-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M3fsOK7ZOzwtOd1uDmB4g9VXl2WHJZanqYdg3TQIr/4RWKg0MS4F871ebzRvDKfw FveVfHS9ZfCNLbLA+b+lsw== 0000906602-00-000034.txt : 20000331 0000906602-00-000034.hdr.sgml : 20000331 ACCESSION NUMBER: 0000906602-00-000034 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IMMUCELL CORP /DE/ CENTRAL INDEX KEY: 0000811641 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 010382980 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-12934 FILM NUMBER: 584885 BUSINESS ADDRESS: STREET 1: 56 EVERGREEN DR CITY: PORTLAND STATE: ME ZIP: 04103 BUSINESS PHONE: 2078782770 MAIL ADDRESS: STREET 1: 56 EVERGREEN DRIVE CITY: PORTLAND STATE: ME ZIP: 04103 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to 0-15507 (Commission file number) IMMUCELL CORPORATION (Exact name of Registrant as specified in its charter) DELAWARE 01-0382980 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 56 EVERGREEN DRIVE, PORTLAND, MAINE 04103 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (207) 878-2770 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12 (g) of the Act: Common Stock par value $.10 per share (Title of class) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the Common Stock held by non-affiliates of the Registrant at March 20, 2000 was approximately $14,300,000. The number of shares of the Registrant's Common Stock outstanding at March 20, 2000 was 2,616,684. Documents incorporated by reference: Portions of the Registrant's 2000 Proxy Statement to be filed in connection with the Annual Meeting of shareholders are Incorporated by reference to Part iii hereof. TABLE OF CONTENTS PART I ITEM 1. Business .............................................1 ITEM 2. Properties............................................7 ITEM 3. Legal Proceedings.....................................7 ITEM 4. Submission of Matters to a Vote of Security Holders...7 PART II ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters...............................................7 ITEM 6. Selected Financial Data...............................7 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.............................8 ITEM 8. Financial Statements and Supplementary Data..........12 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.............................12 PART III ITEM 10. Directors and Executive Officers of the Registrant 12 ITEM 11. Executive Compensation 13 ITEM 12. Security Ownership of Certain Beneficial Owners and Management 13 ITEM 13. Certain Relationships and Related Transactions.......13 PART IV ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 13 SIGNATURES PART I ITEM 1 - BUSINESS General ImmuCell Corporation (the "Company") is a biotechnology company striving to build shareholder value by commercializing proprietary technologies and helping dairy and beef producers and their veterinarians manage disease and reproduction in their herds. Engaged principally in the development of animal health products to expand its commercialized line of products for use by dairy and beef producers, the Company is also conducting a Phase I/II clinical trial of DiffGAM bovine anti-Clostridium difficile immunoglobulins, a human application of its milk-derived passive antibody technology, for use as an alternative to antibiotics in the treatment of a gastrointestinal infection. In addition, the Company is marketing Crypto-Scan , a diagnostic test that detects Cryptosporidium in drinking-water supplies world-wide. From its inception in 1982, the Company has engaged in the research and development of both infectious disease diagnostic tests and products for therapeutic and preventive uses against certain infectious diseases in animals and humans. Beginning in 1996, the Company diversified its product development pipeline in two significant ways. First, the Company utilized the knowledge gained developing a product to treat a gastrointestinal infection caused by Cryptosporidium parvum to develop a method to detect the presence of this dangerous parasite in drinking-water supplies. Secondly, the Company utilized both its expertise in purifying proteins from cows' milk and its exclusive world-wide license to certain purification technology to develop a process to purify milk proteins derived from cheese whey for nutritional applications. Since 1998, the Company has focused the majority of its product development efforts on the animal health industry. Research and development expenditures amounted to 17% and 23% of total revenues in 1999 and 1998, respectively. Internally funded research and development expenditures (those expenditures not supported by outside sources of funding such as grant income) amounted to 13% and 17% of product sales in 1999 and 1998, respectively. Going forward in 2000 and beyond, the Company intends to maintain internally funded research and development expenditures near to 13% of product sales, which should result in continued profitability provided that product sales do not decline. The Company intends to actively pursue external financing for its research and development efforts through licensing arrangements with corporate partners and funding from government grants. As product sales increase, the Company can both reduce this ratio and increase the absolute dollar value of the investment in product development without jeopardizing the objective of recording continuing and increasing net operating profits. Animal Health Products for the Dairy and Beef Industry On December 30, 1999, the Company acquired rights to the product, Wipe Out Dairy Wipes, and certain other related rights from AMBI Inc. of Purchase, New York. The transaction included the purchase of certain equipment, trademarks and a license of intellectual property for an aggregate of $359,000. The Company also acquired approximately $173,000 of product inventory. The Wipe Out product consists of pre-moistened towelettes that are impregnated with nisin to clean, sanitize and dry the teat area of a cow in advance of milking. Nisin is a natural antibacterial protein that has been demonstrated in clinical studies to be an effective aid in the reduction of disease-causing organisms in dairy cows. The use of nisin for such applications is covered by five issued patents that were licensed by AMBI to the Company. In December 1999, the Company obtained approval from the U.S. Department of Agriculture ("USDA") to sell Tip-Test Johne's, which is a rapid immunodiagnostic test for the detection of Johne's disease, a chronic intestinal infection of cattle caused by Mycobacterium paratuberculosis. This highly sensitive product delivers on-site results from a blood or serum sample in about twenty minutes, which is a significant advantage to the dairy producer in comparison to the existing diagnostic technology that is performed only in certified veterinary diagnostic laboratories (which is a more time consuming and expensive process). Before sales can be initiated in any state, the USDA approval is subject to the further approval of each state veterinarian. The Company has obtained the necessary state approval in many states and is proceeding with obtaining the necessary approvals throughout the U.S. market. The test format used for this test is the subject of an exclusive, world-wide license from a third party, which license also covers the format's use by the Company for five additional bovine applications. In 1991, the Company obtained approval from the USDA to sell First Defense , which is manufactured by the Company from cows' colostrum using the Company's proprietary vaccine and milk protein purification technologies. Currently, First Defense is the only USDA-licensed, bivalent (effective in combating two different infectious agents) scours preventive product on the market. The target disease, "calf scours", is seasonal, with the highest incidence in the winter calving months. This diarrheal disease causes dehydration in newborn calves and often leads to serious sickness and even death. In 1988, the Company obtained an exclusive world-wide license to purchase from Kamar, Inc. of Steamboat Springs, Colorado and to market and sell an animal health care product known as the Kamar Heatmount Detector. This product is used to detect the physical mounting of bovines for the determination of standing heat, and is sold primarily to dairy farmers. In June 1998, the Company entered into a renewal of its service and license agreement effective through December 31, 2003 with Kamar whereby Kamar will continue to provide the Company warehousing, distribution and certain other services and the Company will continue to market the Kamar Heatmount Detector under the exclusive world-wide license. The renewal agreement continues to be cancelable by either party upon twelve months written notice. The Company also markets the following two animal health products: 1) RPT and Accufirm , trade names for a milk progesterone test used by dairy farmers to monitor the reproductive status of their cows and 2) RJT, used in the detection of Mycobacterium paratuberculosis infections (Johne's Disease) in cattle. Sales of these products have been limited since their commercial introductions. The sales and sales growth potential for these products in the future are not expected to be significant. Commercialization of Milk Protein Purification Technology for Nutritional Applications Underlying the Company's milk antibody products for human and animal health applications is a certain expertise developed by the Company to process and purify milk proteins. To capitalize on this expertise, in 1996 the Company formed a joint venture with Agri-Mark Inc. of Methuen, Massachusetts known as AgriCell Company, LLC to produce and sell a nutritional protein derived from cheese whey, known as lactoferrin. Lactoferrin is an iron-binding protein that, among several applications, can be used in infant formula, nutritional applications and certain cosmetics. The Company licensed certain rights to a patented purification system, to which the Company holds an exclusive world-wide license from Advanced Separations Technologies, Inc. ("AST") for all milk and whey protein applications, to AgriCell for use in the production of lactoferrin. In 1997, AgriCell commissioned a 6,800 square foot production facility at Agri-Mark's cheese plant in Middlebury, Vermont which was subsequently approved by the USDA, allowing the commercial production of lactoferrin to be initiated. Initial sales of lactoferrin have been extremely limited. The primary markets for this product at this time are in Asia, and sales have been negatively impacted by reduced demand from Asian customers. The Company has a 50% ownership interest in this joint venture and is entitled to 50% of the joint venture's profits from the sale of lactoferrin after Agri-Mark has obtained the return of an amount equal to its invested capital. Agri-Mark has funded a capital investment by AgriCell in excess of $1,000,000 principally in working capital, fixed assets and production facility modifications, and Agri-Mark is entitled to a 90% priority return until it obtains the return of an amount equal to this invested capital. Additionally, Agri-Mark has the right to utilize the Company's technology to produce and sell whey protein isolate from Agri-Mark's Vermont cheese whey source. The Company is entitled to a royalty on any such sales. In November 1997, the Company licensed certain rights to the same patented protein purification system described above to Murray Goulburn Co- operative Co., Limited of Australia for the production of whey protein isolate and certain other milk proteins (excluding high purity lactoferrin). In consideration for the license, the Company received a $250,000 payment in 1997 and is entitled to a royalty on the sales of whey protein isolate and any other milk proteins manufactured under this license. Murray Goulburn has launched commercial sales of whey protein isolate, and royalties are expected to begin to be earned by the Company in 2000. To extend the term of the exclusive license covering the patented milk and whey protein purification system from AST to June 30, 2002, the Company and its partners must purchase another purification system from AST by December 31, 2000. The license from AST can then be extended by up to three more one year periods to as far as June 30, 2005. The purchase of an additional purification system before the license expires is required to extend the license for each of these additional one year terms. The purchase of one additional purification system by June 30, 2005 would further extend the license term by an additional six month term to December 31, 2005. Product to Detect Pathogens in Drinking Water The Crypto-Scan water diagnostic test has been developed to capitalize on certain scientific knowledge gained under the Company's CryptoGAM research program described below. In 1996, the Company formed a joint venture with Membrex, Inc. to commercialize the combination of certain immunomagnetic separation ("IMS") technology developed by the Company with certain concentration technology owned by Membrex into a diagnostic test to detect Cryptosporidium parvum oocysts and other microorganisms in water. In 1998, Membrex was acquired by Osmonics, Inc., and subsequently the joint venture was dissolved. Simultaneously with the dissolution of the joint venture, the relevant technology (that had been previously licensed to the joint venture) was licensed directly to the Company, subject to a royalty obligation payable to Osmonics. The license agreement covering the Osmonics concentration technology was terminated in March 2000. The Company is continuing to market its IMS technology under the Crypto-Scan brand name. Initial and limited sales of Crypto-Scan began in 1997. During 1997, the Company entered into a distribution agreement with Adreck Marketing Limited covering sales in the United Kingdom. Initial sales in the U.K. have been limited as the Company is working to gain access to the market through the applicable U.K. regulatory authorities. Sales of Crypto-Scan are not expected to be significant until and unless the product is approved by the applicable U.K. regulatory authority. The Company currently expects to complete the required validation study by April 30, 2000. Sales in the U.S. market would be influenced significantly by the U.S. Environmental Protection Agency. Milk Antibody Product Under Development For Humans DiffGAM{ }bovine anti-Clostridium difficile immunoglobulins is a bovine- derived specific polyclonal antibody product under clinical development, which is subject to approval by the U.S. Food and Drug Administration ("FDA") before sales can be initiated. DiffGAM is intended to prevent and/or treat Clostridium difficile-associated diarrhea ("CDAD") that is caused by toxin- producing Clostridium difficile. DiffGAM is intended to neutralize the toxins produced by Clostridium difficile in the colons of affected patients. CDAD is caused most frequently by the use of broad spectrum oral antibiotics, which kill bacteria in the colon that normally inhibit the proliferation of Clostridium difficile. When Clostridium difficile then proliferates, producing toxins that cause disease, the standard treatment is to use oral antibiotics specific for Clostridium difficile. This multi-antibiotic treatment approach can lead to high rates of relapse and the development of antibiotic resistance. The Company believes that DiffGAM may provide a safe alternative to the current methods used to treat CDAD. The Company has developed a proprietary formulation to deliver active antibodies to the lower gastrointestinal tract, the site of Clostridium difficile infections. The Company believes that this formulation is central to the effectiveness of DiffGAM. Using its proprietary milk protein purification technology, the Company has developed methods for the production of commercial quantities of pathogen specific antibodies from cows' milk. The Company's milk protein purification technology, which is directed toward the efficient production and formulation of antibodies used to prevent and/or treat gastrointestinal infections, is used to manufacture DiffGAM and the Company's commercialized animal health product, First Defense . Unlike First Defense which is produced from the colostrum (or "first milk") of hyper-immunized cows, DiffGAM is produced from the milk of hyper- immunized cows. Although antibody concentrations are much higher in colostrum, more total antibodies are available from the balance of the lactation cycle. Specifically, colostrum contains less than 20% of the total antibodies produced by a cow during the entire lactation cycle. For this reason, the Company has developed a purification process that allows the Company to harvest antibodies from a cow's entire lactation cycle, as opposed to only from the colostrum. The Company believes this milk purification process may create a significant product cost advantage. Under an Investigational New Drug ("IND") application filed with the FDA in March 1997, a clinical trial was conducted in mid-1997 demonstrating the safety of DiffGAM and the colonic bioavailability of the current oral formulation of the product. The Company expects to complete a multi-site Phase I/II clinical trial of this product in the first quarter of 2000. The principal objective of this trial is to assess the safety and preliminary effectiveness of DiffGAM in the treatment of established CDAD. Contingent upon positive clinical trial results, the Company intends to seek a partner to fund further development activities in exchange for marketing rights to the product. The Company would expect to benefit from a manufacturing and supply arrangement with such a partner. The Company does not intend to internally fund this product development. Clinical development of a second product, TravelGAM bovine anti-E. coli immunoglobulins, was discontinued in 1998. TravelGAM was intended to prevent diarrhea caused by enterotoxigenic E. coli (commonly known as Travelers' Diarrhea). Further development of this product was discontinued principally due to the lack of a detectible treatment effect in field trials despite the more positive results from earlier hospital-based trials. Clinical development of a third product, CryptoGAM bovine anti- Cryptosporidium immunoglobulins, was discontinued in 1997. CryptoGAM was intended to treat chronic, life-threatening diarrhea (known as cryptosporidiosis) in AIDS patients. The decision to discontinue development was made principally because the targeted patient population for the product had materially decreased due to the positive impact of new drug therapies on AIDS patients. The Company has obtained four Phase I and three Phase II Small Business Innovation Research grants from the National Institutes of Health to support the development of milk antibody products to prevent gastrointestinal infections in humans. The value of these grants has aggregated approximately $1,891,000 since 1990, $162,000 of which was recognized in 1999 and $66,000 of which is expected to be recognized in 2000. Other Products As an extension of its expertise with infectious diseases and subject to a royalty bearing license payable to a third party, the Company manufactures and sells specific antibody-based reagents used for the diagnosis of Group A streptococcal infections, a bacterial infection which causes "strep throat". Sales of these reagents have declined significantly in recent years and are not expected to be a primary focus of the Company's commercial business going forward. While the Company continues its efforts with internally and externally funded product development programs, the Company is also actively seeking to acquire new products and technologies. Marketing and Sales The Company engages in the direct marketing and sales of its products principally through its wholly-owned marketing subsidiary, the Kamar Marketing Group, Inc. The manner in which the Company's products are marketed and distributed depends in large measure upon the nature of the particular product, its intended users and the country where it is sold. The distribution channel selected is intended to address the particular characteristics of the marketplace for a given product. First Defense is primarily sold through major veterinarian distributors, and the Kamar Heatmount Detector is sold through bovine semen distributors and farm supply retailers. Separate agreements have been entered into for sales through these distribution channels. The Company sells Tip-Test: Johne's to bovine veterinarians, and Wipe Out Dairy Wipes are sold directly to the dairy producer. Foreign Sales Foreign product sales represented approximately 24%, 25% and 28% of the Company's total product sales for the years ended December 31, 1999, 1998 and 1997, respectively. The majority of these foreign sales were to European countries, Australia, New Zealand and Canada. It is anticipated that a significant amount of the Company's future sales will continue to be made outside of the United States. The Company currently prices most of its products in United States dollars. An increase in the value of the dollar in any foreign country in which the Company's products are sold may have the effect of increasing the local price of such products, thereby leading to a reduction in demand. Price adjustments have been made on occasion to mitigate these effects. Such a negative impact of the strong U.S. dollar was experienced in sales to Pacific rim countries in 1998 and 1999. On the other hand, to the extent that the value of the dollar may decline with respect to a foreign currency, the Company's competitive position may be enhanced. Research and Development Beginning in 1998, the Company shifted the primary focus of its research and development efforts to products for the animal health industry. This focus continued in 1999 and is expected to continue in 2000. To expand its commercialized line of products for use by dairy and beef producers, the Company has invested in the development of new diagnostic products leveraging the Company's experience with infectious diseases. The Company has also initiated early stage development programs of certain vaccine and disease preventive products. The Company maintains relationships with several scientific advisors that have particular expertise in the areas targeted by the Company. The Company's research and development activities are conducted internally and through contracts with third parties depending upon the availability of staff, the technical skills required, the nature of the particular project and other considerations. As additional opportunities to commercialize the Company's technology become apparent, the Company may begin new research and development projects. The Company spent approximately $813,000, $1,013,000 and $1,068,000 on research and development activities during the years ended December 31, 1999, 1998 and 1997, respectively. These expenditures were in part supported by grant income totaling approximately $187,000, $282,000 and $249,000 during the years ended December 31, 1999, 1998 and 1997, respectively. Competition The Company's competition in the animal and human health care markets includes other biotechnology companies, major pharmaceutical firms and food and chemical companies. Many of these competitors have substantially greater financial, marketing, manufacturing and human resources and more extensive research and development facilities than the Company. Many of these competitors may develop technologies and/or products which are superior to those of the Company, or may be more successful in developing production capability or in obtaining certain regulatory approvals. The Company believes that First Defense offers two significant competitive advantages over other products in the market: 1) its capsule form, which does not require refrigeration and provides ease of administration and 2) competitive products currently on the market provide protection only against the leading cause of calf scours, while First Defense provides this protection and additional protection against the second leading cause of the disease. Recently, competitive companies have introduced products similar to the Kamar Heatmount Detector. The success of these products could reduce sales of the Company's product. GelTex Pharmaceuticals Inc., Ophidian Pharmaceuticals Inc., Peptide Therapeutics Group plc and Synsorb Biotech Inc. are developing products to prevent and/or treat Clostridium difficile-associated diarrhea. Dynal, Inc., Genera Technologies, Ltd and Hach Company market competitive immunomagnetic separation products for use in the detection of Cryptosporidum in drinking water. The Company believes that its competitive position will be highly influenced by its ability to attract and retain key scientific and managerial personnel, to develop proprietary technologies and products, to obtain USDA or FDA approval for new products, to continue to profitably sell its current products and to raise adequate levels of capital to fund its activities. The Company believes that supplies and raw materials for the production of its products are readily available from a number of vendors and farms. It is the Company's policy to maintain several sources of supply for the components used in the Company's products. The Company currently competes on the basis of product performance, price and distribution capability. The Company continues to monitor its network of independent distributors to maintain its competitive position. Patents and Proprietary Information In 1998, the Company was issued two patents from the U.S. Patent and Trademark Office. The first, which issued under U.S. Patent No. 5,747,031, covers certain aspects of the Company's proprietary manufacturing process to separate antibodies from cows' milk used in the production of DiffGAM. The second, which issued under U.S. Patent No. 5,789,190, covers certain aspects of the method used to detect Cryptosporidium parvum in drinking-water supplies. In March 1999, the Company was issued U.S. Patent No. 5,888,748 covering a different aspect of this water test. In January 2000, the Company received notice of allowance for a patent application covering the method of formulation responsible for colonic delivery in DiffGAM and for other proteins. Going forward, the Company may file additional patent applications for certain products under development. There can be no assurance that patents will be issued with respect to any pending or future applications. The Company has licensed the right to use certain milk purification technology for the processing of immunoglobulins, which technology is the subject matter of one or more patents owned or controlled by the Wisconsin Alumni Research Foundation. The Company has also licensed exclusively the right to use a purification system to manufacture proteins from cows' milk, which is the subject matter of one or more patents owned or controlled by Advanced Separations Technologies, Inc., which company was acquired by Calgon Carbon Corporation in 1997. In connection with the acquisition of the product, Wipe Out, the Company licensed rights to several patents covering the use of nisin as a teat wipe to prevent bovine infections as well as certain proprietary know-how used in the production of nisin from AMBI Inc. The format used in the Tip-Test on-site diagnostic product line is the subject of at least one issued patent to Hydros Inc. to which the Company has licensed rights. The Company has also licensed exclusively rights to certain cloned antigens of Cryptosporidium parvum from the Regents of the University of California, for which two U.S. patents have been issued to the Regents. This license covers vaccine product applications for animals and was sublicensed by the Company exclusively to AgriVax Inc. in 1999 in return for a royalty on any product sales. In 1999, the Company obtained an exclusive license for pharmaceutical applications to U.S. Patent No. 5,773,000 entitled "Therapeutic Treatment of Clostridium difficile Associated Diseases" from GalaGen, Inc. In connection with this license, the Company agreed to pay GalaGen a royalty on any related product sales. The Company also granted GalaGen an option to exclusively license the Company's milk protein purification technology for the purification of immunoglobulins. To exercise this option, GalaGen is required to purchase a certain milk purification system from AST by December 1, 2000 to extend the Company's exclusive license from AST. The Company would receive a royalty on any related product sales achieved by GalaGen. In some cases, the Company has chosen and may choose in the future not to seek patent protection for certain products or processes. Instead, the Company has sought and may seek in the future to maintain the confidentiality of any relevant proprietary technology. Reliance upon trade secret, rather than patent protection, may cause the Company to be vulnerable to competitors who successfully replicate the Company's manufacturing techniques and processes. Additionally, there can be no assurance that others may not independently develop similar trade secrets or technology or obtain access to the Company's unpatented trade secrets or proprietary technology. All of the Company's employees are required to execute nondisclosure and invention assignment agreements designed to protect the Company's rights in its proprietary products. Other companies may have filed patent applications and may have been issued patents involving products or technologies potentially useful to the Company or necessary for the Company to commercialize its products or achieve its business goals. There can be no assurance that the Company will be able to obtain licenses to such patents on terms acceptable to the Company. Trademarks The Company has registered certain trademarks with the U.S. Patent and Trademark Office in connection with the marketing of its products. The Company has obtained registration of the following trademarks: First Defense , for one of its animal health products, Crypto-Scan for its water diagnostic test and RPT and Accufirm , for its progesterone test. The Company has applied for federal trademark registration for the Tip-Test on-site diagnostic product line and for RJT Mycobacterium paratuberculosis diagnostic product. In December 1999, the Company purchased the federal trademark application for Wipe Out and related design and the registered trademark, the "One Step Cow Prep ". The Company has received notice of allowance for the Wipe Out mark. Government Regulation The manufacture and sale of some of the Company's animal health care products within the United States is regulated by the USDA. The manufacture and marketing of disease treatment and prevention products for human medical applications and certain animal health products within the United States is subject to regulation by the FDA. Comparable agencies exist in foreign countries and foreign sales of the Company's products will be subject to regulation by such agencies. Many states (including Maine where the Company's facilities are located) have laws regulating the production, sale, distribution or use of biological products, and the Company may have to obtain approvals from regulatory authorities in states in which it proposes to sell its products. Depending upon the product and its applications, obtaining USDA and other regulatory approvals may be a relatively brief and inexpensive procedure or it may involve extensive clinical tests, incurring significant expenses and an approval process of several years' duration. The Company has received USDA approval for Tip-Test: Johne's (its on- site Johne's disease diagnostic test), First Defense (its scours preventive product) and RJT (its Johne's disease diagnostic test). DiffGAM (to prevent Clostridium difficile-associated diarrhea) is in an FDA Phase I/II clinical trial under an approved Investigational New Drug application. Regulatory approval from the Drinking Water Inspectorate in the United Kingdom is required before the Company can expect to realize significant sales of Crypto-Scan in that country. The Company believes that it is in compliance with current regulatory requirements relating to the Company's business and products. Product Liability The manufacture and marketing of certain of the Company's products entails a risk of product liability. The Company's current exposure to product liability is mitigated to some extent by the fact that the Company's current products have heretofore been principally directed towards the animal health care market. The Company has maintained product liability insurance in an amount which it believes is adequate to cover its potential exposure in this area. Employees The Company and its wholly-owned subsidiary, the Kamar Marketing Group, Inc., currently employ approximately twenty-two employees, including two part-time employees. The full-time equivalent of approximately nine and one- half employees are engaged in manufacturing operations, five in research and development activities, three in finance and administration and three and one-half in marketing and sales. The manufacturing personnel is utilized, as needed, in the production of clinical material for use in research and development. The Company is not a party to any collective bargaining agreement and considers its employee relations to be excellent. ITEM 2 - PROPERTIES The Company owns a 10,000 square foot building at 56 Evergreen Drive in Portland, Maine. The Company currently uses this space for substantially all of its office, laboratory and manufacturing needs. Given the increased demands on the Company's manufacturing facility resulting from increased sales of First Defense and the introduction of a new product, Tip-Test: Johne's, the Company is planning an expansion of approximately 6,000 square feet to its building in 2000, which expansion is estimated to cost approximately $400,000. The Company also maintains access to certain animals, primarily cows, through contractual relationships with several farms. ITEM 3 - LEGAL PROCEEDINGS None ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None PART II ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock trades on The Nasdaq SmallCap Market tier of The Nasdaq Stock Market under the symbol: ICCC. No dividends have been declared or paid on the common stock since its inception, and the Company does not contemplate the payment of cash dividends in the foreseeable future. The following table sets forth the high and low sales price information for the Company's common stock as reported by The Nasdaq Stock Market during the period January 1, 1998 through December 31, 1999:
1999 1998 1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR. 1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR. High $1.75 $1.63 $2.00 $2.63 $2.75 $2.50 $2.63 $2.13 Low $1.06 $1.00 $1.25 $1.50 $1.94 $1.75 $1.00 $1.25
Such market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission. As of March 20, 2000, the Company had 8,000,000 common shares authorized and 2,616,684 common shares outstanding, and there were approximately 1,400 shareholders of record. The last sales price of the Company's common stock on March 20, 2000 was $5.75 as quoted on The Nasdaq Stock Market. ITEM 6 - SELECTED FINANCIAL DATA The selected financial data set forth below has been derived from the audited financial statements of the Company. The information should be read in conjunction with the audited financial statements and related notes appearing elsewhere in this Form 10-K.
Year Ended December 31, 1999 1998 1997 1996 1995 Statement of Operations Data: Total Revenues $4,909,245 $4,481,867 $4,556,678 $4,440,188 $4,937,529 Product Sales 4,722,374 4,199,851 3,982,798 4,054,191 4,350,340 Research & Development Expenses 812,892 1,012,813 1,068,069 1,291,043 1,578,145 Net Profit (Loss) 550,843 (102,518) 263,852 (66,202) 29,811 Per Common Share: Basic Net Profit (Loss) 0.23 (0.04) 0.11 (0.03) 0.01 Diluted Net Profit (Loss) 0.22 (0.04) 0.10 (0.03) 0.01 Stockholders' Equity 1.15 0.93 0.96 0.81 0.83 Cash Dividend -- -- -- -- -- Balance Sheet Data: Total Assets 3,855,979 3,144,847 3,231,050 3,131,399 3,234,426 Cash, Cash Equivalents and Short term Investments 1,823,689 1,538,905 1,021,324 1,044,441 1,550,011 Current Liabilities 605,923 443,902 561,795 684,163 720,767 Net Working Capital 2,219,386 1,866,222 1,642,363 1,405,099 1,849,580 Long-Term Debt Obligations 434,658 453,349 339,747 570,022 608,343 Stockholders' Equity $2,815,398 $2,247,596 $2,329,508 $1,877,214 $1,905,316
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Fiscal 1999 Compared to Fiscal 1998 Total revenues for the year ended December 31, 1999 of $4,909,000 increased by $427,000 (10%) from $4,482,000 in 1998. Product sales for the year ended December 31, 1999 of $4,722,000 were $523,000 (12%) more than the product sales recorded in 1998. Product selling prices have generally increased in line with inflation. Grant income decreased by $95,000 (34%) to $187,000 in 1999. Aggregate sales of First Defense and the Kamar Heatmount Detector totaled approximately $4,517,000 (96% of total product sales) for the year ended December 31, 1999 as compared to approximately $3,984,000 (95% of total product sales) for the year ended December 31, 1998. The sales of First Defense are seasonal with highest sales expected in the winter months. Sales of First Defense increased by 25% in the fourth quarter of 1999 as compared to the fourth quarter of 1998. While this significant increase in sales is a positive indication for the product in the long term, the resulting unexpected reduction in product inventory levels caused by the sudden increase in sales volume has created a backlog during the first quarter of 2000. The Company estimates that such backlog may amount to approximately $250,000. Grant income decreased to approximately $187,000 (4% of total revenues) in 1999 as compared to $282,000 (6% of total revenues) in 1998. In October 1997, the Company was awarded approximately $710,000 under a two-year federal research grant to partially fund the Company's efforts to develop a product to prevent Travelers' Diarrhea. In 1998, the remaining funding then available under this grant was reallocated to the development of DiffGAM. During 1999, the term of this grant was extended by one year. Approximately $162,000 and $282,000 in grant income was recognized under this grant in 1999 and 1998, respectively. Grant income in 1999 also included approximately $25,000 from the State of Maine partially funding early stage research of a bovine vaccine technology. Interest income exceeded interest expense by approximately $33,000 and $20,000 in 1999 and 1998, respectively. Interest expense was incurred in both years on the Company's outstanding bank debt. The Company's share of the loss in the equity of its joint venture (AgriCell Company, LLC) aggregated $97,000 and $123,000 in 1999 and 1998, respectively. The Company's joint venture loss was principally caused by the limited sales of lactoferrin due to the financial crisis in Asia, the primary market for this product. As of December 31, 1999, the investment in this joint venture asset was completely written off. While the operations of the joint venture are ongoing, any further losses incurred by the joint venture will have no impact on the Company's financial statements. Such losses could be carried forward to reduce any future taxable income distributed to the Company by the joint venture. Product costs amounted to 46% of product sales in 1999 as compared to 48% in 1998. Internally developed products tend to have higher gross margin percentages than licensed-in products. Some deterioration of the gross margin percentage is anticipated as new products are developed and acquired. Over time, as these products are fully integrated into the Company's manufacturing and marketing operations, the Company expects to be able to improve the gross margin percentage. The Company expects product costs as a percentage of product sales to increase in 2000 as the Company begins to record sales of Wipe Out Dairy Wipes, a new product that was acquired by the Company on December 30, 1999. At this stage in the Company's development, management is focusing on growing the absolute dollar value of the gross margin on product sales. The Company decreased its expenditures for research and development to approximately $813,000 in 1999 as compared to $1,013,000 in 1998. Research and development expenses aggregated 17% and 23% of total revenues in 1999 and 1998, respectively. Research and development expenses exceeded grant income by approximately $626,000 in 1999 and by $731,000 in 1998. These "net" research and development expenses were reduced to 13% of product sales in 1999 from 17% of product sales in 1998. During 1998, the Company shifted the primary focus of its research and development efforts to products for the animal health industry. To expand its commercialized line of products for use by dairy and beef producers, the Company has invested in the development of new diagnostic products leveraging the Company's experience with infectious diseases. The Company has also initiated early stage development programs of certain vaccine and disease preventive products. The Company has one product, DiffGAM, in human clinical trials to prevent and treat Clostridium difficile-associated diarrhea. However, for clinical development to proceed into more expensive Phase II and III trials, a partner would be required. The Company has also invested in the development of a test intended to detect the presence of Cryptosporidium parvum in drinking water. Sales and marketing expenses increased by approximately $73,000 (9%) to $890,000 in 1999, aggregating 19% of product sales in 1999 and 1998. The Company continues to leverage its small sales force through wholesale distribution channels. General and administrative expenses were approximately $439,000 in 1999 as compared to $637,000 in 1998. This decrease was due principally to the reduction in payroll resulting from the resignation of the Company's former President at the end of 1998. General and administrative expenses in 1998 included the accrual of severance costs associated with that resignation. The Company has continued its efforts to control its general and administrative expenses while incurring all the necessary expenses associated with being a publicly held company. Fiscal 1998 Compared to Fiscal 1997 Total revenues for the year ended December 31, 1998 of $4,482,000 decreased by $75,000 (2%) from $4,557,000 in 1997. Product sales for the year ended December 31, 1998 of $4,200,000 were $217,000 (5%) more than the product sales recorded in 1997. Product selling prices have generally increased in line with inflation. Other revenues, comprised of technology licensing income and grant income decreased to $282,000 in 1998 from $574,000 in 1997. Aggregate sales of First Defense and the Kamar Heatmount Detector totaled approximately $3,984,000 (95% of total product sales) for the year ended December 31, 1998 as compared to approximately $3,770,000 (95% of total product sales) for the year ended December 31, 1997. The sales of First Defense are seasonal with highest sales expected in the winter months. Sales of the Company's human infectious disease diagnostic reagents decreased to approximately $28,000 (less than 1% of total product sales) for the year ended December 31, 1998 from approximately $58,000 (1% of total product sales) for the year ended December 31, 1997. The Company received technology licensing income totaling $325,000 (7% of total revenues) in 1997, which was comprised of a $75,000 option payment received in January 1997 and a $250,000 payment received in November 1997 upon the exercise of the option for a license to the Company's milk protein purification technology for use in the purification of certain milk proteins other than lactoferrin. The Company received no similar technology licensing income in 1998. Grant income increased to approximately $282,000 (6% of total revenues) in 1998 as compared to $249,000 (5% of total revenues) in 1997. In October 1997, the Company was awarded approximately $710,000 under a two-year federal research grant to partially fund the Company's efforts to develop a product to prevent Travelers' Diarrhea. In 1998, the remaining funding then available under this grant was reallocated to the development of DiffGAM. Approximately $282,000 and $200,000 in grant income was recognized under this grant in 1998 and 1997, respectively. The 1997 grant income also includes approximately $49,000 recognized under a grant awarded to the Company in 1996 to partially fund development of a commercial prototype of the Company's diagnostic test to detect Cryptosporidium in water. Interest income exceeded interest expense by approximately $20,000 in 1998. Interest expense exceeded interest income by $29,000 in 1997. Interest expense was incurred in both years on the Company's outstanding bank debt. The reduction in interest expense in 1998 resulted from a refinancing of the Company's bank debt in May 1998. The Company's share of the loss in the equity of its joint ventures aggregated $123,000 and $13,000 in 1998 and 1997, respectively. The Company's joint venture loss was principally caused by the limited sales of lactoferrin due to the financial crisis in Asia, the primary market for this product. Product costs amounted to 48% of product sales in 1998 as compared to 46% in 1997. Internally developed products tend to have higher gross margin percentages than licensed-in products. The Company decreased its expenditures for research and development to approximately $1,013,000 in 1998 as compared to $1,068,000 in 1997. Research and development expenses exceeded grant income by approximately $731,000 in 1998 and by $819,000 in 1997. Research and development expenses aggregated 23% of total revenues in 1998 and 1997. Research and development expenses were reduced to 24% of product sales in 1998 from 27% of product sales in 1997. During 1998, the Company shifted the primary focus of its research and development efforts to products for the animal health industry. To expand its commercialized line of products for use by dairy and beef producers, the Company has invested in the development of new diagnostic products leveraging the Company's experience with infectious diseases. The Company has also initiated early stage development programs of certain vaccine and disease preventive products. The Company has one product, DiffGAM, in human clinical trials to prevent and treat Clostridium difficile-associated diarrhea. However, for clinical development to proceed into more expensive Phase II and III trials, a potential partner would be required. The Company has also invested in the development of a test intended to detect the presence of Cryptosporidium parvum in drinking water. Sales and marketing expenses of approximately $817,000 were essentially unchanged in 1998 compared to 1997, aggregating 19% of product sales in 1998 compared to 21% in 1997. The Company continues to leverage its small sales force through wholesale distribution channels. General and administrative expenses were approximately $637,000 in 1998 as compared to $546,000 in 1997. This increase was due principally to severance costs incurred in connection with the resignation of the Company's former President, which costs were incurred in 1998 and paid in 1999. The Company has continued its efforts to control its general and administrative expenses while incurring all the necessary expenses associated with being a publicly held company. Financial Position, Liquidity and Capital Resources The Company's total assets increased to $3,856,000 at December 31, 1999 from $3,145,000 at December 31, 1998. The Company's cash balance as of December 31, 1999 increased to $1,824,000 from $1,539,000 at December 31, 1998. Net working capital increased to $2,219,000 at December 31, 1999 from $1,866,000 at December 31, 1998. Stockholders' equity increased to $2,815,000 at December 31, 1999 from $2,248,000 at December 31, 1998. During 1999, approximately $680,000 in cash was provided by operating activities as the profit of $551,000 was net of $102,000 in non-cash depreciation expense and a $97,000 non-cash charge associated with the Company's share of the losses of its joint venture, AgriCell Company, LLC. A $248,000 use of cash to finance accounts receivable and inventories was partially offset by a net increase of $161,000 in accounts payable and accrued expenses. Investing activities were comprised of a $132,000 net investment in fixed assets and the $250,000 acquisition of certain product rights both relating principally to the acquisition of Wipe Out. Regular principal repayments on the Company's bank debt were approximately offset by the proceeds from the issuance of common stock upon the exercise of stock options. The Company funded its 1999 research and development expenses from government grants and product sales. The Company's current profitability provides positive cash flow to fund all operating expenses as well as new product acquisitions while reporting a net operating profit. During the year ended December 31, 1999, the $2,569,000 gross margin from product sales more than funded the aggregate of $1,954,000 in net research and development ("net R&D") expenses and general, sales and administrative ("G, S&A") expenses. In 1998, the $2,185,000 gross margin on product sales was approximately equal to the aggregate of net R&D and G, S&A expenses. In 1997, the gross margin on product sales contributed $2,163,000 to the aggregate of $2,182,000 in net R&D and G, S&A expenses. In a manner similar to many biotechnology product development funding models, funding of DiffGAM beyond the completion of the current clinical trial would require a strategic alliance with a corporate partner. Since 1990, the Company has been awarded five Phase I and three Phase II Small Business Innovation Research grants from the National Institutes of Health. These grants aggregate approximately $1,991,000 in funding for the Company's research and development programs. Approximately $1,763,000 of this grant income was recognized prior to 1999, approximately $162,000 was recognized in 1999. Approximately $66,000 is expected to be recognized in 2000 in support of the DiffGAM clinical development program. Additionally, since 1994 a small portion of the Company's research and development efforts has been supported by two grants from the State of Maine aggregating approximately $45,000. Additionally, for the two year period ending December 31, 2001, the Company has been awarded $40,000 to participate in a collaborative study funded by the American Water Work's Association Research Foundation related to Crypto-Scan . The Company continues to seek federal research grant support as a means of leveraging the funds that it is able to spend developing new products. Long-term debt decreased to $435,000 at December 31, 1999, from $453,000 at December 31, 1998. The current portion of this bank debt obligation increased to $19,000 at December 31, 1999 from $17,000 at December 31, 1998. In May 1998, the Company refinanced its bank debt obligations by using the proceeds from a $480,000 mortgage loan together with approximately $29,000 in additional cash to repay all of the then outstanding bank debt obligations. The Company is obligated to make monthly principal and interest payments aggregating approximately $5,000 under the outstanding debt obligation. (See Note 5 to the accompanying financial statements for further detail on these debt obligations). Management believes that its current cash and investments balance will be sufficient to meet its operating and capital requirements in 2000. Forward-Looking Statements The statements contained in this report which are not historical fact are "forward-looking statements" that involve various important assumptions, risks, uncertainties and other factors. There can be no assurance that actual results will not differ materially from those projected or suggested in such forward-looking statements as a result of various factors including, but not limited to, the risk factors discussed below. The Company is heavily dependent on the successful development of new products for its future growth. These new products have the potential to increase the Company's profitability. It is the Company's objective to fund all selling, general and administrative expenses as well as all research and development expenditures that are not funded by an outside source with the gross margin earned from product sales. Continuation of the Company's profitability will, in large part, be determined by the ongoing successful marketing of First Defense and the Kamar Heatmount Detector. Growth in the Company's profitability will, in large part, be determined by the success of the Company's efforts to market its two new products, Tip-Test: Johne's and Wipe Out Dairy Wipes as well as its ability to effectively develop and acquire additional animal health products. The Company estimates that it may be able to achieve annual sales of $400,000 and $750,000 for Tip-Test: Johne's and Wipe Out, respectively. The Company estimates that sales of its Crypto-Scan water diagnostic test could reach approximately $1-2,000,000 per year if regulatory and market acceptance can be achieved and maintained in the United Kingdom. The Company anticipates being able to earn a royalty of approximately $150,000 per year from the use of its technology in the production of whey protein isolate by an Australian partner for as long as the Company is able to keep the applicable technology license in effect, which will require the Company and its partners to meet certain minimum equipment purchase requirements. If clinical trials are successful, sales of DiffGAM would not be anticipated to begin until approximately the year 2002, due to the complex regulatory process required to obtain approval of this product. If the product is successfully developed, the Company intends to enter into a marketing alliance with a corporate partner to fund clinical development beyond the Phase I/II trial that the Company expects to complete in the first quarter of 2000 and to distribute the product if FDA approval is obtained. The Company estimates that any such partner could achieve potential sales of DiffGAM of approximately $50,000,000 to $100,000,000. The Company anticipates being able to financially benefit from a manufacturing and supply agreement, or other royalty arrangements with a potential marketing partner. The ultimate profitability of this product cannot be accurately predicted at this time. Risk Factors The development of these new products is subject to financial, efficacy, regulatory and market risks. There can be no assurance that the Company will be able to finance the development of these new product opportunities nor that, if financed, the new products will be found to be efficacious and gain the appropriate regulatory approval. Furthermore, if regulatory approval is obtained, there can be no assurance that the market estimates will prove to be accurate or that market acceptance at a profitable price level can be achieved or that the products can be profitably manufactured. The license covering the sales of the Kamar Heatmount Detector is subject to twelve months' notice of early termination prior to December 31, 2003. Effects of Inflation and Interest Rates The Company believes that neither inflation nor interest rates have had a significant effect on revenues and expenses. ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements of the Company, together with the notes thereto and the report of the accountants thereon, are set forth on Pages F-1 through F-14 at the end of this report. ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (A) Information with respect to the Company's directors is incorporated herein by reference to the section of the Company's 2000 Proxy Statement titled "Election of the Board of Directors", which is intended to be filed with the Securities and Exchange Commission within 120 days after the end of the Company's fiscal year. (B) The Company's executive officers are as follows: MICHAEL F. BRIGHAM (Age: 39, Officer Since: October 1991, Director Since: March 1999) was appointed to serve as President and Chief Executive Officer in February 2000, while maintaining the titles of Treasurer and Secretary, and was appointed to serve as a Director of the Company in March 1999. He previously had been elected Vice President of the Company in December 1998 and served as Chief Financial Officer since October 1991. He has served as Secretary since December 1995 and as Treasurer since October 1991. Prior to that, he served as Director of Finance and Administration since originally joining the Company in September 1989. Mr. Brigham serves on the Board of Directors of the Biotechnology Association of Maine and of the Maine Center for Innovation in Biotechnology. Prior to joining the Company, he was employed as an audit manager for the public accounting firm of Ernst & Young. Mr. Brigham earned his Masters in Business Administration from New York University in 1989. JOSEPH H. CRABB, Ph.D. (Age: 45, Officer Since: March 1996) served as a Director of the Company from March 1999 until he resigned from that position in February 2000 and was elected Vice President of the Company in December 1998, while maintaining the title of Chief Scientific Officer. He has served as Chief Scientific Officer since September 1998. Prior to that, he served as Vice President of Research and Development since March 1996. Prior to that, he served as Director of Research and Development and Senior Scientist since originally joining the Company in November 1988. Dr. Crabb currently holds a Clinical Assistant Professorship at Tufts University School of Veterinary Medicine and serves on National Institutes of Health and American Water Works Association advisory committees. Prior to joining the Company in 1988, Dr. Crabb earned his Ph.D. in Biochemistry from Dartmouth Medical School and completed postdoctoral studies in microbial pathogenesis at Harvard Medical School, where he also served on the faculty. STAFFORD C. WALKER (Age: 48, Officer Since: December 1998) served as a Director of the Company from March 1999 until he resigned from that position in February 2000 and was elected Vice President and Chief Marketing Officer of the Company in December 1998. Prior to that, he served as Director of Sales and Marketing since originally joining the Company in July 1992. Prior to joining the Company, he held various product management and sales positions in the animal health division of American Cyanamid Company. There is no family relationship between any director, executive officer, or person nominated or chosen by the Company to become a director or executive officer. ITEM 11 - EXECUTIVE COMPENSATION Information regarding cash compensation paid to executive officers of the Company is incorporated herein by reference to the section of the Company's 2000 Proxy Statement titled "Executive Compensation", which is intended to be filed with the Securities and Exchange Commission within 120 days after the end of the Company's fiscal year. ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information regarding ownership of the Company's common stock by certain owners and management is incorporated herein by reference to the section of the Company's 2000 Proxy Statement titled "Security Ownership of Certain Beneficial Owners and Management", which is intended to be filed with the Securities and Exchange Commission within 120 days after the end of the Company's fiscal year. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information regarding certain relationships and related transactions is incorporated herein by reference to the section of the Company's 2000 Proxy Statement titled "Certain Relationships and Related Transactions", which is intended to be filed with the Securities and Exchange Commission within 120 days after the end of the Company's fiscal year. PART IV ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Exhibits 3.1 Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of the Registrant's 1987 Registration Statement Number 33-12722 on Form S-1 as filed with the Commission). 3.2 Certificate of Amendment to the Company's Certificate of Incorporation (incorporated by reference to Exhibit 4.1 to the Registrant's Quarterly Report on Form 10-Q for the three months ended June 30, 1990). 3.3 Certificate of Amendment to the Company's Certificate of Incorporation effective August 24, 1992 (incorporated by reference to Exhibit 3.4 of the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992). 3.4 Bylaws of the Registrant as amended (incorporated by reference to Exhibit 3.3 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1995). 4.1 Rights Agreement dated as of September 5, 1995, between the Registrant and American Stock Transfer and Trust Co., as Rights Agent, which includes as Exhibit A thereto the form of Right Certificate and as Exhibit B thereto the Summary of Rights to Purchase Common Stock (incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K dated September 5, 1995). 4.2 $480,000 Note Payable to Peoples Heritage Bank dated May 6, 1998 (incorporated by reference to Exhibit 4.1 to the Registrant's Quarterly Report on Form 10-Q for the three months ended June 30, 1998). 10.1+ 1989 Stock Option and Incentive Plan of the Registrant (incorporated by reference to Exhibit 10.27 to the Registrant's Annual Report on Form 10- K for the fiscal year ended December 31, 1989). 10.2+{ }Form of Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.28 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989). 10.3+ Form of Indemnification Agreement entered into with each of the Company's directors and officers (incorporated by reference to Exhibit 10.32 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989). 10.4+ Amendment, dated April 1992, to Employment Agreement dated November 1991, between the Registrant and Michael F. Brigham (incorporated by reference to Exhibit 10.26 to the Registrant's Annual Report on Form 10- K for the fiscal year ended December 31, 1992). 10.5+ Amendment, dated April 1992, to Employment Agreement dated November 1991, between the Registrant and Joseph H. Crabb (incorporated by reference to Exhibit 10.32 to the Registrant's Annual Report on Form 10- K for the fiscal year ended December 31, 1995). 10.6 License and Supply Agreement between Bio-Vac, Inc. and the Registrant dated June 15, 1993 (incorporated by reference to Exhibit 10.25 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993). 10.7(1) ImmuCell - Advanced Separation Technologies, Inc. Agreement for exclusivity in protein separation of milk or whey proteins, dated August 30, 1993 (incorporated by reference to Exhibit 10.27 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993). 10.8 Distribution and Licensing Agreement between Kamar, Inc. and the Registrant dated December 3, 1993 (incorporated by reference to Exhibit 10.30 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993). 10.9 Amendment No. 1 to Agreement for Exclusivity between Advanced Separation Technologies, Inc. and the Registrant dated January 14, 1994 (incorporated by reference to Exhibit 10.33 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993). 10.10(2)Exclusive License Agreement between The Regents of the University of California of Alameda, California and the Registrant dated February 23, 1994 (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the three months ended March 31, 1994). 10.11 Non-qualified Stock Option Agreement dated November 10, 1994 between the Registrant and Redwood MicroCap Fund, Inc. (incorporated by reference to Exhibit 10.25 to the Registrant's Annual Report on Form 10- K for the fiscal year ended December 31, 1994). 10.12 Amendment No. 2 to Agreement for Exclusivity between Advanced Separation Technologies, Inc. and the Registrant dated December 16, 1994 (incorporated by reference to Exhibit 10.26 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994). 10.13(3) License Agreement between Registrant and Wisconsin Alumni Research Foundation effective March 1, 1995 (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the three months ended March 31, 1995). 10.14 1995 Stock Option Plan for Outside Directors (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the three months ended June 30, 1995). 10.15 Form of Stock Option Agreement (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the three months ended June 30, 1995). 10.16 Amendment No. 3 to Agreement for Exclusivity between Advanced Separation Technologies, Inc. and the Registrant dated May 3, 1995 (incorporated by reference to Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q for the three months ended June 30, 1995). 10.17 Amendment No. 4 to Agreement for Exclusivity between Advanced Separation Technologies, Inc. and the Registrant dated November 15, 1995 (incorporated by reference to Exhibit 10.28 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1995). 10.18 Limited Liability Company Agreement of AgriCell Company, LLC dated as of September 10, 1996 between the Registrant and Agri-Mark, Inc. of Methuen, MA (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the three months ended September 30, 1996). 10.19 Amendment No. 5 to Agreement for Exclusivity between Advanced Separation Technologies, Inc. and the Registrant dated October 2, 1997 (incorporated by reference to Exhibit 10.25 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997). 10.20(4) License Agreement between the Registrant and Murray Goulburn Co- operative Co., Limited, dated November 14, 1997 (incorporated by reference to Exhibit 10.26 to the Registrant's Annual Report on Form 10- K for the fiscal year ended December 31, 1997). 10.21(5)Amendment No. 1 to Distribution and Licensing Agreement between the Registrant and Kamar, Inc. dated July 1, 1998 (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the three months ended September 30, 1998). 10.22+ Employment Agreement dated April 29, 1999 between the Registrant and Michael F. Brigham. 10.23+ Employment Agreement dated April 29, 1999 between the Registrant and Joseph H. Crabb. 10.24+ Employment Agreement dated April 29, 1999 between the Registrant and Stafford C. Walker. 10.25 License Agreement between the Registrant and Hydros Environmental Diagnostics, Inc. dated December 8, 1999. 10.26 Asset Purchase Agreement between the Registrant and AMBI Inc. dated December 30, 1999 (incorporated by reference to Exhibit 2 to the Registrant's Current Report on Form 8-K dated as of December 30, 1999). 21.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996). 23.1 Consent of PricewaterhouseCoopers LLP. 27.1 Financial Data Schedule (Filed Only Electronically). (1) Confidential Treatment as to certain portions obtained effective until December 31, 2000. The copy filed as an exhibit omits the information subject to the Confidential Treatment. (2) Confidential Treatment as to certain portions obtained effective until March 31, 2002. The copy filed as an exhibit omits the information subject to the Confidential Treatment. (3) Confidential Treatment as to certain portions has been requested effective until March 1, 2005. The copy filed as an exhibit omits the information subject to the confidentiality request. (4) Confidential Treatment as to certain portions obtained effective until November 14, 2012. The copy filed as an exhibit omits the information subject to the Confidential Treatment. (5) Confidential Treatment as to certain portions obtained effective until December 31, 2003. The copy filed as an exhibit omits the information subject to the Confidential Treatment. + Management contract or compensatory plan or arrangement. (b) Index to Financial Statement Schedules Report of PricewaterhouseCoopers LLP, Independent Accountants F-1 Consolidated Balance Sheets - December 31, 1999 and 1998 F-2 to F-3 Consolidated Statements of Operations for the years ended December 31, 1999, 1998 and 1997 F-4 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1999, 1998, and 1997 F-5 Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997 F-6 Notes to Consolidated Financial Statements F-7 to F-14 All financial statement schedules have been omitted as they are not required, are not applicable, or the information is included in the consolidated financial statements or otherwise. (c) Reports on Form 8-K The Company filed a Current Report on Form 8-K dated December 30, 1999 with the Commission reporting under Item 2, "Other Events", the acquisition of rights to the product Wipe Out Dairy Wipes and certain other related rights. REPORT OF INDEPENDENT ACCOUNTANTS Board of Directors and Shareholders of ImmuCell Corporation: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, shareholders' equity, and cash flows present fairly, in all material respects, the financial position of ImmuCell Corporation and Subsidiary at December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ PricewaterhouseCoopers LLP Portland, Maine January 28, 2000
IMMUCELL CORPORATION AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1999 and 1998 ASSETS 1999 1998 _______________________ CURRENT ASSETS: Cash and cash equivalents $1,823,688 $1,538,905 Accounts receivable, net of allowance for doubtful accounts of $41,000 and $44,000 at December 31, 1999 and 1998, respectively 453,139 249,754 Inventories 520,656 475,949 Prepaid expenses 27,826 45,516 _______________________ Total current assets 2,825,309 2,310,124 PROPERTY, PLANT AND EQUIPMENT, at cost: Laboratory and manufacturing equipment 961,554 837,179 Building and improvements 586,242 583,472 Office furniture and equipment 63,418 68,540 Land 50,000 50,000 _______________________ 1,661,214 1,539,191 Less-accumulated depreciation 881,384 789,419 _______________________ Net property, plant and equipment 779,830 749,772 INVESTMENT IN JOINT VENTURE -- 84,111 PRODUCT RIGHTS AND OTHER ASSETS 250,840 840 _______________________ TOTAL ASSETS $3,855,979 $3,144,847 ======================-
The accompanying notes are an integral part of the financial statements.
IMMUCELL CORPORATION AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1999 and 1998 LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998 _______________________ CURRENT LIABILITIES: Accounts payable $ 322,241 $ 140,312 Accrued expenses 264,991 286,333 Current portion of long-term debt 18,691 17,257 _______________________ Total current liabilities 605,923 443,902 LONG-TERM DEBT: Mortgage loan 434,658 453,349 _______________________ Total long-term debt 434,658 453,349 COMMITMENTS AND CONTINGENT LIABILITIES STOCKHOLDERS' EQUITY: Common stock, Par value - $.10 per share Authorized-8,000,000 shares Issued-2,834,682 and 2,818,482 shares at December 31, 1999 and 1998, respectively 283,468 281,848 Capital in excess of par value 8,354,246 8,338,907 Accumulated deficit (5,235,581) (5,786,424) ________________________ 3,402,133 2,834,331 Treasury stock,at cost-389,598 shares (586,735) (586,735) ________________________ Total stockholders' equity 2,815,398 2,247,596 ________________________ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,855,979 $3,144,847 ========================
The accompanying notes are an integral part of the financial statements.
IMMUCELL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1999 1998 1997 _____________________________________ REVENUES: Product sales $4,722,374 $4,199,851 $3,982,798 Technology licensing income -- -- 325,000 Grant income 186,871 282,016 248,880 _____________________________________ Total revenues 4,909,245 4,481,867 4,556,678 COSTS AND EXPENSES: Product costs 2,152,959 2,014,626 1,819,587 Research and development expenses 812,892 1,012,813 1,068,069 Sales and marketing expenses 889,501 816,705 817,089 General and administrative expenses 438,923 637,439 546,073 _____________________________________ Total costs and expenses 4,294,275 4,481,583 4,250,818 Interest and other income 72,763 64,973 39,802 Interest expense (39,757) (45,217) (68,378) Equity in net loss of joint ventures (97,133) (122,558) (13,432) _____________________________________ Net interest and other (64,127) (102,802) (42,008) _____________________________________ NET PROFIT (LOSS) $ 550,843 $ (102,518) $ 263,852 ===================================== BASIC NET PROFIT (LOSS) PER COMMON SHARE $ 0.23 $ (0.04) $ 0.11 DILUTED NET PROFIT (LOSS) PER COMMON SHARE $ 0.22 $ (0.04) $ 0.10 ===================================== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 2,432,701 2,426,474 2,332,939 =====================================
The accompanying notes are an integral part of the financial statements.
IMMUCELL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 and 1997 Common Stock $.10 Par Value Capital in Treasury Stock Total ------------------ Excess of Accumulated ---------------- Stockholders' Shares Amount Par Value Deficit Shares Amount Equity BALANCE, December 31, 1996 2,719,162 $271,916 $8,139,791 $(5,947,758) 389,598 $(586,735) $1,877,214 Net profit -- -- -- 263,852 -- -- 263,852 Issuance of Common Stock 80,820 8,082 174,517 -- -- -- 182,599 Exercise of stock options 4,500 450 5,393 -- -- -- 5,843 ________________________________________________________________________________ BALANCE, December 31, 1997 2,804,482 280,448 8,319,701 (5,683,906) 389,598 (586,735) 2,329,508 Net loss -- -- -- (102,518) -- -- (102,518) Exercise of stock options 14,000 1,400 19,206 -- -- -- 20,606 ________________________________________________________________________________ BALANCE, December 31, 1998 2,818,482 281,848 8,338,907 (5,786,424) 389,598 (586,735) 2,247,596 Net profit -- -- -- 550,843 -- -- 550,843 Exercise of stock options 16,200 1,620 15,339 -- -- -- 16,959 ________________________________________________________________________________ BALANCE, December 31, 1999 2,834,682 $283,468 $8,354,246 $(5,235,581) 389,598 $(586,735) $2,815,398 ======================================================================================
The accompanying notes are an integral part of the financial statements.
IMMUCELL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1999 1998 1997 _____________________________________ CASH FLOWS FROM OPERATING ACTIVITIES: Net profit (loss) $ 550,843 $ (102,518) $ 263,852 Adjustments to reconcile net profit (loss) to net cash provided by operating activities- Depreciation 101,537 105,542 98,872 Equity share in joint venture losses 97,134 127,558 5,000 Changes in: Accounts receivable (203,385) 431,513 (310,469) Inventories (44,707) (1,423) 173,750 Prepaid expenses 17,690 (18,475) (1,294) Accounts payable 181,929 (16,911) (112,362) Accrued expenses (21,342) 114,535 (13,458) --------- --------- --------- Net cash provided by operating activites 679,699 639,821 103,891 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of equipment, building and improvements, net (131,595) (65,931) (71,627) (Investment in) distribution from joint venture (13,023) 25,000 (17,000) Acquisition of product rights (250,000) -- -- --------- --------- --------- Net cash used for investing activities (394,618) (40,931) (88,627) --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from debt obligations -- 480,000 -- Payments of debt obligations (17,257) (579,415) (229,323) Proceeds from issuance of common stock 16,959 20,606 193,345 Stock issuance costs -- (2,500) (2,403) --------- --------- --------- Net cash used for financing activities (298) (81,309) (38,381) --------- --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 284,783 517,581 (23,117) BEGINNING CASH AND CASH EQUIVALENTS 1,538,905 1,021,324 1,044,441 ------------------------------------- ENDING CASH AND CASH EQUIVALENTS $1,823,688 $1,538,905 $1,021,324 ===================================== CASH PAID FOR INTEREST $ 39,883 $ 45,153 $ 69,165 =====================================
The accompanying notes are an integral part of the financial statements. The accompanying notes are an integral part of the financial statements. IMMUCELL CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) BUSINESS OPERATIONS ImmuCell Corporation (the "Company") is a biotechnology company primarily engaged in the development of animal health products to expand its commercialized line of products for use by dairy and beef producers. The Company was originally incorporated in Maine in 1982 and reincorporated in Delaware in March 1987. The Company is subject to certain risks associated with its stage of development including dependence on key individuals, competition from other larger companies, the successful marketing of existing products and the development of additional commercially viable products. In addition, sales of a significant product are subject to a license that is scheduled to expire on December 31, 2003 and is subject to earlier termination upon twelve months' notice. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Consolidation Principles The consolidated financial statements of the Company include the accounts of the Company and its wholly-owned subsidiary, the Kamar Marketing Group, Inc. All intercompany accounts and transactions have been eliminated in consolidation. (b) Cash and Cash Equivalents The Company considers all highly liquid investment instruments purchased with an original maturity of three months or less to be cash equivalents. (c) Inventories Inventories include raw materials, work-in-process and finished goods and are recorded at the lower of standard cost which approximates cost on the first-in, first-out method or market (net realizable value). Work-in-process and finished goods inventories include materials, labor and manufacturing overhead. Inventories consist of the following: DECEMBER 31, 1999 1998 [S] [C] [C] Raw materials $136,909 $ 61,938 Work-in-process 243,895 383,691 Finished goods 139,852 30,320 -------- -------- $520,656 $475,949 ======== ======== (d) Equipment, Building and Improvements and Intangible Assets The Company provides for depreciation and amortization on the straight- line method by charges to operations in amounts estimated to allocate the cost of the assets over their estimated useful lives, generally equal to five to ten years for equipment and ten years for building improvements. The cost of the building is being depreciated over 30 years. The $250,000 acquisition of certain product rights on December 30, 1999 is valued at cost and is being amortized to cost of sales over ten years. (e) Revenue Recognition Revenues related to the sale of manufactured products are recorded at the time of shipment to the customer. Collaborative research and development revenue and income on government research grants are recognized as reimburseable expenses are incurred. Indirect costs which are billed to the government are subject to their review. All related research and development costs are expensed as incurred, as are all patent costs. Income from the sale of technology licenses is recognized when definitive agreement as to terms is reached, which approximates the receipt of the associated cash payments. (f) Net Profits (Loss) Per Common Share The basic net profits (loss) per common share have been computed in accordance with Financial Accounting Standards Board Statement No. 128 by dividing the net profits (loss) by the weighted average number of common shares outstanding during the year. The denominator in the diluted net profit per common share calculation in 1999 was increased by 409,800 "in-the-money" common stock options and reduced by 322,539 shares that could have been repurchased with the proceeds from the exercise of these common stock options. Options to purchase 168,667 shares of common stock at prices ranging from $1.69 to $4.00 per share were outstanding during 1999 but not included in the computation of diluted net profit per share because the options' exercise prices were greater than the average market price of the common shares and, therefore, the effect would be antidilutive. Common stock equivalents outstanding have not been included in the 1998 diluted net loss per common share computation, as the effect would be antidilutive, thereby decreasing the net loss per common share. The denominator in the diluted net profit per common share calculation in 1997 was increased by 466,167 "in-the-money" common stock options and reduced by 269,013 shares that could have been repurchased with the proceeds from the exercise of these common stock options. Options to purchase 54,000 shares of common stock at prices ranging from $3.06 to $4.00 per share were outstanding during 1997 but not included in the computation of diluted net profit per share because the options' exercise prices were greater than the average market price of the common shares and, therefore, the effect would be antidilutive. For additional disclosures regarding the outstanding common stock options see Notes 7(a) and 7(b). (g) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual amounts could differ from those estimates. (h) Segment Information In 1998, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 131, Disclosures about Segments of an Enterprise and Related Information. SFAS No. 131 supersedes SFAS No. 14, Financial Reporting for Segments of a Business Enterprise, replacing the "industry segment" approach with the "management" approach. The management approach designates the internal organization that is used by management for making operating decisions and assessing performance as the source of the Company's reportable segments. SFAS No. 131 also requires disclosures about products and services, geographic areas, and major customers. The adoption of SFAS No. 131 did not affect results of operations or financial position but did affect the disclosure of segment information (see Note 9, "Segment and Significant Customer Information"). (3) INVESTMENT IN JOINT VENTURE In 1996, the Company and Agri-Mark, Inc. of Methuen, Massachusetts formed a joint venture, AgriCell Company, LLC, a Delaware limited liability company, to manufacture and sell lactoferrin, a nutritional milk protein derived from cheese whey. The Company licensed certain proprietary technology to AgriCell, invested $125,000 in new fixed assets and contributed other fixed assets with a net book value of approximately $95,000 as well as additional personnel costs to assist in the installation of the commercial production facility. Agri-Mark invested approximately $1,000,000 in principally working capital, fixed assets and production facility modifications. Agri-Mark has the right to receive 90% of the profits from the joint venture until it obtains the return of an amount equal to its original investment, after which all profits are to be split equally. This investment is accounted for under the equity method. During the year ended December 31, 1999, the Company recorded a $97,000 non-cash charge against earnings reflecting its equity share in AgriCell's net loss. This loss principally resulted from a write down of inventory costs due to the limited product sales achieved to date. As of December 31, 1999, the investment in this joint venture asset was completely written off; any further losses incurred by the joint venture will have no impact on the Company's financial statements. (4) ACCRUED EXPENSES Accrued expenses consisted of the following:
DECEMBER 31, 1999 1998 Accrued royalties $ 70,537 $ 69,403 Accrued professional fees 49,370 34,744 Accrued payroll 101,509 147,016 Accrued other 43,575 35,170 -------- -------- $264,991 $286,333 ======== ========
(5)(5) DEBT OBLIGATIONS The Company has long-term debt obligations, net of current maturities, as follows:
DECEMBER 1999 1998 8.62% Bank mortgage, collateralized by first security interest in building, due 1999 to 2003 $453,349 $470,606 Less current portion 18,691 17,257 -------- -------- Long-term debt $434,658 $453,349 ======== ========
In May 1998, the Company refinanced its bank debt obligations by using the proceeds from a $480,000 mortgage loan together with approximately $29,000 in additional cash to repay all of the then outstanding bank debt obligations. The new mortgage has a 15 year amortization schedule with interest payable at the fixed rate of 8.62% per year for the first five years. The Company intends to repay the then outstanding principal at the end of this five year period, but the mortgage does provide the option of resetting at a new fixed interest rate to be determined at that time for one additional five year period. Principal payments under the above debt obligations due subsequent to December 31, 1999 are approximately as follows: $19,000 (2000); $20,000 (2001); $22,000 (2002); and $392,000 (2003). The weighted average interest rate of the bank debt outstanding as of December 31, 1999 and 1998 is 8.62%. The difference between the fair value and the carrying value of these debt obligations is immaterial. (6) INCOME TAXES The Company accounts for income taxes in accordance with Financial Accounting Standards Board Statement No. 109. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of the Company's deferred tax assets and liabilities are as follows:
December 31, 1999 1998 Deferred tax assets: Net operating loss carryover $ 1,883,878 $2,083,564 Expenses not currently deductible 61,046 73,435 General business credit carryforward 183,538 215,655 ----------- ---------- Total deferred tax assets 2,128,462 2,372,654 =========== ========== Deferred tax liabilities: Tax over book depreciation 7,173 1,330 ----------- ---------- Total deferred tax liabilities 7,173 1,330 ----------- ---------- Net deferred tax assets before valuation allowance 2,121,289 2,371,324 Valuation allowance (2,121,289) (2,371,324) ----------- ---------- Net deferred tax assets $ -- $ -- =========== ==========
The Company offset current tax expense for 1999 of approximately $200,000 by utilizing the benefit of approximately $200,000 of net operating loss carryforwards. As a result, the Company has reduced its deferred tax valuation allowance to reflect such utilization. Due to the uncertainty of future taxable income, the Company has fully reserved for its net deferred tax assets. The Company will have remaining federal and state net operating loss carryforwards of approximately $4,700,000, expiring in years 2002 through 2018. The net operating loss carryforwards are available to offset future federal and state taxable income. (7) STOCKHOLDERS' EQUITY (a) Non-qualified Stock Options In April 1992, a total of 200,000 non-qualified stock options were issued to the three, then-serving executive officers of the Company at an exercise price of $1.05 per share, the then current market price of the Company's common stock. These options, which were granted outside of the stock option plans described below, expire in April 2002. Half of these options became exercisable in April 1993, and the remaining half became exercisable in April 1994. A former executive officer of the Company exercised 16,200 of such options during October 1999 and the aggregate of an additional 133,800 of such options during January and February 2000. In November 1994, the Company entered into a non-exclusive investment banking contract with Redwood MicroCap Fund of Colorado Springs, Colorado ("Redwood"). As compensation for services provided under this contract, the Company issued 30,000 non-qualified stock options to Redwood. The options expired without being exercised on November 2, 1999. In April 1999, a total of 93,300 non-qualified stock options were issued to the three executive officers of the Company at an exercise price of $1.31 per share, the then current market price of the Company's common stock. These options, which were granted outside of the stock option plans described below, expire in April 2009. One third of these options became exercisable in March 2000, an additional one third become exercisable in March 2001 and the remaining options become exercisable in March 2002. (b) Stock Option Plans In May 1989, the stockholders approved the 1989 Stock Option and Incentive Plan (the "1989 Plan") pursuant to the provisions of the Internal Revenue Code of 1986, under which employees may be granted options to purchase shares of the Company's common stock at i) no less than fair market value on the date of grant in the case of incentive stock options and ii) no less than 85% of fair market value on the date of grant in the case of non-qualified stock options. Vesting requirements are determined by the Compensation and Stock Option Committee of the Board of Directors on a case by case basis. Originally, 90,000 shares of common stock were reserved for issuance under the 1989 Plan; the stockholders of the Company approved an increase in this number to 190,000 shares at the August 1992 Annual Meeting and a further increase in this number to 290,000 shares at the June 1994 Annual Meeting and a further increase in this number to 340,000 shares at the June 1998 Annual Meeting. All options granted under the 1989 Plan expire no later than ten years from the date of grant. The 1989 Plan expired in March 1999, and no further options may be granted under the 1989 Plan; however, outstanding options under the 1989 Plan may be exercised in accordance with their terms. Since the inception of the 1989 Plan and prior to December 31, 1999, 49,833 options have been exercised. In February 1995, the Board of Directors adopted the 1995 Stock Option Plan for Outside Directors (the "1995 Plan"). The 1995 Plan was approved by the stockholders of the Company on June 23, 1995. Under the 1995 Plan, each director who was not an employee of the Company on the date the Plan was adopted was automatically granted a non-qualified stock option to purchase 8,000 shares of common stock at its fair market value on the date of the grant. Directors who were newly elected to the Board subsequent to February 1995 received an automatic grant of an option to purchase 8,000 shares, at fair market value on the date when such directors were first elected to the Board by the stockholders. As of February 1995, 64,000 shares of common stock were reserved for issuance under the 1995 Plan. Options to purchase an aggregate of 40,000 shares were automatically granted on the date the Plan was adopted by the Board of Directors. Of these 40,000 options, 8,000 terminated in September 1995. Options to purchase another 8,000 shares were automatically granted in June 1995, which options terminated in December 1999. Options as to 4,000 of such shares were exercised during 1997. All options granted under the 1995 Plan expire no later than five years from the date of grant. The 1995 Plan expired in February 2000, and no further options may be granted under the 1995 Plan; however, outstanding options under the 1995 Plan may be exercised in accordance with their terms. Activity under the stock option plans described above, was as follows:
Weighted Average 1989 Plan 1995 Plan Exercise Price --------- --------- ---------------- Balance at December 31, 1996 230,000 40,000 $2.29 Grants 48,667 -- 2.48 Terminations (24,000) -- 3.40 Exercises (500) (4,000) 1.30 -------- -------- Balance at December 31, 1997 254,167 36,000 2.25 Grants 15,000 -- 1.66 Terminations (41,534) -- 2.42 Exercises (14,000) -- 1.47 -------- -------- Balance at December 31, 1998 213,633 36,000 2.23 Grants 79,700 -- 1.31 Terminations (19,966) (8,000) 1.65 Exercises -- -- -- -------- -------- Balance at December 31, 1999 273,367 28,000 2.04 Exercisable at December 31, 1999 174,442 28,000 $2.32 -------- --------
At December 31, 1999, approximately 578,467 common shares were reserved for future issuance under all outstanding stock options described above. (c) Compliance with Financial Accounting Standards Board New Accounting Standard In 1995, the Financial Accounting Standards Board ("FASB") issued "Statement of Financial Accounting Standard ("SFAS") No. 123 - Accounting for Stock-Based Compensation". This statement requires a fair value based method of accounting for employee and director stock options and would result in expense recognition for the Company's stock plans. It also permits a Company to continue to measure compensation expense for such plans using the intrinsic value based method as prescribed by Accounting Principles Board Opinion No. 25 ("APB No. 25"), "Accounting for Stock Issued to Employees". The Company has elected to follow APB No. 25 in accounting for its stock plans, and accordingly, no compensation cost has been recognized. Had compensation cost for the Company's stock plans been determined based on the fair value requirements of SFAS No. 123, the Company's net profit (loss) and basic net profit (loss) per share would have been reduced (increased) to the pro forma amounts indicated below:
1999 1998 1997 ---- ---- ---- Net profit (loss) As reported $550,843 $(102,518) $263,852 Pro forma $464,163 $(173,061) $211,072 Basic net profit (loss) per share As reported $0.23 $(0.04) $0.11 Pro forma $0.19 $(0.07) $0.08
The weighted average remaining life of the options outstanding under the 1989 Plan and the 1995 Plan as of December 31, 1999 was approximately six years and three months. The exercise price of the options outstanding and of the options exercisable as of December 31, 1999 ranged from $1.25 to $4.00. The weighted-average grant date fair values of options granted during 1999 and 1998 were $1.31 and $1.12 per share, respectively. The fair value of each stock option grant has been estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:
1999 1998 1997 ---- ---- ---- Risk-free interest rate 5.8% 5.1% 5.7% Dividend yield 0 0 0 Expected volatility 76.2% 79.7% 83.4% Expected life 5 years 5 years 5 years (d) Common Stock Rights Plan On September 5, 1995, the Board of Directors of the Company adopted a Common Stock Rights Plan and declared a dividend of one common share purchase right (a "Right") for each of the then outstanding shares of the common stock of the Company. The dividend was distributed to the shareholders of record as of the close of business on September 19, 1995. Each Right entitles the registered holder to purchase from the Company one share of common stock at an initial purchase price of $70.00 per share, subject to adjustment. The description and terms of the Rights are set forth in a Rights Agreement between the Company and American Stock Transfer & Trust Co., as Rights Agent. The Rights become exercisable and transferrable apart from the common stock upon the earlier of (i) 10 days following a public announcement that a person or group (acquiring person) has, without the prior consent of the Continuing Directors (as such term is defined in the Rights Agreement), acquired beneficial ownership of 15 percent or more of the outstanding common stock, or (ii) 10 days following commencement of a tender offer or exchange offer the consummation of which would result in ownership by a person or group of 20% or more of the outstanding common stock (the earlier of such dates being called the "Distribution Date"). Upon the acquisition of 15% or more of the Company's common stock by an acquiring person, the holder of each Right not owned by the acquiring person would be entitled to purchase common stock having a market value equal to two times the exercise price of the Right (i.e., at a 50 percent discount). If, after the Distribution Date, the Company should consolidate or merge with any other entity and the Company were not the surviving company, or, if the Company were the surviving company, all or part of the Company's common stock were changed or exchanged into the securities of any other entity, or if more than 50% of the Company's assets or earning power were sold, each Right would entitle its holder to purchase, at the Rights' then-current purchase price, a number of shares of the acquiring company's common stock having a market value at that time equal to twice the Right's exercise price. At any time after a person or group becomes an acquiring person and prior to the acquisition by such person or group of 50% or more of the outstanding common stock, the Board of Directors of the Company may exchange the Rights (other than Rights owned by such person or group which have become void), in whole or in part, at an exchange ratio of one share of common stock per Right (subject to adjustment). At any time prior to fourteen days following the date that any person or group becomes an acquiring person (subject to extension by the Board of Directors), the Board of Directors of the Company may redeem the then outstanding Rights in whole, but not in part, at a price of $.005 per Right, subject to adjustment. The Rights will expire on the earlier of (i) the close of business on September 19, 2005, or (ii) the time at which the Rights are redeemed by the Company. (8) COMMITMENTS AND CONTINGENCIES In connection with the acquisition of Wipe Out Dairy Wipes, the Company assumed the rights and obligations of a certain sub-contractor manufacturing contract. As of December 31, 1999, the Company would be obligated to pay this sub-contractor approximately $56,000 in the event of the termination of this contract. The contingent liability reduces on a per unit basis as the Company purchases product from this sub-contractor. The Company has entered into employment contracts with its three executive officers which could require the Company to pay three months' salary as severance pay depending upon the circumstances of any termination of employment of these key employees. In June 1998, the Company entered into a renewal of its service and license agreement effective through December 31, 2003 with Kamar, Inc. whereby Kamar will continue to provide the Company warehousing, distribution and certain other services and the Company will continue to market a certain bovine heat detection device under an exclusive world-wide license. The renewal agreement is cancelable by either party upon twelve months written notice. The Company is committed to pay Kamar a monthly fee for distribution services and related license fees of $21,100 (adjusted annually for inflation) until the license agreement is canceled. Royalties paid on sales made during the years ended December 31, 1999, 1998 and 1997 were $228,000, $217,000 and $188,000, respectively. The research, manufacturing and marketing of human and animal health care products by the Company entail an inherent risk that liability claims will be asserted against the Company. The Company feels it has adequate levels of liability insurance to support its operations. (9) SEGMENT AND SIGNIFICANT CUSTOMER INFORMATION The Company principally operates in the business segment described in Note 1. The Company's primary customers for the majority of its 1999 product sales (74%) are in the United States dairy and beef industries. Revenues derived from foreign customers, who are also in the dairy and beef industries, aggregated 24% of 1999 product sales. Government grant income amounted to approximately 4% ($187,000), 6% ($282,000) and 5% ($249,000) of total revenues in the years ended December 31, 1999, 1998 and 1997, respectively. In 1998, the Company adopted SFAS No. 131. The prior year=*s segment information has been restated to present the Company=*s two reportable segments: (1) Animal Health Products and (2) Research and Development ("R&D"). The accounting policies of the segments are the same as those described in Note 2, "Summary of Significant Accounting Policies." The Company evaluates the performance of its segments and allocates resources to them based on contribution before allocation of corporate overhead charges. The table below presents information about reported segments for the years ending December 31:
Animal Health 1999: Products R&D Other Total ------------- ------- -------- ------- Product Sales $4,655,231 -- $ 67,143 $4,722,374 Grant Income -- $186,871 -- 186,871 ---------- --------- --------- ---------- Total Revenues 4,655,231 186,871 67,143 4,909,245 Product Costs 2,123,847 -- 29,112 2,152,959 Research and Development -- 812,892 -- 812,892 Sales and Marketing Expenses 889,501 -- -- 889,501 Other Expenses -- -- 503,050 503,050 ---------- --------- --------- ---------- Net Profit (Loss) $1,641,883 $(626,021) $(465,019) $ 550,843 ========== ---------- ---------- ==========
Animal Health 1998: Products R&D Other Total ------------- ------- -------- ------- Product Sales $4,120,367 -- $79,484 $4,199,851 Grant Income -- $282,016 -- 282,016 Other Income -- -- -- -- ---------- -------- -------- ---------- Total Revenues 4,120,367 282,016 79,484 4,481,867 Product Costs 1,950,476 -- 64,150 2,014,626 Research and Development -- 1,012,813 -- 1,012,813 Sales and Marketing Expenses 816,705 -- -- 816,705 Other Expenses -- -- 740,241 740,241 ---------- -------- -------- ---------- Net Profit (Loss) $1,353,186 $(730,797) $(724,907) $ (102,518) ========== ========== ========== ===========
Animal Health 1997: Products R&D Other Total ------------- ------- -------- ------- Product Sales $3,918,710 -- $64,088 $3,982,798 Grant Income -- $ 248,880 -- 248,880 Other Income -- -- 325,000 325,000 ---------- ---------- --------- ---------- Total Revenues 3,918,710 248,880 389,088 4,556,678 Product Costs 1,784,819 -- 34,768 1,819,587 Research and Development -- 1,068,069 -- 1,068,069 Sales and Marketing Expenses 817,089 -- -- 817,089 Other Expenses -- -- 588,081 588,081 ---------- ---------- --------- ---------- Net Profit (Loss) $1,316,802 $(819,189) $(233,761) $ 263,852 ========== ---------- --------- ----------
(10) EMPLOYEE BENEFITS The Company has a 401(k) savings plan in which all employees completing one year of service with the Company (working at least 1,000 hours) are eligible to participate. Participants may contribute up to 20% of their annual compensation to the plan, subject to certain limitations. Beginning January 1, 1994, the Company has matched 50% of each employee's contribution to the plan up to a maximum match of 3% of each employee's base compensation. Under this matching contribution program, the Company paid the aggregate of $18,000, $24,000 and $24,000 to the plan for the years ended December 31, 1999, 1998 and 1997, respectively. The Company intends to continue this same matching contribution program in 2000. Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. IMMUCELL CORPORATION Date: March 24, 2000 By: /S/ MICHAEL F. BRIGHAM Michael F. Brigham President, Chief Executive Officer and Treasurer POWER OF ATTORNEY We, the undersigned directors and officers of ImmuCell Corporation hereby severally constitute and appoint Michael F. Brigham our true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for us and in our stead, in any and all capacities, to sign any and all amendments to this report and all documents relating thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in- fact and agent, full power and authority to do and perform each and every act and thing necessary or advisable to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Date: March 24, 2000 By: /S/ Michael F. Brigham Michael F. Brigham President, Chief Executive Officer, Treasurer and Director Date: March 24, 2000 By: /S/Anthony B. Cashen Anthony B. Cashen, Director Date: March 24, 2000 By: /S/John P. Donahoe John P. Donahoe, Ph.D., Director Date: March 24, 2000 By: /S/Keith N. Haffer Keith N. Haffer, Ph.D., Director Date: March 24, 2000 By: /S/William H. Maxwell William H. Maxwell, Ph.D., Director Date: March 24, 2000 By: /S/Mitchel Sayare Mitchel Sayare, Ph.D., Director IMMUCELL CORPORATION AND SUBSIDIARY Exhibit Index 10.22 Employment Agreement dated April 29, 1999 between the Registrant and Michael F. Brigham. 10.23 Employment Agreement dated April 29, 1999 between the Registrant and Joseph H. Crabb. 10.24 Employment Agreement dated April 29, 1999 between the Registrant and Stafford C. Walker. 10.25 License Agreement between the Registrant and Hydros Environmental Diagnostics, Inc. dated December 8, 1999. 23.1 Consent of PricewaterhouseCoopers LLP 27.1 Financial Data Schedule (Filed Only Electronically). EX-10.22 2 IMMUCELL CORPORATION AND SUBSIDIARY Exhibit 10.22 Employment Agreement dated April 29, 1999 between the Registrant and Michael F. Brigham. EMPLOYMENT AGREEMENT AGREEMENT made this 29th day of April, 1999, between IMMUCELL CORPORATION, a Delaware Corporation (the "Company"), and Michael F. Brigham, of Kennebunk, Maine ("Brigham"). WITNESSETH: In consideration of the mutual promises hereinafter contained, the parties hereto agree as follows: 1. EMPLOYMENT AND TERM. The Company hereby employs Brigham and Brigham hereby accepts employment by the Company subject to the provisions of this Agreement for a term commencing on April --, 1999 and ending upon the date of termination of Brigham's employment with the Company. 2. DUTIES OF BRIGHAM. Brigham shall be employed by the Company as Vice President, Chief Financial Officer, Treasurer and Secretary to perform such duties consistent with such a position as Vice President, Chief Financial Officer, Treasurer and Secretary as its Board of Directors shall assign Brigham from time to time. Brigham shall serve the Company faithfully and diligently, use his best efforts to promote the interests of the Company, and shall devote his full time and efforts to the business and affairs of the Company. 3. COMPENSATION. (a) BASE SALARY. As compensation for his services hereunder, the Company shall pay Brigham $7,916.66 per month, beginning on February 1, 1999. During the entire term of this agreement, Brigham's salary shall be subject to periodic review and adjustment by the Board of Directors of the Company, which Board of Directors may in its sole discretion change the salary to an amount greater than that provided for therein; provided, however, that in no event may the Company's Board of Directors decrease Brigham's salary below that which is provided for herein. (b) EMPLOYEE BENEFITS. During the term of this Agreement the Company shall provide Brigham with the standard health, life, and disability insurance coverage that is provided to the Company's other non-officer employees. Brigham shall also be eligible to receive all other employee benefits of the Company in the same manner and to the same extent as other employees of the Company in accordance with the Company's policies, including, without limitation, any incentive pay programs offered by the Company to all of its non-officer employees. (c) NONQUALIFIED STOCK OPTIONS. (1) GRANT. By unanimous resolution of the full Board of Directors on March 1, 1999 the Company granted to Brigham an option (`Option') to purchase thirty-one thousand and one hundred (31,100) shares of ImmuCell common stock (`Shares') at a price equal to $1.3125 per share. (2) VESTING. Brigham's right to purchase the Shares subject to this Option shall vest as follows: (i) As to 10,366 Shares on and after March 1, 2000; (ii) As to an additional 10,367 Shares on and after March 1, 2001; and (iii) As to the remaining 10,367 Shares on and after March 1, 2002. (3) EXERCISE. Except as hereinafter provided, the Option may be exercised in full or in part at any time to the extent vested in accordance with subsection (2). In no event may the Option be exercised to purchase fewer than one hundred (100) Shares, unless fewer than one hundred (100) Shares are subject to the Option. The purchase price for the Shares acquired upon exercise of the Option shall be paid (i) in cash or certified check, or (ii) at the discretion of the Compensation and Stock Option Committee of the Board of Directors of the Company by delivery of one or more stock certificates, duly endorsed, evidencing other Shares with a Fair Market Value on the date of exercise equal to the option price, or (iii) at the discretion of the Compensation and Stock Option Committee, by a combination of the methods described in (i) or (ii). As soon as practicable after Brigham has tendered payment of the purchase price to the Company, the Company shall provide Brigham with a Certificate evidencing the Shares purchased. Such certificate shall include any legends required under federal or state securities laws. In the event of Brigham's termination of employment with the Company (except for by reason of "just cause" as provided by subsection (c) of Section 4 of this Agreement), disability or death, the Option shall be exercisable during the eighteen-month period following the date of Brigham's termination. In the event of Brigham's termination for "just cause" as provided by subsection (c) of Section 4, the Option shall be exercisable for the three month period following such termination only to the extent it was exercisable at the time of such termination. (4) EXPIRATION OF OPTION. This Option shall expire at 5:00 p.m., Eastern time on February 28, 2009, unless sooner terminated as provided in Section (c)(3) above, and may not be exercised thereafter. (5) NONTRANSFERABILITY. Brigham may not transfer the Option other than by will or the laws of descent and distribution. During Brigham's lifetime, only Brigham may exercise the Option. (6) CHANGE IN CONTROL. In the event of a change in control of the Company, Brigham's right to purchase Shares subject to the Option shall vest immediately. For purposes of this Amendment, `change in control' shall mean any one of the following events: (a) Any person shall become beneficial owner, directly or indirectly, of securities representing fifty percent (50%) or more of the combined voting power of the Company's then outstanding stock. As used in this Paragraph 6 (a), `beneficial owner' shall have the meaning ascribed to it from time to time under rules promulgated by the Securities and Exchange Commission pursuant to Section 13 (d) of the Securities Exchange Act of 1934, or any similar successor statute or rule; and a `person' shall include any natural person, corporation, partnership, trust, association, or any group or combination thereof, whose ownership of the Company stock would be reportable pursuant to such provision of the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder; (b) The Company's stockholders approve (i) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of Company common stock would be converted into cash, securities or other property, or (ii) any sale, lease, exchange, liquidation or other transfer (in one transaction or a series of transactions) of all or substantially all of the assets of the Company. (c) Any other event which a majority of all the Company's Directors who are not employees of the Company determines constitutes a change of control. (7) NO REGISTRATION OF SECURITIES. The parties agree that the Company presently intends to rely on the securities registration exemption contained in Section 10502 (1) (L) of the Revised Maine Securities Act and that, accordingly, no registration or exemption filing shall be made by the Company under such Act with respect to the Shares. Brigham acknowledges that transfer of the Shares may be restricted by applicable federal and state securities laws and that the Shares when issued shall contain an appropriate legend to that effect. Notwithstanding the foregoing, the Company agrees to register these shares in conjunction with its next Registration Statement on Form S-8 to be filed with the Securities and Exchange Commission. (d) BONUS. A cash bonus will be paid to Brigham by the Company if certain performance objectives are met during any fiscal year. These objectives will be specified by the Company's Board of Directors on an annual basis. Each and any such annual incentive compensation agreement shall be incorporated by reference into this Employment Agreement. Any bonus earned during a fiscal year will be paid by 1 February of the next fiscal year. 4. TERMINATION OF EMPLOYMENT. (a) VOLUNTARY TERMINATION. Should Brigham voluntarily terminate his employment with the company, Brigham hereby covenants that, for a period of one (l) year he will abide by the terms of the "Agreement in Connection with Employment" dated August 24, 1989 between Brigham and the Company, a copy of which is appended hereto as ATTACHMENT A. (b) OTHER TERMINATION. (i) Should Brigham's employment with the Company terminate for any reason except through Brigham's voluntary act or by termination for "just cause" as provided by subsection (c) of this Section 4 or (ii) should Brigham's status or position with the Company be in any way altered without Brigham's consent so as to materially reduce Brigham's status or responsibilities in a manner inconsistent with his position as Vice President and Chief Financial Officer of the Company (it being understood that the Board of Directors may at any time elect other individuals to the offices of Treasurer and Secretary without diminution in Brigham's status or responsibilities as Vice President and Chief Financial Officer) and should Brigham resign from all offices and positions held with the Company in response to such change or alteration in his status or position with the Company or (iii) should the Company terminate Brigham's employment at any time, Brigham shall receive from the Company salary and benefits at the monthly level existing prior to termination for an additional three (3) months after the date of termination of Brigham's employment. In consideration for the payments to be made to him pursuant to this subsection (b), Brigham shall be bound by the provisions of subsection (a) of this Section in the same manner as if his termination had been voluntary, and Brigham shall not compete with the Company as provided therein for a period of one (1) year from the date of termination of Brigham's employment by the Company. (c) TERMINATION FOR JUST CAUSE. Notwithstanding the forgoing provisions of this Section 4, a majority of the Board of Directors of the Company may at any time terminate the employment of Brigham for just cause (as hereinafter defined) upon seven (7) days' written notice to Brigham. Upon the expiration of such seven (7) day period, Brigham's employment with the Company shall cease, and from and after such date the Company shall have no further liability or obligation to make any payments or provide any benefits which would otherwise be paid to Brigham hereunder, except as such have accrued on or before such date. In the event of the termination of Brigham's employment for just cause as provided herein, Brigham shall be bound by the provisions of subsection (a) of this Section in the same manner as if his termination had been voluntary, and Brigham shall not compete with the Company as provided therein for a period of one (1) year from the date of termination of Brigham's employment. As used in this subsection (c), "just cause" shall be deemed to include only the following: (i) Brigham's conviction of a felony involving moral turpitude or dishonesty; or (ii) Brigham's persistent failure to comply with the reasonable directives or assignments of the Company's Board of Directors, provided that such directives or assignments are consistent with Brigham's status and position as set forth in Section 2 of this Agreement; or (iii) Brigham's persistent failure to devote his full time and efforts to the business and affairs of the Company in the manner contemplated by Section 2 of this Agreement. (d) CERTAIN EVENTS. In the event that (i) following the termination of Brigham's employment pursuant to subsection (b) of this Section 4 the Company shall fail to pay Brigham when due, or within ten (10) business days thereafter, all current sums payable to Brigham pursuant to said subsection (b), or (ii) following the termination of Brigham's employment for any reason whatsoever, the Company or any successor or assignee of the Company entitled to the benefits of this Agreement shall cease to conduct the business of the company engaged in by the Company at the times of such termination, then, and in either such event, the covenants against competition set forth in subsections (a), (b), and (c) of this Section 4 shall be terminated and Brigham shall thereafter not be bound by the provisions thereof. The termination of said covenants against competition shall not alter or affect the obligation of the Company to make any payments required to be made to Brigham pursuant to the provisions of subsection (b) of this Section 4. 5. COVENANT CONCERNING OTHER EMPLOYEES. Should Brigham voluntarily terminate his employment with the Company for any reason whatsoever, Brigham hereby covenants that, for a period of one (1) year, Brigham will not directly or indirectly persuade, induce or otherwise encourage any other employee of the Company to leave the employ of the Company to join or form any other firm, corporation, partnership, association, joint venture, trust or business entity of any kind engaged in, or to be engaged in the future in, any business which is similar to or competitive with the business now or at any time hereafter engaged in by the Company. 6. MISCELLANEOUS. a) NOTICE. Any notice required to be given hereunder shall be given in writing and shall be delivered by hand or sent by registered or certified mail, postage prepaid, return receipt requested, or by Federal Express, if to the Company, at the address of its principal offices on the date upon which such notice is given, and if to Brigham, at the then current residential address of Brigham (as reflected on the records of the Company) by any of the aforesaid means. Any such notice shall be effective when delivered in person or deposited in the United States mails in accordance with the provisions of this subsection. b) DEATH. In the event of the death of Brigham during the term of this Agreement while he shall be an employee of the Company, Brigham's compensation pursuant to Section 3 hereof shall cease as of the last day of the month in which Brigham's death occurs. Any remaining amounts owing to Brigham pursuant to Section 3 hereof in respect to such month shall be paid to his estate or shall pass by applicable laws of descent and distribution. In the event of the death of Brigham after he has terminated his employment with the Company, but prior to the payment of all amounts payable to him pursuant to the provisions of subsection (b) of Section 4 hereof, the remaining such amounts shall be paid to the representatives of Brigham's estate. (c) INJUNCTIVE RELIEF. The parties agree that the extent of damage to the Company in the event of the breach by Brigham of the noncompetition covenants contained in the agreement attached hereto as ATTACHMENT A would be difficult or impossible to ascertain and that there would be no adequate remedy at law available to the Company in the event of such breach. Therefore, in the event of any such breach, the Company shall be entitled to enforce any or all of such covenants by injunction or other equitable relief in addition to receiving damages or other relief to which the Company may be entitled. (d) BINDING EFFECT; ASSIGNMENT. The provision of this Agreement shall be binding upon and shall inure to the benefit of the Company and its successors and assigns and to the benefit of Brigham and his heirs and legal representative. This Agreement is a personal contract and the rights and interest of Brigham herein may not be sold, transferred, assigned, pledged, or hypothecated and any such attempted sale, transfer, assignment, pledge or hypothecation shall be null, void and of no effect. (e) ENTIRE AGREEMENT. Except as set forth in the next succeeding sentence, this Agreement contains the entire agreement between the parties hereto with respect to the transactions contemplated herein and supersedes all prior agreements and understandings, written and oral with respect to the subject matter hereof, including without limitation the Employment Agreement dated November 8, 1991 between Brigham and the Company, and may not be amended or modified except by an instrument in writing signed by both parties hereto. It is understood and agreed that the following additional agreements shall remain in full force and effect and shall not be superceded by this Agreement: (i) the "Agreement in Connection with Employment" dated August 24, 1989 and appended hereto as ATTACHMENT A, (ii) the provisions regarding the nonqualified stock options granted to Brigham contained in the Amendment to Employment Agreement dated April 13, 1992 between Brigham and the Company, and (iii) all other incentive and non-qualified stock option agreements previously entered into between Brigham and the Company, which agreements remain in full force to the same extent they were in force before this Agreement was executed. (f) SEVERABILITY. If any provision of this Agreement is declared invalid, illegal or unenforceable, such provision shall be severed and all remaining provisions shall continue in full force and effect. (g) LAW GOVERNING. This Agreement shall be governed by and enforced in accordance with the laws of the State of Maine IN WITNESS WHEREOF, the parties hereto have executed this Agreement, intending the same to take effect as a sealed instrument, as of the date first above written. IMMUCELL CORPORATION /S/ Michael F. Brigham /S/ Anthony B. Cashen Michael F. Brigham By: Anthony B. Cashen Vice President and Chief Financial Member, Compensation and Stock Officer Option Committee EX-10.23 3 IMMUCELL CORPORATION AND SUBSIDIARY Exhibit 10.23 Employment Agreement dated April 29, 1999 between the Registrant and Joseph H. Crabb. EMPLOYMENT AGREEMENT AGREEMENT made this 29th day of April, 1999, between IMMUCELL CORPORATION, a Delaware Corporation (the "Company"), and Joseph H. Crabb, of Newfield, Maine ("Crabb"). WITNESSETH: In consideration of the mutual promises hereinafter contained, the parties hereto agree as follows: 2. EMPLOYMENT AND TERM. The Company hereby employs Crabb and Crabb hereby accepts employment by the Company subject to the provisions of this Agreement for a term commencing on April 29, 1999 and ending upon the date of termination of Crabb's employment with the Company. 2. DUTIES OF CRABB. Crabb shall be employed by the Company as Vice President and Chief Scientific Officer to perform such duties consistent with such a position as Vice President and Chief Scientific Officer as its Board of Directors shall assign Crabb from time to time. Crabb shall serve the Company faithfully and diligently, use his best efforts to promote the interests of the Company, and shall devote his full time and efforts to the business and affairs of the Company. 3. COMPENSATION. (a) BASE SALARY. As compensation for his services hereunder, the Company shall pay Crabb $7,916.66 per month, beginning on February 1, 1999. During the entire term of this agreement, Crabb's salary shall be subject to periodic review and adjustment by the Board of Directors of the Company, which Board of Directors may in its sole discretion change the salary to an amount greater than that provided for therein; provided, however, that in no event may the Company's Board of Directors decrease Crabb's salary below that which is provided for herein. (b) EMPLOYEE BENEFITS. During the term of this Agreement the Company shall provide Crabb with the standard health, life, and disability insurance coverage that is provided to the Company's other non-officer employees. Crabb shall also be eligible to receive all other employee benefits of the Company in the same manner and to the same extent as other employees of the Company in accordance with the Company's policies, including, without limitation, any incentive pay programs offered by the Company to all of its non-officer employees. (c) NONQUALIFIED STOCK OPTIONS. (8) GRANT. By unanimous resolution of the full Board of Directors on March 1, 1999 the Company granted to Crabb an option (`Option') to purchase thirty-one thousand and one hundred (31,100) shares of ImmuCell common stock (`Shares') at a price equal to $1.3125 per share. (9) VESTING. Crabb's right to purchase the Shares subject to this Option shall vest as follows: (iv) As to 10,366 Shares on and after March 1, 2000; (v) As to an additional 10,367 Shares on and after March 1, 2001; and (vi) As to the remaining 10,367 Shares on and after March 1, 2002. (10) EXERCISE. Except as hereinafter provided, the Option may be exercised in full or in part at any time to the extent vested in accordance with subsection (2). In no event may the Option be exercised to purchase fewer than one hundred (100) Shares, unless fewer than one hundred (100) Shares are subject to the Option. The purchase price for the Shares acquired upon exercise of the Option shall be paid (i) in cash or certified check, or (ii) at the discretion of the Compensation and Stock Option Committee of the Board of Directors of the Company by delivery of one or more stock certificates, duly endorsed, evidencing other Shares with a Fair Market Value on the date of exercise equal to the option price, or (iii) at the discretion of the Compensation and Stock Option Committee, by a combination of the methods described in (i) or (ii). As soon as practicable after Crabb has tendered payment of the purchase price to the Company, the Company shall provide Crabb with a Certificate evidencing the Shares purchased. Such certificate shall include any legends required under federal or state securities laws. In the event of Crabb's termination of employment with the Company (except for by reason of "just cause" as provided by subsection (c) of Section 4 of this Agreement), disability or death, the Option shall be exercisable during the eighteen-month period following the date of Crabb's termination. In the event of Crabb's termination for "just cause" as provided by subsection (c) of Section 4, the Option shall be exercisable for the three month period following such termination only to the extent it was exercisable at the time of such termination. (11) EXPIRATION OF OPTION. This Option shall expire at 5:00 p.m., Eastern time on February 28, 2009, unless sooner terminated as provided in Section (c)(3) above, and may not be exercised thereafter. (12) NONTRANSFERABILITY. Crabb may not transfer the Option other than by will or the laws of descent and distribution. During Crabb's lifetime, only Crabb may exercise the Option. (13) CHANGE IN CONTROL. In the event of a change in control of the Company, Crabb's right to purchase Shares subject to the Option shall vest immediately. For purposes of this Amendment, `change in control' shall mean any one of the following events: (d) Any person shall become beneficial owner, directly or indirectly, of securities representing fifty percent (50%) or more of the combined voting power of the Company's then outstanding stock. As used in this Paragraph 6 (a), `beneficial owner' shall have the meaning ascribed to it from time to time under rules promulgated by the Securities and Exchange Commission pursuant to Section 13 (d) of the Securities Exchange Act of 1934, or any similar successor statute or rule; and a `person' shall include any natural person, corporation, partnership, trust, association, or any group or combination thereof, whose ownership of the Company stock would be reportable pursuant to such provision of the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder; (e) The Company's stockholders approve (i) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of Company common stock would be converted into cash, securities or other property, or (ii) any sale, lease, exchange, liquidation or other transfer (in one transaction or a series of transactions) of all or substantially all of the assets of the Company. (f) Any other event which a majority of all the Company's Directors who are not employees of the Company determines constitutes a change of control. (14) NO REGISTRATION OF SECURITIES. The parties agree that the Company presently intends to rely on the securities registration exemption contained in Section 10502 (1) (L) of the Revised Maine Securities Act and that, accordingly, no registration or exemption filing shall be made by the Company under such Act with respect to the Shares. Crabb acknowledges that transfer of the Shares may be restricted by applicable federal and state securities laws and that the Shares when issued shall contain an appropriate legend to that effect. Notwithstanding the foregoing, the Company agrees to register these shares in conjunction with its next Registration Statement on Form S-8 to be filed with the Securities and Exchange Commission. (d) BONUS. A cash bonus will be paid to Crabb by the Company if certain performance objectives are met during any fiscal year. These objectives will be specified by the Company's Board of Directors on an annual basis. Each and any such annual incentive compensation agreement shall be incorporated by reference into this Employment Agreement. Any bonus earned during a fiscal year will be paid by 1 February of the next fiscal year. 4. TERMINATION OF EMPLOYMENT. (b) VOLUNTARY TERMINATION. Should Crabb voluntarily terminate his employment with the company, Crabb hereby covenants that, for a period of one (l) year he will abide by the terms of the "Agreement in Connection with Employment" dated September 19, 1988 between Crabb and the Company, a copy of which is appended hereto as ATTACHMENT A. (b) OTHER TERMINATION. (i) Should Crabb's employment with the Company terminate for any reason except through Crabb's voluntary act or by termination for "just cause" as provided by subsection (c) of this Section 4 or (ii) should Crabb's status or position with the Company be in any way altered without Crabb's consent so as to materially reduce Crabb's status or responsibilities in a manner inconsistent with his position as Vice President and Chief Scientific Officer of the Company and should Crabb resign from all offices and positions held with the Company in response to such change or alteration in his status or position with the Company or (iii) should the Company terminate Crabb's employment at any time, Crabb shall receive from the Company salary and benefits at the monthly level existing prior to termination for an additional three (3) months after the date of termination of Crabb's employment. In consideration for the payments to be made to him pursuant to this subsection (b), Crabb shall be bound by the provisions of subsection (a) of this Section in the same manner as if his termination had been voluntary, and Crabb shall not compete with the Company as provided therein for a period of one (1) year from the date of termination of Crabb's employment by the Company. (c) TERMINATION FOR JUST CAUSE. Notwithstanding the forgoing provisions of this Section 4, a majority of the Board of Directors of the Company may at any time terminate the employment of Crabb for just cause (as hereinafter defined) upon seven (7) days' written notice to Crabb. Upon the expiration of such seven (7) day period, Crabb's employment with the Company shall cease, and from and after such date the Company shall have no further liability or obligation to make any payments or provide any benefits which would otherwise be paid to Crabb hereunder, except as such have accrued on or before such date. In the event of the termination of Crabb's employment for just cause as provided herein, Crabb shall be bound by the provisions of subsection (a) of this Section in the same manner as if his termination had been voluntary, and Crabb shall not compete with the Company as provided therein for a period of one (1) year from the date of termination of Crabb's employment. As used in this subsection (c), "just cause" shall be deemed to include only the following: (i) Crabb's conviction of a felony involving moral turpitude or dishonesty; or (ii) Crabb's persistent failure to comply with the reasonable directives or assignments of the Company's Board of Directors, provided that such directives or assignments are consistent with Crabb's status and position as set forth in Section 2 of this Agreement; or (iii) Crabb's persistent failure to devote his full time and efforts to the business and affairs of the Company in the manner contemplated by Section 2 of this Agreement. (d) CERTAIN EVENTS. In the event that (i) following the termination of Crabb's employment pursuant to subsection (b) of this Section 4 the Company shall fail to pay Crabb when due, or within ten (10) business days thereafter, all current sums payable to Crabb pursuant to said subsection (b), or (ii) following the termination of Crabb's employment for any reason whatsoever, the Company or any successor or assignee of the Company entitled to the benefits of this Agreement shall cease to conduct the business of the Company engaged in by the Company at the times of such termination, then, and in either such event, the covenants against competition set forth in subsections (a), (b), and (c) of this Section 4 shall be terminated and Crabb shall thereafter not be bound by the provisions thereof. The termination of said covenants against competition shall not alter or affect the obligation of the Company to make any payments required to be made to Crabb pursuant to the provisions of subsection (b) of this Section 4. 5. COVENANT CONCERNING OTHER EMPLOYEES. Should Crabb voluntarily terminate his employment with the Company for any reason whatsoever, Crabb hereby covenants that, for a period of one (1) year, Crabb will not directly or indirectly persuade, induce or otherwise encourage any other employee of the Company to leave the employ of the Company to join or form any other firm, corporation, partnership, association, joint venture, trust or business entity of any kind engaged in, or to be engaged in the future in, any business which is similar to or competitive with the business now or at any time hereafter engaged in by the Company. 6. MISCELLANEOUS. a) NOTICE. Any notice required to be given hereunder shall be given in writing and shall be delivered by hand or sent by registered or certified mail, postage prepaid, return receipt requested, or by Federal Express, if to the Company, at the address of its principal offices on the date upon which such notice is given, and if to Crabb, at the then current residential address of Crabb (as reflected on the records of the Company) by any of the aforesaid means. Any such notice shall be effective when delivered in person or deposited in the United States mails in accordance with the provisions of this subsection. b) DEATH. In the event of the death of Crabb during the term of this Agreement while he shall be an employee of the Company, Crabb's compensation pursuant to Section 3 hereof shall cease as of the last day of the month in which Crabb's death occurs. Any remaining amounts owing to Crabb pursuant to Section 3 hereof in respect to such month shall be paid to his estate or shall pass by applicable laws of descent and distribution. In the event of the death of Crabb after he has terminated his employment with the Company, but prior to the payment of all amounts payable to him pursuant to the provisions of subsection (b) of Section 4 hereof, the remaining such amounts shall be paid to the representatives of Crabb's estate. (c) INJUNCTIVE RELIEF. The parties agree that the extent of damage to the Company in the event of the breach by Crabb of the noncompetition covenants contained in the agreement attached hereto as ATTACHMENT A would be difficult or impossible to ascertain and that there would be no adequate remedy at law available to the Company in the event of such breach. Therefore, in the event of any such breach, the Company shall be entitled to enforce any or all of such covenants by injunction or other equitable relief in addition to receiving damages or other relief to which the Company may be entitled. (d) BINDING EFFECT; ASSIGNMENT. The provision of this Agreement shall be binding upon and shall inure to the benefit of the Company and its successors and assigns and to the benefit of Crabb and his heirs and legal representative. This Agreement is a personal contract and the rights and interest of Crabb herein may not be sold, transferred, assigned, pledged, or hypothecated and any such attempted sale, transfer, assignment, pledge or hypothecation shall be null, void and of no effect. (e) ENTIRE AGREEMENT. Except as set forth in the next succeeding sentence, this Agreement contains the entire agreement between the parties hereto with respect to the transactions contemplated herein and supersedes all prior agreements and understandings, written and oral with respect to the subject matter hereof, including without limitation the Employment Agreement dated November 8, 1991 as amended on March 17, 1992 between Crabb and the Company, and may not be amended or modified except by an instrument in writing signed by both parties hereto. It is understood and agreed that the following additional agreements shall remain in full force and effect and shall not be superceded by this Agreement: (i) the "Agreement in Connection with Employment" dated September 19, 1988 and appended hereto as ATTACHMENT A, (ii) the provisions regarding the nonqualified stock options granted to Crabb contained in the Amendment to Employment Agreement dated April 13, 1992 between Crabb and the Company, and (iii) all other incentive and non- qualified stock option agreements previously entered into between Crabb and the Company, which agreements remain in full force to the same extent they were in force before this Agreement was executed. (f) SEVERABILITY. If any provision of this Agreement is declared invalid, illegal or unenforceable, such provision shall be severed and all remaining provisions shall continue in full force and effect. (g) LAW GOVERNING. This Agreement shall be governed by and enforced in accordance with the laws of the State of Maine IN WITNESS WHEREOF, the parties hereto have executed this Agreement, intending the same to take effect as a sealed instrument, as of the date first above written. IMMUCELL CORPORATION /S/ Joseph H. Crabb /S/ Anthony B. Cashen Joseph H. Crabb By: Anthony B. Cashen Vice President and Chief Scientific Member, Compensation and Officer Stock Option Committee EX-10.24 4 IMMUCELL CORPORATION AND SUBSIDIARY Exhibit 10.24 Employment Agreement dated April 29, 1999 between the Registrant and Stafford C. Walker. EMPLOYMENT AGREEMENT AGREEMENT made this 29th day of April, 1999, between IMMUCELL CORPORATION, a Delaware Corporation (the "Company"), and Stafford C. Walker, of Carmel, Indiana ("Walker"). WITNESSETH: In consideration of the mutual promises hereinafter contained, the parties hereto agree as follows: 3. EMPLOYMENT AND TERM. The Company hereby employs Walker and Walker hereby accepts employment by the Company subject to the provisions of this Agreement for a term commencing on April 29, 1999 and ending upon the date of termination of Walker's employment with the Company. 2. DUTIES OF WALKER. Walker shall be employed by the Company as Vice President and Chief Marketing Officer to perform such duties consistent with such a position as Vice President and Chief Marketing Officer as its Board of Directors shall assign Walker from time to time. Walker shall serve the Company faithfully and diligently, use his best efforts to promote the interests of the Company, and shall devote his full time and efforts to the business and affairs of the Company. 3. COMPENSATION. (a) BASE SALARY. As compensation for his services hereunder, the Company shall pay Walker $7,916.66 per month, beginning on February 1, 1999. During the entire term of this agreement, Walker's salary shall be subject to periodic review and adjustment by the Board of Directors of the Company, which Board of Directors may in its sole discretion change the salary to an amount greater than that provided for therein; provided, however, that in no event may the Company's Board of Directors decrease Walker's salary below that which is provided for herein. (b) EMPLOYEE BENEFITS. During the term of this Agreement the Company shall provide Walker with the standard health, life, and disability insurance coverage that is provided to the Company's other non-officer employees. Walker shall also be eligible to receive all other employee benefits of the Company in the same manner and to the same extent as other employees of the Company in accordance with the Company's policies, including, without limitation, any incentive pay programs offered by the Company to all of its non-officer employees. (c) NONQUALIFIED STOCK OPTIONS. (15) GRANT. By unanimous resolution of the full Board of Directors on March 1, 1999 the Company granted to Walker an option (`Option') to purchase thirty-one thousand and one hundred (31,100) shares of ImmuCell common stock (`Shares') at a price equal to $1.3125 per share. (16) VESTING. Walker's right to purchase the Shares subject to this Option shall vest as follows: (vii) As to 10,366 Shares on and after March 1, 2000; (viii) As to an additional 10,367 Shares on and after March 1, 2001; and (ix) As to the remaining 10,367 Shares on and after March 1, 2002. (17) EXERCISE. Except as hereinafter provided, the Option may be exercised in full or in part at any time to the extent vested in accordance with subsection (2). In no event may the Option be exercised to purchase fewer than one hundred (100) Shares, unless fewer than one hundred (100) Shares are subject to the Option. The purchase price for the Shares acquired upon exercise of the Option shall be paid (i) in cash or certified check, or (ii) at the discretion of the Compensation and Stock Option Committee of the Board of Directors of the Company by delivery of one or more stock certificates, duly endorsed, evidencing other Shares with a Fair Market Value on the date of exercise equal to the option price, or (iii) at the discretion of the Compensation and Stock Option Committee, by a combination of the methods described in (i) or (ii). As soon as practicable after Walker has tendered payment of the purchase price to the Company, the Company shall provide Walker with a Certificate evidencing the Shares purchased. Such certificate shall include any legends required under federal or state securities laws. In the event of Walker's termination of employment with the Company (except for by reason of "just cause" as provided by subsection (c) of Section 4 of this Agreement), disability or death, the Option shall be exercisable during the eighteen-month period following the date of Walker's termination. In the event of Walker's termination for "just cause" as provided by subsection (c) of Section 4, the Option shall be exercisable for the three month period following such termination only to the extent it was exercisable at the time of such termination. (18) EXPIRATION OF OPTION. This Option shall expire at 5:00 p.m., Eastern time on February 28, 2009, unless sooner terminated as provided in Section (c)(3) above, and may not be exercised thereafter. (19) NONTRANSFERABILITY. Walker may not transfer the Option other than by will or the laws of descent and distribution. During Walker's lifetime, only Walker may exercise the Option. (20) CHANGE IN CONTROL. In the event of a change in control of the Company, Walker's right to purchase Shares subject to the Option shall vest immediately. For purposes of this Amendment, `change in control' shall mean any one of the following events: (g) Any person shall become beneficial owner, directly or indirectly, of securities representing fifty percent (50%) or more of the combined voting power of the Company's then outstanding stock. As used in this Paragraph 6 (a), `beneficial owner' shall have the meaning ascribed to it from time to time under rules promulgated by the Securities and Exchange Commission pursuant to Section 13 (d) of the Securities Exchange Act of 1934, or any similar successor statute or rule; and a `person' shall include any natural person, corporation, partnership, trust, association, or any group or combination thereof, whose ownership of the Company stock would be reportable pursuant to such provision of the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder; (h) The Company's stockholders approve (i) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of Company common stock would be converted into cash, securities or other property, or (ii) any sale, lease, exchange, liquidation or other transfer (in one transaction or a series of transactions) of all or substantially all of the assets of the Company. (i) Any other event which a majority of all the Company's Directors who are not employees of the Company determines constitutes a change of control. (21) NO REGISTRATION OF SECURITIES. The parties agree that the Company presently intends to rely on the securities registration exemption contained in Section 10502 (1) (L) of the Revised Maine Securities Act and that, accordingly, no registration or exemption filing shall be made by the Company under such Act with respect to the Shares. Walker acknowledges that transfer of the Shares may be restricted by applicable federal and state securities laws and that the Shares when issued shall contain an appropriate legend to that effect. Notwithstanding the foregoing, the Company agrees to register these shares in conjunction with its next Registration Statement on Form S-8 to be filed with the Securities and Exchange Commission. (d) BONUS. A cash bonus will be paid to Walker by the Company if certain performance objectives are met during any fiscal year. These objectives will be specified by the Company's Board of Directors on an annual basis. Each and any such annual incentive compensation agreement shall be incorporated by reference into this Employment Agreement. Any bonus earned during a fiscal year will be paid by 1 February of the next fiscal year. 4. TERMINATION OF EMPLOYMENT. (c) VOLUNTARY TERMINATION. Should Walker voluntarily terminate his employment with the company, Walker hereby covenants that, for a period of one (l) year he will abide by the terms of the "Agreement in Connection with Employment" dated July 7, 1992 between Walker and the Company, a copy of which is appended hereto as ATTACHMENT A. (b) OTHER TERMINATION. (i) Should Walker's employment with the Company terminate for any reason except through Walker's voluntary act or by termination for "just cause" as provided by subsection (c) of this Section 4 or (ii) should Walker's status or position with the Company be in any way altered without Walker's consent so as to materially reduce Walker's status or responsibilities in a manner inconsistent with his position as Vice President and Chief Marketing Officer of the Company and should Walker resign from all offices and positions held with the Company in response to such change or alteration in his status or position with the Company or (iii) should the Company terminate Walker's employment at any time, Walker shall receive from the Company salary and benefits at the monthly level existing prior to termination for an additional three (3) months after the date of termination of Walker's employment. In consideration for the payments to be made to him pursuant to this subsection (b), Walker shall be bound by the provisions of subsection (a) of this Section in the same manner as if his termination had been voluntary, and Walker shall not compete with the Company as provided therein for a period of one (1) year from the date of termination of Walker's employment by the Company. (c) TERMINATION FOR JUST CAUSE. Notwithstanding the forgoing provisions of this Section 4, a majority of the Board of Directors of the Company may at any time terminate the employment of Walker for just cause (as hereinafter defined) upon seven (7) days' written notice to Walker. Upon the expiration of such seven (7) day period, Walker's employment with the Company shall cease, and from and after such date the Company shall have no further liability or obligation to make any payments or provide any benefits which would otherwise be paid to Walker hereunder, except as such have accrued on or before such date. In the event of the termination of Walker's employment for just cause as provided herein, Walker shall be bound by the provisions of subsection (a) of this Section in the same manner as if his termination had been voluntary, and Walker shall not compete with the Company as provided therein for a period of one (1) year from the date of termination of Walker's employment. As used in this subsection (c), "just cause" shall be deemed to include only the following: (i) Walker's conviction of a felony involving moral turpitude or dishonesty; or (ii) Walker's persistent failure to comply with the reasonable directives or assignments of the Company's Board of Directors, provided that such directives or assignments are consistent with Walker's status and position as set forth in Section 2 of this Agreement; or (iii) Walker's persistent failure to devote his full time and efforts to the business and affairs of the Company in the manner contemplated by Section 2 of this Agreement. (d) CERTAIN EVENTS. In the event that (i) following the termination of Walker's employment pursuant to subsection (b) of this Section 4 the Company shall fail to pay Walker when due, or within ten (10) business days thereafter, all current sums payable to Walker pursuant to said subsection (b), or (ii) following the termination of Walker's employment for any reason whatsoever, the Company or any successor or assignee of the Company entitled to the benefits of this Agreement shall cease to conduct the business of the Company engaged in by the Company at the times of such termination, then, and in either such event, the covenants against competition set forth in subsections (a), (b), and (c) of this Section 4 shall be terminated and Walker shall thereafter not be bound by the provisions thereof. The termination of said covenants against competition shall not alter or affect the obligation of the Company to make any payments required to be made to Walker pursuant to the provisions of subsection (b) of this Section 4. 5. COVENANT CONCERNING OTHER EMPLOYEES. Should Walker voluntarily terminate his employment with the Company for any reason whatsoever, Walker hereby covenants that, for a period of one (1) year, Walker will not directly or indirectly persuade, induce or otherwise encourage any other employee of the Company to leave the employ of the Company to join or form any other firm, corporation, partnership, association, joint venture, trust or business entity of any kind engaged in, or to be engaged in the future in, any business which is similar to or competitive with the business now or at any time hereafter engaged in by the Company. 6. MISCELLANEOUS. a) NOTICE. Any notice required to be given hereunder shall be given in writing and shall be delivered by hand or sent by registered or certified mail, postage prepaid, return receipt requested, or by Federal Express, if to the Company, at the address of its principal offices on the date upon which such notice is given, and if to Walker, at the then current residential address of Walker (as reflected on the records of the Company) by any of the aforesaid means. Any such notice shall be effective when delivered in person or deposited in the United States mails in accordance with the provisions of this subsection. b) DEATH. In the event of the death of Walker during the term of this Agreement while he shall be an employee of the Company, Walker's compensation pursuant to Section 3 hereof shall cease as of the last day of the month in which Walker's death occurs. Any remaining amounts owing to Walker pursuant to Section 3 hereof in respect to such month shall be paid to his estate or shall pass by applicable laws of descent and distribution. In the event of the death of Walker after he has terminated his employment with the Company, but prior to the payment of all amounts payable to him pursuant to the provisions of subsection (b) of Section 4 hereof, the remaining such amounts shall be paid to the representatives of Walker's estate. (c) INJUNCTIVE RELIEF. The parties agree that the extent of damage to the Company in the event of the breach by Walker of the noncompetition covenants contained in the agreement attached hereto as ATTACHMENT A would be difficult or impossible to ascertain and that there would be no adequate remedy at law available to the Company in the event of such breach. Therefore, in the event of any such breach, the Company shall be entitled to enforce any or all of such covenants by injunction or other equitable relief in addition to receiving damages or other relief to which the Company may be entitled. (d) BINDING EFFECT; ASSIGNMENT. The provision of this Agreement shall be binding upon and shall inure to the benefit of the Company and its successors and assigns and to the benefit of Walker and his heirs and legal representative. This Agreement is a personal contract and the rights and interest of Walker herein may not be sold, transferred, assigned, pledged, or hypothecated and any such attempted sale, transfer, assignment, pledge or hypothecation shall be null, void and of no effect. (e) ENTIRE AGREEMENT. Except as set forth in the next succeeding sentence, this Agreement contains the entire agreement between the parties hereto with respect to the transactions contemplated herein and supersedes all prior agreements and understandings, written and oral with respect to the subject matter hereof and may not be amended or modified except by an instrument in writing signed by both parties hereto. It is understood and agreed that the following additional agreements shall remain in full force and effect and shall not be superceded by this Agreement: (i) the "Agreement in Connection with Employment" dated July 7, 1992 and appended hereto as ATTACHMENT A AND (ii) all other incentive and non-qualified stock option agreements previously entered into between Walker and the Company, which agreements remain in full force to the same extent they were in force before this Agreement was executed. (f) SEVERABILITY. If any provision of this Agreement is declared invalid, illegal or unenforceable, such provision shall be severed and all remaining provisions shall continue in full force and effect. (g) LAW GOVERNING. This Agreement shall be governed by and enforced in accordance with the laws of the State of Maine IN WITNESS WHEREOF, the parties hereto have executed this Agreement, intending the same to take effect as a sealed instrument, as of the date first above written. IMMUCELL CORPORATION /S/ Stafford C. Walker /S/ Anthony B. Cashen Stafford C. Walker By: Anthony B. Cashen Vice President and Chief Marketing Officer Member, Compensation and Stock Option Committee EX-10.25 5 IMMUCELL CORPORATION AND SUBSIDIARY Exhibit 10.25 License Agreement between the Registrant and Hydros Environmental Diagnostics, Inc. dated December 8, 1999. LICENSE AGREEMENT LICENSE AGREEMENT This License Agreement ("Agreement") is made effective the 8th day of December, 1999 by and between Hydros Environmental Diagnostics, Inc., a Massachusetts corporation with its principal place of business at 230 Jones Road, Falmouth, Massachusetts 02540, USA (hereinafter called "Hydros"), and ImmuCell Corporation (hereinafter called "ImmuCell"), a Delaware corporation with its principal place of business at 56 Evergreen Drive, Portland, Maine, 04103, USA, together hereinafter called the Parties. WHEREAS, Hydros has developed certain technology as described in Section 1.1 herein entitled "LICENSED TECHNOLOGY", and Hydros is willing to grant a license for said LICENSED TECHNOLOGY to ImmuCell; NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, the Parties covenant and agree as follows: Section 1: Definitions 1.1 "LICENSED TECHNOLOGY" shall refer to and mean the Components assembled in a Tip format and an associated Tray with Kit Reagents that can be used to further manufacture diagnostic kits to detect infectious disease organisms or other substances. Such LICENSED TECHNOLOGY also shall refer to and include (i) United States Patent 5,171,537 and any additional related patents now or hereafter owned or licensed by Hydros, (ii) all foreign equivalents thereof, (iii) any and all U.S. and/or foreign patent applications that claim said LICENSED TECHNOLOGY. LICENSED TECHNOLOGY does not include the reagents and other materials exclusively supplied by ImmuCell. 1.2 "Field of Use" shall mean detection of certain diseases in bovines set forth in Appendix A, through the detection of an agent or any marker indicating the presence of such disease. This Field of Use may be expanded pursuant to the provisions of Section 5 of this Agreement. 1.3 "Territory" shall be worldwide. 1.4 "TTJ" shall mean ImmuCell's product, Tip-Test: Johne's, for which a complete product license application was submitted to the U.S. Department of Agriculture on or about June 30, 1999. TTJ is the first test to be developed by ImmuCell utilizing the LICENSED TECHNOLOGY. 1.5 "Kit Reagents" shall mean certain chemical formulations used to effect the desired diagnostic test result. Kit Reagents do not include the chemical formulations currently supplied by ImmuCell for TTJ. 1.6 "Trays" shall mean a multi well plastic container used to contain the Kit Reagents and Tip(s) together with a lid seal. 1.7 "Tip" shall mean the Hydros AffiniTip, which is a single plastic tip having at least three elements, two covers and a storage buffer. 1.8 "Components" shall mean the Kit Reagents, a Tray and a Tip, which collectively comprise the intended diagnostic test. Components shall not include the luer adapter or syringe. 1.9 "Bulk Product" shall mean certain non-assembled Components including Tip(s) and Kit Reagents supplied by Hydros in bulk containers which are part of the diagnostic test. Bulk Product shall not include the syringe, luer adapter or Trays. Section 2: License 2.1(a) Hydros hereby grants to ImmuCell an exclusive license to use the LICENSED TECHNOLOGY to use and sell Components as part of diagnostic kits in the Field of Use throughout the Territory for the term of the Agreement, including any extension thereof. 2.1(b) Hydros hereby further grants to ImmuCell an exclusive license to use the LICENSED TECHNOLOGY to make Trays and/or Bulk Product as part of diagnostic kits in the Field of Use throughout the Territory for the term of the Agreement, including any extension thereof, provided that ImmuCell meets the minimum purchase requirements defined in Section 3.1 and pays the royalties due to Hydros as defined in Section 4. 2.1 (c) Hydros hereby further grants to ImmuCell an exclusive license to use the LICENSED TECHNOLOGY to make Tips, Trays and/or Bulk Product as part of diagnostic kits in the Field of Use throughout the Territory for the term of the Agreement, including any extension thereof, which license shall be operative only if Hydros fails to supply a) the minimum purchase requirements of Components defined in Section 3.1 by the first of each month as defined or b) subsequent orders for Components, Tips and/or Bulk Product within three months of an order by ImmuCell, except that any delays caused by ImmuCell supplying reagents late will not count toward the three month period. Should ImmuCell exercise its right to make Tips under the LICENSED TECHNOLOGY, Hydros will provide technical training to ImmuCell personnel as necessary to enable ImmuCell to make Components; provided however, that Hydros has no obligation to disclose information that is protected by any other agreement(s) in force on January 12, 1999. 2.2 The licenses shall revert to a non-exclusive licenses following the term of the Agreement, including any extension thereof. The provisions of this Section 2.2 shall survive termination of the Agreement. 2.3 ImmuCell shall not obtain rights of any kind in the LICENSED TECHNOLOGY other than the rights specifically set forth herein. 2.4 Hydros hereby acknowledges receipt from ImmuCell of good and sufficient payment in January 1999 in consideration for the licenses granted to ImmuCell pursuant to this Agreement. Section 3: Supply of Components and Services 3.1 Hydros agrees to sell to ImmuCell, and ImmuCell agrees to purchase from Hydros those quantities of Components and Tips set forth in Appendix C at the times specified in Appendix C, subject to ImmuCell's right to cancel set forth in Section 9.3 hereof. 3.2 Appendix B sets forth the prices to be paid by ImmuCell to Hydros for all tests in the Field of Use. However, if and when the bill of materials (for raw materials, direct labor and machine costs) for the Components of a given test supports a cost that is significantly different (defined as greater than 5%) from the cost associated with the TTJ Components, Hydros has the right to adjust the price commensurate with the increased cost of Components for such test. Such cost increases will be documented in writing. When the license becomes non-exclusive, Hydros agrees to sell ImmuCell Components at prices no less favorable than Components sold to other companies. 3.3 Prices shall be reviewed as of January 1, 2001 and each January 1 thereafter during the term of this Agreement. The price to ImmuCell for Components will not increase at a rate that exceeds the inflation rate as measured by the U.S. consumer price index for the previous year plus two percent (2%) and may be adjusted no more than once per year, except that Hydros may increase the price if it experiences extraordinary increases in its raw materials (defined as greater than 5%), in which case costs may be passed on to ImmuCell in their entirety, and such costs will be documented in writing. 3.4 Hydros shall use its best efforts to ship Components ordered by ImmuCell promptly after its receipt of any written order for such Components. ImmuCell agrees to make payment to Hydros in U.S. Dollars for each shipment within thirty (30) days after arrival of each shipment of Components. 3.5 Hydros agrees to manufacture and supply in bulk all Components in such quantities as may be ordered from time to time in writing (fax, mail or commercial courier) by ImmuCell (subject to a minimum order of 3,000 Components per shipment prior to applicable regulatory approval of the product and 10,000 per shipment subsequent to such regulatory approval of the product) and ship the Components to ImmuCell. ImmuCell will pay for shipping and any additional handling, vialing or sealing required. 3.6 Hydros shall provide, at ImmuCell's expense, such technical training of ImmuCell's personnel and such educational, sales and technical documentation, information and marketing support as shall be reasonably requested by ImmuCell in furtherance of the purposes of this Agreement. 3.7 To facilitate ImmuCell's license to make Trays, Hydros will assist ImmuCell by introducing ImmuCell to appropriate vendors for the plastic and lid seal materials for direct ordering by ImmuCell. 3.8 Title to and all risk of loss of all Components ordered by ImmuCell hereunder shall pass to ImmuCell upon shipment from Falmouth, MA. ImmuCell shall pay for and determine the best method of shipment. Shipping is to be coordinated through Hydros and all delivery will be scheduled with Hydros in advance. The provisions of this Section 3 shall survive termination of the Agreement. Section 4: Royalties For every Tip that is manufactured by Hydros and that ImmuCell packages with a Tray not manufactured by Hydros, ImmuCell will pay Hydros a royalty of $0.10 per test sold by ImmuCell. Hydros will bill for royalty payments based on the number of Tips sold by Hydros to ImmuCell less all Tips purchased by ImmuCell for research and development. ImmuCell will remit royalty payments, if any, to Hydros semi-annually, on July 31 and January 31 each year during the term of this Agreement and any extension thereof. Section 5: Option to Expand Field of Use ImmuCell has the option to expand the Field of Use to cover two additional bovine disease indications selected by ImmuCell (Disease A and Disease B) by paying Hydros $5,000 upon the signing of this Agreement. The specific diseases covered by this option must be named by ImmuCell on or before December 31, 1999. It is understood that ImmuCell's exclusive rights to the LICENSED TECHNOLOGY with respect to Disease A and Disease B shall revert to non-exclusive status if submissions of complete product license applications to the applicable regulatory agency are not made by January 12, 2002 for Disease A and January 12, 2003 for Disease B. Such revision of rights to a non-exclusive status for either Disease A or Disease B shall not effect the exclusive status for the other disease if the relevant performance requirements have been met for that other disease. Section 6: Non-Competition Hydros agrees not to sell Components of tests to detect the presence of the diseases set forth in the Field of Use outside of the Field of Use except at a price that is four times the transfer price of Components sold to ImmuCell during the term of this Agreement, including any extension hereof. Hydros will take all necessary steps to ensure that Components used to manufacture diagnostic tests for the detection of diseases covered by the Field of Use in other species shall not be used in the Field of Use. ImmuCell shall not advertise its diagnostic tests using Components outside the Field of Use nor will it fund any research that will enable the test's use other than in bovines. On an annual basis, Hydros shall notify ImmuCell of the quantity of Components being used for further or final manufacture of tests for diseases covered by the Field of Use that are being used outside the Field of Use. In no case shall Hydros use technology or reagents from ImmuCell to manufacture a test to detect diseases covered by the Field of Use in a species other than bovine. ImmuCell agrees not to sell any diagnostic tests in the Field of Use with Tips that are developed after the date of execution of this Agreement unless the Tips are obtained from Hydros. Section 7: Certain Warranties of Hydros 7.1 As to the LICENSED TECHNOLOGY Hydros warrants that it has the right to grant the licenses to ImmuCell as provided in this Agreement. However, nothing in this Agreement shall be construed as a warranty or representation by Hydros as to the validity, enforceability or scope of any LICENSED TECHNOLOGY or as to its effectiveness or as to any results or advantage to be achieved by its use. If a third party makes a claim against ImmuCell that the LICENSED TECHNOLOGY infringes any patent, copyright, trade secret or trademark, Hydros will defend ImmuCell at Hydros' expense against the claim and pay all costs, damages and expenses (including reasonable legal fees) incurred by ImmuCell arising out of such claim. ImmuCell agrees to assist Hydros, at no cost to ImmuCell, including agreeing to be named as a party plaintiff in any legal action, in the event that Hydros decides to pursue third party infringers of the LICENSED TECHNOLOGY. 7.2 Nothing contained in this Agreement shall be construed to convey to ImmuCell any ownership rights, proprietary interest or other rights or interest of any kind, except for the licenses granted in Section 2 and right to use the LICENSED TECHNOLOGY in the manufacture, distribution and sale of diagnostic tests using Components which is expressly granted by this Agreement. ImmuCell covenants and agrees that it shall not at any time during the term of this Agreement challenge or contest the ownership of the LICENSED TECHNOLOGY, or trademark or trade name used by Hydros ("TRADEMARKS"), including the trademark and trade name "Hydros." ImmuCell shall not challenge the validity or enforceability of any of the Patents and/or TRADEMARKS associated with this License, nor do anything that in any way tarnishes them or otherwise impairs their value. 7.3 Hydros warrants that Components sold hereunder shall perform to ImmuCell's specifications for such Components as set forth in Appendix D hereto. Hydros disclaims all other warranties not expressly set forth in this Agreement, including warranties of merchantability and fitness for a particular purpose. The provisions of this Section 7 shall survive termination of the Agreement. Section 8: Regulatory Registration 8.1 ImmuCell shall utilize commercially reasonable efforts to conduct clinical trials of products made from the Components in the Territory. The costs for such clinical trials shall be borne by ImmuCell. ImmuCell will perform such trials in a timely manner so as to achieve the regulatory submission milestones set forth in Sections 5 and 9.2. If requested to do so, Hydros will provide reasonable assistance to ImmuCell in conducting clinical trials at no cost to ImmuCell. 8.2 Any and all regulatory filings to obtain applicable regulatory approvals and any and all approvals in the Territory shall be filed in the name of and owned by ImmuCell. Section 9: Term And Termination 9.1 Except as provided below, the term of this Agreement shall begin as of January 12, 1999 and continue until the earlier of (i) December 31, 2006, (ii) a petition for bankruptcy is filed by or against ImmuCell or (iii) liquidation proceedings are instituted by or against ImmuCell. ImmuCell may extend the term of exclusivity granted in this Agreement an additional six (6) years by payment to Hydros of three percent (3%) of sales of product under this license in the year 2005. Such payment must be made to Hydros by December 31, 2006 9.2 It is understood that ImmuCell's exclusive rights to LICENSED TECHNOLOGY with respect to each disease in the Field of Use shall revert to non-exclusive status if the following is not met: submission of complete product license application to the applicable regulatory agency by the following dates: 1) Johne's disease January 12, 2000; 2) Disease #2 and Disease #3 by January 12, 2001; and 3) Disease #4 by July 12, 2001. Such reversion of rights to a non-exclusive status for any of the four diseases shall not effect the exclusive status for any diseases for which performance requirements have been met. 9.3 ImmuCell may terminate this Agreement at any time by giving at least ninety (90) days' written notice of such termination to Hydros. ImmuCell shall pay to Hydros a termination fee of $2,500 if it terminates the Agreement early without cause. This right to terminate does not apply to the commitments defined in Appendix C, Part I. 9.4 If ImmuCell at any time defaults in the timely payment of any monies due to Hydros or commits any material breach of any other covenant herein contained, and fails to remedy such breach within ninety (90) days after written notice thereof by Hydros, Hydros may, at its option, terminate this Agreement by giving written notice of termination to ImmuCell. 9.5 Upon the termination of this Agreement, ImmuCell shall remain obligated to pay any outstanding monies owed for Components sold by Hydros to ImmuCell and the following Sections shall survive termination or expiration of this Agreement: Sections 2.2, 3, 7, 9.5, 12, 13, 16, 18 and 19. 9.6 Upon the termination of this Agreement, all rights to LICENSED TECHNOLOGY will revert to Hydros and the license to ImmuCell shall immediately cease. Section 10: Distribution Obligation of ImmuCell ImmuCell shall comply with all governmental laws, ordinances, rules and regulations applicable in connection its sale or shipment of , or use or service of diagnostic tests which use Components, or the fulfillment of any of ImmuCell's obligations under this Agreement including, but not limited to, the payment of any duties (excluding Hydros income taxes), obtaining of any governmental permits, clearances or approvals, and compliance with customs requirements or testing of Components. Section 11: Minimums ImmuCell agrees that the minimums defined by Section 3.1 and Appendix C are reasonable and that if such annual minimums are not achieved, the license will become non-exclusive. Section 12: Confidentiality Each party acknowledges and agrees that it may be necessary during the term hereof that each party (the "Disclosing Party") disclose to the other party (the "Recipient Party") confidential or proprietary information of the Disclosing Party pertaining to the Field of Use. Each Recipient Party agrees that during the term hereof and for a period of 5 years thereafter, it shall keep confidential and refrain from disclosing to any third party or using for its own account, any such confidential or proprietary information of the Disclosing Party. The Parties agree that the foregoing provisions shall not apply with respect to any information that (i) is (through no improper action or inaction by the Recipient Party) generally known to the public, (ii) was in the Recipient Party's possession or known by it prior to receipt from the Disclosing Party, or (iii) was rightfully disclosed to the Recipient Party by a third party without restriction. Each Recipient Party may make disclosures required by court order provided it uses diligent effort to limit disclosures and to obtain confidential treatment or a protective order and has allowed Hydros the opportunity to participate in the proceeding. Each Recipient Party further agrees that upon expiration or termination of this Agreement, it shall return all such information which is in writing, along with all pamphlets, referencing materials, manuals, brochures and the like which may have been furnished to the Recipient Party by the Disclosing Party during the term hereof, including all copies, reproduction or translations thereof, and Hydros shall return to ImmuCell all reagents in its possession therefore delivered to Hydros by ImmuCell. The provisions of this Section 12 shall survive termination of the Agreement. Section 13: Severability In the event that any one or more provisions of this Agreement shall be declared to be illegal or unenforceable under the law, rule or regulation of any government having jurisdiction over the Parties hereto, such illegality or un-enforceability shall not affect the validity or enforceability of the other provisions hereof, and the Parties hereto shall agree upon the modification of this Agreement with respect to such illegal or unenforceable provisions to eliminate such illegality or un-enforceability. The provisions of this Section 13 shall survive termination of the Agreement. Section 14: Counterparts This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of which together shall be deemed to be one and the same instrument. Section 15: Future Products Hydros agrees, in the event that it develops new products for which a market to end customers in the bovine market may exist, that it shall enter into good faith negotiations with ImmuCell with respect to the distribution of such products by ImmuCell in the bovine market. Section 16: Patent Marking: The Parties shall agree on the manner in which patent(s) and patent application(s) are shown on the end customer packaging of products using Components to comply with applicable United States and international law. Except as provided in this paragraph, all end customer package copy shall be at the sole discretion and sole responsibility of ImmuCell. The provisions of this Section 16 shall survive termination of the Agreement. Section 17: Benefit/Non-Assignability. This Agreement shall be assignable to, inure to the benefit of and be binding upon purchasers acquiring all or substantially all of the assets of ImmuCell or Hydros to which this Agreement relates, and any successor to ImmuCell or Hydros by merger, and no other person, and this Agreement and the rights and obligations of either party hereunder may not otherwise be assigned or transferred without the written consent of the other party; provided, however, that Hydros acknowledges and agrees that ImmuCell may appoint sub-distributors to assist in discharging ImmuCell marketing obligations hereunder. Section 18: Governing Law. The rights and obligations of the Parties under this Agreement shall be governed by the laws of the Commonwealth of Massachusetts, USA. The provisions of this Section 18 shall survive termination of the Agreement. Section 19: Notices: Any notice to be served or given hereunder shall be deemed to have been given when delivered personally or sent by certified or registered United States mail, postage prepaid, to Hydros or ImmuCell, as the case may be at the respective addresses set forth in this Agreement or such other address for which notice was given in the manner provided herein. The provisions of this Section 19 shall survive termination of the Agreement. Section 20: Relationship. ImmuCell shall act only as an independent contractor under this Agreement and shall have no power, right or authority, expressed or implied, to create or assume in any manner any obligation of any kind on behalf of Hydros or in Hydros' name. Neither party is in any respect an agent, employee or a legal representative of the other party and neither party shall hold itself out as such for any purpose whatsoever. Section 21: Integration. This Agreement constitutes the full understanding between the Parties with reference to the subject matter hereof, and no statements or agreements by or between the Parties, whether orally or in writing, except as provided for elsewhere herein, made prior to or at the signing hereof, shall vary or modify the written terms of this Agreement. Neither party shall claim any amendment, modification, or release from any provisions of the Agreement by mutual agreement, acknowledgment, or otherwise, unless such mutual agreement is in writing, signed by the other party and specifically states that it is an amendment to this Agreement. IN WITNESS WHEREOF, ImmuCell and Hydros have executed this Agreement by their duly authorized officers or representatives, effective on the date first above written. Hydros, Inc. ImmuCell Corporation By: /S/ Steven H. Boyd By: /S/ Michael F. Brigham Steven H. Boyd, President Michael F. Brigham, Vice President and CFO (Date) 12/8/99 (Date) 12/9/99 Witness : /S/ Kendra Williams Witness: /S/ Joyce N. Watson (Date) 12/8/99 (Date) 12/9/99 EX-23.1 6 IMMUCELL CORPORATION AND SUBSIDIARY Exhibit 23.1 Consent of PricewaterhouseCoopers LLP CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in this Registration Statement of ImmuCell Corporation on Form S-8 of our report dated January 28, 2000 on our audits of the consolidated financial statements of ImmuCell Corporation and Subsidiary as of December 31, 1999 and 1998, and for each of the three years in the period ended December 31, 1999, which report is included in this Annual Report on Form 10-K. /s/ PricewaterhouseCoopers LLP Portland, Maine March 17, 2000 EX-27 7 ART. 5 FDS FOR IMMUCELL CORPORATION
5 IMMUCELL CORPORATION AND SUBSIDIARY Exhibit 27.1 Financial Data Schedule (Filed Only Electronically) Financial Data Schedule IMMUCELL CORPORATION THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S AUDITED FINANCIAL STATEMENTS FOR THE ANNUAL PERIOD ENDED DECEMBER 31, 1999 AS REPORTED ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 12-MOS DEC-31-1999 DEC-31-1999 1,823,688 0 494,059 40,920 520,656 2,825,309 1,661,214 881,384 3,855,979 605,923 434,658 0 0 2,815,398 0 3,855,979 4,722,374 4,909,245 2,152,959 4,294,275 24,370 0 39,757 550,843 0 550,843 0 0 0 550,843 .22 .22
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