuant to this Agreement may be assigned by
Abbott to a transferee of the Shares only if:
(a) RTI is, prior to such transfer, furnished with written
notice of the name and address of such transferee and the
Shares with respect to which such registration rights are
being assigned and a copy of a duly executed written
instrument in form reasonably satisfactory to RTI by which
such transferee assumes all of the obligations and
liabilities of its transferor hereunder and agrees itself to
be bound hereby;
(b) immediately following such transfer the disposition of the
Shares by the transferee is restricted under the Securities
Act;
(c) such assignment includes all of the Shares then held by
Abbott; provided, however, that such share limitation shall
-------- -------
not apply to transfers by Abbott to its affiliates if all
such transferees or assignees agree in writing to appoint a
single representative as their attorney-in-fact for the
purpose of receiving any notices and exercising their rights
under this Agreement; and
(d) Abbott guarantees the performance of the transferee of its
obligations under this Agreement.
2.9 Termination of Registration Rights. The registration rights
----------------------------------
provided in this Agreement shall terminate if Abbott may sell all
of the Shares pursuant to Rule 144 in any three (3) month period.
Upon the termination of registration rights
RTI - Reg. Rights Agmt
May 2, 2000 -6-
pursuant to this Section 2.9, RTI may withdraw the Registration
Statement, or any portion thereof, covering the Shares.
2.10 Reports Under Securities Exchange Act of 1934. With a view to
---------------------------------------------
making available to Abbott the benefits of Rule 144 promulgated
under the Securities Act and any other rule or regulation of the
SEC that may at any time permit Abbott to sell securities of RTI
to the public without registration or pursuant to a registration
on Form S-3, RTI agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times
after ninety (90) days after the effective date of the first
registration statement filed by RTI for the offering of its
securities to the general public;
(b) file with the SEC in a timely manner all reports and other
documents required of RTI under the Securities Act and the
Exchange Act; and
(c) furnish to Abbott, so long as Abbott owns any Shares,
forthwith upon request (i) a written statement by RTI that
it has complied with the reporting requirements of SEC Rule
144 (at any time after ninety (90) days after the effective
date of the first registration statement filed by RTI), the
Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), or that
it qualifies as a registrant whose securities may be resold
pursuant to Form S-3, (ii) a copy of the most recent annual
or quarterly report of RTI and such other reports and
documents so filed by RTI, and (iii) such other information
as may be reasonably requested in availing Abbott of any
rule or regulation of the SEC that permits the selling of
any such securities without registration or pursuant to such
form.
2.12 "Lock-up" Agreement; Confidentiality of Notices.
-----------------------------------------------
(a) If requested by the managing underwriter of an underwritten
public offering by RTI of RTI common stock, Abbott hereby
agrees that, for a period of one hundred eighty (180) days
following the effective date of a Registration Statement,
(i) it will not offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to
purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of RTI common stock or
any securities convertible into or exercisable or
exchangeable for RTI common stock; (ii) it will not enter
into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic
consequences of ownership of the RTI common stock, whether
any such transaction described in clause (i) or (ii) above
is to be settled by
RTI - Reg. Rights Agmt
May 2, 2000 -7-
delivery of RTI common stock or such other securities, in
cash or otherwise; and (iii) it shall execute any other
customary lock-up agreements as may be requested by the
managing underwriters, provided that all stockholders
holding not less than the number of shares of RTI common
stock held by Abbott (including the shares of RTI common
stock issuable upon conversion of the Shares, or other
convertible securities, or upon exercise of options,
warrants or rights) and all officers and directors of RTI
enter into similar agreements.
(b) RTI may impose stop-transfer instructions with respect to
Registrable Securities or other securities subject to the
foregoing restrictions until the end of the applicable lock-
up period.
(c) Abbott shall treat confidentially any written notice
received by Abbott from RTI regarding RTI's plans to file a
Registration Statement and shall not disclose such
information to any person other than as necessary to
exercise its rights under this Agreement.
3. Indemnification and Contribution.
--------------------------------
3.1 Indemnification by RTI. RTI agrees to indemnify and hold harmless
----------------------
Abbott, each of Xxxxxx'x directors, officers and U.S. wholly-
owned subsidiaries, and each person, if any, who controls Abbott
within the meaning of the Securities Act or the Exchange Act,
from and against any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) to which they may
become subject (under the Securities Act or otherwise) insofar as
such losses, claims, damages, or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon
any untrue statements of a material fact contained in (or upon
the omission of a material fact from) a Registration Statement
delivered or circulated by Abbott in connection with a sale of
RTI securities by Abbott, or arise out of any failure by RTI to
fulfill any undertaking included in the Registration Statement,
and RTI will, as incurred reimburse Abbott and such persons for
any legal or other expenses reasonably incurred in investigating,
defending or preparing to defend any such action, proceeding, or
claim; provided, however, that RTI shall not be liable in any
such case to the extent that such loss, claim, damage, or
liability arises out of, or is based upon:
(a) an untrue statement made in (or upon the omission of a
material fact from) such Registration Statement in reliance
upon and in conformity with written information furnished to
RTI by or on behalf of Abbott specifically for use in
preparation of the Registration Statement,
(b) the failure of RTI to comply with the covenants or
agreements contained in Section 2.5 hereof, or
RTI - Reg. Rights Agmt
May 2, 2000 -8-
(c) any untrue statement or omission in any prospectus that is
corrected in any subsequent prospectus that was delivered to
Abbott prior to the pertinent sale or sales by Abbott.
3.2 Indemnification by Xxxxxx. Xxxxxx agrees to indemnify and hold
-------------------------
harmless RTI, each of RTI's directors and officers, and each
person, if any, who controls RTI within the meaning of the
Securities Act or the Exchange Act, from and against any losses,
claims, damages or liabilities (or actions or proceedings in
respect thereof) to which they may become subject (under the
Securities Act or otherwise) insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect
thereof) arise out of, or are based upon:
(a) either an untrue statement made in or the omission of a
material fact from such Registration Statement in reliance
upon and in conformity with written information furnished to
RTI by or on behalf of Abbott specifically for use in
preparation of the Registration Statement,
(b) the failure of Abbott to comply with the covenants or
agreements contained in Section 2.6 hereof, or
(c) any untrue statement or omission in any prospectus that is
corrected in any subsequent prospectus that was delivered to
Abbott prior to the pertinent sale or sales by Abbott, and
Abbott will, as incurred, reimburse RTI and such persons for
any legal or other expenses reasonably incurred in
investigating, defending, or preparing to defend any such
action, proceeding, or claim;
provided, however, that in no event shall Xxxxxx'x cumulative
aggregate liability under this Section 3.2, or under Section 3.4,
or under Sections 3.2 and 3.4 together, exceed the net amount
received by Abbott from the sale of the Shares to which such loss
relates minus the amount of any damages which Abbott has
otherwise been required to pay by reason of such untrue or
allegedly untrue statement or omission or alleged omission.
RTI - Reg. Rights Agmt
May 2, 2000 -9-
3.3 Indemnification Procedures. Promptly after receipt by any
--------------------------
indemnified party of a notice of a claim or the beginning of any
action in respect of which indemnity is to be sought against an
indemnifying person pursuant to this Article 3, such indemnified
person shall notify the indemnifying person in writing of such
claim or of the commencement of such action and, subject to the
provisions hereinafter stated, in case any such action shall be
brought against an indemnified person and the indemnifying person
shall have been notified thereof, the indemnifying person shall
be entitled to participate therein, and, to the extent that it
shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to the indemnified person. After notice
from the indemnifying person to such indemnified person of the
indemnifying person's election to assume the defense thereof, the
indemnifying person shall not be liable to such indemnified
person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof;
provided, however, that if there exists or shall exist a conflict
of interest that would make it inappropriate in the reasonable
judgment of the indemnified person for the same counsel to
present both the indemnified person and such indemnifying person
or any affiliate or associate thereof, the indemnified person
shall be entitled to retain its own counsel at the expense of
such indemnifying person.
3.4 Contribution. If the indemnification provided for in this Article
------------
3 is unavailable to or insufficient to hold harmless an
indemnified party under Section 3.1 or 3.2 above in respect of
any losses, claims, damages, or liabilities (or actions or
proceedings in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims,
damages, or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative fault of RTI
on one hand and Abbott on the other in connection with the
statements or omissions which resulted in such losses, claims,
damages, or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact
related to information supplied by RTI on one hand or Abbott on
the other and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement
or omission; provided, however, that in no event shall Xxxxxx'x
cumulative aggregate liability under this Section 3.4, or under
Section 3.2, or under Sections 3.2 and 3.4 together, exceed the
net amount received by Abbott from the sale of the Shares to
which such loss relates minus the amount of any damages which
Abbott has otherwise been required to pay by reason of such
untrue or allegedly untrue statement or omission or alleged
omission. RTI and Abbott agree that it would not be just and
equitable if contribution pursuant to this Section 3.4 were
determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to above in this Section 3.4. The amount
paid or payable
RTI - Reg. Rights Agmt
May 2, 2000 -10-
by an indemnified party as a result of the losses, claims,
damages, or liabilities (or actions in respect thereof) referred
to above in this Section 3.4 shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or
claim. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
3.5 Continuing Obligations. The obligations of RTI and Abbott under
----------------------
this Article 3 shall survive the completion of the offering of
the Shares pursuant to the Registration Statement and shall be in
addition to any liability that RTI and Abbott may otherwise have.
4. Miscellaneous.
-------------
4.1 Waiver. The failure on the part of RTI or Abbott to exercise or
------
enforce any right conferred upon it hereunder shall not be deemed
to be a waiver of any such right, nor operate to bar the exercise
or enforcement thereof at any time or times thereafter.
4.2 Notices. Any notice required or permitted to be given by the
-------
terms of this Agreement by a party shall be given by prepaid,
registered air mall or by express delivery service, such as
Federal Express or DHL, properly addressed to the address of the
other party set forth below, or to such other address as may,
from time to time, be designated in writing by such other party,
and shall be deemed to have been given upon receipt:
As to Abbott:
Senior Vice President
Hospital Products Division
Xxxxxx Laboratories
000 Xxxxxx Xxxx Xxxx
Xxxxxx Xxxx, Xxxxxxxx 00000-0000
With copy (which will not constitute notice) to:
Divisional Vice President, D-322
Xxxxxx Laboratories
000 Xxxxxx Xxxx Xxxx
XX0X X-000
Xxxxxx Xxxx, Xxxxxxxx 00000-0000
RTI - Reg. Rights Agmt
May 2, 2000 -11-
As to RTI:
Retractable Technologies, Inc.
000 Xxxx Xxxx
Xxxxxx Xxx, Xxxxx 00000
Attn: Xxxxxx X. Xxxx, Chief
Executive Officer and President
With copy (which will not constitute notice) to:
Retractable Technologies, Inc.
Legal Department
000 Xxxx Xxxx
Xxxxxx Xxx, Xxxxx 00000
Attn: Xxxxxxx Xxxxxx
4.3 Applicable Law. The corporate law of the State of Texas shall
--------------
govern all issues concerning the relative rights of RTI and its
stockholders. All other questions concerning the construction,
validity and interpretation of this Agreement shall be construed
and interpreted according to the law of the State of Illinois,
without giving effect to its conflict of law provisions.
4.4 Alternative Dispute Resolution. The parties shall attempt to
------------------------------
amicably resolve disputes arising between them regarding the
validity, construction, enforceability, or performance of the
terms of this Agreement and any differences or disputes in the
interpretation of the rights, obligations, liabilities and/or
remedies hereunder, which have been identified in a written
notice from one party to the other, by good faith settlement
discussions between the President of Xxxxxx'x Hospital Products
division and the President and Chief Executive Officer of RTI.
The parties agree that any dispute that arises in connection with
the Agreement, which cannot be amicably resolved by such
representative within thirty (30) days after the receipt of such
written notice, shall be resolved by binding Alternative Dispute
Resolution ("ADR") in the manner described in Annex B to the
Credit Agreement.
4.5 Captions. The captions to the Articles and Sections of this
--------
Agreement are for convenience only, and shall not be deemed of
any force or effect whatsoever in construing this Agreement.
4.6 Entire Agreement. The terms and provisions contained herein,
----------------
including the Annex hereto, and the Credit Agreement and the
exhibits and annexes thereto, constitute the entire agreement
between the parties and shall supersede all previous
communications, representations, agreements or understandings,
either oral or written, between the parties hereto with respect
to the subject matter hereof. No amendment to this Agreement
varying or extending the terms hereof will be binding upon either
party hereto unless in writing, signed by duly authorized
officers of the respective parties, and referencing this
Agreement.
RTI - Reg. Rights Agmt
May 2, 2000 -12-
4.7 Assignment. This Agreement shall not be assignable by the
----------
parties, except as permitted under Section 2.9 or (a) to an
Affiliate of such party, provided the assigning party guarantees
the performance of the Affiliate, (b) as mutually agreed to in
writing in advance, or (c) as incident to the merger,
consolidation, reorganization, or acquisition of stock or assets
affecting actual voting control of the assigning party or
affecting all or substantially all of the assets of such party to
which this Agreement relates. Any permitted assignment shall be
binding on the successors of the assigning party. Any assignment
or attempted assignment by any party in violation of the terms of
this Section 4.7, shall be null and void and of no legal effect.
For purposes of this Agreement, the term "Affiliate" shall mean,
with respect to any party hereto, any corporation or other form
of business organization, which directly owns, controls, is
controlled by, or is under common control with, such party. An
entity shall be regarded as being in control of another entity if
the former entity has the direct or indirect power to order or
cause the direction of the policies of the other entity whether
(x) through the ownership of more than fifty percent (50%) of the
voting securities of the other entity; or (y) by contract,
statute, regulation, or otherwise.
4.8 Severability. In the event that any provision of this Agreement
------------
is held by a court of competent jurisdiction to be unenforceable
because it is invalid or in conflict with any law of any relevant
jurisdiction, (a) the validity of the remaining provisions shall
not be affected, (b) the particular provision shall to the extent
permitted by law be reasonably construed and equitably reformed
to be valid and enforceable, and (c) the rights and obligations
of the parties shall be construed and enforced as if the
Agreement did not contain the unreformed, particular provisions
held to be unenforceable.
4.9 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their duly authorized officers as of the date first
above written.
XXXXXX LABORATORIES RETRACTABLE TECHNOLOGIES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx By: /s/ Xxxxxx X. Xxxx
----------------------------- -----------------------------
Xxxxxxx X. Xxxxxxxx
Title: Senior Vice President, Title: CEO
Hospital Products
RTI - Reg. Rights Agmt
May 2, 2000 -13-
