-----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, OljlnWSn2+2WsaqEu4Qm5EbGVKYPpmVn6XcmHy+iQtwCCCbif+LP6gepGMIC/69q xzaIYl6P9XVMFJOjVknJLg== 0000898432-00-000219.txt : 20000310 0000898432-00-000219.hdr.sgml : 20000310 ACCESSION NUMBER: 0000898432-00-000219 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 20000309 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTH AMERICAN VACCINE INC CENTRAL INDEX KEY: 0000856573 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 980121241 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-10451 FILM NUMBER: 564755 BUSINESS ADDRESS: STREET 1: 10150 OLD COLUMBIA ROAD CITY: COLUMBIA STATE: MD ZIP: 21046 BUSINESS PHONE: 4103097100 10-Q/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q/A (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ COMMISSION FILE NUMBER 1-10451 NORTH AMERICAN VACCINE, INC. ---------------------------- (Exact name of registrant as specified in its charter) CANADA 98-0121241 ------ ---------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 10150 OLD COLUMBIA ROAD, COLUMBIA, MARYLAND 21046 - ------------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (410) 309-7100 FORMER ADDRESS: - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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 the number of shares outstanding of each of the registrant's classes of Common Stock, as of the latest practicable date. COMMON STOCK, NO PAR VALUE, OUTSTANDING AS OF NOVEMBER 3, 1999 - 32,870,350 SHARES TABLE OF CONTENTS PAGE NUMBER PART I. FINANCIAL INFORMATION ----------- Item 1. Financial Statements................................. 3 Consolidated Balance Sheets.......................... 4 Consolidated Statements of Operations................ 5 Consolidated Statements of Shareholders' Deficit..... 6 Consolidated Statements of Cash Flows................ 7 Notes to Condensed Consolidated Financial Statements. 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........ 14 Item 3. Quantitative and Qualitative Disclosures About Market Risk.......................................... 27 PART II. OTHER INFORMATION Item 1. Legal Proceedings.................................... 30 Item 2. Changes in Securities and Use of Proceeds............ 30 Item 6. Exhibits and Reports on Form 8-K..................... 31 SIGNATURES ................................................... 32 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS -------------------- The following unaudited, condensed consolidated financial statements of North American Vaccine, Inc. and Subsidiaries (the "Company") have been prepared in accordance with the instructions to Form 10-Q and, therefore, omit or condense certain footnotes and other information normally included in financial statements prepared in accordance with generally accepted accounting principles. This report should be read in conjunction with the Company's Annual Report on Form 10-K filed for the year ended December 31, 1998. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the financial information for the interim periods reported have been made. Results of operations for the three and nine months ended September 30, 1999, will not necessarily be indicative of the results for the entire fiscal year ending December 31, 1999. 3
NORTH AMERICAN VACCINE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) SEPTEMBER 30, DECEMBER 31, 1999 1998 --------------- -------------- ASSETS (UNAUDITED) - ------ CURRENT ASSETS: Cash and cash equivalents $ 1,917 $ 22,953 Accounts receivable 1,729 1,625 Inventory 4,457 4,067 Prepaid expenses and other current assets 810 998 ---------------- -------------- Total current assets 8,913 29,643 Property, plant and equipment, net 21,076 25,315 Investment in affiliate, at market - 1,554 Deferred financing costs, net 2,566 2,505 Cash restricted for lease obligation 3,624 4,877 Other assets 858 631 ---------------- -------------- TOTAL ASSETS $ 37,037 $ 64,525 ================ ============== LIABILITIES AND SHAREHOLDERS' DEFICIT CURRENT LIABILITIES: Accounts payable $ 4,448 $ 3,881 Short term debt 4,000 - Deferred revenue - 850 Obligation under capital leases, current portion 1,927 1,754 Other current liabilities 8,360 5,848 ---------------- -------------- Total current liabilities 18,735 12,333 6.5% Convertible subordinated notes, due May 1, 2003 75,326 83,734 4.5% Convertible secured notes, due November 13, 2003 25,000 25,000 Obligation under capital leases, net of current portion 1,016 2,356 Deferred rent credits, net of current portion 186 76 ---------------- -------------- Total liabilities 120,263 123,499 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' DEFICIT: Preferred stock, no par value; unlimited shares authorized-Series A, convertible; issued and outstanding 2,000,000 shares; entitled to Can $2.50 per share (or U.S. $3.4 million in the aggregate) in liquidation 6,538 6,538 Common stock, no par value; unlimited shares authorized; issued 32,859,581 shares at September 30, 1999 and 32,216,096 shares at December 31, 1998 90,473 80,824 Additional paid-in capital 13,047 11,956 Cumulative comprehensive income excluded from net loss - 926 Accumulated deficit 193,284) (159,218) ---------------- --------------- Total shareholders' deficit (83,226) (58,974) ---------------- --------------- TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 37,037 $ 64,525 ================ =============== The accompanying notes are an integral part of these condensed consolidated financial statements.
- 4 - NORTH AMERICAN VACCINE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1999 1998 1999 1998 -------------- -------------- -------------- ------------- REVENUES: Product sales $ 1,173 $ 501 $ 3,589 $ 845 Marketing, research and development agreements 3,249 2,563 4,037 4,282 -------------- -------------- -------------- ------------- Total revenues 4,422 3,064 7,626 5,127 -------------- -------------- -------------- ------------- OPERATING EXPENSES: Production 5,449 5,108 15,821 14,274 Research and development 4,202 4,731 11,827 13,264 Selling, general and administrative 3,465 2,383 8,585 7,198 -------------- -------------- -------------- ------------- Total operating expenses 13,116 12,222 36,233 34,736 -------------- -------------- -------------- ------------- OPERATING LOSS (8,694) (9,158) (28,607) (29,609) OTHER INCOME (EXPENSE): Gain on sale of investment in affiliate - - 952 - Interest and dividend income 66 276 446 1,232 Interest expense (2,193) (1,571) (6,857) (4,793) -------------- -------------- -------------- ------------- NET LOSS $ (10,821) $ (10,453) $ (34,066) $ (33,170) ============== ============== ============== ============= BASIC AND DILUTED NET LOSS PER SHARE $ (0.33) $ (0.32) $ (1.05) $ (1.03) WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 32,844 32,206 32,499 32,132 The accompanying notes are an integral part of these condensed consolidated financial statements.
- 5 - NORTH AMERICAN VACCINE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT (IN THOUSANDS) (UNAUDITED)
SERIES A CUMULATIVE CONVERTIBLE COMPREHENSIVE TOTAL PREFERRED STOCK COMMON STOCK ADDITIONAL INCOME ACCUM- SHARE- -------------------- ---------------------- PAID-IN EXCLUDED FROM ULATED HOLDERS' SHARES AMOUNT SHARES AMOUNT CAPITAL NET LOSS DEFICIT DEFICIT -------- ----------- ---------- ----------- ----------- ------------- ------------ ------------ Balance, December 31, 1998 2,000 $ 6,538 32,216 $ 80,824 $ 11,956 $ 926 $ (159,218) $ (58,974) Net loss - - - - - - (34,066) (34,066) Increase in market value of investment - - - - - 26 - 26 Realized investment holding gain - - - - - (952) - (952) ---------- Comprehensive loss (34,992) Exercises of stock options - - 58 169 - - - 169 Shares issued under 401(k) plan - - 36 252 - - - 252 Warrant expense - - - - 1,091 - - 1,091 Conversion of 6.5% subordinated convertible notes into common stock - - 550 9,228 - - - 9,228 Balance, -------- --------- -------- ---------- ---------- ------------ ------------ ----------- September 30, 1999 2,000 $ 6,538 32,860 $ 90,473 $ 13,047 $ - $ (193,284) $ (83,226) ======== ========= ======== ========== ========== ============ ============ =========== The accompanying notes are an integral part of these condensed consolidated financial statements.
- 6 - NORTH AMERICAN VACCINE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1999 1998 ------------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (34,066) $ (33,170) Adjustments to reconcile net loss to net cash used in operating activities: Gain on sale of investment in affiliate (952) - Loss on disposal of property, plant, and equipment 384 - Depreciation and amortization 4,691 6,117 Amortization and reduction of deferred financing costs 840 366 Contribution of common stock to 401(k) plan 252 216 Debt conversion expense 940 - Increase in other assets (227) (183) Increase (decrease) in deferred rent 92 (29) Cash flows provided by (used in) other working capital items 2,010 (2,427) ------------- ------------ Net cash used in operating activities (26,036) (29,110) ------------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (2,686) (1,320) Proceeds from sale of investment in affiliate 1,581 - Proceeds from sale/leaseback 2,110 - ------------- ------------ Net cash provided by (used in) investing activities 1,005 (1,320) ------------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under revolving credit facilities 4,000 - Proceeds from exercises of stock options, net 169 2,017 Loan to a former officer related to the purchase of common stock - (1,228) Principal payments on capital lease obligations (1,427) (1,180) Cash restricted for capital lease obligation 1,253 (5,271) ------------- ------------ Net cash provided by (used in) financing activities 3,995 (5,662) ------------- ------------ NET DECREASE IN CASH AND CASH EQUIVALENTS (21,036) (36,092) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 22,953 45,502 ------------- ------------ CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,917 $ 9,410 ============= ============ The accompanying notes are an integral part of these condensed consolidated financial statements.
- 7 - NORTH AMERICAN VACCINE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (IN THOUSANDS) (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1999 1998 -------------- -------------- CASH FLOWS PROVIDED BY (USED IN) OTHER WORKING CAPITAL ITEMS: (Increase) decrease in : Accounts receivable $ (104) $ (2,181) Inventory (390) (390) Prepaid expenses and other current assets 188 (307) Increase (decrease) in : Accounts payable 567 (299) Deferred revenue and other current liabilities 1,749 750 -------------- -------------- Net cash provided by (used in) other working capital items $ 2,010 $ (2,427) ============== ============== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest $ 3,572 $ 3,105 ============== ============== Equipment acquired through capital lease $ 260 $ - ============== ============== Conversion of subordinated notes to common stock $ 8,408 $ - ============== ============== Use of stock to exercise stock options $ - $ 3,429 ============== ============== The accompanying notes are an integral part of these condensed consolidated financial statements.
- 8 - NORTH AMERICAN VACCINE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BUSINESS The Company is engaged in the research, development, production, and sale of vaccines for the prevention of infectious diseases in children and adults. In July 1998, the Company received marketing authorization from the U.S. Food and Drug Administration ("FDA") to market its DTaP vaccine (Certiva(REGISTERED)) in the United States for the prevention of diphtheria, tetanus, and pertussis (whooping cough). The Company markets Certiva(REGISTERED) in the U.S. to government purchasers, including state governments and the Centers for Disease Control and Prevention ("CDC"). Under a marketing agreement between the Company and Abbott Laboratories ("Abbott"), Abbott began to market Certiva(REGISTERED) in October 1998 to private physicians and managed care markets in the United States for immunization of infants and children. Abbott terminated the agreement at the end of the third quarter of 1999. Previously, in 1996, regulatory approval for a European formulation of Certiva(REGISTERED) was granted in Sweden, and regulatory approval of a combined DTaP-IPV (polio) vaccine was granted in Denmark. In April 1997, regulatory approval for the Company's monovalent acellular pertussis ("aP") vaccine to vaccinate children was also granted in Sweden. In June 1998, the Company was advised that, under the European mutual recognition procedure, the regulatory authorities in Germany, Austria, Sweden and Finland agreed to recognize the marketing authorization granted by Denmark for the DTaP-IPV vaccine. In the first half of 1999, both Germany and Austria issued their national marketing authorizations for the Company's DTaP-IPV vaccine pending the completion of labeling issues related to distribution of the product. Under a marketing agreement between the Company and Chiron-Behring GmbH & Co. ("Chiron"), Chiron was to market the DTaP-IPV vaccine in Germany and Austria. In October 1999, Chiron notified the Company that Chiron is seeking to terminate the marketing agreement in Germany and Austria for the Company's DTaP-IPV vaccine. Chiron alleges that the Company misrepresented the status of European regulatory approval of its products and fraudulently induced Chiron to enter into the agreement. Chiron has demanded that the Company repay $3 million of nonrefundable payments that Chiron made under the agreement. If discussions directly with Chiron do not resolve the dispute, the Company intends to challenge Chiron's effort to terminate. The agreement between the Company and Chiron includes an arbitration process for resolving any such dispute, and the Company will avail itself of that process and will vigorously contest and defend against the claims raised by Chiron. The Company believes that the claims against it are without merit, that the Company has meritorious defenses available to it, and that certain counterclaims also may be available to it. 2. SIGNIFICANT ACCOUNTING POLICIES (a) BASIS OF ACCOUNTING AND CURRENCY. The Company is a Canadian corporation incorporated under the Canadian Business Corporations Act ("CBCA") on August 31, 1989. The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") in the United States and are denominated in U.S. dollars, because the Company conducts the majority of its transactions in this currency. The application of Canadian GAAP would not result in material adjustments to the accompanying financial statements except for the impact of the adoption of Statement of Financial Accounting Standards ("SFAS") No. 115, and the interest charge of $12.0 million related to the issuance of the 4.5% Convertible Secured Notes due November 13, 2003 ("4.5% Notes") during the fourth quarter of 1998. Under Canadian GAAP, the beneficial conversion feature of the 4.5% Notes would be assigned a value and reported as additional equity to be amortized to retained earnings ratably over 9 the term of the 4.5% Notes rather than being charged to interest in 1998. The effect of foreign currency translation has been immaterial. (b) PERVASIVENESS OF ESTIMATES. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from estimates. (c) REVENUE RECOGNITION. Nonrefundable fees or milestone payments in connection with research and development or collaborative agreements are recognized when they are earned in accordance with the applicable performance requirements and contract terms. Revenue from product sales is recognized when all significant risks of ownership have been transferred, the amount of the selling price is fixed and determinable, all significant related acts of performance have been completed, and no other significant uncertainties exist. In most cases, these criteria are met when the goods are shipped. (d) SEGMENT REPORTING. In 1997, the Financial Accounting Standards Board issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." The Company implemented SFAS No. 131 for the year ended December 31, 1998 and has determined that it currently does not have reportable segments. Product sales in the United States were approximately $0 and $1.6 million for the three and nine months ended September 30, 1999, respectively, and $0 for each of the same periods in 1998. Product sales to Europe were approximately $1.2 million and $2.0 million for the three and nine months ended September 30, 1999, respectively, and approximately $501,000 and $845,000 for the same periods in 1998. All products are manufactured at the Company's one production facility in the United States. The production process, and ultimately product costing, is primarily the same for all of the Company's acellular pertussis vaccine products sold in the United States and Europe. Because of this, and the relative consistency in selling prices, as well as the nature of the distribution methods utilized by the Company, the Company does not differentiate and manage its business along geographic lines. 3. PROPERTY, PLANT AND EQUIPMENT In September 1999, the Company completed a sale/leaseback of its only owned facility. The approximately 31,000 square foot facility, which is used as a warehousing and testing facility was sold for approximately $2.1 million with a loss on the sale of $378,000. The lease for the facility is for an initial term of ten years, with two five-year renewal options. The initial base annual rent under the lease is approximately $237,000 with minimum annual escalations. In March 1998, the Company leased an approximately 75,500 square foot facility to be used for research, development, selling, general and administrative functions and for future expansion of the Company's operations. The lease is for an initial term of ten years, with two five-year renewal options. The initial base annual rent under the lease is approximately $981,000 with minimum annual escalations. At the end of the fifth year of the initial term, the Company has the right to terminate the lease for a specified fee. In addition, the Company has an option to purchase the facility during specified periods of the lease 10 term. The landlord provided the Company a tenant improvement allowance of approximately $1.4 million. 4. INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or market. Components of inventory cost include materials, labor, and manufacturing overhead. Production costs attributable to a product are expensed until regulatory approval is obtained for such product. Beginning in the third quarter of 1998, costs to produce Certiva(REGISTERED) for sale in the United States were capitalized, except that costs attributable to Certiva(REGISTERED) production under non-regulatory approved optimization production processes are being expensed until regulatory approval is obtained for such new processes. Any production costs incurred in excess of net realizable value are expensed in the quarter in which they are incurred. Inventories consist of the following: September 30, December 31, 1999 1998 ---------------------------- (in thousands) Raw materials $ 2,418 $ 2,509 Work in process 1,753 1,024 Finished goods 286 534 ------- ------- Total $ 4,457 $ 4,067 ======= ======= 5. OTHER CURRENT LIABILITIES Other current liabilities consisted of the following components: September 30, December 31, 1999 1998 --------------------------- (in thousands) Accrued interest $ 2,536 $ 1,103 Payroll and fringe benefits 2,838 1,702 Accrued taxes 810 1,149 Reserve for contract loss 720 720 Accrued consulting and professional fees 424 353 Accrued costs of clinical trials 245 216 Other accrued liabilities 787 605 ------- ------- Total other current liabilities $ 8,360 $ 5,848 ======= ======= 6. RESTRICTED CASH AND OBLIGATIONS UNDER CAPITAL LEASE In connection with an operating lease for a 35,000 square foot development and production facility, the Company entered into an agreement that included the purchase and lease of equipment and leasehold improvements. As part of the operating lease, the Company assumed the underlying real estate leases which are scheduled to expire in February 2001, but may be extended through 2011. Under 11 the terms of the equipment lease, there are certain financial covenants that obligate the Company to maintain certain cash and investment balances, a minimum tangible net worth (defined to include amounts under the outstanding convertible subordinated notes), and certain other financial ratios. The equipment lease agreement permits the Company, at its option, to suspend the application of financial covenants by posting a stand-by letter of credit, which may be revoked by the Company provided certain conditions are satisfied. In April 1998, as permitted by the equipment lease agreement, the Company voluntarily posted a letter of credit in the amount of $5.9 million, thereby suspending the application of all financial covenants. The letter of credit decreases on a monthly basis as the payments on the lease obligation are made and is secured by a restricted cash deposit of an equal amount. The balance of the letter of credit and the corresponding restricted cash is $3.6 million at September 30, 1999. The letter of credit will expire by its terms on November 1, 2000. 7. CONVERTIBLE DEBT In November 1998, the Company completed a $25 million financing through the private placement of 4.5% Convertible Secured Notes ("4.5% Notes"). The 4.5% Notes were sold at par, mature on November 13, 2003 and provide for interest payable semi-annually on May 13 and November 13 of each year commencing on May 13, 1999. The net proceeds from this offering were approximately $24.6 million. The 4.5% Notes are convertible, in whole or in part, by the holder(s) at any time prior to maturity (unless previously redeemed or repurchased) into shares of the Company's Common Stock at the conversion price of approximately $8.54 per share. The 4.5% Notes are secured by certain assets of the Company, are otherwise subordinated in right of payment to all existing and future senior indebtedness of the Company, do not restrict the incurrence of future senior or other indebtedness of the Company, and are redeemable, in whole or in part, at the option of the Company on or after one year from the date of issuance at par, plus accrued interest to the redemption date. On November 12, 1998, the date on which the 4.5% Notes were issued, the closing price for the Company's Common Stock was $12.625, which exceeded the initial conversion price for the 4.5% Notes. The difference between the initial conversion price and the fair market value per share on the date of issue of the 4.5% Notes, for the number of equivalent shares, has been recognized and recorded as paid in capital, with a corresponding charge to interest expense, thus increasing the effective interest rate of the 4.5% Notes. Given that the 4.5% Notes are immediately convertible, the interest expense of approximately $12.0 million was recognized immediately and was included in the 1998 Consolidated Statements of Operations. In June 1999, the Company retired $8.4 million principal amount of the 6.5% convertible subordinated notes ("6.5% Notes") in exchange for 550,000 shares of Common Stock. As a result of the transaction, the Company has recognized a one-time non-cash debt conversion expense of approximately $940,000, which is included in interest expense. The principal balance of the outstanding notes was $75.3 million at September 30, 1999. 12 8. LINE OF CREDIT In July 1999, the Company obtained from a bank a $6 million revolving line of credit maturing December 31, 1999. The interest rate on borrowings under the line of credit is LIBOR plus 265 basis points. BioChem Pharma Inc. ("BioChem"), an affiliate of the Company, has provided the guarantee of the line of credit, which will remain in place for a maximum of two years, unless there is a change of control such as the contemplated acquisition by the third party. (See Note 9.) Upon drawing down on the line of credit by the Company, BioChem was entitled to receive warrants to purchase up to a total of 750,000 shares of the Company's Common Stock. The warrants were issued by the Company ratably as it drew down under the line of credit such that BioChem received a warrant for 125,000 shares of Common Stock for each $1 million drawn down by the Company. Each warrant has a term of two years from the date of issuance. The per share exercise price under the warrant is approximately $5.14, which is the average of the closing price of the Company's Common Stock on the American Stock Exchange over five trading days that began on June 28 and ended on July 2, 1999. Each warrant contains anti-dilution provisions and registration rights among other provisions. The Company drew down $4 million and $2 million in the third and fourth quarters of 1999, respectively, under the revolving line of credit and accordingly has issued warrants to purchase 750,000 shares of Common Stock to BioChem. The Company will recognize a total of approximately $1.6 million of interest expense calculated using the Black-Scholes pricing model based upon the issuance of these warrants to purchase up to 750,000 shares of common stock. The Company is recognizing interest expense over the life of the line of credit beginning at the issuance date of the warrants and ending on December 31, 1999, the repayment date for the line of credit. The expense related to the issuance of the 500,000 warrants was $429,000 for the three months and nine months ended September 30, 1999. 9. SUBSEQUENT EVENT On November 1, 1999, the Company finalized terms relating to a secured revolving line of credit from Bank of America, N.A., which is guaranteed by an unaffiliated third party. The credit line made $5 million immediately available to the Company at an interest rate of LIBOR plus .625%. An additional amount of up to $25 million will be available if the Company executes a definitive acquisition agreement with the third party, with whom the Company is in exclusive negotiations. The line of credit is secured by all of the Company's otherwise unencumbered assets, including patents, patent applications and receivables. The Company expects to complete negotiations regarding a definitive acquisition agreement shortly, although there can be no assurances that the Company will enter into a definitive acquisition agreement or, if it does, that the transaction will close. Should the Company be unable to reach a definitive acquisition agreement by November 18, 1999 (unless otherwise extended by Bank of America, N.A.), then the Company would be required to repay the initial $5 million within 20 days of that date. There are no assurances that the Company would be able to obtain additional financing within that timeframe to repay the $5 million or that such financing, if obtained, would be adequate to fund the ongoing operations of the Company. 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND ---------------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- THE FOLLOWING PARAGRAPHS IN THIS FORM 10-Q CONTAIN CERTAIN FORWARD LOOKING STATEMENTS, WHICH ARE WITHIN THE MEANING OF AND MADE PURSUANT TO THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THESE FORWARD LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION, THOSE REGARDING THE PROSPECTS AND TIMING FOR FILING FOR AND OBTAINING REGULATORY APPROVAL, THE PROSPECTS FOR AND TIMING OF MARKETING AND DISTRIBUTION OF VACCINE PRODUCTS, THE PROSPECTS FOR AND TIMING OF INCREASING PRODUCTION CAPACITY AND EFFICIENCY, THE PROSPECTS FOR AND FACTORS AFFECTING FUTURE REVENUES AND PROFITABILITY, THE AVAILABILITY OF FUNDS UNDER EXISTING CREDIT FACILITIES, THE ABILITY TO SERVICE THE COMPANY'S DEBT AND TO MEET THE COMPANY'S CASH FLOW NEEDS, PROSPECTS FOR PRODUCTION CAPACITY, REDUCED PRODUCTION COSTS, AND THE ABILITY TO CAMPAIGN PRODUCTS THROUGH ITS PRODUCTION FACILITY, LIKELIHOOD OF ADDITIONAL FUNDING UNDER LICENSE, MARKETING, DISTRIBUTION AND/OR DEVELOPMENT AGREEMENTS OR FROM FURTHER FINANCINGS, PROSPECTS FOR AND TIMING FOR ENTERING INTO AND COMPLETING A DEFINITIVE AGREEMENT FOR THE ACQUISITION OF THE COMPANY, CASH REQUIREMENTS FOR FUTURE OPERATIONS, PROJECTED RESULTS OF OPERATIONS, AND PROJECTED CAPITAL EXPENDITURES AND COST REDUCTIONS. READERS ARE CAUTIONED THAT FORWARD LOOKING STATEMENTS INVOLVE RISKS, UNCERTAINTIES, AND FACTORS THAT MAY AFFECT THE COMPANY'S BUSINESS AND PROSPECTS, INCLUDING WITHOUT LIMITATION THOSE DESCRIBED BELOW AS WELL AS THE RISKS ASSOCIATED WITH: OBTAINING REGULATORY APPROVAL OF PRODUCTS AND FACILITIES BY REGULATORY AGENCIES INCLUDING THE U.S. FOOD AND DRUG ADMINISTRATION ("FDA"); THE PRODUCTION OF VACCINES; THE TIMING FOR AND EFFICIENCIES RECOGNIZED FROM PRODUCT CAPACITY IMPROVEMENTS; THE NATURE OF COMPETITION; NEED FOR EFFECTIVE MARKETING; DEPENDENCE ON SUPPLIERS, INCLUDING STATENS SERUM INSTITUT ("SSI"), AND DISTRIBUTORS; UNCERTAINTIES RELATING TO CLINICAL TRIALS; UNCERTAINTIES RELATING TO NEGOTIATING AND COMPLETING A DEFINITIVE AGREEMENT FOR THE ACQUISITION OF THE COMPANY; AND THE TIMING AND NECESSITY FOR EXPENDITURES AND/OR COST REDUCTIONS, ALL AS DISCUSSED IN THE COMPANY'S FILINGS WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION ("SEC"), INCLUDING THE 1998 ANNUAL REPORT ON FORM 10-K, TO WHICH THE READER'S ATTENTION IS DIRECTED. BACKGROUND - ---------- The Company is engaged in the research, development, production, and sale of vaccines for the prevention of infectious diseases in children and adults. In July 1998, the Company received marketing authorization from the FDA to market its DTaP vaccine (Certiva(REGISTERED) in the United States for the prevention of diphtheria, tetanus, and pertussis (whooping cough). The Company markets Certiva(REGISTERED) in the U.S. to government purchasers, including state governments and the Centers for Disease Control and Prevention ("CDC"). Under a marketing agreement between the Company and Abbott Laboratories ("Abbott"), Abbott began to market Certiva(REGISTERED) in October 1998 to private physicians and managed care markets in the United States for immunization of infants and children. Abbott terminated the agreement at the end of the third quarter. The Company is currently considering selling Certiva(REGISTERED) in the United States to non-government purchasers through direct arrangements with distributors, although no formal agreements have been completed. Previously, in 1996, regulatory approval for a European formulation of Certiva(REGISTERED) was granted in Sweden, and regulatory approval of a combined DTaP-IPV (polio) vaccine was granted in Denmark. In April 1997, regulatory 14 approval for the Company's monovalent acellular pertussis ("aP") vaccine to vaccinate children was also granted in Sweden. In June 1998, the Company was advised that, under the European mutual recognition procedure, the regulatory authorities in Germany, Austria, Sweden and Finland agreed to recognize the marketing authorization granted by Denmark for the DTaP-IPV vaccine. In the first half of 1999, both Germany and Austria issued their national marketing authorizations for the Company's DTaP-IPV vaccine pending the completion of labeling issues related to distribution of the product. Under a marketing agreement between the Company and Chiron-Behring GmbH & Co. ("Chiron"), Chiron was to market the DTaP-IPV vaccine in Germany and Austria. In October 1999, Chiron notified the Company that Chiron is seeking to terminate the marketing agreement in Germany and Austria for the Company's DTaP-IPV vaccine. Chiron alleges that the Company misrepresented the status of European regulatory approval of its products and fraudulently induced Chiron to enter into the agreement. Chiron has demanded that the Company repay $3 million of nonrefundable payments that Chiron made under the agreement. If discussions directly with Chiron do not resolve the dispute, the Company intends to challenge Chiron's effort to terminate. The agreement between the Company and Chiron includes an arbitration process for resolving any such dispute, and the Company will avail itself of that process and will vigorously contest and defend against the claims raised by Chiron. The Company believes that the claims against it are without merit, that the Company has meritorious defenses available to it, and that certain counterclaims also may be available to it. On November 1, 1999, the Company finalized terms relating to a secured revolving line of credit from Bank of America, N.A., which is guaranteed by an unaffiliated third party. The credit line made $5 million immediately available to the Company at an interest rate of LIBOR plus .625%. An additional amount of up to $25 million will be available if the Company executes a definitive acquisition agreement with the third party, with whom the Company is in exclusive negotiations. The line of credit is secured by all of the Company's otherwise unencumbered assets, including patents, patent applications and receivables. The Company expects to complete negotiations regarding a definitive acquisition agreement shortly, although there can be no assurances that the Company will enter into a definitive acquisition agreement or, if it does, that the transaction will close. Should the Company be unable to reach a definitive acquisition agreement by November 18, 1999 (unless otherwise extended by Bank of America, N.A.), then the Company would be required to repay the initial $5 million within 20 days of that date. There are no assurances that the Company would be able to obtain additional financing within that timeframe to repay the $5 million or that such financing, if obtained, would be adequate to fund the ongoing operations of the Company. In April 1999, the Company announced that it had significantly shortened the timeline for preparing and submitting an application for regulatory approval to sell its group C meningococcal conjugate vaccine in the United Kingdom ("U.K."). In October 1999, the U.K. National Health Service ("NHS") committed to purchase 3 million doses in 2000 of NeisVac-C(TRADEMARK), the Company's group C meningococcal conjugate vaccine. This commitment is contingent on regulatory 15 approval of NeisVac-C(TRADEMARK) by the appropriate U.K. regulatory authorities. The Company anticipates that during the fourth quarter of 1999, or shortly thereafter, it will file with the U.K. regulatory authorities the application for approval of NeisVac-C(TRADEMARK). The terms of the U.K. tender require, among other things, that the Company reimburse the NHS and its affiliates for any costs associated with delays caused by the Company should the Company be unable to meet agreed-upon delivery schedules. Beginning in the fourth quarter of 1999, the Company will change over from Certiva(REGISTERED) and aP production to produce the group C meningococcal conjugate vaccine in anticipation of the commercial launch of the product in the U.K. In May 1996, the Company completed an offering of 6.50% Convertible Subordinated Notes in the principal amount of $86.25 million due in full on May 1, 2003 ("6.5% Notes"). The 6.5% Notes are convertible into shares of the Company's Common Stock, at an initial conversion price of approximately $24.86 per share, are subordinated to present and future senior indebtedness of the Company, do not restrict the incurrence of future senior or other indebtedness by the Company, and are redeemable, in whole or in part, at the option of the Company on or after May 1, 1999, at certain pre-established redemption prices, plus accrued interest. Upon a change in control, the Company is required to offer to purchase all or part of the 6.5% Notes then outstanding at a purchase price equal to 100% of the principal amount thereof, plus interest. The repurchase price is payable in cash or, at the option of the Company, in shares of the Company's Common Stock. In June 1999, the Company retired $8.4 million of the principal amount of the 6.5% Notes in exchange for 550,000 shares of Common Stock. The exchange was privately negotiated with a single holder of the notes, and resulted in the recognition of an approximately $940,000 one-time non-cash expense included in interest expense for the quarter ended June 30, 1999. As of September 30, 1999, the principal amount of the outstanding notes was $75.3 million. In November 1998, the Company completed a private placement of $25 million aggregate principal amount of 4.5% Convertible Secured Notes due November 13, 2003 ("4.5% Notes"). The 4.5% Notes are convertible into the Company's Common Stock at a conversion price of approximately $8.54 per share, are secured by certain assets of the Company, and otherwise subordinated in right of payment to all existing and future senior indebtedness of the Company, do not restrict the incurrence of future senior or other indebtedness of the Company and will be redeemable, in whole or in part, at the option of the Company on or after November 13, 1999. Upon a change in control, the Company will be required to offer to purchase all of the 4.5% Notes then outstanding at a purchase price equal to 100% of the principal amount thereof, plus accrued interest. The repurchase price will be payable in cash or, at the option of the Company, in shares of the Company's Common Stock. The 4.5% Notes were issued to certain existing shareholders, affiliates and accredited investors, including BioChem Pharma Inc. ("BioChem") and Phillip Frost, M.D., which purchased 4.5% Notes in the principal amount of $9 million and $4.25 million, respectively. In addition, Societe financiere d'innovation inc. ("Sofinov"), a high technology investment fund that is a subsidiary of La Caisse de depot et placement du Quebec, purchased 4.5% Notes in the aggregate principal amount of $6.25 million. Denis Dionne, a director of the Company, is the President of Sofinov. 16 In July 1999, the Company obtained from a commercial bank a $6 million revolving line of credit maturing December 31, 1999. BioChem, an affiliate of the Company, has provided the guarantee of the line of credit, which will remain in place for a maximum of two years, unless there is a change of control such as the contemplated acquisition by the third party. The interest rate on borrowings under the line of credit is LIBOR plus 265 basis points. Upon drawing down on the line of credit by the Company, BioChem was entitled to receive warrants to purchase up to a total of 750,000 shares of the Company's Common Stock. The warrants were issued by the Company ratably as it drew down under the line of credit such that BioChem received a warrant for 125,000 shares of Common Stock for each $1 million drawn down by the Company. Each warrant has a term of two years from the date of issuance. The per share exercise price under the warrants is approximately $5.14, which is the average of the closing price of the Company's Common Stock on the American Stock Exchange over five trading days that began on June 28 and ended on July 2, 1999. Each warrant contains anti-dilution provisions and registrations rights among other provisions. The Company drew down $4 million and $2 million in the third and fourth quarters of 1999, respectively, under the revolving line of credit and accordingly issued warrants to purchase 750,000 shares of Common Stock to BioChem. The Company will recognize a total of approximately $1.6 million of interest expense based upon the issuance of these warrants to purchase up to 750,000 shares of common stock. The Company is recognizing interest expense over the life of the line of credit beginning at the issuance date of the warrants and ending on December 31, 1999, the repayment date for the line of credit. The expense related to the issuance of the 500,000 warrants, issued prior to September 30, 1999, was $429,000 for the quarter and nine months ended September 30, 1999. In September 1999, the Company completed a sale/leaseback of its only owned facility. The approximately 31,000 square foot facility, which is used as a warehousing and testing facility was sold for approximately $2.1 million, resulting in a non-cash loss on the sale of $378,000. The lease for the facility is for an initial term of ten years, with two five-year renewal options. The initial base annual rent under the lease is approximately $237,000 with minimum annual escalations. The Company had 274 and 290 employees as of September 30, 1999 and 1998, respectively. RESULTS OF OPERATIONS - --------------------- THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 In 1999, the Company recognized total revenue of $4.4 million of which approximately $1.2 million was from sales of product to SSI and approximately $3.2 million was collaborative agreement development funding under a collaborative agreement with Pasteur Merieux Connaught ("PMC"). Revenue in 1998 totaled $3.1 million of which approximately $501,000 was from sales of product to SSI and the remaining from collaborative agreements. Production expenses were $5.4 million in 1999 compared to $5.1 million in 1998. The increase in these expenses in 1999 is primarily attributable to: aP production under optimized production processes that were expensed during the 17 period, increased sales of product to SSI, FDA post-marketing surveillance expenses, and higher contractor testing expenses. These increases were partially offset by lower repairs and maintenance, lower material and labor costs, lower royalty expenses, and lower depreciation related to the use of an accelerated depreciation method for equipment acquired prior to 1998. Costs attributable to Certiva(REGISTERED) production were expensed until regulatory approval was obtained in the third quarter of 1998; however, costs attributable to aP production under optimized production processes are being expensed until regulatory approval is obtained for such new processes. See "Projected Results From Operations." Research and development expenses were $4.2 million in 1999 compared to $4.7 million in 1998. The decrease is attributable primarily to lower depreciation expenses related to the use of an accelerated depreciation method for equipment acquired prior to 1998, lower costs associated with the new facility obtained in the second quarter of 1998 because in 1999 a smaller portion of this facility was occupied by the research group, and lower materials and supply expenses offset in part by higher clinical trial expenses. Selling, general and administrative expenses were $3.5 million in 1999 compared to $2.4 million in 1998. In 1999, there was an increase due to compensation costs as part of an employee retention program, the $378,000 non-cash loss on the sale of a Company-owned building, an increase in facility costs associated with occupying space in the new facility, and legal fees and expenses associated with litigation related to the Company's former president and with partnering opportunities. These were partially offset by a decrease in outside marketing related costs and the termination of the lease of the Company's former headquarters in July 1999, which were the result of management's plan to reduce costs. Interest and dividend income decreased to $66,000 in 1999 from $276,000 in 1998. This reduction is due primarily to a decrease in the average cash balance. Interest expense increased to $2.2 million in 1999 from $1.6 million in 1998. The increase is due primarily to the amortization of costs associated with the issuance of 500,000 warrants under the BioChem line of credit guarantee, as well as increased debt as a result of the issuance of the 4.5% Notes, offset in part by the conversion of $8.4 million principal amount of the 6.5% Notes in exchange for 550,000 shares of Common Stock in June 1999 and principal payments made on the equipment lease. The factors cited above resulted in a net loss of $10.8 million or $(0.33) per share in 1999 and a net loss of $10.5 million or $(0.32) per share in 1998. The weighted-average number of common shares outstanding was 32.8 million for 1999 compared to 32.2 million for 1998. Without the $429,000 expense recognized on the issuance of warrants and the loss on the sale of the building, the net loss would have been $10.0 million or $(0.30) per share. The increase in the number of weighted-average shares outstanding for 1999 as compared to 1998 is attributable primarily to the conversion of some of the 6.5% Notes into 550,000 shares of Common Stock in June 1999 and to a lesser extent the exercise of stock options after September 30, 1998. 18 NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 In 1999, the Company recognized total revenue of $7.6 million of which approximately $1.4 million was from product sales of Certiva(REGISTERED) to government agencies and $200,000 was from sales to Abbott, approximately $2.0 million was from sales of product to SSI and approximately $4.0 million was under collaborative agreements. Revenue for 1999 from collaborative agreements consists primarily of $3.2 million of development funding under the Company's agreement with PMC and recognition of approximately $800,000 of development funding from Abbott. Revenue in 1998 totaled $5.1 million of which approximately $845,000 was from sales of product to SSI and the remaining from collaborative agreements. Revenue for 1998 from collaborative agreements consists primarily of a milestone payment and development funding from Abbott and to a lesser extent milestone payments under a supply and distribution agreement with Chiron. Production expenses were $15.8 million in 1999 compared to $14.3 million in 1998. The increase in these expenses in 1999 is primarily attributable to: aP production under optimized production processes that were expensed during the period, a total of $806,000 of write-offs of finished product due to production failures and to a lesser extent non-conforming product as a result of a third party shipping error, FDA post-marketing licensing and surveillance expenses, higher material and labor expenses, and contractor expenses. These increases were partially offset by lower depreciation related to the use of an accelerated depreciation method for equipment purchased prior to 1998, and lower repair and maintenance and royalty expenses. Costs attributable to Certiva(REGISTERED) production were expensed until regulatory approval was obtained in the third quarter of 1998; however, costs attributable to Certiva(REGISTERED) production under optimized production processes are being expensed until regulatory approval is obtained for such new processes. Research and development expenses were $11.8 million in 1999 compared to $13.3 million in 1998. The decrease is attributable primarily to lower depreciation expenses related to the use of an accelerated depreciation method for equipment acquired prior to 1998, regulatory consulting costs incurred in 1998 but not in 1999 in seeking FDA approval of Certiva(REGISTERED), lower facility related costs associated with the new facility obtained in the second quarter of 1998 because in 1999 a smaller portion of this facility was occupied by the research group, and lower materials and supply expense, offset in part by higher labor costs attributed to a higher average number of employees for product development projects and the reimbursement of expenses under a collaborative agreement in 1998. Selling, general and administrative expenses were $8.6 million in 1999 compared to $7.2 million in 1998. In 1999 there was an increase in building costs associated with the new facility occupied beginning late in the third quarter of 1998, an increase in deferred compensation costs as part of an employee retention program, the non-cash loss on the sale of a Company-owned building, legal fees and expenses associated with litigation related to the Company's former president and with partnering opportunities, and supplies and services costs. These increases were partially offset by a decrease in outside marketing related costs and the termination of the lease of the Company's former headquarters in July 1999, which were the result of management's plan to reduce costs. 19 In March 1999, the Company sold the remaining 125,000 shares of its investment in IVAX Corporation ("IVAX") Common Stock generating gross proceeds of approximately $1.6 million and income of $952,000. Interest and dividend income decreased to $446,000 in 1999 from $1.2 million in 1998. This reduction is due primarily to a decrease in the average cash balance. Interest expense increased to $6.9 million in 1999 from $4.8 million in 1998. The increase is due primarily to the $940,000 expense recognized on the conversion of $8.4 million principal amount of 6.5% Notes, increased debt as a result of the issuance of the 4.5% Notes, the amortization of costs associated with the issuance of 500,000 warrants under the BioChem line of credit guarantee, offset in part by the conversion of $8.4 million principal amount of 6.5% Notes in exchange for 550,000 shares of Common Stock in June 1999 and principal payments made on the equipment lease. The factors cited above resulted in a net loss of $34.1 million or $(1.05) per share in 1999 as compared to a net loss of $33.2 million or $(1.03) per share in 1998. The weighted-average number of common shares outstanding was 32.5 million for 1999 compared to 32.1 million for 1998. Without the gain on sale of the investment in an affiliate, the expense recognized on the conversion of some of the 6.5% Notes, the expense recognized on the issuance of 500,000 warrants, and the loss on the sale of the building, the net loss would have been $33.3 million or $(1.02) per share. The increase in the number of weighted-average shares outstanding for 1999 as compared to 1998 is attributable primarily to the conversion of some of the 6.5% Notes into 550,000 shares of the Company's Common Stock in June 1999 and to a lesser extent the exercise of stock options after September 30, 1998. LIQUIDITY AND CAPITAL RESOURCES; OUTLOOK - ---------------------------------------- The Company's cash requirement for operations for the third quarter of 1999 was $8.2 million as compared to $10.7 million in the second quarter of 1999. The decrease is due primarily to interest payments made in May 1999 for the 6.5% and 4.5% convertible notes. The Company's cash requirement for operations is the net cash used in operating activities for the period being reported less amounts received under license, marketing, distribution and/or development agreements and further adjusted by the timing of proceeds from the sale of an investment in an affiliate. At September 30, 1999, the Company had cash and cash equivalents of approximately $1.9 million. In addition, the Company had approximately $3.6 million of restricted cash pledged as collateral under the letter of credit agreement, which will be reduced in amount as payments are made under the equipment lease described in Note 6 of the financial statements. PROJECTED RESULTS FROM OPERATIONS. The Company anticipates that it will report a net loss of between $14 and $16 million for the fourth quarter of 1999. It will likely incur a quarterly net operating loss in the first quarter of 2000, based upon several factors. The factors included in assessing the projected losses are, among others: limited projected revenue primarily due to limited Certiva(REGISTERED) inventory on hand and the changeover from 20 Certiva(REGISTERED) to group C meningococcal vaccine production; current manufacturing limitations; the costs required to accelerate the group C meningococcal conjugate vaccine program; the timing and amount of milestone payments under an existing collaboration agreement with PMC; the timing and amount of up-front and other payments under anticipated license, distribution, marketing and collaboration agreements; and the recognition of expense associated with the issuance of warrants to BioChem under its line of credit guarantee for the Company, all as more completely discussed in the following paragraphs. Quarterly operating results will be affected by the revenue from sales of the remaining inventory of Certiva(REGISTERED). Revenues from the sale of Certiva(REGISTERED) and aP sales to SSI have been limited. The reported Certiva(REGISTERED) net sales during the third, second and first quarters of 1999 were approximately $0, $800,000, and $800,000, respectively. Although, the national marketing authorization for the sale and distribution of its DTaP-IPV vaccine in Germany and Austria has been completed, labeling amendments related to distribution of the product have not been finalized. Until the labeling issue and the termination issue with Chiron, the Company's appointed distributor in Germany and Austria, are resolved, the Company will not be able to sell aP vaccine to be formulated as DTaP-IPV in those countries. There can be no assurance that these issues will be satisfactorily resolved, or that if resolved, any product launch will generate significant revenues in 1999 or into 2000. The Company anticipates limited revenues from Certiva(REGISTERED) and aP during the remainder of 1999 and into 2000 due to limited inventory of those products, the termination of the marketing and distribution agreement by Abbott, and because the Company changed over from Certiva(REGISTERED) and aP production in August 1999 to start production of the group C meningococcal conjugate vaccine in the fourth quarter of 1999 in anticipation of the commercial launch of the product in the United Kingdom. The Company anticipates filing in the fourth quarter of 1999, or shortly thereafter, for regulatory approval of the group C meningococcal conjugate vaccine. As noted above, quarterly operating results will be affected by various manufacturing limitations. The Company's manufacturing facility has limited production capacity based on the present size, configuration, equipment, processes and methods utilized to produce, test and release its commercial products and its acellular pertussis toxoid. Production expenses are mainly fixed and consist primarily of expenses relating to the operation of its production facility and maintaining a ready work force. Further, from time to time, the Company experiences disruptions and production failures. These disruptions and failures increase unit production costs as units are lost in the production process. These factors have contributed to higher production costs for the Company's acellular pertussis products, which costs currently exceed their net realizable value. These excess costs are expensed in the quarter incurred. In addition, the Company has not manufactured the group C meningococcal vaccine on a commercial scale in this facility, and there can be no assurance that there will not be disruptions or product failures. In order to address these production limitations, the Company is implementing a two-step enhancement program with respect to its production of Certiva(REGISTERED) and aP vaccines. First, the Company has modified its existing facilities and operations in a manner intended to significantly expand production capacity and efficiency. The Company filed the appropriate documentation with the FDA in the fourth quarter of 1999 in seeking the approval for these enhancements. Following completion of this first step, the Company believes that the manufacturing facility will have substantially increased 21 Certiva(REGISTERED) and aP production capacity and output. The second step is to eliminate bottlenecks and streamline and strengthen the product testing and release process thereby reducing production disruptions and failures and enhancing the reliability of the production process. This work will be performed off-line during the remainder of 1999 and into early 2000, while the group C meningococcal vaccine is being produced in the facility. Upon completion of both of these programs, the Company expects that unit production costs will be reduced significantly and that Certiva(REGISTERED) could be produced in sufficient quantities to generate a gross profit based on the currently known pricing arrangements and competitive environment, and with the Company's primary focus on governmental sales. As a result of a recent assessment of potential health risks related to mercury contained in food and drugs conducted by the FDA, in cooperation with the Environmental Protection Agency, the continued use of thimerosal in vaccines has been questioned. Thimerosal is a mercury-containing preservative commonly used in vaccines packaged in multi-dose vials. Thimerosal is approved for use by the FDA and is currently included in more than 30 licensed vaccines in the United States. Vaccines containing this preservative have been administered to hundreds of millions of children and adults worldwide, with no scientific or medical data to suggest that it poses a public health risk. In July 1999, the Company decided to follow the developing recommendations of these agencies and move toward the discontinued use of thimerosal in Certiva(REGISTERED). The Company intends to submit data to the FDA on the European formulation of Certiva(REGISTERED), which does not contain thimerosal, to facilitate the approval and introduction in the United States of a thimerosal-free formulation of the product in single-dose syringes. The Company is currently evaluating the impact of this decision on the per unit cost to produce Certiva(REGISTERED), as well as the impact on the current selling price. The Company expects to submit data to the FDA on a thimerosal-free formulation of Certiva(REGISTERED) before the end of the fourth quarter of 1999 or shortly thereafter, and the Company will work expeditiously with the FDA to obtain approval. The American Academy of Pediatrics has called for the FDA to expedite the review of manufacturers' supplemental applications to eliminate or reduce the mercury content of vaccine products. The U.S. Public Health Service, the Centers for Disease Control and Prevention, and the American Academy of Pediatrics continue to recommend that all children should be immunized against the diseases indicated in the recommended immunization schedule. The Company will in the interim continue to sell previously produced thimerosal containing Certiva(REGISTERED) that it has in inventory to government purchasers and possibly through distributors to private physicians and has begun to manufacture thimerosal-free Certiva(REGISTERED) in anticipation of regulatory approval. As a function of the two-step enhancement program for acellular pertussis production and testing processes, the regulatory work for a thimerosal-free Certiva(REGISTERED), and the market opportunities for a launch of the group C meningococcal conjugate vaccine in 2000, the Company, beginning in late fourth quarter 1999, will produce its group C meningococcal conjugate vaccine for sale in the U.K. in the facility that had been producing Certiva(REGISTERED). All costs associated with this production effort will be expensed until regulatory approval is obtained. Because of the planned production of group C meningococcal conjugate vaccine in this facility, neither acellular pertussis vaccine nor Certiva(REGISTERED) will be manufactured until at the earliest, the beginning of the second quarter of 2000. Thus, sales of acellular pertussis containing products will be limited and may result in reduced sales in the second half of 1999 through the second or third quarter of 22 2000 due to limited product inventory. Sales could be limited in the second half of 2000 if the enhanced production and testing processes do n0t work properly upon startup of acellular pertussis production and/or the Company is unable to reach agreements with suitable distributors for these products in the U.S. and, if necessary, in Germany and Austria. Under the guarantee agreement with BioChem for the $6 million line of credit obtained in July 1999, the Company issued warrants to BioChem as the Company drew down on the line of credit. The Company drew down $4 million and $2 million in the third and fourth quarters of 1999, respectively, under the revolving line of credit and accordingly issued warrants to purchase 750,000 shares of Common Stock to BioChem. The Company will recognize a total of approximately $1.6 million of interest expense based upon the issuance of these warrants to purchase up to 750,000 shares of common stock. The Company recognizes interest expense over the life of the line of credit beginning at the issuance date of the warrants and ending on December 31, 1999, the repayment date for the line of credit. The expense related to the issuance of the 500,000 warrants, issued through the third quarter of 1999, was $429,000 for the three months and nine months ended September 30, 1999. Finally, future operating results are dependent upon the amount and timing of further milestone and other payments under existing and new license, distribution or development agreements. During 1999 and into 2000, the Company will be continuing its development efforts for several products, including the one covered by the existing agreement with PMC. The Company is entitled under the PMC agreement to milestone payments upon achievement of prescribed events and is entitled to be paid for certain prescribed development costs as incurred. The milestone payments under the PMC agreement are tied to measured progress in the regulatory process for the Company's group B meningococcal vaccine. Although initial clinical development plans have been completed for this product, and clinical trials are projected to commence in early 2000, there are no assurances that such milestone events will occur during 2000, or at all, or that any such payments will contribute materially to quarterly net operating results. The foregoing paragraphs include forward looking statements including statements as to: revenue projections, earnings (losses); timing and likelihood of further regulatory approvals; the ability of the Company to timely and efficiently expand its production capacity and lower unit costs for Certiva(REGISTERED); the prospects for and timing of group C meningococcal conjugate vaccine production and regulatory filings; the prospects for and timing of milestone payments under an existing collaborative agreement; and the ability of the Company to address production failures relating to Certiva(REGISTERED) production, among others. The factors that affect the level of future revenues from product sales include, among other things, the ability of the Company to obtain distribution partners for pertussis products in the U.S. and, if necessary, Germany and Austria, and for the group C meningococcal vaccine in the U.K., the ability of the Company and its distribution partners to effectively position the Company's products against competitive products (including safety, efficacy, and pricing), the Company's ability to manufacture and deliver pertussis and group C meningococcal vaccine products in accordance with customer orders, the timing and amount of product orders, and the timing of future product launches. The factors that affect the ability of the Company to timely and efficiently expand its production capacity include, among others, the adequacy of engineering designs, the manufacturing experience with these enhancements, the timeliness of regulatory review of modifications, the 23 acceptability of such modifications to the applicable regulatory authorities, and the ability to successfully streamline and strengthen the product testing and release process. There can be no assurances that the Company's plans to increase production capacity and output will be effective or result in anticipated production efficiencies and reduced unit cost or will be acceptable to any regulatory agency. The factors affecting prospects for and timing of milestone payments under an existing collaborative agreement include regulatory authorization to commence clinical trials and adequacy of clinical trial results. The factors affecting timing for commercialization of the group C meningococcal conjugate vaccine include, among other things, successful changeover in the manufacturing facility, results of ongoing clinical trials, and expedited UK regulatory review. In addition, there are no assurances that the steps taken by the Company to address production disruptions and failures and quality testing inefficiencies for both the pertussis and group C meningococcal vaccines will be effective or that disruptions, failures, and inefficiencies will not continue in the future. Production disruptions, failures or inefficiencies could have a material adverse effect on the Company's future operating results and could affect the Company's existing licenses as well as any applications for approval for its products or the timing of such approval. No assurances can be given that the Company will be successful in maintaining consistent and continuous commercial production of its products. Further, because the Company's manufacturing operations are located principally in one facility, any condition or event that adversely affects the condition or operation of such facility would have a material adverse affect on the Company's financial condition and future results of operations. PROJECTED CASH REQUIREMENTS FOR OPERATIONS. The cash requirements for operations in the fourth quarter of 1999 are projected to be between $13 and $15 million. This range could be affected by the timing and amount of additional cash requirements associated with the acceleration of the group C meningococcal conjugate vaccine development program. The fourth quarter cash requirement is anticipated to be higher than that incurred in the third quarter of 1999 due primarily to the semi-annual interest payment of $2.4 million on the 6.5% Notes and the approximately $600,000 payment for the 4.5% Notes both due in November 1999. The above cash requirements do not include the repayment of the revolving line of credit, guaranteed by BioChem, which expires December 31, 1999, the balance of which was $6 million at November 5, 1999. The foregoing include forward looking statements and the factors which affect the actual cash required for operations could include, among other things: vaccine production levels; regulatory authorization to commence clinical investigations; timing for the commencement of planned clinical trials; and the level of expenditures for the Company's ongoing research and development program, which includes the acceleration of the group C meningococcal conjugate vaccine program. See "Funding Sources," below. CAPITAL EXPENDITURES. Total capital expenditures for the first nine months of 1999 were $2.9 million which includes a $260,000 capital lease for equipment. As noted above, the Company has expanded its manufacturing capacity and efficiency for its acellular pertussis toxoid and Certiva(REGISTERED) and is planning to produce the group C meningococcal conjugate vaccine beginning in the fourth quarter of 1999. Total projected capital expenditures for the remainder of 1999 for minor ongoing facilities' modifications, equipment, systems and other capital additions are approximately $800,000. The foregoing include forward looking statements. The amount of and timing for capital expenditures could fluctuate based upon a number of factors including, without limitation, the equipment purchases required in order to produce the group C meningococcal conjugate vaccine; and the amount and timing of unanticipated costs to replace 24 or repair existing equipment and systems in order to keep facilities operational and in compliance with regulatory requirements. FUNDING SOURCES. To maintain the Company's production, research, development and growth at current levels, present cash and cash equivalents, expected product sales of Certiva(REGISTERED) and the Company's other products, and revenues from existing collaborative agreements are not expected to provide sufficient cash to fund the Company's operations, debt service payments and capital expenditures for the remainder of 1999 and into 2000. To address the cash needs, the Company obtained a secured revolving line of credit from Bank of America, N.A. The Company has received $5 million under the line of credit. An additional amount of up to $25 million will be available if the Company executes a definitive acquisition agreement with the unaffiliated third party, with whom the Company is in exclusive negotiations. The line of credit has been guaranteed by the third party and is secured by all of the Company's otherwise unencumbered assets, including patents, patent applications and receivables. Should the Company be unable to reach a definitive acquisition agreement by November 18, 1999 (unless otherwise extended by Bank of America, N.A.), then the Company would be required to repay all outstanding indebtedness under the borrowing agreement within 20 days of that date. There are no assurances that the Company would be able to obtain additional financing within that timeframe to repay the $5 million or that such financing, if obtained, would be adequate to fund the ongoing operations of the Company. If the Company signs the definitive acquisition agreement and secures the additional $25 million, it believes that it will meet 1999 and first quarter 2000 cash requirements for operations with this line of credit, although there are no assurances in this regard. The foregoing include forward looking statements, and the factors that will determine the timing and amount of additional funding include, without limitation, the satisfaction of certain conditions to the signing of a definitive acquisition agreement with the third party. If the Company is unable to complete the transaction with the third party noted above, the Company would be required to obtain additional funding through a borrowing arrangement with one or more of its affiliates, through the sale of debt and/or equity securities and/or reduce cash requirements through significant reductions in operating levels. There can be no assurances that the Company will be able to obtain debt or equity financing on favorable terms in amounts required to meet future cash requirements and the amounts owed under outstanding lines of credit in the timeframe required, or that the Company, if necessary, would be successful in reducing operating levels or effectively controlling costs, or that if operating levels are reduced, the Company would be able to maintain operations for any extended period of time. The foregoing paragraphs contain only a partial description of the factors affecting the Company's business prospects and risk factors affecting future operations. Reference is made to the risk factors and other information described elsewhere in this management's discussion and analysis of financial condition and results of operations, including in the first paragraph hereof, and in the Company's other filings with the SEC, for a more complete description of the risks and uncertainties affecting the Company and its business. 25 TAX AND REPORTING MATTERS - ------------------------- At December 31, 1998, the Company and its subsidiaries had income tax loss carry forwards of approximately $38.2 million to offset future Canadian source income and approximately $93.2 million to offset future United States taxable income subject to the alternative minimum tax rules in the United States. If more than a certain percentage of the Company's assets or income becomes passive, the Company will be classified for U.S. tax purposes as a passive foreign investment company ("PFIC"), and a U.S. taxpayer may be subject to an additional Federal income tax on receiving certain dividends from the Company or selling the Company's Common Stock. The Company has not been classified as a PFIC to date, and it intends to, and believes that it can, generate sufficient other income to avoid being classified as a PFIC. This is a forward looking statement and the factors affecting this classification include, among other things, the timing and amount of revenue from product sales; the timing and amount of license fees, milestone payments and development funding under license, marketing, distribution and development agreements; the classification of payments received by the Company as active or passive; and the classification of the Company's assets as active or passive. In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." The Company implemented SFAS No. 131 for the year ended December 31, 1998 and has determined that it currently does not have reportable segments. There were no product sales in the United States for the quarters ended September 30, 1999 and 1998, and approximately $1.6 million and $0 for the nine months periods ended September 30, 1999 and 1998, respectively. Product sales to Europe, which were all made to SSI, were approximately $1.2 million and $501,000 for the quarters ended September 30, 1999 and 1998, respectively, and approximately $2.0 million and $845,000 for the nine months ended September 30, 1999 and 1998, respectively. All products are currently being manufactured at the Company's one production facility in the United States. The production process, and ultimately product costing, is primarily the same for all of the Company's acellular pertussis vaccine products sold in the United States and Europe. Because of this, and the relative consistency in selling prices, as well as the nature of the distribution methods utilized by the Company, the Company does not differentiate and manage its business along geographic lines. The Company has been notified by the American Stock Exchange ("Exchange") that it was considering delisting the Company because of non-compliance with its listing requirements. The Exchange has deferred its judgment on delisting until it has reviewed the Company's Annual Report on Form 10-K for the year ending December 31, 1999. If the proposed transaction with the potential acquiror is not entered into or consummated, then the Exchange has requested that the Company provide it with additional information regarding its financial condition. IMPACT OF THE YEAR 2000 ISSUE ON THE COMPANY - -------------------------------------------- The Year 2000 issue is the result of some computers, software and other equipment, including computer code, in which calendar year data is abbreviated to only two digits. Management has initiated a company-wide program to prepare the Company's information systems for the year 2000. Based on an internal assessment, the Company believes that the principal management information 26 system software that is currently being used is designed to be Year 2000 compliant. However, there can be no assurances in this regard. The Company intends to test the system for Year 2000 compliance. The Company also uses various "off the shelf" software applications for the storage and analysis of various types of data and systems. Management is dependent on this software for day-to-day operations. The Company has completed the inventory of its information technology and date-sensitive systems and has completed the assessment phases and has substantially completed the required remediation of noncompliant, mission-critical systems to achieve Year 2000 qualification. This process is nearing completion; however, the Company is unable at this time to assess the impact, if any, that non-compliant systems or equipment might ultimately have on the Company's systems and operations or its future financial position or results of operations. The Company has communicated with substantially all of its significant suppliers to determine the extent to which the Company is vulnerable to failures by such third parties to remediate their own Year 2000 issues. The Company has not been advised by its suppliers that costs to obtain Year 2000 compliance will be passed on to the Company; however, there can be no assurances that such costs will not be passed through to the Company either directly or indirectly or, if passed through to the Company, the magnitude of such charges. The systems of other companies on which the Company's systems rely may not be timely converted. Accordingly, there are no assurances that the failure by such other companies' systems to achieve Year 2000 qualification, or qualify in a manner that is compatible to Company systems, would not have a material adverse effect on the Company. The Company is finalizing contingency plans for various possible scenarios. The Company has determined that it has no exposure to contingencies related to the Year 2000 Issue for product it has sold. Based on the internal assessment, the Company has not identified any material costs or expenditures specifically related to modifications of information systems for Year 2000 compatibility. This internal assessment is a continuing process, consequently there can be no assurances that the Company will not be required to expend significant amounts on achieving Year 2000 qualification or that such expenditures will not have a material adverse affect on future results from operations or financial condition. The foregoing paragraphs contain forward looking statements and the factors affecting the impact of Year 2000 on the Company include, among others, the availability and cost of programming and testing resources, vendors' ability to modify proprietary software, unanticipated problems identified in the ongoing compliance assessment, and compliance of material third party suppliers and vendors. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ---------------------------------------------------------- The Company does not have significant exposure to changing interest rates on invested cash at September 30, 1999. The Company invests in U.S. Treasury bills and investment grade commercial paper that have maturities of three months or less. As a result, the interest rate market risk implicit in these investments at September 30, 1999, is low, as the investments mature within three months. 27 The Company had $25 million of 4.5% Notes at September 30, 1999, which bear interest at 4.5% per annum and mature in November 2003. The Company does not have significant exposure to changing interest rates related to the 4.5% Notes because the interest rate on these notes is fixed. The Company had $75.3 million of 6.5% Notes at September 30, 1999, which bear interest at 6.5% per annum and mature in May 2003. The Company does not have significant exposure to changing interest rates related to the 6.5% Notes because the interest rate on these notes is fixed. The Company has drawn down a total of $6 million in three equal draws under the revolving line of credit guaranteed by BioChem. The loans bear interest at LIBOR plus 265 basis points, which are currently between 8.06% and 8.09%. Each draw under the line is an individual revolving loan. New interest rates and periods will be determined when these loans mature. The entire principal balance on the line of credit must be repaid no later than December 31, 1999. The Company has exposure to changing interest rates related to the $6 million of debt but does not deem it material due to the time limitations on the borrowing. The Company drew down $5 million in November 1999 under a revolving line of credit guaranteed by a third party. The loan bears interest at LIBOR plus .625%. The Company has exposure to changing interest rates related to the $5 million of debt but does not deem it material due to the time limitations on the borrowing. The Company has not undertaken any actions to cover interest market risk and is not a party to any interest rate market risk management activities. A hypothetical ten percent change in the market interest rates over the next year would not materially impact the Company's earnings or cash flow as the interest rates on the Company's long-term convertible debt are fixed and its revolving line of credit and cash investments are short term. A hypothetical ten percent change in the market interest rate over the next year, by itself, would not have a material adverse effect on the fair value of the Company's long-term convertible debt, revolving line of credit or its short-term cash investments. The Company does principally all of its transactions in U.S. dollars and currently has limited payment obligations in Swedish Krona and Danish Kroner; however, such obligations are not material to the Company's operations. In addition, the Company's contract with the NHS in the U.K. is denominated in British pounds sterling. The Company intends to reduce risk due to possible changes in exchange rates between the currencies by entering into a hedging transaction before the effective date of the contract. 28 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS ----------------- Sharon Mates, the Company's former president, continues to pursue her appeal of the judgment that the Company had obtained its favor from the U.S. District Court in Maryland. The appeal is pending in the U.S. Court of Appeals for the Fourth Circuit. Dr. Mates's original counsel, however, has withdrawn from their representation, causing Dr. Mates to apply for an extension of time to find new counsel and file her brief. On October 15, 1999, the Fourth Circuit granted Dr. Mates's motion, giving her until November 18, 1999, to file her brief. The lawsuit was filed by Dr. Mates in November 1998 and included claims against the Company and two directors for, among other things, abusive discharge, defamation, interference with business relations, and breach of contract. In December 1998, the Company filed a motion to dismiss on the basis that the allegations in the complaint did not state any claim under applicable law. In June 1999, the U.S. District Court in Maryland dismissed all claims filed by Dr. Mates, as well as the claims filed against the two named directors and an affiliate, BioChem Pharma Inc. ("BioChem"). In July 1999, Dr. Mates filed a notice of appeal. In October 1999, Chiron-Behring GmbH & Co. ("Chiron") notified the Company that Chiron is seeking to terminate the marketing agreement in Germany and Austria for the Company's DTaP-IPV vaccine. Chiron alleges that the Company misrepresented the status of European regulatory approval of its products and fraudulently induced Chiron to enter into the agreement. Chiron has demanded that the Company repay $3 million of nonrefundable payments that Chiron made under the agreement. If discussions directly with Chiron do not resolve the dispute, the Company intends to challenge Chiron's effort to terminate. The agreement between the Company and Chiron includes an arbitration process for resolving any such dispute, and the Company will avail itself of that process and will vigorously contest and defend against the claims raised by Chiron. The Company believes that the claims against it are without merit, that the Company has meritorious defenses available to it, and that certain counterclaims also may be available to it. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS ----------------------------------------- In July 1999 the Company obtained a $6 million revolving line of credit maturing December 31, 1999. The interest rate on borrowings under the line of credit is LIBOR plus 265 basis points. BioChem, an affiliate of the Company, has provided the guarantee of the line of credit, which will remain in place for a maximum of two years, unless there is a change of control such as the contemplated acquisition by the third party. The Company issued to BioChem warrants to purchase a total of 500,000 shares of the Company's Common Stock in reliance on Section 4(2) of the Securities Act, related to draws of $4 million under the line of credit through September 30, 1999. An additional 250,000 warrants have been issued by the Company to BioChem for the draw of the remaining $2 million under the line during the fourth quarter of 1999. Each warrant has a term of two years from the date of issuance. The per share exercise price under each warrant is approximately $5.14, which is the average of the closing price of the Company's Common Stock on the American Stock Exchange over five trading days that began on June 28 and ended on July 2, 1999. Each warrant contains anti-dilution provisions and registrations rights among other provisions. 29 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- (a) Exhibits Exhibit No. Description 10.45 Common Stock Purchase Warrant No. W-2 dated August 26, 1999 10.46 Common Stock Purchase Warrant No. W-3 dated October 28, 1999 10.47 Revolving Credit Facility Letter Agreement dated November 1, 1999 by and between Bank of America, N.A. and North American Vaccine, Inc. 10.48 Fee Letter dated November 1, 1999 10.49 Security Agreement dated as of November 1, 1999 by and between North American Vaccine, Inc. and Bank of America, N.A. 10.50 Security Agreement dated as of November 1, 1999 10.51 Patent and Trademark Assignment and Security Agreement dated as of November 1, 1999 by and between North American Vaccine, Inc. and Bank of America, N.A. 10.52 Patent and Trademark Assignment and Security Agreement dated as of November 1, 1999 10.53 Guaranty Agreement dated November 1, 1999 10.54 Reimbursement Agreement dated as of November 1, 1999 27 Financial Data Schedule (b) Reports on Form 8-K None 30 SIGNATURES Pursuant to the requirements 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. NORTH AMERICAN VACCINE, INC. ---------------------------- (Registrant) By: /s/ Randal D. Chase ------------------------ Randal D. Chase, Ph.D. President and Chief Executive Officer By: /s/ Lawrence J. Hineline ------------------------ Lawrence J. Hineline Vice President - Finance Date: March 9, 2000 31 EX-10.45 2 THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR PROVINCE OF CANADA AND SUCH SECURITIES MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM NORTH AMERICAN VACCINE, INC. Warrant for the Purchase of Common Shares ----------------------------------------- No. W-2 250,000 Shares --- FOR VALUE RECEIVED, NORTH AMERICAN VACCINE, INC. (the "Company"), a Canadian corporation, hereby certifies that BioChem Pharma Inc. or its permitted assigns (the "Holder") is entitled to purchase from the Company, at any time or from time to time after the date set forth on the signature page, but prior to 5:00 p.m. on August 13, 2001, two hundred fifty thousand (250,000) fully paid and non-assessable common shares, no par value, of the Company for an aggregate purchase price of One Million Two Hundred Eighty-Four Thousand Three Hundred Seventy-Five U.S. Dollars (US$1,284,375) (computed on the basis of US$5.1375 per share). (Hereinafter, (i) said common shares, together with any other equity securities which may be issued by the Company in substitution therefor, are referred to as the "Common Shares":, (ii) the Common Shares purchasable hereunder are referred to as the "Warrant Shares", (iii) the aggregate purchase price payable hereunder for the Warrant Shares is referred to as the "Aggregate Warrant Price", (iv) the price payable hereunder for each of the Warrant Shares, as adjusted in the manner set forth in Section 3, is referred to as the "Per Share Warrant Price" and (v) this Warrant and all warrants hereafter issued in exchange or substitution for this Warrant are referred to as the "Warrants") The Aggregate Warrant Price is not subject to adjustment. The Per Share Warrant Price and the number of Warrant Shares are subject to adjustment as hereinafter provided. 1. EXERCISE OF WARRANT. This Warrant may be exercised, in whole at any time or in part from time to time (such partial exercises to be in amounts of not less than 1,000 Warrant Shares), on and after the date set forth on the signature page, but prior to 5:00 p.m. on August 13, 2001, by the Holder of this Warrant by the surrender of this Warrant (with the subscription form at the end hereof duly executed) at the principal office of the Company in Columbia, MD together with proper payment of the Aggregate Warrant Price applicable on such date, or the proportionate part thereof if this Warrant is exercised in part. Payment for Warrant Shares shall be made by (i) check payable to the order of the Company, (ii) wire transfer to an account designated by and in the name of the Company, (iii) by delivery to the Company of debt securities for which it is the issuer and bound to make payment in the stated principal amount, where the principal amount on such debt security delivered to the Company for retirement is equal to the Aggregate Warrant Price; or (iv) by any combination of the methods set forth in (i) through (iii), above. If this Warrant is exercised in part, this Warrant must be exercised for a number of whole Warrant Shares, and the Holder is entitled to receive a new Warrant covering the number of Warrant - 1 - Shares in respect of which this Warrant has not been exercised and setting forth the proportionate part of the Aggregate Warrant Price applicable to such Warrant Shares. Upon such surrender of this Warrant, the Company will issue a certificate or certificates in the name of the Holder for the largest number of whole Warrant Shares to which the Holder shall be entitled and, if this Warrant is exercised in whole, in lieu of any fractional Warrant Share to which the Holder shall be entitled, cash equal to the fair value of such fractional share (determined in such reasonable manner as the Board of Directors of the Company shall determine). 2. RESERVATION OF WARRANT SHARES. The Company agrees that, prior to the expiration of this Warrant, the Company will at all times have authorized and reserve, and will keep available, solely for issuance or delivery upon the exercise of this Warrant, the Warrant Shares free and clear of all restrictions on sale or transfer (except as may arise under applicable securities laws) and free and clear of all preemptive rights. 3. PROTECTION AGAINST DILUTION. (a) If, at any time or from time to time after the date of this Warrant, the Company shall (i) issue to the holders of the Common Shares any Common Shares by way of a stock dividend; (ii) subdivide its outstanding Common Shares into a greater number of shares; (iii) combine its outstanding number of Common Shares into a smaller number (i.e., a reverse stock split); or (iv) issue by reclassification of its Common Shares any shares of capital stock of the Company then, and in each such case, the Per Share Warrant Price in effect immediately prior to the date of such action shall be adjusted, or further adjusted, to a price (to the nearest cent) determined by dividing (x) an amount equal to the number of Common Shares outstanding immediately prior to such issuance multiplied by the Per Share Warrant Price in effect immediately prior to such issuance by (y) the total number of Common Shares outstanding immediately after such issuance. Upon each adjustment in the Per Share Warrant Price resulting from a stock split or stock dividend, the number of Warrant Shares shall be adjusted by dividing the Aggregate Warrant Price by the Per Share Warrant Price in effect immediately after such adjustment. Notice of each such adjustment and each such readjustment shall be forthwith mailed to the Holder. (b) If the Company shall be consolidated with or merged into another corporation, or shall sell all or substantially all of its assets as part of a reorganization to which the Company is a party within the meaning of the Internal Revenue Code of 1986, as presently in effect, or shall issue a security convertible into its Common Shares as a dividend on its Common Shares, each Warrant Share shall be replaced for the purposes hereof by the securities or properties issuable or distributed in respect of one Common Share upon such consolidation, merger, sale, reclassification or reorganization, and adequate provisions to that effect shall be made at the time thereof. Notice of such consolidation, merger, sale, reclassification or reorganization, and of said provisions so proposed to be made, shall be mailed to the Holder not less than 15 days prior to such event. (c) If the Board of Directors of the Company shall declare any dividend or other distribution in cash with respect to the Common Shares, other than out of surplus, the Company shall mail notice thereof to the Holder not less than 15 - 2 - days prior to the record date fixed for determining shareholders entitled to participate in such dividend or other distribution. (d) If , during the term of this Warrant, the Company shall issue or sell its Common Shares for a consideration per share less than the Per Share Warrant Price immediately prior to the time of such issue or sale, then forthwith upon such issue or sale, the Per Share Warrant Price in effect immediately prior to such issue or sale shall be reduced to the lower of the prices (calculated to the nearest cent) determined as follows: (1) by dividing (A) an amount equal to the sum of (i) the number of shares of Common Stock outstanding immediately prior to such issue or sale multiplied by the then-existing Per Share Warrant Price, and (ii) the consideration, if any, received by the Company upon such issue or sale, by (B) the total number of Common Shares outstanding immediately after such issue or sale; and (2) by multiplying the Per Share Warrant Price in effect immediately prior to the time of such issue or sale by a fraction, the numerator of which shall be (A) the sum of (i) the number of Common Shares outstanding immediately prior to such issue or sale multiplied by the market price immediately prior to such issue or sale; and (ii) the consideration received by the Company upon such sale, divided by (B) the total number of Common Shares outstanding immediately after such issue or sale, and the denominator of which shall be the market price immediately prior to such issue or sale. 4. FULLY PAID SHARES; TAXES. The Company agrees that the Common Shares represented by each and every certificate for Warrant Shares delivered on the exercise of this Warrant shall, at the time of such delivery, be validly issued and outstanding, fully paid and non-assessable. The Company further covenants and agrees that it will pay, when due and payable, any and all Federal and state stamp, original issue or similar taxes which may be payable in respect of the issue of any Warrant Share or certificate therefor. 5. TRANSFERABILITY. This Warrant and the Warrant Shares shall not be sold, transferred, assigned or hypothecated by the Holder except (i) pursuant to an effective registration statement under the Securities Act of 1933, as amended, and qualification for sale under all other applicable state and provincial securities rules and regulations [collectively the "Securities Acts"]; or (ii) in full compliance with all requirements necessary to establish an exemption from the registration requirements of the Securities Acts. In order to properly establish compliance with (ii), above, the Company shall be entitled to request and receive in advance of authorizing any sale, transfer, assignment or hypothecation of this Warrant or any of the Warrant Shares: (x) appropriate transferor and transferee representation letters supporting a claimed exemption from registration requirements of the Securities Acts; (y) an opinion of counsel for the holder of the Warrant and/or Warrant Shares reasonably satisfactory to the Company that the proposed transfer from the holder of the Warrant and/or Warrant Shares to the transferee is exempt from the registration requirements of the Securities Act; and (z) such other documentation, representations and - 3 - filings as may be reasonably required by counsel in order to issue the foregoing opinion. The Company may treat the registered holder of this Warrant as it appears on the Company's books at any time as the Holder for all purposes. 6. LOSS, ETC. OF WARRANT. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and of indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed, and upon surrender and cancellation of this Warrant, if mutilated, and upon reimbursement of the Company's reasonable incidental expenses, the Company shall execute and deliver to the Holder a new Warrant of like date, tenor and denomination. 7. WARRANT HOLDER NOT SHAREHOLDER. Except as otherwise provided herein, this Warrant does not confer upon the Holder any right to vote or to consent or to receive notice as a shareholder of the Company, as such, in respect of any matters whatsoever, or any other rights or liabilities as a shareholder, prior to the exercise hereof. 8. COMMUNICATION. No notice or other communication under this Warrant shall be effective unless, but any notice or other communication shall be effective and shall be deemed to have been given if, the same is in writing and is mailed by first-class mail, postage prepaid, addressed to: (a) the Company at North American Vaccine, Inc., 10150 Old Columbia Road, Columbia, MD 21046 Attention: Vice President-Finance, or such other address as the Company has designated in writing to the Holder, or (b) the Holder at BioChem Pharma Inc., 275 Armand Frappier Boulevard, Laval, H7V 4A7 Quebec, Canada Attention: Executive Vice President-Investments & Subsidiaries, or such other address as the Holder has designated in writing to the Company. 9. HEADINGS. The headings of this Warrant have been inserted as a matter of convenience and shall not affect the construction hereof. 10. APPLICABLE LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of New York. - 4 - IN WITNESS WHEREOF, NORTH AMERICAN VACCINE, INC. has caused this Warrant to be signed by its Senior Vice President-Legal Affairs & General Counsel and its corporate seal to be hereunto affixed and attested by its Secretary this 26th day of August, 1999. ATTEST: NORTH AMERICAN VACCINE, INC. /s/ Russell P. Wilson By: /s/ Daniel J. Abdun-Nabi - --------------------- ------------------------ Russell P. Wilson Daniel J. Abdun-Nabi Assistant Secretary Senior Vice President-Legal Affairs & General Counsel [Corporate Seal] - 5 - EX-10.46 3 THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR PROVINCE OF CANADA AND SUCH SECURITIES MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM NORTH AMERICAN VACCINE, INC. Warrant for the Purchase of Common Shares ----------------------------------------- No. W-3 250,000 Shares --- FOR VALUE RECEIVED, NORTH AMERICAN VACCINE, INC. (the "Company"), a Canadian corporation, hereby certifies that BioChem Pharma Inc. or its permitted assigns (the "Holder") is entitled to purchase from the Company, at any time or from time to time after the date set forth on the signature page, but prior to 5:00 p.m. on October 28, 2001, two hundred fifty thousand (250,000) fully paid and non-assessable common shares, no par value, of the Company for an aggregate purchase price of One Million Two Hundred Eighty-Four Thousand Three Hundred Seventy-Five U.S. Dollars (US$1,284,375) (computed on the basis of US$5.1375 per share). (Hereinafter, (i) said common shares, together with any other equity securities which may be issued by the Company in substitution therefor, are referred to as the "Common Shares":, (ii) the Common Shares purchasable hereunder are referred to as the "Warrant Shares", (iii) the aggregate purchase price payable hereunder for the Warrant Shares is referred to as the "Aggregate Warrant Price", (iv) the price payable hereunder for each of the Warrant Shares, as adjusted in the manner set forth in Section 3, is referred to as the "Per Share Warrant Price" and (v) this Warrant and all warrants hereafter issued in exchange or substitution for this Warrant are referred to as the "Warrants") The Aggregate Warrant Price is not subject to adjustment. The Per Share Warrant Price and the number of Warrant Shares are subject to adjustment as hereinafter provided. 1. EXERCISE OF WARRANT. This Warrant may be exercised, in whole at any time or in part from time to time (such partial exercises to be in amounts of not less than 1,000 Warrant Shares), on and after the date set forth on the signature page, but prior to 5:00 p.m. on October 28, 2001, by the Holder of this Warrant by the surrender of this Warrant (with the subscription form at the end hereof duly executed) at the principal office of the Company in Columbia, MD together with proper payment of the Aggregate Warrant Price applicable on such date, or the proportionate part thereof if this Warrant is exercised in part. Payment for Warrant Shares shall be made by (i) check payable to the order of the Company, (ii) wire transfer to an account designated by and in the name of the Company, (iii) by delivery to the Company of debt securities for which it is the issuer and bound to make payment in the stated principal amount, where the principal amount on such debt security delivered to the Company for retirement is equal to the Aggregate Warrant Price; or (iv) by any combination of the methods set forth in (i) through (iii), above. If this Warrant is exercised in part, this Warrant must be exercised for a number of whole Warrant Shares, and the Holder is entitled to receive a new Warrant covering the number of Warrant - 1 - Shares in respect of which this Warrant has not been exercised and setting forth the proportionate part of the Aggregate Warrant Price applicable to such Warrant Shares. Upon such surrender of this Warrant, the Company will issue a certificate or certificates in the name of the Holder for the largest number of whole Warrant Shares to which the Holder shall be entitled and, if this Warrant is exercised in whole, in lieu of any fractional Warrant Share to which the Holder shall be entitled, cash equal to the fair value of such fractional share (determined in such reasonable manner as the Board of Directors of the Company shall determine). 2. RESERVATION OF WARRANT SHARES. The Company agrees that, prior to the expiration of this Warrant, the Company will at all times have authorized and reserve, and will keep available, solely for issuance or delivery upon the exercise of this Warrant, the Warrant Shares free and clear of all restrictions on sale or transfer (except as may arise under applicable securities laws) and free and clear of all preemptive rights. 3. PROTECTION AGAINST DILUTION. (a) If, at any time or from time to time after the date of this Warrant, the Company shall (i) issue to the holders of the Common Shares any Common Shares by way of a stock dividend; (ii) subdivide its outstanding Common Shares into a greater number of shares; (iii) combine its outstanding number of Common Shares into a smaller number (i.e., a reverse stock split); or (iv) issue by reclassification of its Common Shares any shares of capital stock of the Company then, and in each such case, the Per Share Warrant Price in effect immediately prior to the date of such action shall be adjusted, or further adjusted, to a price (to the nearest cent) determined by dividing (x) an amount equal to the number of Common Shares outstanding immediately prior to such issuance multiplied by the Per Share Warrant Price in effect immediately prior to such issuance by (y) the total number of Common Shares outstanding immediately after such issuance. Upon each adjustment in the Per Share Warrant Price resulting from a stock split or stock dividend, the number of Warrant Shares shall be adjusted by dividing the Aggregate Warrant Price by the Per Share Warrant Price in effect immediately after such adjustment. Notice of each such adjustment and each such readjustment shall be forthwith mailed to the Holder. (b) If the Company shall be consolidated with or merged into another corporation, or shall sell all or substantially all of its assets as part of a reorganization to which the Company is a party within the meaning of the Internal Revenue Code of 1986, as presently in effect, or shall issue a security convertible into its Common Shares as a dividend on its Common Shares, each Warrant Share shall be replaced for the purposes hereof by the securities or properties issuable or distributed in respect of one Common Share upon such consolidation, merger, sale, reclassification or reorganization, and adequate provisions to that effect shall be made at the time thereof. Notice of such consolidation, merger, sale, reclassification or reorganization, and of said provisions so proposed to be made, shall be mailed to the Holder not less than 15 days prior to such event. (c) If the Board of Directors of the Company shall declare any dividend or other distribution in cash with respect to the Common Shares, other than out of surplus, the Company shall mail notice thereof to the Holder not less than 15 - 2 - days prior to the record date fixed for determining shareholders entitled to participate in such dividend or other distribution. (d) If , during the term of this Warrant, the Company shall issue or sell its Common Shares for a consideration per share less than the Per Share Warrant Price immediately prior to the time of such issue or sale, then forthwith upon such issue or sale, the Per Share Warrant Price in effect immediately prior to such issue or sale shall be reduced to the lower of the prices (calculated to the nearest cent) determined as follows: (1) by dividing (A) an amount equal to the sum of (i) the number of shares of Common Stock outstanding immediately prior to such issue or sale multiplied by the then-existing Per Share Warrant Price, and (ii) the consideration, if any, received by the Company upon such issue or sale, by (B) the total number of Common Shares outstanding immediately after such issue or sale; and (2) by multiplying the Per Share Warrant Price in effect immediately prior to the time of such issue or sale by a fraction, the numerator of which shall be (A) the sum of (i) the number of Common Shares outstanding immediately prior to such issue or sale multiplied by the market price immediately prior to such issue or sale; and (ii) the consideration received by the Company upon such sale, divided by (B) the total number of Common Shares outstanding immediately after such issue or sale, and the denominator of which shall be the market price immediately prior to such issue or sale. 4. FULLY PAID SHARES; TAXES. The Company agrees that the Common Shares represented by each and every certificate for Warrant Shares delivered on the exercise of this Warrant shall, at the time of such delivery, be validly issued and outstanding, fully paid and non-assessable. The Company further covenants and agrees that it will pay, when due and payable, any and all Federal and state stamp, original issue or similar taxes which may be payable in respect of the issue of any Warrant Share or certificate therefor. 5. TRANSFERABILITY. This Warrant and the Warrant Shares shall not be sold, transferred, assigned or hypothecated by the Holder except (i) pursuant to an effective registration statement under the Securities Act of 1933, as amended, and qualification for sale under all other applicable state and provincial securities rules and regulations [collectively the "Securities Acts"]; or (ii) in full compliance with all requirements necessary to establish an exemption from the registration requirements of the Securities Acts. In order to properly establish compliance with (ii), above, the Company shall be entitled to request and receive in advance of authorizing any sale, transfer, assignment or hypothecation of this Warrant or any of the Warrant Shares: (x) appropriate transferor and transferee representation letters supporting a claimed exemption from registration requirements of the Securities Acts; (y) an opinion of counsel for the holder of the Warrant and/or Warrant Shares reasonably satisfactory to the Company that the proposed transfer from the holder of the Warrant and/or Warrant Shares to the transferee is exempt from the registration requirements of the Securities Act; and (z) such other documentation, representations and - 3 - filings as may be reasonably required by counsel in order to issue the foregoing opinion. The Company may treat the registered holder of this Warrant as it appears on the Company's books at any time as the Holder for all purposes. 6. LOSS, ETC. OF WARRANT. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and of indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed, and upon surrender and cancellation of this Warrant, if mutilated, and upon reimbursement of the Company's reasonable incidental expenses, the Company shall execute and deliver to the Holder a new Warrant of like date, tenor and denomination. 7. WARRANT HOLDER NOT SHAREHOLDER. Except as otherwise provided herein, this Warrant does not confer upon the Holder any right to vote or to consent or to receive notice as a shareholder of the Company, as such, in respect of any matters whatsoever, or any other rights or liabilities as a shareholder, prior to the exercise hereof. 8. COMMUNICATION. No notice or other communication under this Warrant shall be effective unless, but any notice or other communication shall be effective and shall be deemed to have been given if, the same is in writing and is mailed by first-class mail, postage prepaid, addressed to: (a) the Company at North American Vaccine, Inc., 10150 Old Columbia Road, Columbia, MD 21046 Attention: Vice President-Finance, or such other address as the Company has designated in writing to the Holder, or (b) the Holder at BioChem Pharma Inc., 275 Armand Frappier Boulevard, Laval, H7V 4A7 Quebec, Canada Attention: Executive Vice President-Investments & Subsidiaries, or such other address as the Holder has designated in writing to the Company. 9. HEADINGS. The headings of this Warrant have been inserted as a matter of convenience and shall not affect the construction hereof. 10. APPLICABLE LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of New York. - 4 - IN WITNESS WHEREOF, NORTH AMERICAN VACCINE, INC. has caused this Warrant to be signed by its Vice President-Finance and its corporate seal to be hereunto affixed and attested by its Assistant Secretary this 28th day of October, 1999. ATTEST: NORTH AMERICAN VACCINE, INC. /s/ Russell P. Wilson By: /s/ Lawrence J. Hineline - --------------------- ------------------------ Russell P. Wilson Lawrence J. Hineline Assistant Secretary Vice President-Finance [Corporate Seal] - 5 - EX-10.47 4 November 1, 1999 North American Vaccine, Inc. 10150 Old Columbia Road Columbia, Maryland 21046 Attention: Dr. Randal Chase Chief Executive Officer and President Re: Revolving Credit Facility ------------------------- Ladies/Gentlemen: BANK OF AMERICA, N.A. ("LENDER") is pleased to make available to NORTH AMERICAN VACCINE, INC., a Canadian corporation ("BORROWER"), a revolving credit facility on the terms and subject to the conditions set forth below. Terms not defined herein have the meanings assigned to them in EXHIBIT A hereto. 1. THE FACILITY. (a) THE COMMITMENT. Subject to the terms and conditions set forth herein, Lender agrees to make available to Borrower until the Maturity Date a revolving line of credit providing for loans ("LOANS") in an aggregate principal amount not exceeding at any time US$30,000,000 (the "COMMITMENT"); PROVIDED, HOWEVER, Lender shall not be obligated to advance Loans in an aggregate principal amount exceeding $5,000,000 until such time as Lender (I) shall have received written evidence satisfactory to Lender of the approval of the finance committee of Guarantor to permit Loans in an aggregate amount exceeding $5,000,000 (but in no event greater than the Commitment), (II) shall have been granted a first priority security interest in the collateral set forth in SCHEDULE 3(K) attached hereto and (III) shall otherwise comply with the terms and conditions set forth in PARAGRAPH 2(B) hereof. Subject to the foregoing limits, Borrower may borrow, repay and reborrow Loans until the Maturity Date. (b) BORROWINGS, CONVERSIONS, CONTINUATIONS. Borrower may request that Loans be (i) made as or converted to Base Rate Loans by irrevocable notice to be received by Lender not later than 11 a.m. on the Business Day of the borrowing or conversion, or (ii) made or continued as, or converted to, Offshore Rate Loans by irrevocable notice to be received by Lender not later than 11 a.m. three Business Days prior to the Business Day of the borrowing, continuation or conversion. If Borrower fails to give a notice of conversion or continuation prior to the end of any Interest Period in respect of any Offshore Rate Loan, Borrower shall be deemed to have requested that such Loan be converted to a Base Rate Loan on the last day of the applicable Interest Period. Each Offshore Rate Loan shall be in a minimum principal amount of $1,000,000 or a multiple of $500,000 in excess thereof. Each Base Rate Loan shall be in a minimum principal amount of $500,000 or a multiple of $100,000 in excess thereof. There shall not be more than five (5) different Interest Periods in effect at any time. Notwithstanding the foregoing, except for the initial Loan, Borrower shall not be permitted to borrow Loans in an aggregate principal amount in excess of $2,500,000 during any consecutive fourteen (14) day period (measured on a rolling fourteen (14) day basis) (unless otherwise consented to in writing by Guarantor) and only for the purposes set forth in PARAGRAPH 3(F) hereof. (c) INTEREST. At the option of Borrower, Loans shall bear interest at a rate per annum equal to (i) the Offshore Rate PLUS .625%; or (ii) the Base Rate. Interest on Base Rate Loans when the Base Rate is determined by Lender's prime rate shall be calculated on the basis of a year of 365 or 366 days and actual days elapsed. All other interest hereunder shall be calculated on the basis of a year of 360 days and actual days elapsed. Borrower promises to pay interest (i) for each Offshore Rate Loan, on the last day of the applicable Interest Period, and, if the Interest Period is longer than one month, on the respective dates that fall every month after the beginning of the Interest Period; (ii) for Base Rate Loans, on the last Business Day of each calendar month; and (iii) for all Loans, on the Maturity Date. If the time for any payment is extended by operation of law or otherwise, interest shall continue to accrue for such extended period. After the date any principal amount of any Loan is due and payable (whether on the maturity date, upon acceleration or otherwise), or after any other monetary obligation hereunder shall have become due and payable, Borrower shall pay, but only to the extent permitted by law, interest (after as well as before judgment) on such amounts at a rate per annum equal to the Base Rate plus 2%. Such interest shall be payable on demand. In no case shall interest hereunder exceed the amount that Lender may charge or collect under applicable law. -2- (d) EVIDENCE OF LOANS. The Loans and all payments thereon shall be evidenced by Lender's loan accounts and records; PROVIDED, HOWEVER, that upon the request of Lender, the Loans may be evidenced by a grid promissory note in the form of EXHIBIT B hereto, instead of or in addition to such loan accounts and records. Such loan accounts, records and promissory note shall be conclusive absent manifest error of the amount of the Loans and payments thereon. Any failure to record any Loan or payment thereon or any error in doing so shall not limit or otherwise affect the obligation of Borrower to pay any amount owing with respect to the Loans. (e) FEES. Borrower promises to pay the following fees in accordance with the terms hereof: (i) STRUCTURING FEE. Borrower shall pay to Lender a fee (the "STRUCTURING FEE") in accordance with the terms and conditions of that certain letter agreement dated as of November 1, 1999 among Borrower, Guarantor and Lender. The Structuring Fee shall be due and payable to Lender upon the execution and delivery of this Agreement and shall be non-refundable once paid. (ii) COMMITMENT FEE. Borrower shall pay to Lender a commitment fee (the "COMMITMENT FEE") of .25% per annum on the daily unused portion of the Commitment, payable in arrears on the last Business Day of each calendar month and on the Maturity Date, and calculated on the basis on a year of 360 days and actual days elapsed; provided that Borrower shall not be obligated to pay the Commitment Fee with respect to the portion of the Commitment that is not available (in accordance with the terms of PARAGRAPH 1(A) hereof) for borrowing by Borrower. (f) REPAYMENT. Borrower promises to pay all Loans then outstanding on the Maturity Date, unless earlier accelerated in accordance with the terms of this Agreement. Borrower shall make all payments required hereunder not later than 1 p.m. on the date of payment in same day funds in United States Dollars at the office of Lender located at 100 North Tryon Street, Charlotte, North Carolina 28255 or such other address as Lender may from time to time designate in writing. -3- All payments by Borrower to Lender hereunder shall be made to Lender in full without set-off or counterclaim and free and clear of and exempt from, and without deduction or withholding for or on account of, any present or future taxes, levies, imposts, duties or charges of whatsoever nature imposed by any government or any political subdivision or taxing authority thereof. If any taxes are required to be withheld or deducted from any amount payable under this Agreement or the Note (if any), then the amount payable under this Agreement or such Note shall be increased to the amount which, after deduction from such increased amount of all taxes required to be withheld or deducted therefrom, will yield to Lender the amount stated to be payable under this Agreement or such Note. Borrower shall reimburse Lender for any taxes imposed on or withheld from such payments and paid by Lender (other than taxes imposed on Lender's income, and franchise taxes imposed on Lender, by the jurisdiction under the laws of which Lender is organized or any political subdivision thereof) not later than 10 days after written demand by Lender, and Borrower shall be responsible for any interest, penalties and expenses incurred by Lender in connection with the collection of such amounts. (g) PREPAYMENTS. Borrower may, upon three Business Days' notice, in the case of Offshore Rate Loans, and upon same-day notice in the case of Base Rate Loans, prepay Loans on any Business Day; PROVIDED that Borrower pays all Breakage Costs (if any) associated with such prepayment on the date of such prepayment. Prepayments of Offshore Rate Loans must be accompanied by a payment of interest on the amount so prepaid. Prepayments must be in a principal amount of at least $500,000 or a multiple of $100,000 in excess thereof. (h) COMMITMENT REDUCTIONS. Borrower may, upon five Business Days' notice, reduce or cancel the undrawn portion of the Commitment, PROVIDED, that the amount of such reduction is not less than $500,000 or a whole multiple thereof. 2. (a) CONDITIONS PRECEDENT TO INITIAL LOAN. As a condition precedent to the initial Loan hereunder (which such amount shall not exceed US$5,000,000), Lender must receive the following from or on behalf of Borrower and/or Guarantor in form satisfactory to Lender and Guarantor (provided that with respect to items delivered by Guarantor to Lender, such items need only be satisfactory to Lender in its discretion): (i) the enclosed duplicate of this Agreement duly executed and delivered on behalf of Borrower; (ii) (A) the Security Agreement and the IP Security Agreement, each duly executed and delivered on behalf of Borrower to Lender and (I) UCC financing statements executed on behalf of Borrower to -4- Lender for each appropriate jurisdiction as is necessary, in Lender's and Guarantor's discretion, to perfect its security interest in such collateral and/or (II) such patent/trademark/copyright filings executed on behalf of Borrower to be made with the United States Patent and Trademark Office as requested by Lender in order to perfect Lender's security interest in such collateral and (B) a security agreement and intellectual property security agreement executed and delivered on behalf of Borrower to Guarantor in consideration of Borrower's obligations under the Reimbursement Agreement and (I) UCC financing statements executed on behalf of Borrower to Guarantor for each appropriate jurisdiction as is necessary, in Guarantor's discretion, to perfect its security interest in such collateral and/or (II) such patent/trademark/copyright filings executed on behalf of Borrower to be made with the United States Patent and Trademark Office as requested by Guarantor in order to perfect Guarantor's security interest in such collateral; (iii) legal documentation deemed necessary or appropriate by Lender and Guarantor under Canadian law to pledge Borrower's interest with respect to the collateral described in the Security Agreement and the IP Security Agreement; (iv) the Guaranty duly executed and delivered on behalf of Guarantor; (v) the Reimbursement Agreement duly executed and delivered on behalf of Borrower; (vi) a favorable legal opinion of (A) U.S. counsel(s) to Borrower acceptable to Lender and Guarantor regarding, but not limited to, the due authorization, execution, delivery and enforceability of this Agreement and the perfection of the security interests granted to Lender by the Security Agreement and the IP Security Agreement and (B) Canadian counsel to Borrower acceptable to Lender and Guarantor regarding, but not limited to, the due authorization, execution, delivery and enforceability of the Canadian collateral documents and the perfection of the security interests granted thereunder; (vii) the execution and delivery of that certain letter agreement dated as of November 1, 1999 among Borrower, Guarantor and Lender and the payment of the fees referenced therein; -5- (viii) the execution and delivery of that certain letter agreement between Borrower and Guarantor regarding the payment by Borrower of certain break-up fees; (ix) a copy of (A) the articles of incorporation (or other charter documents) and bylaws of Borrower certified by a secretary or assistant secretary of Borrower to be true and correct as of the Closing Date and (B) the articles of incorporation (or other charter documents) and bylaws of Guarantor certified by a secretary or assistant secretary of Guarantor to be true and correct as of the Closing Date; (x) a certified borrowing resolution or other evidence of Borrower's authority to borrow hereunder; (xi) a certified resolution or other evidence of Guarantor's\ authority to deliver the Guaranty; (xii) a certificate of incumbency for each of Borrower and Guarantor; (xiii) a certificate of good standing, existence or its equivalent with respect to each of Borrower and Guarantor certified as of a recent date by the appropriate governmental authorities of the state or other jurisdiction of incorporation and each other jurisdiction in which the failure to so qualify and be in good standing would have a Material Adverse Effect; (xiv) if requested by Lender, a promissory note as contemplated in PARAGRAPH 1(D) above; (xv) receipt of (A) audited consolidated balance sheet and statements of earnings and cash flow of Borrower and its Subsidiaries as of December 31, 1998 and (B) unaudited consolidated balance sheet and statements of earnings and cash flow of Borrower and its Subsidiaries for the fiscal quarters ending March 31, 1999 and June 30, 1999, respectively; (xvi) receipt of copies of (A) the Royal Bank of Canada Credit Facility certified by an officer of Borrower to be a true and accurate copy and (B) each other credit agreement of Borrower and/or its Subsidiaries evidencing liabilities, in each case, of Borrower and/or its Subsidiaries in excess of $1,000,000; and -6- (xvii) such other documents as Lender or Guarantor may reasonably request. (b) CONDITIONS PRECEDENT TO SECOND BORROWING. As a condition precedent to the second borrowing under this Agreement (which such second borrowing shall not exceed U.S. $25,000,000 and together with the initial Loan shall not exceed in the aggregate U.S. $30,000,000), Lender must receive the following from or on behalf of Borrower and/or Guarantor in form satisfactory to Lender and Guarantor (provided that with respect to items delivered by Guarantor to Lender, such items need only be satisfactory to Lender in its discretion): (i) written evidence satisfactory to Lender of the approval of the finance committee of Guarantor to permit Loans in an aggregate amount exceeding $5,000,000; (ii) (A) Borrower shall have granted to Lender a first priority security interest in additional unencumbered collateral existing at such time which is reasonably satisfactory to Lender and Guarantor and Borrower shall have executed and delivered (I) all necessary documents to be filed with the U.S. Patent and Trademark Office and other appropriate filing locations and (II) all UCC financing statements for each appropriate jurisdiction as deemed necessary by Lender and Guarantor, in Lender's and Guarantor's discretion, to Lender or its designee for filing with the appropriate offices and (B) Borrower shall have granted to Guarantor a security interest in the additional collateral referred to in subsection (A) above and Borrower shall have executed and delivered (I) all necessary documents to be filed with the U.S. Patent and Trademark Office and other appropriate filing locations and (II) all UCC financing statements for each appropriate jurisdiction as deemed necessary by Lender and Guarantor, in Lender's and Guarantor's discretion, to Guarantor or its designee for filing with the appropriate offices; and (iii) a legal opinion of counsel(s) to Borrower acceptable to Lender and Guarantor regarding, but not limited to, the due authorization, execution, delivery and enforceability of such documents related to the additional collateral; (iv) an officer's certificate of Borrower stating that all representations and warranties set forth in PARAGRAPH 3 continue to be true and correct in all material respects as of the date of such borrowing and that no Default or Event of Default shall have occurred and be continuing on the date of such borrowing; -7- (v) the North American Vaccine Acquisition Agreement shall have been executed and delivered on or before November 16, 1999; (vi) no Material Adverse Change shall have occurred since the Closing Date; and (vii) such other documents, filings or opinions as Lender or Guarantor may reasonably request. (c) CONDITIONS TO EACH BORROWING, CONTINUATION AND CONVERSION. As a condition precedent to each borrowing (including the initial borrowing), conversion and continuation of any Loan: (i) Borrower must furnish Lender and Guarantor with, as appropriate, a notice of borrowing, conversion or continuation; (ii) each representation and warranty set forth in PARAGRAPH 3 below shall be true and correct in all material respects as if made on the date of such borrowing, continuation or conversion; and (iii) no Default or Event of Default shall have occurred and be continuing on the date of such borrowing, continuation or conversion. Each notice of borrowing and notice of conversion or continuation shall be deemed a representation and warranty by Borrower that the conditions referred to in clauses (ii) and (iii) above have been met. 3. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to the Lender that: (a) EXISTENCE AND QUALIFICATION; POWER; COMPLIANCE WITH LAWS. It is a corporation duly organized or formed, validly existing and in good standing under the laws of Canada, has the power and authority and the legal right to own and operate its properties, to lease the properties it operates and to conduct its business, is duly qualified and in good standing under the laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification, and is in compliance with all laws except to the extent that noncompliance does not have a Material Adverse Effect. (b) POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The execution, delivery and performance of this Agreement and the other Loan Documents by Borrower are within its powers and have been duly authorized by all -8- necessary action, and this Agreement is and the other Loan Documents, when executed, will be, legal, valid and binding obligations of Borrower, enforceable in accordance with their respective terms, except as the enforceability thereof may be limited by applicable Debtor Relief Laws and general principles of equity. The execution, delivery and performance of this Agreement and the other Loan Documents are not in contravention of law or of the terms of Borrower's organic documents and will not result in the breach of or constitute a default under, or result in the creation of a lien under any indenture, agreement or undertaking to which Borrower is a party or by which it or its property may be bound or affected. (c) FINANCIAL STATEMENTS; NO MATERIAL ADVERSE EFFECT. (I) The audited consolidated balance sheet and statements of earnings and cash flow of Borrower and its Subsidiaries for the fiscal year ended as of December 31, 1998 have heretofore been furnished to Lender and filed with Borrower's Form 10-K for the fiscal year then ended. The unaudited consolidated balance sheet and statements of earnings and cash flows for the fiscal quarters ending March 31, 1999 and June 30, 1999, respectively, have heretofore been furnished to Lender and filed with Borrower's Form 10-Q for such quarters. The financial statements for Borrower's fiscal quarter ending June 30, 1999 (excluding any amendments, restatements or subsequent filings with respect thereto) present fairly the consolidated financial condition of Borrower and its Subsidiaries as of June 30, 1999, and since June 30, 1999 there has been no event or circumstance that has a Material Adverse Effect, except as has been publicly disclosed by Borrower prior to the date hereof or except as set forth in Schedule 3(c). All of the foregoing historical financial statements have been prepared in accordance with generally accepted accounting principles consistently applied except as disclosed in the notes thereto. (II) On and as of the Closing Date, the Projections delivered to the Lender have been prepared in good faith and are based on reasonable assumptions, and there are no statements, calculations or conclusions in the Projections which are based upon or include information known to Borrower to be misleading in any material respect or which fail to take into account material information known to Borrower regarding the matters reported therein. On the Closing Date, Borrower believes that the Projections are reasonable. (d) NO MATERIAL LITIGATION. Except as set forth in SCHEDULE 3(D) hereof, no litigation or governmental proceeding is pending or, to the best knowledge of Borrower, threatened by or against Borrower which, if adversely determined, has a Material Adverse Effect. (e) NO DEFAULT. No Default or Event of Default has occurred and is continuing. -9- (f) USE OF PROCEEDS. The proceeds of the Loans will be used solely for working capital purposes of Borrower (and in any event in accordance with the restrictions set forth in Section 4(c) hereof) and not for any other purposes except as set forth in SCHEDULE 3(F) hereto. (g) ERISA. Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code, and other Federal or state law, including all requirements under the Code or ERISA for filing reports, and benefits have been paid in accordance with the provisions of such Plan except where the failure to be in compliance in all material respects does not have a Material Adverse Effect. (h) ENVIRONMENTAL MATTERS. All facilities owned or leased by Borrower or its Subsidiaries have been and continue to be in material compliance with all material environmental laws and regulations. (i) YEAR 2000. Borrower has (i) initiated a review and assessment of all areas within its and each of its Subsidiaries' business and operations (including those affected by customers and vendors) that could be adversely affected by the "Year 2000 Problem" (that is, the risk that computer applications and devices containing imbedded computer chips used by Borrower or any of its Subsidiaries (or their respective customers and vendors) may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 1999), (ii) developed a plan and timeline for addressing the Year 2000 Problem on a timely basis, and (iii) to date, implemented that plan in accordance with that timetable. Based on the foregoing, Borrower believes that all computer applications and devices containing imbedded computer chips (including those of its and its Subsidiaries' customers and vendors) that are material to its or any of its Subsidiaries' business and operations are reasonably expected on a timely basis to be able to perform properly date-sensitive functions for all dates before and after January 1, 2000 (that is, be "Year 2000 compliant"), except to the extent that a failure to do so does not have a Material Adverse Effect. (j) FULL DISCLOSURE. No written statement made by Borrower to Lender in connection with this Agreement, or in connection with any Loan, contains any untrue statement of a material fact or omits a material fact necessary to make the statement made not misleading. (k) INTELLECTUAL PROPERTY. Borrower owns, or has the legal right to use, all trademarks, tradenames, copyrights, technology, know-how and processes (the "INTELLECTUAL PROPERTY") necessary for it to conduct its business as currently conducted, except for such Intellectual Property for which the failure to own or have the legal right to use could not -10- have a Material Adverse Effect. Set forth on SCHEDULE 3(K) is a list of all Intellectual Property that Borrower is pledging as collateral on the Closing Date. Except as provided on SCHEDULE 3(K), no claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does Borrower have knowledge of any such claim, and the use of such Intellectual Property by Borrower does not infringe on the rights of any Person, except for such claims and infringements that, in the aggregate, could not have a Material Adverse Effect. (l) NO OTHER LIENS. Other than as disclosed in SCHEDULE 3(K) or otherwise disclosed in writing to Lender and Guarantor, with respect to the "Collateral" (as defined in the Security Agreement) and the "Intellectual Property Collateral" (as defined in the IP Security Agreement), Borrower has not assigned rights of payment in or otherwise granted a security interest with respect to such rights or collateral to any other Person. 4. COVENANTS. So long as principal of and interest on any Loan or any other amount payable hereunder or under any other Loan Document remains unpaid or unsatisfied and the Commitment has not been terminated: (a) INFORMATION. Borrower shall deliver to Lender: (i) (A) as soon as available and in any event within 90 days after the end of each fiscal year of Borrower a consolidated balance sheet of Borrower and its Subsidiaries as of the end of such fiscal year and the related consolidated statements of income and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all prepared in accordance with generally accepted accounting principles applied on a consistent basis and certified by independent public accountants of nationally recognized standing and (B) as soon as available and in any event within 30 days after the end of each fiscal year of Borrower a preliminary consolidated balance sheet of Borrower and its Subsidiaries as of the end of such fiscal year and the related preliminary consolidated statements of income and cash flows for such fiscal year, setting forth in each case in comparative form figures for (I) Borrower's previous fiscal year and (II) the projected budget for the fiscal year then ended, all in reasonable detail and duly certified (subject to normal year-end adjustments) by the chief financial officer of Borrower as having been prepared in accordance with generally accepted accounting principles applied on a consistent basis, and, in addition to the preliminary statements required to be delivered pursuant to (B) above, Borrower shall provide to Lender any changes or -11- modifications (if any) to such preliminary financial statements every two weeks after the initial delivery of such preliminary statements; (ii) (A) as soon as available and in any event within 30 days after the end of each of the first three quarters of each fiscal year of Borrower, a consolidated balance sheet of Borrower and its Subsidiaries as of the end of such quarter and the related consolidated statements of income and cash flows for such quarter and for the portion of Borrower's fiscal year ended at the end of such quarter, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of Borrower's previous fiscal year, all in reasonable detail and duly certified (subject to normal year-end adjustments) by the chief financial officer of Borrower as having been prepared in accordance with generally accepted accounting principles applied on a consistent basis and (B) as soon as available and in any event within 15 days after the end of each of the first three fiscal quarters of each fiscal year of Borrower a preliminary consolidated balance sheet of Borrower and its Subsidiaries as of the end of such quarter and related preliminary consolidated statements of income and cash flow for such quarter then ended; (iii) as soon as available and in any event within 20 days after the end of each month (except the final month of its fiscal year), a copy of the unaudited consolidated balance sheet of Borrower and its Subsidiaries and the related consolidated statements of income and cash flows for such month, setting forth in each case in comparative form the figures for (A) the corresponding month of Borrower's previous fiscal year and (B) the projected budget for the month then ended, all in reasonable detail and duly certified (subject to normal year-end adjustments) by the chief financial officer of Borrower as having been prepared in accordance with generally accepted accounting principles applied on a consistent basis; (iv) within 20 days after the end of each month (except the final month of its fiscal year), a certificate of Borrower certified by the chief financial officer of Borrower that (A) each of the representations and warranties set forth in PARAGRAPH 3 hereof are true and accurate as of the end of such fiscal month and (B) no Default or Event of Default shall have occurred and be continuing as of the end of such fiscal month; (v) promptly upon transmission or receipt thereof, (A) complete copies of any filings and registrations with, and reports (special or otherwise) to or from, the Securities and -12- Exchange Commission or any successor agency, (B) proxy statements, notices and reports that Borrower sends to its shareholders and (C) copies of all press releases issued by Borrower; (v) promptly upon Borrower's obtaining knowledge of any Default or Event of Default, a certificate of the chief financial officer of Borrower setting forth the details thereof and any action that Borrower is taking or proposes to take with respect thereto; and (vi) from time to time such additional information regarding the financial condition or business of Borrower and its Subsidiaries as Lender may reasonably request. (b) OTHER AFFIRMATIVE COVENANTS. Borrower shall, and shall cause each of its Subsidiaries to: (i) preserve and maintain all of its rights, privileges, and franchises necessary or desirable in the normal conduct of its business; (ii) comply with the requirements of all applicable laws, rules, regulations, and orders of governmental authorities the violation of which could result in a Material Adverse Effect; (iii) pay and discharge when due all taxes, assessments, and governmental charges or levies imposed on it or on its income or profits or any of its property, except for any such tax, assessment, charge, or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained; (iv) maintain all of its properties owned or used in its business in good working order and condition ordinary wear and tear excepted; (v) permit representatives of Lender, during normal business hours and upon reasonable notice, to examine, copy, and make extracts from its books and records, to inspect its properties, and to discuss its business and affairs with its officers, directors, and accountants; (vi) cause (A) all of its Intellectual Property set forth on SCHEDULE 3(K) and (B) all of its receivables and other collateral subject to the Security Agreement to be subject at all times to first priority, perfected Liens in favor of Lender to secure the obligations under this Agreement pursuant to the terms and conditions of the IP Security -13- Agreement and the Security Agreement. Borrower shall promptly notify Lender of the acquisition of any Intellectual Property subsequent to the Closing Date; and (vii) maintain insurance in such amounts, with such deductibles, and against such risks as is customary for similarly situated businesses. (c) NEGATIVE COVENANTS. Borrower shall not, nor shall it permit any of its Subsidiaries to: (i) INDEBTEDNESS. Create, incur, assume or suffer to exist any Indebtedness, EXCEPT: (A) Indebtedness under the Loan Documents and (B) Indebtedness outstanding on the date hereof and listed on SCHEDULE 4(C)(I); provided that from and after the date of this Agreement, in no event shall Borrower or its Subsidiaries be permitted to make any additional borrowings under the Royal Bank of Canada Credit Facility (not to include conversions or continuations of existing borrowed amounts). (ii) LIENS AND NEGATIVE PLEDGES. Incur, assume or suffer to exist, any Lien or Negative Pledge upon any of its property, assets or revenues, whether now owned or hereafter acquired, EXCEPT Liens and Negative Pledges existing on the date hereof and listed on SCHEDULE 4(C)(II). (iii) FUNDAMENTAL CHANGES. Except as provided for or contemplated under the North America Vaccine Acquisition Agreement, merge or consolidate with or into any Person or enter into any other agreement contemplating a merger, consolidation or disposition of all or substantially all of its assets with any other Person (other than Guarantor or any Affiliate of Guarantor) or liquidate, wind-up or dissolve itself, or permit or suffer any liquidation or dissolution or use the proceeds of any Loan in connection with any merger or acquisition of assets. (iv) DISPOSITIONS. Make any Dispositions, other than (A) Dispositions of inventory and (B) other than Dispositions in the ordinary course of Borrower's business and in amounts not to exceed $25,000 for any single Disposition. (v) INVESTMENTS. Make any Investments. (vi) LEASE OBLIGATIONS. Create or suffer to exist any obligations for the payment of rent for any property under lease or agreement to lease, EXCEPT leases in existence on the date hereof and any renewal, extension or refinancing thereof -14- provided that the rental payments or financed amount with respect to such lease does not increase. (vii) RESTRICTED PAYMENTS. Make any Restricted Payments or otherwise prepay any obligations or liabilities (whether in the ordinary course or otherwise). (viii) ERISA. At any time engage in a transaction which could be subject to Sections 4069 or 4212(c) of ERISA, or permit any Pension Plan to (a) engage in any non-exempt "prohibited transaction" (as defined in Section 4975 of the Code); (b) fail to comply with ERISA or any other applicable Laws; or (c) incur any material "accumulated funding deficiency" (as defined in Section 302 of ERISA), which, with respect to each event listed above, has a Material Adverse Effect. (ix) CHANGE IN NATURE OF BUSINESS. Make any change in the nature of the business of Borrower or its Subsidiaries as conducted and as proposed to be conducted as of the date hereof. (x) TRANSACTIONS WITH AFFILIATES. Enter into any transaction of any kind with any Affiliate of Borrower other than arm's-length transactions with Affiliates that are otherwise permitted hereunder. (xi) CAPITAL EXPENDITURES. Except as set forth in SCHEDULE 3(f) hereto, mmake, or become legally obligated to make, any capital expenditure in excess of $100,000 from the Closing Date to and including the Maturity Date. (xii) CHANGE IN AUDITORS. Change the certified public accountants auditing the books of Borrower without the consent of Lender. 5. EVENTS OF DEFAULT. The following are "EVENTS OF DEFAULT" hereunder: (a) Borrower fails to pay any principal of any Loan as and on the date when due; or (b) Borrower fails to pay any interest on any Loan, or any commitment fees due hereunder, or any portion thereof, within three days after the date when due; or Borrower fails to pay any other fees or amount payable to Lender under any Loan Document, or any portion thereof, within five days after the date due; or (c) Any default occurs in the observance or performance of any agreement contained in PARAGRAPH 4(a) or 4(c) hereof; or (d) Borrower fails to perform or observe any other covenant or agreement (not specified above) contained in any Loan Document on its part to be performed or observed and such failure continues for 10 days; or -15- (e) Any representation or warranty in any Loan Document or in any certificate, agreement, instrument or other document made or delivered by Borrower pursuant to or in connection with any Loan Document proves to have been incorrect when made or deemed made; or (f) Borrower (i) defaults in any payment when due of principal of or interest on any indebtedness (other than indebtedness hereunder), or (ii) defaults in the observance or performance of any other agreement or condition relating to any indebtedness (other than indebtedness hereunder) or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur, the effect of which default or other event is to cause, or to permit the holder or holders of such indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, indebtedness having an aggregate principal amount in excess of $100,000 to be demanded or become due (automatically or otherwise) prior to its stated maturity, or any guaranty obligation in such amount to become payable, or Borrower is unable or admits in writing its inability to pay its debts as they mature; or (g) Any Loan Document, at any time after its execution and delivery and for any reason other than the agreement of Lender or satisfaction in full of all the indebtedness hereunder, ceases to be in full force and effect or to give Lender the Liens, rights, powers and privileges purported to be created thereby, or any Loan Document is declared by a court of competent jurisdiction to be null and void, invalid or unenforceable in any respect; or Borrower denies that it has any or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind any Loan Document; or (h) The Guaranty or any provision thereof shall cease to be in full force and effect or Guarantor or any Person acting by or on behalf of Guarantor shall deny or disaffirm Guarantor's obligations under the Guaranty, or Guarantor shall otherwise default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to the Guaranty, including without limitation the occurrence of any Guaranty Event of Default; or (i) A final judgment against Borrower is entered for the payment of money in excess of $100,000 and such judgment remains unsatisfied without procurement of a stay of execution within 10 calendar days after the date of entry of judgment; or -16- (j) Borrower or any of its Subsidiaries institutes or consents to the institution of any proceeding under Debtor Relief Laws, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of Borrower or such Subsidiary; or any proceeding under Debtor Relief Laws relating to Borrower or any Subsidiary or to all or any part of Borrower's or such Subsidiary's property is instituted without the consent of Borrower or such Subsidiary, or an order for relief is entered in any such proceeding; or (k) Any event occurs which has a Material Adverse Effect; or (l) An "Event of Default" (as such term is defined in the Royal Bank of Canada Credit Facility) occurs under the Royal Bank of Canada Credit Facility; or (m) The North American Vaccine Acquisition Agreement shall not be executed by the Borrower and Guarantor on or prior to November 16, 1999 or the North American Vaccine Acquisition shall be unwound, reversed or otherwise rescinded in whole or in any material part for any reason or the North American Vaccine Acquisition Agreement or any letter of intent associated therewith shall be terminated by any party thereto; or (n) An "Event of Default" (as such term is defined in (x) that certain Indenture dated as of May 7, 1996 between Borrower and Marine Midland Bank (the "MARINE MIDLAND INDENTURE"), or (y) that certain Indenture dated November 12, 1998, between Borrower and Bankers Trust Company (the "BT Indenture")) occurs under the Marine Midland Indenture or the BT Indenture; or (o) Any Change of Control. Upon the occurrence of an Event of Default, Lender may declare the Commitment to be terminated, whereupon the Commitment shall be terminated, and/or declare all sums outstanding hereunder and under the other Loan Documents to be immediately due and payable, together with all interest thereon, without notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor, or other notices or demands of any kind or character, all of which are hereby expressly waived; PROVIDED, HOWEVER, that upon the occurrence of any event specified in Paragraph 5(j) above, the Commitment shall automatically terminate, and all sums outstanding hereunder and under each other Loan Document shall become immediately due and payable, together with all interest thereon, without notice of default, presentment or demand -17- for payment, protest or notice of nonpayment or dishonor, or other notices or demands of any kind or character, all of which are hereby expressly waived. 6. MISCELLANEOUS. (a) All financial computations required under this Agreement shall be made, and all financial information required under this Agreement shall be prepared, in accordance with generally accepted accounting principles consistently applied. (b) All references herein and in the other Loan Documents to any time of day shall mean the local (standard or daylight, as in effect) time of Charlotte, North Carolina. (c) All Breakage Costs shall be for the account of Borrower. (d) If at any time Lender, in its sole discretion, determines that (i) deposits in the amount of any requested Offshore Rate Loan for any requested Interest Period are not available to Lender in the offshore dollar interbank market, or (ii) the Offshore Rate does not accurately reflect the funding cost to Lender of lending such Loans, Lender's obligation to make Offshore Rate Loans shall cease for the period during which such circumstance exists. (e) Borrower shall reimburse or compensate Lender, upon demand, for all costs incurred, losses suffered or payments made by Lender which are applied or reasonably allocated by Lender to the transactions contemplated herein (all as determined by Lender in its reasonable discretion) by reason of any and all future reserve, deposit, capital adequacy or similar requirements against (or against any class of or change in or in the amount of) assets, liabilities or commitments of, or extensions of credit by, Lender; and compliance by Lender with any directive, or requirements from any regulatory authority, whether or not having the force of law. (f) No amendment or waiver of any provision of this Agreement or of any other Loan Document and no consent by Lender to any departure therefrom by Borrower shall be effective unless such amendment, waiver or consent shall be in writing and signed by a duly authorized officer of Lender, and any such amendment, waiver or consent shall then be effective only for the period and on the conditions and for the specific instance specified in such writing. No failure or delay by Lender in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other rights, power or privilege. -18- (g) Except as otherwise expressly provided herein, notices and other communications to each party provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed or sent by telecopy or electronic mail to the address set forth on the signature page hereto or as otherwise provided in writing from time to time by such party. Any such notice or other communication sent by overnight courier service, mail or telecopy shall be effective on the earlier of actual receipt and (i) if sent by overnight courier service, the scheduled delivery date, (ii) if sent by mail, the fourth Business Day after deposit in the U.S. mail first class postage prepaid, and (iii) if sent by telecopy, when transmission in legible form is complete. All notices and other communications sent by the other means listed in the first sentence of this paragraph shall be effective upon receipt. Notwithstanding anything to the contrary contained herein, all notices (by whatever means) to Lender pursuant to PARAGRAPH 1(B) hereof shall be effective only upon receipt. (h) This Agreement shall inure to the benefit of the parties hereto and their respective successors and assigns, except that Borrower may not assign its rights and obligations hereunder. LENDER MAY AT ANY TIME (I) ASSIGN ALL OR ANY PART OF ITS RIGHTS AND OBLIGATIONS HEREUNDER TO ANY OTHER PERSON WITH THE CONSENT OF BORROWER, SUCH CONSENT NOT TO BE UNREASONABLY WITHHELD, PROVIDED BORROWER HEREBY SPECIFICALLY ACKNOWLEDGES AND AGREES THAT NO SUCH CONSENT SHALL BE REQUIRED IF THE ASSIGNMENT IS TO (A) AN AFFILIATE OF LENDER, (B) GUARANTOR OR (C) IF A DEFAULT OR EVENT OF DEFAULT EXISTS, AND (II) GRANT TO ANY OTHER PERSON PARTICIPATING INTERESTS IN ALL OR PART OF ITS RIGHTS AND OBLIGATIONS HEREUNDER WITHOUT NOTICE TO BORROWER. Borrower agrees to execute any documents reasonably requested by Lender in connection with any such assignment. All information provided by or on behalf of Borrower to Lender or its affiliates may be furnished by Lender to its affiliates and to any actual or proposed assignee or participant. (i) Borrower shall pay Lender, on demand, all reasonable out-of-pocket expenses and legal fees (including the allocated costs for in-house legal services) incurred by Lender in connection with the enforcement of this Agreement or any instruments or agreements executed in connection herewith. (j) If any provision of this Agreement or any other Loan Document shall be held invalid or unenforceable in whole or in part, such invalidity or unenforceability shall not affect the remaining provisions hereof or thereof. This Agreement supersedes all prior agreements and oral negotiations with respect to the subject matter hereof. -19- (k) This Agreement may be executed in one or more counterparts, and each counterpart, when so executed, shall be deemed an original but all such counterparts shall constitute but one and the same instrument. (l) This Agreement and the other Loan Documents are governed by, and shall be construed in accordance with, the laws of the State of New York and the applicable laws of the United States of America. Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court and each state court in the City of New York for the purposes of all legal proceedings arising out of or relating to any of the Loan Documents or the transactions contemplated thereby. Borrower irrevocably consents to the service of any and all process in any such action or proceeding by the mailing of copies of such process to Borrower at its address set forth beneath its signature hereto. Borrower irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. (m) BORROWER AND LENDER EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. (n) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. -20- Please indicate your acceptance of the Commitment on the foregoing terms and conditions by returning an executed copy of this Agreement to the undersigned not later than November 1, 1999. BANK OF AMERICA, N.A. By:/s/ Lawrence J. Gordon ----------------------------------- Name: Lawrence J. Gordon Title: Vice President Notice Address: Bank of America Center 700 Louisiana Street, TX4-213-08-10 Houston, Texas 77002-2700 Attention: Lawrence J. Gordon Vice President Fax No.: 713-247-6719 ACCEPTED AND AGREED TO: NORTH AMERICAN VACCINE, INC. By: /s/ Randal Chase ------------------------------- Name: Randal Chase, Ph.D. ------------------------------- Title: Chief Executive Officer & President ----------------------------------- Date: November 1, 1999 Notice Address: 10150 Old Columbia Road Columbia, Maryland 21046 Attention: Vice-President Fax No.: (410) 309-4077 -21- EXHIBIT A DEFINITIONS Affiliate: Any Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, Borrower. A Person shall be deemed to be "controlled by" any other Person if such other Person possesses, directly or indirectly, power (a) to vote 10% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors or managing general partners; or (b) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. Agreement: This letter agreement, as amended, restated, extended, supplemented or otherwise modified in writing from time to time. Base Rate: A fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest publicly announced from time to time by Lender as its prime rate. The Lender's prime rate is a rate set by Lender based upon various factors including Lender's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in the prime rate announced by Lender shall take effect at the opening of business on the day specified in the public announcement of such change. Base Rate Loan: A Loan bearing interest based on the Base Rate. Breakage Costs: Any loss, cost or expense incurred by Lender (including any loss of anticipated profits and any loss or expense arising from the liquidation or reemployment of funds obtained by Lender to maintain the relevant Offshore Rate Loan or from fees payable to terminate the deposits from which such funds were obtained) as a result of (i) any continuation, conversion, payment or prepayment of any Offshore Rate Loan on a day other than the last day of the Interest Period therefor (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise); or (ii) any failure by Borrower (for a reason other than the failure of Lender to make a Loan when all conditions to making such Loan have been met by Borrower in accordance with the terms hereof) to prepay, borrow, continue or convert any Offshore Rate Loan on a date or in the amount notified by A-1 Borrower. The certificate of Lender as to its costs of funds, losses and expenses incurred shall be conclusive absent manifest error. Business Day: Any day other than a Saturday, Sunday, or other day on which commercial banks are authorized to close under the laws of, or are in fact closed in, the State of North Carolina where Lender's lending office is located and, if such day relates to any Offshore Rate Loan, means any such day on which dealings in dollar deposits are conducted by and between banks in the offshore dollar interbank market. Change of Control: Any of the following events: (a) any "person" or "group" (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act) (other than one or more of the Principal Shareholders) has become, directly or indirectly, the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act, except that a Person shall be deemed to have a "beneficial ownership" of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), by way of merger, consolidation or otherwise, of 20% or more of the voting power of the Voting Stock of Borrower on a fully-diluted basis, after giving effect to the conversion and exercise of all outstanding warrants, options and other securities of Borrower convertible into or exercisable for Voting Stock of Borrower (whether or not such securities are then currently convertible or exercisable); or (b) during any period of two consecutive calendar years, individuals who at the beginning of such period constituted the board of directors of Borrower (together with any new directors whose election to such board or whose nomination for election by the stockholders of Borrower was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously approved) cease for any reason to constitute a majority of the board of directors of Borrower then in office; or (c) the failure of Biochem Pharma Inc. at any time to directly own beneficially and of record on a fully diluted basis at least 35% of the Voting Stock of Borrower. Closing Date: Means the date of this Agreement. Code: The Internal Revenue Code of 1986, as amended from time to time. Contractual Obligation: Any provision of any security issued by such Person or of any agreement, instrument or undertaking to which such Person is a party or by which it or any of its property is bound. A-2 Debtor Relief Laws: The Bankruptcy Code of the United States of America, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States of America or other applicable jurisdictions from time to time in effect affecting the rights of creditors generally. Default: Any event that, with the giving of any notice, the passage of time, or both, would be an Event of Default. Disposition: The sale, transfer, license or other disposition (including any sale and leaseback transaction) of any property by any Person, including any sale, assignment, transfer or other disposal with or without recourse of any notes or accounts receivable or any rights and claims associated therewith. ERISA: The Employee Retirement Income Security Act of 1974 and any regulations issued pursuant thereto, as amended from time to time. Event of Default: Has the meaning set forth in Paragraph 5. Federal Funds Rate: For any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; PROVIDED that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to Lender on such day on such transactions as determined by Lender. Governmental Authority: Any (a) international, foreign, federal, state, county or municipal government, or political subdivision thereof, (b) governmental or quasi-governmental agency, authority, board, bureau, commission, department, instrumentality, central bank or public body, or (c) court, administrative tribunal or public utility. Guarantor: Baxter International, Inc., a Delaware Corporation. Guaranty: The Guaranty dated as of the date of the Agreement given by Guarantor for the benefit of Lender. A-3 Guaranty Event of Default: Has the meaning set forth in the Guaranty. Guaranty Obligation: Any (a) guaranty by a Person of Indebtedness of, or other obligation payable or performable by, any other Person or (b) assurance, agreement, letter of responsibility, letter of awareness, undertaking or arrangement given by a Person to an obligee of any other Person with respect to the payment or performance of an obligation by, or the financial condition of, such other Person, whether direct, indirect or contingent, including any purchase or repurchase agreement covering such obligation or any collateral security therefor, any agreement to provide funds (by means of loans, capital contributions or otherwise) to such other Person, any agreement to support the solvency or level of any balance sheet item of such other Person or any "keep-well" or other arrangement of whatever nature given for the purpose of assuring or holding harmless such obligee against loss with respect to any obligation of such other Person; PROVIDED, HOWEVER, that the term Guaranty Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guaranty Obligation shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, covered by such Guaranty Obligation or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the Person in good faith. Indebtedness: As to any Person at a particular time, all items which would, in conformity with GAAP, be classified as liabilities on a balance sheet of such Person as at such time (excluding trade and other accounts payable in the ordinary course of business in accordance with customary trade terms and which are not overdue for a period of more than 60 days and excluding deferred taxes), but in any event including: (a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (b) any direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), banker's acceptances, bank guaranties, surety bonds and similar instruments; (c) net obligations under any Swap Contract in an amount equal to (i) if such Swap Contract has been closed out, the termination value thereof, or (ii) if such Swap Contract has not been closed out, the mark-to-market value thereof determined on the basis of readily available quotations provided by any recognized dealer in such Swap Contract; (d) A-4 whether or not so included as liabilities in accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property or services, and indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse; (e) lease payment obligations under capital leases or Synthetic Lease Obligations; and (f) all Guaranty Obligations of such Person in respect of any of the foregoing. For all purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer. Intellectual Property: Has the meaning set forth in PARAGRAPH 3(K). Interest Period: For each Offshore Rate Loan, (a) initially, the period commencing on the date the Offshore Rate Loan is disbursed or converted from a Base Rate Loan and (b) thereafter, the period commencing on the last day of the preceding Interest Period, and, in each case, ending on the earlier of (x) the Maturity Date and (y) one month thereafter, as requested by Borrower; PROVIDED that: (i) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day; and (ii) any Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period. Investment: Any acquisition or any investment by such Person, whether by means of the purchase or other acquisition of stock or other securities of any other Person or by means of a loan, creating a debt, capital contribution, guaranty or other debt or equity participation or interest in any other Person, including any partnership and joint venture interests in such other Person. A-5 IP Security Agreement: The Patent and Trademark Assignment and Security Agreement dated as of the Closing Date between Borrower, as assignor, and Lender, as assignee. Lien: Any mortgage, pledge, hypothecation, assignment, deposit arrangement (in the nature of compensating balances, cash collateral accounts or security interests), encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the Uniform Commercial Code or comparable laws of any jurisdiction), including the interest of a purchaser of accounts receivable. Loan Documents: This Agreement, the Security Agreement, the IP Security Agreement and any promissory note, certificate, fee letter, financing statement and other instrument, document or agreement delivered in connection with this Agreement or the Security Agreement or the IP Security Agreement. Material Adverse Effect: Any set of circumstances or events which (a ) has or could reasonably be expected to have any material adverse effect whatsoever upon the validity or enforceability of any Loan Document, (b) is or could reasonably be expected to be material and adverse to the condition (financial or otherwise), business operations or prospects of Borrower or (c) materially impairs or could reasonably be expected to materially impair the ability of Borrower to perform its obligations and liabilities under this Agreement or any other Loan Document; provided, however, that a Material Adverse Effect under this Agreement shall not include any circumstances or events (including, without limitation, any loss of personnel, loss of customers, loss of suppliers or the delay or cancellation of any orders for products): (i) relating to the economy in general, (ii) relating to the industry in which Borrower operates in general, (iii) relating to any actions taken by The American Stock Exchange with respect to its letter to the Borrower dated September 24, 1999, (iv) arising out of or resulting from actions contemplated by the Borrower and the Guarantor in connection with, or which is attributable to, the announcement of this Agreement and/or the transactions contemplated hereby (including, without limitation, the Guarantor's acquisition of the Borrower), or (v) relating to the release of Borrower's financial results or Borrower's failure to meet any publicized financial projections for so long as Borrower's revenue and A-6 expenses are substantially in accordance with the Projections. Maturity Date: March 31, 2000, or such earlier date on which the Commitment may terminate in accordance with the terms hereof. Multiemployer Plan: Any employee benefit plan of the type described in Section 4001(a)(3) of ERISA. Negative Pledge: A Contractual Obligation that restricts Liens on property. North American The acquisition by Guarantor of Borrower pursuant to the North Vaccine American Vaccine Acquisition Agreement and all other Acquisition: transactions contemplated by the North American Vaccine Acquisition Agreement. North American The Agreement and Plan of Merger to be entered into between Vaccine Guarantor and Borrower, in substantially the form of EXHIBIT Acquisition C hereto, as amended or modified from time to time as agreed to Agreement: by the parties thereto. Offshore Rate: For any Interest Period with respect to any Offshore Rate Loan, a rate per annum determined pursuant to the following formula: Offshore Rate = Offshore Base Rate ------------------------------------- 1.00 - Eurodollar Reserve Percentage Where, "OFFSHORE BASE RATE" means, for such Interest Period: (a) the rate per annum (carried out to the fifth decimal place) equal to the rate determined by Lender to be the offered rate that appears on the page of the Telerate Screen that displays an average British Bankers Association Interest Settlement Rate (such page currently being page number 3750) for deposits in dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or (b) in the event the rate referenced in the preceding clause (a) does not appear on such page or service or such page or service shall cease to be available, the rate per annum (carried to the fifth decimal place) equal to the rate determined A-7 by Lender to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or (c) in the event the rates referenced in the preceding clauses (a) and (b) are not available, the rate per annum determined by Lender as the rate of interest at which dollar deposits (for delivery on the first day of such Interest Period) in same day funds in the approximate amount of the applicable Offshore Rate Loan and with a term equivalent to such Interest Period would be offered by Lender's London Branch to major banks in the offshore dollar market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period. "EURODOLLAR RESERVE PERCENTAGE" means, for any day during any Interest Period, the reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day applicable to Lender under regulations issued from time to time by the Board of Governors of the Federal Reserve System for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"). The Offshore Rate for each outstanding Offshore Rate Loan shall be adjusted automatically as of the effective date of any change in the Eurodollar Reserve Percentage. Offshore Rate Loan: A Loan bearing interest based on the Offshore Rate. Pension Plan: Any "employee pension benefit plan" (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by Borrower or any ERISA Affiliates or to which Borrower or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer A-8 plan (as described in Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding five plan years. Person: Any individual, trustee, corporation, general partnership, limited partnership, limited liability company, joint stock company, trust, unincorporated organization, bank, business association, firm, joint venture, governmental authority, or otherwise. Plan: Any employee benefit plan maintained or contributed to by Borrower or by any trade or business (whether or not incorporated) under common control with Borrower as defined in Section 4001(b) of ERISA and insured by the Pension Benefit Guaranty Corporation under Title IV of ERISA. Principal Shareholder: Each of Guarantor, Biochem Pharma Inc., Dr. Phillip Frost and/or Frost-Nevada Limited Partnership Projections: The projections of balance sheets, statements of cash flows and comparative statements of operations (2000 Forecast) for Borrower dated October 25, 1999 and delivered to Lender by Borrower prior to the Closing Date. Reimbursement Agreement: That certain Reimbursement Agreement dated as of November 1, 1999 between Borrower and Guarantor. Restricted Payment: (a) The declaration or payment of any dividend or distribution by Borrower or any of its Subsidiaries, either in cash or property, on any shares of the capital stock of any class of Borrower or any of its Subsidiaries; (b) the purchase, repayment, redemption or retirement by Borrower or any of its Subsidiaries of any shares of its capital stock of any class or any warrants, rights or options to purchase or acquire any shares of its capital stock, whether directly or indirectly; (c) any other payment or distribution by Borrower or any of its Subsidiaries in respect of its capital stock, either directly or indirectly; (d) any Investment other than an Investment otherwise permitted under any Loan Document; and (e) the prepayment, repayment, redemption, defeasance or other acquisition or retirement for value prior to any scheduled maturity, scheduled repayment or scheduled sinking fund payment, of any Indebtedness not otherwise permitted under any Loan Document to be so paid. Royal Bank of Canada Credit (A) That certain letter agreement dated July 12, 1999 delivered Facility: by Royal Bank of Canada and accepted by Borrower, Biochem A-9 Pharma Inc. and Biochem Pharma Holdings Inc., in an aggregate principal amount of up to US$6.0MM and (B) that certain Guarantee and Postponement of Claims from Biochem Pharma Inc. and Biochem Pharma Holdings Inc. in favor of Royal Bank of Canada dated July 1, 1999. Securities Exchange Act: The Securities Exchange Act of 1934, as amended, and all rules and regulations issued pursuant thereto. Security Agreement: The Security Agreement dated as of the Closing Date between Borrower, as debtor, and Lender, as secured party. Subsidiary: A corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by Borrower. Swap Contract: (a) Any and all rate swap transactions, basis swaps, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, or (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., or any other master agreement (any such master agreement, together with any related schedules, as amended, restated, extended, supplemented or otherwise modified in writing from time to time, a "MASTER AGREEMENT"), including but not limited to any such obligations or liabilities under any Master Agreement. Synthetic Lease Obligations: All monetary obligations of a Person under (a) a so-called synthetic lease, or (b) an agreement for the use or possession A-10 of property creating obligations which do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the Indebtedness of such Person (without regard to accounting treatment). Voting Stock: All classes of capital stock of Borrower then outstanding and normally entitled to vote in the election of directors. A-11 EXHIBIT B FORM OF PROMISSORY NOTE $30,000,000 _____________, 1999 FOR VALUE RECEIVED, the undersigned, NORTH AMERICAN VACCINE, INC., a ___________ corporation ("BORROWER"), hereby promises to pay to the order of BANK OF AMERICA, N.A. ("LENDER") the principal sum of Thirty Million Dollars (US$30,000,000) or, if less, the aggregate unpaid principal amount of all Loans made by Lender to Borrower pursuant to the letter agreement, dated as of [__________, 1999] (such letter agreement, as it may be amended, restated, extended, supplemented or otherwise modified from time to time, being hereinafter called the "AGREEMENT"), between Borrower and Lender, on the Maturity Date. Borrower further promises to pay interest on the unpaid principal amount of the Loans evidenced hereby from time to time at the rates, on the dates, and otherwise as provided in the Agreement. Lender is authorized to endorse the amount and the date on which each Loan is made or converted, the Interest Period therefor (if applicable) and each payment of principal with respect thereto on the schedules annexed hereto and made a part hereof, or on continuations thereof which shall be attached hereto and made a part hereof; PROVIDED that any failure to so endorse such information on such schedule or continuation thereof or any error in doing so shall not limit or otherwise affect any obligation of Borrower under the Agreement or this promissory note. This promissory note is the promissory note referred to in, and is entitled to the benefits of, the Agreement, which Agreement, among other things, contains provisions for acceleration of the maturity of the Loans evidenced hereby upon the happening of certain stated events and also for prepayments on account of principal of the Loans prior to the maturity thereof upon the terms and conditions therein specified. Unless otherwise defined herein, terms defined in the Agreement are used herein with their defined meanings therein. This promissory note shall be governed by, and construed in accordance with, the laws of the State of North Carolina. NORTH AMERICAN VACCINE, INC. By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ B-1
SCHEDULE A TO NOTE BASE RATE LOANS AND REPAYMENT OF BASE RATE LOANS ------------------------------------------------ (1) (2) (3) (4) (5) Amount of Base Rate Amount of Base Rate Loan Repaid or Unpaid Principal Loan Made or Converted Converted to Offshore Balance of Base Notation Date from Offshore Rate Loan Rate Loan Rate Loans Made By ---- ----------------------- --------- ---------- -------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
B-2
SCHEDULE B TO NOTE OFFSHORE RATE LOANS AND REPAYMENT OF OFFSHORE RATE LOANS -------------------------------------------------------- (1) (2) (3) (4) (5) (6) Amount of Amount of Offshore Rate Offshore Rate Unpaid Principal Loan Made or Loan Repaid or Balance of Converted from Converted to Base Offshore Rate Notation DATE BASE RATE LOAN INTEREST PERIOD RATE LOAN LOANS MADE BY ---- -------------- --------------- --------- ----- ------- - ---------- ------------- ------------ ------------- ------------- ------------- - ---------- ------------- ------------ ------------- ------------- ------------- - ---------- ------------- ------------ ------------- ------------- ------------- - ---------- ------------- ------------ ------------- ------------- ------------- - ---------- ------------- ------------ ------------- ------------- ------------- - ---------- ------------- ------------ ------------- ------------- ------------- - ---------- ------------- ------------ ------------- ------------- ------------- - ---------- ------------- ------------ ------------- ------------- ------------- - ---------- ------------- ------------ ------------- ------------- ------------- - ---------- ------------- ------------ ------------- ------------- ------------- - ---------- ------------- ------------ ------------- ------------- -------------
B-3 EXHIBIT C [Form of North American Vaccine Acquisition Agreement] SCHEDULE 3(D) TO AGREEMENT MATERIAL LITIGATION 1.) On November 2, 1998, Sharon Mates, Ph.D., then a director of the Company and the Company's former president, initiated litigation in United States District Court, District of Maryland (Civil Action No. AW 98-3678) (the "Complaint") against the Company, two of its directors and BioChem. 2.) By letter dated October 7, 1999, Chiron Behring GmbH & Co. ("Chiron") notified Borrower that Chiron was terminating "for cause" the parties' Supply and Distribution Agreement dated December 3, 1996, as amended. Chiron has alleged that Borrower misrepresented the status of regulatory approval of its products and fraudulently induced Chiron to enter into the agreement, and has demanded repayment from Borrower of $3 million in nonrefundable payments under the agreement. SCHEDULE 3(F) TO AGREEMENT USE OF PROCEEDS
SCHEDULE 3(F) NON-WORKING CAPITAL USES OF PROCEEDS (THROUGH MARCH 31, 2000) Preliminary Capital Additions Forecast 10/28/99 DESCRIPTION IN PROGRESS VENDOR Cleaning skid Whiting Turner $ 16,720 Cleaning skid Whiting Turner 4,146 MSS Project installation costs Whiting Turner 17,010 Engineering support Whiting Turner 75,868 services/mening Four agitators - Mening C Harrington Robb 24,988 Micro filtration skid/Mening C Prime Technologies 47,864 HPLC 1100 Zee Hung Lee 45,000 Validation - HPLC Zee Hung Lee 10,050 Centrifuge N/A 5,000 Integrity Tester N/A 15,000 pH Probes N/A 20,000 Plate washers N/A 6,200 MetOne counters N/A 15,000 RCS Air Samplers N/A 15,000 UV1201 Spectrophotometer N/A 6,500 Biowaste Vessel N/A 50,000 Biowaste Vessel/Startup N/A 100,000 4' Biosafety Cabinet N/A 7,000 UV monitor N/A 2,800 Fraction collector N/A 2,500 Acqua Cal Conductivity Std. N/A 3,000 Azonics Temp Std N/A 5,000 Heat block (low temp) N/A 5,950 Heat block (high temp) N/A 5,950 Work benches N/A 5,000 Ultrafiltration skid N/A 200,000 Chem reactor (Men. C) N/A 40,000 Stainless steel tanks N/A 50,000 Miscellaneous N/A 2,384 Total 4th Qtr 1999 803,930 Additions Chromatography columns N/A 10,000 UV detector N/A 11,000 Glucose probe N/A 6,000 Plate reader N/A 45,000 Florescent Plate reader N/A 20,000 Gas Chromatograph N/A 35,000 Microscope N/A 6,000 Ultrafiltration skid N/A 200,000 Ultrafiltration skid N/A 200,000 Microfiltration skid N/A 250,000 SS Tank/controller (for N/A 50,000 purification) YSI analyzer N/A 12,000 Integrated balance and pump N/A 20,000 (2) Air/Oxygen mixer (for N/A 20,000 fermentor) (2) Incubator/Shaker N/A 9,000 Floor scale N/A 6,000 Total 1st Qtr 2000 900,000 Additions TOTAL CAPEX ADDITIONS 6 MONTHS $ 1,703,930 INTEREST PAYMENTS 6.5% Notes $ 2,448,095 4.5% Notes 562,500 TOTAL INTEREST PAYMENTS $ 3,010,595 =============
SCHEDULE 3(K) TO AGREEMENT LIST OF INTELLECTUAL PROPERTY TO BE PLEDGED AS COLLATERAL See Schedule A and Schedule B attached hereto.
- ------------------------------------------------------------------------------------------------------------------------------------ SCHEDULE A - ------------------------------------------------------------------------------------------------------------------------------------ PATENTS AND PATENT APPLICATIONS OF ASSIGNOR - ------------------------------------------------------------------------------------------------------------------------------------ TITLE INVENTORS ASSIGNEE APPL. NO./ APPL. DATE/GRANT STATUS PATENT NO. DATE - ------------------------------------------------------------------------------------------------------------------------------------ ISSUED U.S. PATENTS - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Blake, et al. NVX 08/798,760 February 11, 1997 Notice of Expression, Purification and (co-exclusive (Notice of Allowance Allowance issued Refolding of the Outer Membrane license with PMC) issued Jan. 1999) January 1999 Group B Porin Proteins (fee paid April 1999) - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Blake, et al. NVX & Rockefeller 5,439,808 August 8, 1995 Patent Expression, Purification and University Refolding of the Outer Membrane (co-exclusive Group B Porin Proteins from license with PMC) Neisseria Meningitidis - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Blake, et al. NVX 5,747,287 May 5, 1998 Patent Expression, Purification and (co-exclusive Refolding of the Outer Membrane license with PMC) Group B Porin Proteins from Neisseria Meningitidis - ------------------------------------------------------------------------------------------------------------------------------------ Group A Streptococcal Blake et al. NVX & Rockefeller 5,866,135 February 2, 1999 Patent Polysaccharide Immunogenic University Compositions and Methods - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Blake, et al. NVX 5,879,686 March 9, 1999 Patent Expression, Purification and (co-exclusive Refolding of the Outer Membrane license with PMC) Group B Porin Proteins from Neisseria Meningitidis - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ U.S. PATENT APPLICATIONS - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Tai, et al. NVX 08/096,181 July 23, 1993 Application Expression, Purification and Refolding of the Outer Membrane Protein P2 from Haemophilus Type b - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Tai, et al. NVX 08/449,358 May 24, 1995 Application Expression, Purification and Refolding of the Outer Membrane Protein P2 from Haemophilus Type b - ------------------------------------------------------------------------------------------------------------------------------------ Antigenic Group B Streptococcus Michon, et al. NVX 08/481,883 June 7, 1995 Application Type II and Type III Polysaccharide Fragments Having a 2,5-Anhydro-D-Mannose Terminal Structure and Conjugate Vaccine Thereof - ------------------------------------------------------------------------------------------------------------------------------------ Direct Methods for Molar-Mass Michon, D'Ambra NVX 08/753,242 November 22, 1996 Application Determination of Fragments of Haemophilus Type b Capsular Polysaccharides and Vaccine Preparation - ------------------------------------------------------------------------------------------------------------------------------------ Cloning of Non-IgA FC Binding Tai, Blake NVX 08/923,992 September 5, 1997 Application Forms of the Group B Streptococcal Beta Antigens - ------------------------------------------------------------------------------------------------------------------------------------ Antigenic Group B Streptococcus Michon, et al. NVX 09/025,225 February 18, 1998 Application Type II and Type III Polysaccharide Fragments Having a 2,5-Anhydro-D-Mannose Terminal Structure and Conjugate Vaccine Thereof - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Immunogenic Conjugates Comprising Blake, et al. NVX 09/118/180 July 17, 1998 Application A Group B Meningococcal Porin and an H. Influenzae Polysaccharide - ------------------------------------------------------------------------------------------------------------------------------------ Modified Immunogenic Pneumolysin Minetti, et al. NVX 09/120,044 July 21, 1998 Application Compositions as Vaccines - ------------------------------------------------------------------------------------------------------------------------------------ Group A Streptococcal Blake et al. NVX & 09/207,188 December 8, 1998 Application Polysaccharide Immunogenic Rockefeller Compositions and Methods University - ------------------------------------------------------------------------------------------------------------------------------------ Procedures for the Extraction and Michon, Blake NVX 09/221,620 December 23, 1998 Application Isolation of Bacterial Capsular Polysaccharides for Use as Vaccines or Linked to Proteins as Conjugate Vaccines - ------------------------------------------------------------------------------------------------------------------------------------ Gram Positive Bacterial Antigens Long-Rowe, Blake NVX 09/399,220 September 17, 1999 Application and Methods of Purification of the Streptococcal C-Beta Protein - ------------------------------------------------------------------------------------------------------------------------------------ Immunogenic Polysaccharide-Protein Michon et al. NVX 09/376,911 August 18, 1999 Application Conjugate Useful as a Vaccine Produced Via Conjugation Through a CZ-3 N-Acyl Portion F A Polysaccharide - ------------------------------------------------------------------------------------------------------------------------------------
A-1.
- --------------------------------------------------------------------------------------------------------------------------- SCHEDULE B - --------------------------------------------------------------------------------------------------------------------------- U.S. TRADEMARKS OF ASSIGNOR - --------------------------------------------------------------------------------------------------------------------------- MARK STATUS APPL NO./ APPL./REGIS. DATE OWNER OF RECORD REGIS. NO. - --------------------------------------------------------------------------------------------------------------------------- REGISTERED U.S. TRADEMARKS - --------------------------------------------------------------------------------------------------------------------------- Globe Design Registered 1,932,111 October 31, 1995 North American Vaccine, Inc. - --------------------------------------------------------------------------------------------------------------------------- AMVAX Registered 1,967,632 April 16, 1996 North American Vaccine, Inc. - --------------------------------------------------------------------------------------------------------------------------- TRINAVACEL Registered 2,101,121 September 30, 1997 American Vaccine Corporation - --------------------------------------------------------------------------------------------------------------------------- TRIVAX Registered 2,118,360 December 2, 1997 American Vaccine Corporation - --------------------------------------------------------------------------------------------------------------------------- NAVA Registered 2,267,812 August 3, 1999 American Vaccine Corporation - --------------------------------------------------------------------------------------------------------------------------- PENDING U.S. TRADEMARK APPLICATIONS - --------------------------------------------------------------------------------------------------------------------------- THE IMPORTANCE OF OUR WORK Pending 75/190,826 October 29, 1996 American Vaccine Corporation GROWS BIGGER EVERY DAY - --------------------------------------------------------------------------------------------------------------------------- NEISVAC-C Pending Not Avail. August 26, 1999 American Vaccine Corporation - --------------------------------------------------------------------------------------------------------------------------- NEISIVA Pending Not Avail. August 26, 1999 American Vaccine Corporation - --------------------------------------------------------------------------------------------------------------------------- MENCIVA Pending Not Avail. August 26, 1999 American Vaccine Corporation - ---------------------------------------------------------------------------------------------------------------------------
B-2 SCHEDULE 4(C)(I) TO AGREEMENT OUTSTANDING INDEBTEDNESS Annex B Liabilities Greater than $1,000,000 Indenture dated May 7, 1996 between NAV and Marine Midland Bank, together with related 6.5% Convertible Subordinated Notes. Master Agreement dated November 1, 1996 between NAV and General Electric Capital Corporation Indenture dated November 12, 1998 by and between the Company and Bankers Trust Company, as Trustee SCHEDULE 4(C)(II) TO AGREEMENT LIENS AND NEGATIVE PLEDGES Schedule 4(c)(ii) Liens and Negative Pledges Master Agreement dated November 1, 1996 between NAV and General Electric Capital Corporation, including Security Agreement dated November 1, 1996. Security and Pledge Agreement dated November 12, 1998 by and between the Company and Bankers Trust Company, as trustee Lease dated September 9, 1999 between Borrower and WRIT Limited Partnership Lease dated February 19, 1999 between Borrower and Newcourt Financial USA Inc. (capital lease for mass spectrometer) Lease dated March 25, 1998 between Borrower and ARE-10150 Old Columbia LLC Assignment of Deposit Account dated April 2, 1998 by Borrower to Chase Manhattan Bank, with Notice of Assignment and Notice of Letter of Credit dated April 3, 1998 EX-10.48 5 November 1, 1999 North American Vaccine, Inc. 10150 Old Columbia Road Columbia, Maryland 21046 Attention: Dr. Randal Chase Chief Executive Officer and President Re: $30,000,000 Senior Credit Facility Dear Dr. Chase: Bank of America, N.A. ("Bank of America") is pleased to offer North American Vaccine, Inc., a Canadian corporation (the "Borrower"), a $30 million Senior Secured Credit Facility (the "Facility"). Bank of America is pleased to offer its commitment to lend up to $30 million, upon and subject to the terms and conditions of this letter and the letter loan agreement dated November 1, 1999 (the "Loan Agreement") delivered by Bank of America and acknowledged and agreed to by Borrower and Guarantor. This letter is delivered to you in connection with the Loan Agreement. Unless otherwise defined herein, capitalized terms shall have the meanings set forth therein. The execution and delivery of this letter is a condition to the effectiveness of the Loan Agreement. In connection with, and in consideration of the agreements set forth in the Loan Agreement, the Borrower agrees with Bank of America as follows: STRUCTURING FEE. At Closing, the Borrower will pay a structuring fee of $25,000 to Bank of America for its own account. By acceptance of this letter, the Borrower agrees to pay all reasonable out-of-pocket fees and expenses (including reasonable attorneys' fees and expenses and the allocated cost of internal counsel) incurred before or after the date hereof by us in connection with the Facility; provided that the legal fees and expenses of internal counsel at Bank of America in connection with the Closing of the Facility shall be covered by the structuring fee referenced above. The structuring fee payable above shall be fully-earned upon becoming due and payable, shall be non-refundable for any reason whatsoever and shall be in addition to any other fee, cost or expense payable pursuant to the Facility. North American Vaccine, Inc. November 1, 1999 Page 2 The terms of this letter are confidential and, except for disclosure on a confidential basis to your accountants, attorneys and other professional advisors retained by you in connection with the Facility or as may be required by law, may not be disclosed in whole or in part to any other person or entity without our prior written consent. [The remainder of this page has been intentionally left blank]. North American Vaccine, Inc. November 1, 1999 Page 3 Very truly yours, BANK OF AMERICA, N.A. By: /s/ Lawrence J. Gordon ---------------------------------- Name: Lawrence J. Gordon Title: Vice President Accepted and Agreed to as of November 1, 1999: NORTH AMERICAN VACCINE, INC., as Borrower By: /s/ Randal Chase ----------------------------------- Name: Randal Chase, Ph.D. ------------------- Title: Chief Executive Officer & President ----------------------------------- BAXTER INTERNATIONAL INC., as Guarantor By: /s/ Steven J. Meyer ----------------------------------- Name: Steven J. Meyer Title: Corp. Treasurer EX-10.49 6 SECURITY AGREEMENT THIS SECURITY AGREEMENT (this "Agreement"), dated as of November 1, 1999, is made between NORTH AMERICAN VACCINE, INC., a Canadian corporation ("Debtor") and BANK OF AMERICA, N.A., a national banking association ("Secured Party".) Debtor and Secured Party hereby agree as follows: SECTION 1 DEFINITIONS; INTERPRETATION. --------------------------- (a) All capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings assigned to them in the Loan Agreement (as defined below.) (b) As used in this Agreement, the following terms shall have the following meanings: "COLLATERAL" has the meaning set forth in Section 2. "DOCUMENTS" means the Loan Agreement and all other documents, agreements and instruments delivered to Secured Party in connection therewith or with the Obligations. "EVENT OF DEFAULT" has the meaning set forth in Section 8. "LIEN" means any mortgage, deed of trust, pledge, security interest, assignment, deposit arrangement, charge or encumbrance, lien, or other type of preferential arrangement. "LOAN AGREEMENT" means the letter loan agreement dated November 1, 1999, between Secured Party and Debtor, pursuant to which Secured Party has agreed to make certain revolving loans to Debtor. "OBLIGATIONS" means the indebtedness, liabilities and other obligations of Debtor to Secured Party under or in connection with this Agreement and the other Documents, including, without limitation, all amounts owing under the Loan Agreement and all fees and all other amounts payable by Debtor to Secured Party thereunder or in connection therewith, whether now existing or hereafter arising, and whether due or to become due, absolute or contingent, liquidated or unliquidated, determined or undetermined. "PERMITTED LIEN" means (i) any Lien in favor of Secured Party; (ii) any Lien that is subordinate to the Lien on the Collateral created by this Agreement; (iii) any Lien in favor of Baxter International, Inc. under that certain reimbursement agreement dated as of November 1, 1999; (iv) any Liens existing as of the date hereof and disclosed in writing to Secured Party. "PERSON" means an individual, corporation, partnership, joint venture, trust, unincorporated organization, governmental agency or authority, or any other entity of whatever nature. "UCC" means the Uniform Commercial Code as the same may, from time to time, be in effect in the State of New York; PROVIDED, HOWEVER, in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of the security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, the term "UCC" shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such attachment, perfection or priority and for purposes of definitions related to such provisions. (c) Where applicable and except as otherwise defined herein, terms used in this Agreement shall have the meanings assigned to them in the UCC. (d) In this Agreement, (i) the meaning of defined terms shall be equally applicable to both the singular and plural forms of the terms defined; and (ii) the captions and headings are for convenience of reference only and shall not affect the construction of this Agreement. SECTION 2 SECURITY INTEREST. (a) As security for the payment and performance of the Obligations, Debtor hereby pledges, assigns, transfers, hypothecates and sets over to Secured Party, and hereby grants to Secured Party a security interest in, all of Debtor's right, title and interest in, to and under the following property, wherever located and whether now existing or owned or hereafter acquired or arising (collectively, the "Collateral"): (i) all accounts, accounts receivable, contract rights, rights to payment, chattel paper, letters of credit, documents, securities, money and instruments, and investment property, whether held directly or through a securities intermediary, and other obligations of any kind owed to Debtor, however evidenced; (ii) all deposits and deposit accounts with any bank, savings and loan association, credit union or like organization, and all funds and amounts therein, and whether or not held in trust, or in custody or safekeeping, or otherwise restricted or designated for a particular purpose; (iii) all inventory, including, without limitation, all materials, raw materials, parts, components, work in progress, finished goods, merchandise, supplies, and all other goods which are held for sale, lease or other disposition or furnished under contracts of service or consumed in Debtor's business, including, without limitation, those held for display or demonstration or out on lease or consignment; (iv) all equipment, including, without limitation, all machinery, furniture, furnishings, fixtures, trade fixtures, tools, parts and supplies, automobiles, trucks, tractors and other vehicles, appliances, computer and other 2. electronic data processing equipment and other office equipment, computer programs and related data processing software, and all additions, substitutions, replacements, parts, accessories, and accessions to and for the foregoing; excluding, however, the equipment collateral identified in the agreements referred to in Schedule 4(c)(ii) of the Loan Agreement; (v) all general intangibles and other personal property of Debtor, including, without limitation, (A) all tax and other refunds, rebates or credits of every kind and nature to which Debtor is now or hereafter may become entitled; (B) all intellectual property and all rights therein of any type or description, including, without limitation, all inventions and discoveries, patents and patent applications, copyrights and applications for copyright (together with the underlying works of authorship) whether or not registered, together with any renewals and extensions thereof, trademarks, service marks and trade names, and applications for registration of such trademarks, service marks and trade names, trade secrets, trade dress, trade styles, logos, other source of business identifiers, mask-works, mask-work registrations, mask-work applications, software, confidential and proprietary information, customer lists, other license rights, advertising materials, operating manuals, methods, processes, know-how, algorithms, formulae, databases, quality control procedures, product, service and technical specifications, operating, production and quality control manuals, sales literature, drawings, specifications, blue prints, descriptions, inventions, name plates and catalogs, and the entire goodwill of or associated with the businesses now or hereafter conducted by Debtor connected with and symbolized by any of the aforementioned properties and assets, and all licenses relating to any of the foregoing, all reissuance, continuations and continuations-in-part of the foregoing, all other rights derived from or associated with the foregoing, including the right to sue and recover for past infringement, and all income and royalties with respect thereto; (C) all good will, choses in action and causes of action; (D) all interests in limited and general partnerships and limited liability companies; and (E) all indemnity agreements, guaranties, insurance policies, insurance claims, and other contractual, equitable and legal rights of whatever kind or nature; (vi) all books, records and other written, electronic or other documentation in whatever form maintained by or for Debtor in connection with the ownership of the assets described in this Section 2 or the conduct of its business or evidencing or containing information relating to the Collateral; and (vii) all products and proceeds, including insurance proceeds, of any and all of the foregoing. (b) Anything herein to the contrary notwithstanding, (i) Debtor shall remain liable under any contracts, agreements and other documents included in the Collateral, to the extent set forth therein, to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (ii) the exercise by Secured Party of any of the rights hereunder shall not release Debtor from any of its duties or obligations under such contracts, agreements and other documents included in the Collateral, and (iii) Secured Party shall not have any obligation or liability under any contracts, agreements and other documents included in the Collateral by reason of this Agreement, nor shall Secured Party be obligated to perform any of the obligations or duties of Debtor thereunder or to take any action to collect or enforce any such contract, agreement or other document included in the Collateral hereunder. 3. (c) Notwithstanding the foregoing provisions of this Section 2, the grant of a security interest as provided herein shall not extend to, and the term "Collateral" shall not include, (1) that certain U.S. Patent No. 5,425,946 which is covered by a security interest in favor of Bankers Trust Company as evidenced by the filing in the U.S. Patent and Trademark Office (the "Excluded Patent Collateral"), and (2) any general intangibles of Debtor (whether owned or held as licensee or lessee, or otherwise), to the extent that (i) such general intangibles are not assignable or capable of being encumbered as a matter of law or under the terms of the license, lease or other agreement applicable thereto (but solely to the extent that any such restriction shall be enforceable under applicable law), without the consent of the licensor or lessor thereof or other applicable party thereto and (ii) such consent has not been obtained; PROVIDED, HOWEVER, that the foregoing grant of security interest shall extend to, and the term "Collateral" shall include, (A) any general intangible which is an account receivable or a proceed of, or otherwise related to the enforcement or collection of, any account receivable, or goods which are the subject of any account receivable, (B) any and all proceeds of any general intangibles which are otherwise excluded to the extent that the assignment or encumbrance of such proceeds is not so restricted, and (C) upon obtaining the consent of any such licensor, lessor or other applicable party's consent with respect to any such otherwise excluded general intangibles, such general intangibles as well as any and all proceeds thereof that might have theretofore have been excluded from such grant of a security interest and the term "Collateral." (d) This Agreement shall create a continuing security interest in the Collateral which shall remain in effect until terminated in accordance with Section 19 hereof. SECTION 3 FINANCING STATEMENTS, ETC. Debtor shall execute and deliver to Secured Party concurrently with the execution of this Agreement, and at any time and from time to time thereafter, all financing statements, assignments, continuation financing statements, termination statements, account control agreements, and other documents and instruments, in form reasonably satisfactory to Secured Party, and take all other action, as Secured Party may reasonably request, to perfect and continue perfected, maintain the priority of or provide notice of the security interest of Secured Party in the Collateral and to accomplish the purposes of this Agreement. SECTION 4 REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants to Secured Party that: (a) Debtor is a corporation duly organized, validly existing and in good standing under the law of the jurisdiction of its incorporation and has all requisite power and authority to execute, deliver and perform its obligations under this Agreement. (b) The execution, delivery and performance by Debtor of this Agreement have been duly authorized by all necessary corporate action of Debtor, and this Agreement constitutes the legal, valid and binding obligation of Debtor, enforceable against Debtor in accordance with its terms, except in each case as such enforceability may be limited by bankruptcy, insolvency reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors' rights. 4. (c) Except as otherwise disclosed in writing by Debtor to Secured Party, no authorization, consent, approval, license, exemption of, or filing or registration with, any governmental authority or agency, or approval or consent of any other Person, is required for the due execution, delivery or performance by Debtor of this Agreement. (d) Debtor's chief executive office and principal place of business is located at the address set forth in SCHEDULE 1; all other locations where Debtor conducts business or Collateral is kept are set forth in SCHEDULE 1. (e) Except as otherwise disclosed in writing by Debtor to Secured Party, Debtor is the sole and complete owner of the Collateral, free from any Lien other than Permitted Liens. (f) Other than the Excluded Patent Collateral, all of Debtor's U.S. and foreign patents and patent applications, copyrights (whether or not registered), applications for copyright, trademarks, service marks and trade names (whether registered or unregistered), and applications for registration of such trademarks, service marks and trade names, are set forth in SCHEDULE 2. SECTION 5 COVENANTS. So long as any of the Obligations remain unsatisfied, Debtor agrees that: (a) Debtor shall appear in and defend any action, suit or proceeding which may affect to a material extent its title to, or right or interest in, or Secured Party's right or interest in, the Collateral, and shall do and perform all reasonable acts that may be necessary and appropriate to maintain, preserve and protect the Collateral. (b) Debtor shall comply in all material respects with all laws, regulations and ordinances, and all policies of insurance, relating in a material way to the possession, operation, maintenance and control of the Collateral. (c) Debtor shall give prompt written notice to Secured Party (and in any event not later than 30 days following any change described below in this subsection) of: (i) any change in the location of Debtor's chief executive office or principal place of business, (ii) any change in the locations set forth in Schedule 1; (iii) any change in its name, (iv) any changes in, additions to or other modifications of its trade names and trade styles set forth in Schedule 1 or Schedule 2, and (v) any changes in its identity or structure in any manner which might make any financing statement filed hereunder incorrect or misleading. (d) Debtor shall keep separate, accurate and complete books and records with respect to the Collateral, disclosing Secured Party's security interest hereunder. (e) Except as otherwise disclosed in writing by Debtor to Secured Party, Debtor shall not surrender or lose possession of (other than to Secured Party), sell, lease, rent, or otherwise dispose of or transfer any of the Collateral or any right or interest therein, except in the ordinary course of business; PROVIDED that no such disposition or transfer of Collateral consisting of investment property or instruments shall be permitted while any Event of Default exists. (f) Debtor shall keep the Collateral free of all Liens except Permitted Liens. 5. (g) Debtor shall pay and discharge all taxes, fees, assessments and governmental charges or levies imposed upon it with respect to the Collateral prior to the date on which penalties attach thereto, except to the extent such taxes, fees, assessments or governmental charges or levies are being contested in good faith by appropriate proceedings. (h) Debtor shall maintain and preserve its corporate existence, its rights to transact business and all other rights, franchises and privileges necessary or desirable in the normal course of its business and operations and the ownership of the Collateral, except in connection with any transactions expressly permitted by the Documents. (i) Upon the request of Secured Party, Debtor shall (i) immediately deliver to Secured Party, or an agent designated by it, appropriately endorsed or accompanied by appropriate instruments of transfer or assignment, all documents and instruments, all certificated securities with respect to any investment property, all letters of credit and all accounts and other rights to payment at any time evidenced by promissory notes, trade acceptances or other instruments, (ii) cause any securities intermediaries to show on their books that Secured Party is the entitlement holder with respect to any investment property, and/or obtain account control agreements in favor of Secured Party from such securities intermediaries, in form and substance satisfactory to Secured Party, with respect to any investment property, as requested by Secured Party, (iii) mark all documents and chattel paper with such legends as Secured Party shall reasonably specify, and (iv) obtain consents from any letter of credit issuers with respect to the assignment to Secured Party of any letter of credit proceeds. (j) Debtor shall at any reasonable time and from time to time permit Secured Party or any of its agents or representatives to visit the premises of Debtor and inspect the Collateral and to examine and make copies of and abstracts from the records and books of account of Debtor. (k) Debtor shall: (i) with such frequency as Secured Party may require, furnish to Secured Party such lists of customers and other information relating to the accounts and other rights to payment as Secured Party shall reasonably request; (ii) give only normal discounts, allowances and credits as to accounts and other rights to payment, in the ordinary course of business, according to normal trade practices utilized by Debtor, and enforce all accounts and other rights to payment strictly in accordance with their terms, except that Debtor may grant any extension of the time for payment or enter into any agreement to make a rebate or otherwise to reduce the amount owing on or with respect to, or compromise or settle for less than the full amount thereof, any account or other right to payment, in the ordinary course of business, according to normal and prudent trade practices utilized by Debtor; and (iii) upon the request of Secured Party (A) at any time, notify all or any designated portion of the account debtors and other obligors on the accounts and other rights to payment of the security interest hereunder, and (B) upon the occurrence and during the continuance of an Event of Default, notify the account debtors and other obligors on the accounts and other rights to payment or any designated portion thereof that payment shall be made directly to Secured Party or to such other Person or location as Secured Party shall specify. 6. (l) Debtor shall (i) notify Secured Party of any material claim made or asserted against the Collateral by any Person and of any change in the composition of the Collateral or other event which could materially adversely affect the value of the Collateral or Secured Party's Lien thereon; (ii) furnish to Secured Party such statements and schedules further identifying and describing the Collateral and such other reports and other information in connection with the Collateral as Secured Party may reasonably request, all in reasonable detail; and (iii) upon reasonable request of Secured Party make such demands and requests for information and reports as Debtor is entitled to make in respect of the Collateral. (m) If and when Debtor shall obtain rights to any new patents, trademarks, service marks, trade names or copyrights, or otherwise acquire or become entitled to the benefit of, or apply for registration of, any of the foregoing, Debtor (i) shall promptly notify Secured Party thereof and (ii) hereby authorizes Secured Party to modify, amend, or supplement SCHEDULE 2 and from time to time to include any of the foregoing and make all necessary or appropriate filings with respect thereto. (n) Debtor shall not enter into any agreement (including any license or royalty agreement) pertaining to any of its patents, copyrights, trademarks, service marks and trade names, except for non-exclusive licenses in the ordinary course of business. (o) Debtor shall give Secured Party immediate notice of the establishment of any new deposit account and any new securities account with respect to any investment property. SECTION 6 COLLECTION OF ACCOUNTS. Until Secured Party exercises its rights hereunder to collect the accounts and other rights to payment, Debtor shall endeavor in the first instance diligently to collect all amounts due or to become due on or with respect to the accounts and other rights to payment. At the request of Secured Party, upon the occurrence and during the continuance of any Event of Default, all remittances received by Debtor shall be held in trust for Secured Party and, in accordance with Secured Party's instructions, remitted to Secured Party or deposited to an account of Secured Party in the form received (with any necessary endorsements or instruments of assignment or transfer). At the request of Secured Party, upon and after the occurrence of any Event of Default, Secured Party shall be entitled to receive all distributions and payments of any nature with respect to any investment property or instruments, and all such distributions or payments received by the Debtor shall be held in trust for Secured Party and, in accordance with Secured Party's instructions, remitted to Secured Party or deposited to an account with Secured Party in the form received (with any necessary endorsements or instruments of assignment or transfer). Following the occurrence of an Event of Default any such distributions and payments with respect to any investment property held in any securities account shall be held and retained in such securities account, in each case as part of the Collateral hereunder. Additionally, Secured Party shall have the right, upon the occurrence of an Event of Default, following prior written notice to the Debtor, to vote and to give consents, ratifications and waivers with respect to any investment property and instruments, and to exercise all rights of conversion, exchange, subscription or any other rights, privileges or options pertaining thereto, as if Secured Party were the absolute owner thereof; PROVIDED that Secured Party shall have no duty to exercise any of the foregoing rights afforded to it and shall not be responsible to the Debtor or any other Person for any failure to do so or delay in doing so. 7. SECTION 7 AUTHORIZATION; SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Secured Party shall have the right to, in the name of Debtor, or in the name of Secured Party or otherwise, upon notice to but without the requirement of assent by Debtor, and Debtor hereby constitutes and appoints Secured Party (and any of Secured Party's officers, employees or agents designated by Secured Party) as Debtor's true and lawful attorney-in-fact, with full power and authority to: (i) sign any of the financing statements and other documents and instruments which must be executed or filed to perfect or continue perfected, maintain the priority of or provide notice of Secured Party's security interest in the Collateral (including any notices to or agreements with any securities intermediary); (ii) assert, adjust, sue for, compromise or release any claims under any policies of insurance; and (iii) execute any and all such other documents and instruments, and do any and all acts and things for and on behalf of Debtor, which Secured Party may deem reasonably necessary or advisable to maintain, protect, realize upon and preserve the Collateral and Secured Party's security interest therein and to accomplish the purposes of this Agreement. Secured Party agrees that, except upon and during the continuance of an Event of Default, it shall not exercise the power of attorney, or any rights granted to Secured Party, pursuant to clauses (ii) and (iii). The foregoing power of attorney is coupled with an interest and irrevocable so long as the Obligations have not been paid and performed in full. Debtor hereby ratifies, to the extent permitted by law, all that Secured Party shall lawfully and in good faith do or cause to be done by virtue of and in compliance with this Section 7. SECTION 8 EVENTS OF DEFAULT. Any of the following events which shall occur and be continuing shall constitute an "Event of Default": (a) Debtor shall fail to pay when due any amount payable hereunder or under any other Document or in respect of the Obligations or an "Event of Default" shall occur under the Loan Agreement. (b) Any representation or warranty by Debtor under or in connection with this Agreement any other Document shall prove to have been incorrect in any material respect when made or deemed made. (c) Debtor shall fail to perform or observe in any material respect any other term, covenant or agreement contained in this Agreement, the Loan Agreement or any other Document on its part to be performed or observed and any such failure shall remain unremedied for a period of 5 days from the occurrence thereof; or any "Event of Default" as defined in the Loan Agreement shall have occurred. (d) Any material impairment in the value of the Collateral or the priority of Secured Party's Lien hereunder. (e) Any levy upon, seizure or attachment of any of the Collateral. SECTION 9 REMEDIES. (a) Upon the occurrence and continuance of any Event of Default, Secured Party may declare any of the Obligations to be immediately due and 8. payable and shall have, in addition to all other rights and remedies granted to it in this Agreement or any other Document, all rights and remedies of a secured party under the UCC and other applicable laws. (b) For the purpose of enabling Secured Party to exercise its rights and remedies under this Section 9 or otherwise in connection with this Agreement, Debtor hereby grants to Secured Party an irrevocable, non-exclusive and assignable license (exercisable without payment or royalty or other compensation to Debtor) to use, license or sublicense any intellectual property Collateral. (c) The cash proceeds actually received from the sale or other disposition or collection of Collateral, and any other amounts received in respect of the Collateral the application of which is not otherwise provided for herein, shall be applied FIRST, to the payment of the reasonable costs and expenses of Secured Party in exercising or enforcing its rights hereunder and in collecting or attempting to collect any of the Collateral, and to the payment of all other amounts payable to Secured Party pursuant to Section 13 hereof; and SECOND, to the payment of the Obligations. Any surplus thereof which exists after payment and performance in full of the Obligations shall be promptly paid over to Debtor or otherwise disposed of in accordance with the UCC or other applicable law. Debtor shall remain liable to Secured Party for any deficiency which exists after any sale or other disposition or collection of Collateral. SECTION 10 CERTAIN WAIVERS. Debtor waives, to the fullest extent permitted by law, (i) any right of redemption with respect to the Collateral, whether before or after sale hereunder, and all rights, if any, of marshalling of the Collateral or other collateral or security for the Obligations; (ii) any right to require Secured Party (A) to proceed against any Person, (B) to exhaust any other collateral or security for any of the Obligations, (C) to pursue any remedy in Secured Party's power, or (D) to make or give any presentments, demands for performance, notices of nonperformance, protests, notices of protests or notices of dishonor in connection with any of the Collateral; and (iii) all claims, damages, and demands against Secured Party arising out of the repossession, retention, sale or application of the proceeds of any sale of the Collateral SECTION 11 NOTICES. All notices or other communications hereunder shall be in writing (including by facsimile transmission) and mailed, sent or delivered to the respective parties hereto at or to their respective addresses or facsimile numbers set forth below their names on the signature pages hereof, or at or to such other address or facsimile number as shall be designated by any party in a written notice to the other parties hereto. All such notices and other communications shall be effective (i) if delivered by hand, when delivered; (ii) if sent by mail, upon the earlier of the date of receipt or five business days after deposit in the mail, first class (or air mail, with respect to communications to be sent to or from the United States); and (iii) if sent by facsimile transmission, when sent. SECTION 12 NO WAIVER; CUMULATIVE REMEDIES. No failure on the part of Secured Party to exercise, and no delay in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, remedy, power or privilege preclude any other or further exercise thereof or the exercise of any other right, remedy, 9. power or privilege. The rights and remedies under this Agreement are cumulative and not exclusive of any rights, remedies, powers and privileges that may otherwise be available to Secured Party. SECTION 13 COSTS AND EXPENSES. (a) Subject to the terms of any other written fee agreement between Debtor and Secured Party or Guarantor, Debtor agrees to pay on demand: (i) the reasonable out-of-pocket costs and expenses of Secured Party, and the reasonable fees and disbursements of counsel to Secured Party, in connection with the negotiation, preparation, execution, delivery and administration of this Agreement and the Note, and any amendments, modifications or waivers of the terms thereof, and the custody of the Collateral; (ii) all audit, consulting, search, recording, filing and similar costs, fees and expenses incurred or sustained by Secured Party in connection with this Agreement or the Collateral; and (iii) all costs and expenses of Secured Party, and the fees and disbursements of counsel, in connection with the enforcement or attempted enforcement of, and preservation of any rights or interests under, this Agreement and the Loan Agreement, including in any out-of-court workout or other refinancing or restructuring or in any bankruptcy case, and the protection, sale or collection of, or other realization upon, any of the Collateral. (b) Any amounts payable to Secured Party under this Section 13 or otherwise under this Agreement if not paid upon demand shall bear interest from the date of such demand until paid in full, at the default rate specified in the Loan Agreement. SECTION 14 BINDING EFFECT. This Agreement shall be binding upon, inure to the benefit of and be enforceable by Debtor, Secured Party and their respective successors and assigns. SECTION 15 GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York, except as required by mandatory provisions of law and to the extent the validity or perfection of the security interests hereunder, or the remedies hereunder, in respect of any Collateral are governed by the law of a jurisdiction other than New York. SECTION 16 ENTIRE AGREEMENT; AMENDMENT. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof and shall not be amended except by the written agreement of the parties. SECTION 17 SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under all applicable laws and regulations. If, however, any provision of this Agreement shall be prohibited by or invalid under any such law or regulation in any jurisdiction, it shall, as to such jurisdiction, be deemed modified to 10. conform to the minimum requirements of such law or regulation, or, if for any reason it is not deemed so modified, it shall be ineffective and invalid only to the extent of such prohibition or invalidity without affecting the remaining provisions of this Agreement, or the validity or effectiveness of such provision in any other jurisdiction. SECTION 18 COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. SECTION 19 TERMINATION. Upon payment and performance in full of all Obligations, this Agreement shall terminate and Secured Party shall promptly execute and deliver to Debtor such documents and instruments reasonably requested by Debtor as shall be necessary to evidence termination of all security interests given by Debtor to Secured Party hereunder; PROVIDED, HOWEVER, that the obligations of Debtor under Section 13 hereof shall survive such termination. 11. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement, as of the date first above written. NORTH AMERICAN VACCINE, INC. By: /s/ Lawrence J. Hineline ------------------------ Title: Vice President Finance 10150 Old Columbia Road Columbia, Maryland 21046 Attn: Vice President Finance Fax: (410) 309-4077 BANK OF AMERICA, N.A. By: /s/ Lawrence J. Gordon ----------------------- Title: Vice President Bank of America Center 700 Louisiana Street TX4-213-08-10 Houston, Texas 77002-2700 Attn: Lawrence J. Gordon Fax: (713) 247-6719 12. SCHEDULE 1 to the Security Agreement 1. LOCATIONS OF CHIEF EXECUTIVE OFFICE AND OTHER LOCATIONS, INCLUDING OF COLLATERAL a. Chief Executive Office and Principal Place of Business: North American Vaccine, Inc. 10150 Old Columbia Road Columbia, Maryland 21046 b. Other locations where Debtor conducts business or any Collateral is kept: North American Vaccine, Inc. 9000 Virginia Manor Road Suite 290 Beltsville, Maryland 20705 North American Vaccine, Inc. 12140 Indian Creek Court Beltsville, Maryland 20705 AMVAX, Inc. 12040 Indian Creek Court Beltsville, Maryland 20705 American Vaccine Corporation 1105 North Market Street, Suite 940 Wilmington, Delaware 19801 1. TRADE NAMES AND TRADE STYLES; OTHER CORPORATE, TRADE OR FICTITIOUS NAMES, ETC. See Schedule B attached hereto. S-1. SCHEDULE 2 to the Security Agreement 1. PATENTS AND PATENT APPLICATIONS. See Schedule A attached hereto. 2. COPYRIGHTS (REGISTERED AND UNREGISTERED) AND COPYRIGHT APPLICATIONS. None. 3. TRADEMARKS, SERVICE MARKS AND TRADE NAMES AND TRADEMARK, SERVICE MARK AND TRADE NAME APPLICATIONS. See Schedule B attached hereto. S-2.
- ------------------------------------------------------------------------------------------------------------------------------------ SCHEDULE A - ------------------------------------------------------------------------------------------------------------------------------------ PATENTS AND PATENT APPLICATIONS OF ASSIGNOR - ------------------------------------------------------------------------------------------------------------------------------------ TITLE INVENTORS ASSIGNEE APPL. NO./ APPL. DATE/GRANT STATUS PATENT NO. DATE - ------------------------------------------------------------------------------------------------------------------------------------ ISSUED U.S. PATENTS - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Blake, et al. NVX 08/798,760 February 11, 1997 Notice of Expression, Purification and (co-exclusive (Notice of Allowance Allowance issued Refolding of the Outer Membrane license with PMC) issued Jan. 1999) January 1999 Group B Porin Proteins (fee paid April 1999) - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Blake, et al. NVX & Rockefeller 5,439,808 August 8, 1995 Patent Expression, Purification and University Refolding of the Outer Membrane (co-exclusive Group B Porin Proteins from license with PMC) Neisseria Meningitidis - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Blake, et al. NVX 5,747,287 May 5, 1998 Patent Expression, Purification and (co-exclusive Refolding of the Outer Membrane license with PMC) Group B Porin Proteins from Neisseria Meningitidis - ------------------------------------------------------------------------------------------------------------------------------------ Group A Streptococcal Blake et al. NVX & Rockefeller 5,866,135 February 2, 1999 Patent Polysaccharide Immunogenic University Compositions and Methods - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Blake, et al. NVX 5,879,686 March 9, 1999 Patent Expression, Purification and (co-exclusive Refolding of the Outer Membrane license with PMC) Group B Porin Proteins from Neisseria Meningitidis - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ U.S. PATENT APPLICATIONS - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Tai, et al. NVX 08/096,181 July 23, 1993 Application Expression, Purification and Refolding of the Outer Membrane Protein P2 from Haemophilus Type b - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Tai, et al. NVX 08/449,358 May 24, 1995 Application Expression, Purification and Refolding of the Outer Membrane Protein P2 from Haemophilus Type b - ------------------------------------------------------------------------------------------------------------------------------------ Antigenic Group B Streptococcus Michon, et al. NVX 08/481,883 June 7, 1995 Application Type II and Type III Polysaccharide Fragments Having a 2,5-Anhydro-D-Mannose Terminal Structure and Conjugate Vaccine Thereof - ------------------------------------------------------------------------------------------------------------------------------------ Direct Methods for Molar-Mass Michon, D'Ambra NVX 08/753,242 November 22, 1996 Application Determination of Fragments of Haemophilus Type b Capsular Polysaccharides and Vaccine Preparation - ------------------------------------------------------------------------------------------------------------------------------------ Cloning of Non-IgA FC Binding Tai, Blake NVX 08/923,992 September 5, 1997 Application Forms of the Group B Streptococcal Beta Antigens - ------------------------------------------------------------------------------------------------------------------------------------ Antigenic Group B Streptococcus Michon, et al. NVX 09/025,225 February 18, 1998 Application Type II and Type III Polysaccharide Fragments Having a 2,5-Anhydro-D-Mannose Terminal Structure and Conjugate Vaccine Thereof - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Immunogenic Conjugates Comprising Blake, et al. NVX 09/118/180 July 17, 1998 Application A Group B Meningococcal Porin and an H. Influenzae Polysaccharide - ------------------------------------------------------------------------------------------------------------------------------------ Modified Immunogenic Pneumolysin Minetti, et al. NVX 09/120,044 July 21, 1998 Application Compositions as Vaccines - ------------------------------------------------------------------------------------------------------------------------------------ Group A Streptococcal Blake et al. NVX & 09/207,188 December 8, 1998 Application Polysaccharide Immunogenic Rockefeller Compositions and Methods University - ------------------------------------------------------------------------------------------------------------------------------------ Procedures for the Extraction and Michon, Blake NVX 09/221,620 December 23, 1998 Application Isolation of Bacterial Capsular Polysaccharides for Use as Vaccines or Linked to Proteins as Conjugate Vaccines - ------------------------------------------------------------------------------------------------------------------------------------ Gram Positive Bacterial Antigens Long-Rowe, Blake NVX 09/399,220 September 17, 1999 Application and Methods of Purification of the Streptococcal C-Beta Protein - ------------------------------------------------------------------------------------------------------------------------------------ Immunogenic Polysaccharide-Protein Michon et al. NVX 09/376,911 August 18, 1999 Application Conjugate Useful as a Vaccine Produced Via Conjugation Through a CZ-3 N-Acyl Portion F A Polysaccharide - ------------------------------------------------------------------------------------------------------------------------------------
A-1.
- --------------------------------------------------------------------------------------------------------------------------- SCHEDULE B - --------------------------------------------------------------------------------------------------------------------------- U.S. TRADEMARKS OF ASSIGNOR - --------------------------------------------------------------------------------------------------------------------------- MARK STATUS APPL NO./ APPL./REGIS. DATE OWNER OF RECORD REGIS. NO. - --------------------------------------------------------------------------------------------------------------------------- REGISTERED U.S. TRADEMARKS - --------------------------------------------------------------------------------------------------------------------------- Globe Design Registered 1,932,111 October 31, 1995 North American Vaccine, Inc. - --------------------------------------------------------------------------------------------------------------------------- AMVAX Registered 1,967,632 April 16, 1996 North American Vaccine, Inc. - --------------------------------------------------------------------------------------------------------------------------- TRINAVACEL Registered 2,101,121 September 30, 1997 American Vaccine Corporation - --------------------------------------------------------------------------------------------------------------------------- TRIVAX Registered 2,118,360 December 2, 1997 American Vaccine Corporation - --------------------------------------------------------------------------------------------------------------------------- NAVA Registered 2,267,812 August 3, 1999 American Vaccine Corporation - --------------------------------------------------------------------------------------------------------------------------- PENDING U.S. TRADEMARK APPLICATIONS - --------------------------------------------------------------------------------------------------------------------------- THE IMPORTANCE OF OUR WORK Pending 75/190,826 October 29, 1996 American Vaccine Corporation GROWS BIGGER EVERY DAY - --------------------------------------------------------------------------------------------------------------------------- NEISVAC-C Pending Not Avail. August 26, 1999 American Vaccine Corporation - --------------------------------------------------------------------------------------------------------------------------- NEISIVA Pending Not Avail. August 26, 1999 American Vaccine Corporation - --------------------------------------------------------------------------------------------------------------------------- MENCIVA Pending Not Avail. August 26, 1999 American Vaccine Corporation - ---------------------------------------------------------------------------------------------------------------------------
B-1 EX-10.50 7 SECURITY AGREEMENT THIS SECURITY AGREEMENT (this "Agreement"), dated as of November 1, 1999, is made between NORTH AMERICAN VACCINE, INC., a Canadian corporation ("Debtor") and BAXTER INTERNATIONAL, INC., a Delaware corporation ("Secured Party"). Debtor and Secured Party hereby agree as follows: SECTION 1 DEFINITIONS; INTERPRETATION. (a) All capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings assigned to them in the Reimbursement Agreement. (b) As used in this Agreement, the following terms shall have the following meanings: "BANK" means Bank of America, N.A. "LOAN AGREEMENT" means the loan agreement dated November 1, 1999, between Bank and Debtor, pursuant to which Bank has agreed to make certain revolving loans to Debtor. "COLLATERAL" has the meaning set forth in Section 2. "DOCUMENTS" means the Reimbursement Agreement and all other documents, agreements and instruments delivered to Secured Party in connection therewith or with the Obligations. "EVENT OF DEFAULT" has the meaning set forth in Section 8. "LIEN" means any mortgage, deed of trust, pledge, security interest, assignment, deposit arrangement, charge or encumbrance, lien, or other type of preferential arrangement. "REIMBURSEMENT AGREEMENT" means that certain Reimbursement Agreement dated November 1, 1999 made by Debtor in favor of Secured Party, as amended, modified, renewed, extended or replaced from time to time. "OBLIGATIONS" means the indebtedness, liabilities and other obligations of Debtor to Secured Party under or in connection with this Agreement and the other Documents, including, without limitation, all amounts owing under the Reimbursement Agreement and all fees and all other amounts payable by Debtor to Secured Party thereunder or in connection therewith, whether now existing or hereafter arising, and whether due or to become due, absolute or contingent, liquidated or unliquidated, determined or undetermined. "PERMITTED LIEN" means (i) any Lien in favor of Secured Party; (ii) any Lien that is subordinate to the Lien on the Collateral created by this Agreement; (iii) any Lien in favor of Bank of America, N.A. under that certain credit agreement dated as of November 1, 1999; (iv) any Liens existing as of the date hereof and disclosed in writing to Secured Party. "PERSON" means an individual, corporation, partnership, joint venture, trust, unincorporated organization, governmental agency or authority, or any other entity of whatever nature. "UCC" means the Uniform Commercial Code as the same may, from time to time, be in effect in the State of New York; PROVIDED, HOWEVER, in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of the security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, the term "UCC" shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such attachment, perfection or priority and for purposes of definitions related to such provisions. (c) Where applicable and except as otherwise defined herein, terms used in this Agreement shall have the meanings assigned to them in the UCC. (d) In this Agreement, (i) the meaning of defined terms shall be equally applicable to both the singular and plural forms of the terms defined; and (ii) the captions and headings are for convenience of reference only and shall not affect the construction of this Agreement. SECTION 2 SECURITY INTEREST. (a) As security for the payment and performance of the Obligations, Debtor hereby pledges, assigns, transfers, hypothecates and sets over to Secured Party, and hereby grants to Secured Party a security interest in, all of Debtor's right, title and interest in, to and under the following property, wherever located and whether now existing or owned or hereafter acquired or arising (collectively, the "Collateral"): (i) all accounts, accounts receivable, contract rights, rights to payment, chattel paper, letters of credit, documents, securities, money and instruments, and investment property, whether held directly or through a securities intermediary, and other obligations of any kind owed to Debtor, however evidenced; (ii) all deposits and deposit accounts with any bank, savings and loan association, credit union or like organization, and all funds and amounts therein, and whether or not held in trust, or in custody or safekeeping, or otherwise restricted or designated for a particular purpose; (iii) all inventory, including, without limitation, all materials, raw materials, parts, components, work in progress, finished goods, merchandise, supplies, and all other goods which are held for sale, lease or other disposition or furnished under contracts of service or consumed in Debtor's 2. business, including, without limitation, those held for display or demonstration or out on lease or consignment; (iv) all equipment, including, without limitation, all machinery, furniture, furnishings, fixtures, trade fixtures, tools, parts and supplies, automobiles, trucks, tractors and other vehicles, appliances, computer and other electronic data processing equipment and other office equipment, computer programs and related data processing software, and all additions, substitutions, replacements, parts, accessories, and accessions to and for the foregoing; excluding, however, the equipment collateral identified in the agreements referred to in Schedule 4(c)(ii) of the Loan Agreement; (v) all general intangibles and other personal property of Debtor, including, without limitation, (A) all tax and other refunds, rebates or credits of every kind and nature to which Debtor is now or hereafter may become entitled; (B) all intellectual property and all rights therein of any type or description, including, without limitation, all inventions and discoveries, patents and patent applications, copyrights and applications for copyright (together with the underlying works of authorship) whether or not registered, together with any renewals and extensions thereof, trademarks, service marks and trade names, and applications for registration of such trademarks, service marks and trade names, trade secrets, trade dress, trade styles, logos, other source of business identifiers, mask-works, mask-work registrations, mask-work applications, software, confidential and proprietary information, customer lists, other license rights, advertising materials, operating manuals, methods, processes, know-how, algorithms, formulae, databases, quality control procedures, product, service and technical specifications, operating, production and quality control manuals, sales literature, drawings, specifications, blue prints, descriptions, inventions, name plates and catalogs, and the entire goodwill of or associated with the businesses now or hereafter conducted by Debtor connected with and symbolized by any of the aforementioned properties and assets, and all licenses relating to any of the foregoing, all reissuance, continuations and continuations-in-part of the foregoing, all other rights derived from or associated with the foregoing, including the right to sue and recover for past infringement, and all income and royalties with respect thereto; (C) all good will, choses in action and causes of action; (D) all interests in limited and general partnerships and limited liability companies; and (E) all indemnity agreements, guaranties, insurance policies, insurance claims, and other contractual, equitable and legal rights of whatever kind or nature; (vi) all books, records and other written, electronic or other documentation in whatever form maintained by or for Debtor in connection with the ownership of the assets described in this Section 2 or the conduct of its business or evidencing or containing information relating to the Collateral; and (vii) all products and proceeds, including insurance proceeds, of any and all of the foregoing. (b) Anything herein to the contrary notwithstanding, (i) Debtor shall remain liable under any contracts, agreements and other documents included in the Collateral, to the extent set forth therein, to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been 3. executed, (ii) the exercise by Secured Party of any of the rights hereunder shall not release Debtor from any of its duties or obligations under such contracts, agreements and other documents included in the Collateral, and (iii) Secured Party shall not have any obligation or liability under any contracts, agreements and other documents included in the Collateral by reason of this Agreement, nor shall Secured Party be obligated to perform any of the obligations or duties of Debtor thereunder or to take any action to collect or enforce any such contract, agreement or other document included in the Collateral hereunder. (c) Notwithstanding the foregoing provisions of this Section 2, the grant of a security interest as provided herein shall not extend to, and the term "Collateral" shall not include, (1) that certain U.S. Patent No. 5,425,946 which is covered by a security interest in favor of Bankers Trust Company as evidenced by the filing in the U.S. Patent and Trademark Office (the "Excluded Patent Collateral"), and (2) any general intangibles of Debtor (whether owned or held as licensee or lessee, or otherwise), to the extent that (i) such general intangibles are not assignable or capable of being encumbered as a matter of law or under the terms of the license, lease or other agreement applicable thereto (but solely to the extent that any such restriction shall be enforceable under applicable law), without the consent of the licensor or lessor thereof or other applicable party thereto and (ii) such consent has not been obtained; PROVIDED, HOWEVER, that the foregoing grant of security interest shall extend to, and the term "Collateral" shall include, (A) any general intangible which is an account receivable or a proceed of, or otherwise related to the enforcement or collection of, any account receivable, or goods which are the subject of any account receivable, (B) any and all proceeds of any general intangibles which are otherwise excluded to the extent that the assignment or encumbrance of such proceeds is not so restricted, and (C) upon obtaining the consent of any such licensor, lessor or other applicable party's consent with respect to any such otherwise excluded general intangibles, such general intangibles as well as any and all proceeds thereof that might have theretofore have been excluded from such grant of a security interest and the term "Collateral." (d) This Agreement shall create a continuing security interest in the Collateral which shall remain in effect until terminated in accordance with Section 19 hereof. SECTION 3 FINANCING STATEMENTS, ETC. Debtor shall execute and deliver to Secured Party concurrently with the execution of this Agreement, and at any time and from time to time thereafter, all financing statements, assignments, continuation financing statements, termination statements, account control agreements, and other documents and instruments, in form reasonably satisfactory to Secured Party, and take all other action, as Secured Party may reasonably request, to perfect and continue perfected, maintain the priority of or provide notice of the security interest of Secured Party in the Collateral and to accomplish the purposes of this Agreement. SECTION 4 REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants to Secured Party that: 4. (a) Debtor is a corporation duly organized, validly existing and in good standing under the law of the jurisdiction of its incorporation and has all requisite power and authority to execute, deliver and perform its obligations under this Agreement. (b) The execution, delivery and performance by Debtor of this Agreement have been duly authorized by all necessary corporate action of Debtor, and this Agreement constitutes the legal, valid and binding obligation of Debtor, enforceable against Debtor in accordance with its terms, except in each case as such enforceability may be limited by bankruptcy, insolvency reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors' rights. (c) Except as otherwise disclosed in writing by Debtor to Secured Party, no authorization, consent, approval, license, exemption of, or filing or registration with, any governmental authority or agency, or approval or consent of any other Person, is required for the due execution, delivery or performance by Debtor of this Agreement. (d) Debtor's chief executive office and principal place of business is located at the address set forth in SCHEDULE 1; all other locations where Debtor conducts business or Collateral is kept are set forth in SCHEDULE 1. (e) Except as otherwise disclosed in writing by Debtor to Secured Party, Debtor is the sole and complete owner of the Collateral, free from any Lien other than Permitted Liens. (f) Other than the Excluded Patent, Collateral; all of Debtor's U.S. and foreign patents and patent applications, copyrights (whether or not registered), applications for copyright, trademarks, service marks and trade names (whether registered or unregistered), and applications for registration of such trademarks, service marks and trade names, are set forth in SCHEDULE 2. SECTION 5 COVENANTS. So long as any of the Obligations remain unsatisfied, Debtor agrees that: (a) Debtor shall appear in and defend any action, suit or proceeding which may affect to a material extent its title to, or right or interest in, or Secured Party's right or interest in, the Collateral, and shall do and perform all reasonable acts that may be necessary and appropriate to maintain, preserve and protect the Collateral. (b) Debtor shall comply in all material respects with all laws, regulations and ordinances, and all policies of insurance, relating in a material way to the possession, operation, maintenance and control of the Collateral. (c) Debtor shall give prompt written notice to Secured Party (and in any event not later than 30 days following any change described below in this subsection) of: (i) any change in the location of Debtor's chief executive office or principal place of business, (ii) any change in the locations set forth in Schedule 1; (iii) any change in its name, (iv) any changes in, additions to or other modifications of its trade names and trade styles set forth in Schedule 1 or Schedule 2, and (v) any changes in its identity or 5. structure in any manner which might make any financing statement filed hereunder incorrect or misleading. (d) Debtor shall keep separate, accurate and complete books and records with respect to the Collateral, disclosing Secured Party's security interest hereunder. (e) Debtor shall not surrender or lose possession of (other than to Secured Party), sell, lease, rent, or otherwise dispose of or transfer any of the Collateral or any right or interest therein, except in the ordinary course of business; PROVIDED that no such disposition or transfer of Collateral consisting of investment property or instruments shall be permitted while any Event of Default exists. (f) Debtor shall keep the Collateral free of all Liens except Permitted Liens. (g) Debtor shall pay and discharge all taxes, fees, assessments and governmental charges or levies imposed upon it with respect to the Collateral prior to the date on which penalties attach thereto, except to the extent such taxes, fees, assessments or governmental charges or levies are being contested in good faith by appropriate proceedings. (h) Debtor shall maintain and preserve its corporate existence, its rights to transact business and all other rights, franchises and privileges necessary or desirable in the normal course of its business and operations and the ownership of the Collateral, except in connection with any transactions expressly permitted by the Documents. (i) Upon the request of Secured Party, Debtor shall (i) immediately deliver to Secured Party, or an agent designated by it, appropriately endorsed or accompanied by appropriate instruments of transfer or assignment, all documents and instruments, all certificated securities with respect to any investment property, all letters of credit and all accounts and other rights to payment at any time evidenced by promissory notes, trade acceptances or other instruments, (ii) cause any securities intermediaries to show on their books that Secured Party is the entitlement holder with respect to any investment property, and/or obtain account control agreements in favor of Secured Party from such securities intermediaries, in form and substance satisfactory to Secured Party, with respect to any investment property, as requested by Secured Party, (iii) mark all documents and chattel paper with such legends as Secured Party shall reasonably specify, and (iv) obtain consents from any letter of credit issuers with respect to the assignment to Secured Party of any letter of credit proceeds. (j) Debtor shall at any reasonable time and from time to time permit Secured Party or any of its agents or representatives to visit the premises of Debtor and inspect the Collateral and to examine and make copies of and abstracts from the records and books of account of Debtor. (k) Debtor shall: (i) with such frequency as Secured Party may require, furnish to Secured Party such lists of customers and other information relating to the accounts and other rights to payment as Secured Party shall reasonably request; (ii) give only normal discounts, allowances and credits as to accounts 6. and other rights to payment, in the ordinary course of business, according to normal trade practices utilized by Debtor, and enforce all accounts and other rights to payment strictly in accordance with their terms, except that Debtor may grant any extension of the time for payment or enter into any agreement to make a rebate or otherwise to reduce the amount owing on or with respect to, or compromise or settle for less than the full amount thereof, any account or other right to payment, in the ordinary course of business, according to normal and prudent trade practices utilized by Debtor; and (iii) upon the request of Secured Party (A) at any time, notify all or any designated portion of the account debtors and other obligors on the accounts and other rights to payment of the security interest hereunder, and (B) upon the occurrence and during the continuance of an Event of Default, notify the account debtors and other obligors on the accounts and other rights to payment or any designated portion thereof that payment shall be made directly to Secured Party or to such other Person or location as Secured Party shall specify. (l) Debtor shall (i) notify Secured Party of any material claim made or asserted against the Collateral by any Person and of any change in the composition of the Collateral or other event which could materially adversely affect the value of the Collateral or Secured Party's Lien thereon; (ii) furnish to Secured Party such statements and schedules further identifying and describing the Collateral and such other reports and other information in connection with the Collateral as Secured Party may reasonably request, all in reasonable detail; and (iii) upon reasonable request of Secured Party make such demands and requests for information and reports as Debtor is entitled to make in respect of the Collateral. (m) If and when Debtor shall obtain rights to any new patents, trademarks, service marks, trade names or copyrights, or otherwise acquire or become entitled to the benefit of, or apply for registration of, any of the foregoing, Debtor (i) shall promptly notify Secured Party thereof and (ii) hereby authorizes Secured Party to modify, amend, or supplement SCHEDULE 2 and from time to time to include any of the foregoing and make all necessary or appropriate filings with respect thereto. (n) Debtor shall not enter into any agreement (including any license or royalty agreement) pertaining to any of its patents, copyrights, trademarks, service marks and trade names, except for non-exclusive licenses in the ordinary course of business. (o) Debtor shall give Secured Party immediate notice of the establishment of any new deposit account and any new securities account with respect to any investment property. SECTION 6 COLLECTION OF ACCOUNTS. Until Secured Party exercises its rights hereunder to collect the accounts and other rights to payment, Debtor shall endeavor in the first instance diligently to collect all amounts due or to become due on or with respect to the accounts and other rights to payment. At the request of Secured Party, upon the occurrence and during the continuance of any Event of Default, all remittances received by Debtor shall be held in trust for Secured Party and, in accordance with Secured Party's instructions, remitted to Secured Party or deposited to an account of Secured Party in the form received (with any necessary endorsements or instruments of assignment or transfer.) At the request of Secured Party, upon and after the occurrence of any Event of Default, Secured Party shall be entitled to receive all distributions 7. and payments of any nature with respect to any investment property or instruments, and all such distributions or payments received by the Debtor shall be held in trust for Secured Party and, in accordance with Secured Party's instructions, remitted to Secured Party or deposited to an account with Secured Party in the form received (with any necessary endorsements or instruments of assignment or transfer.) Following the occurrence of an Event of Default any such distributions and payments with respect to any investment property held in any securities account shall be held and retained in such securities account, in each case as part of the Collateral hereunder. Additionally, Secured Party shall have the right, upon the occurrence of an Event of Default, following prior written notice to the Debtor, to vote and to give consents, ratifications and waivers with respect to any investment property and instruments, and to exercise all rights of conversion, exchange, subscription or any other rights, privileges or options pertaining thereto, as if Secured Party were the absolute owner thereof; PROVIDED that Secured Party shall have no duty to exercise any of the foregoing rights afforded to it and shall not be responsible to the Debtor or any other Person for any failure to do so or delay in doing so. SECTION 7 AUTHORIZATION; SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Secured Party shall have the right to, in the name of Debtor, or in the name of Secured Party or otherwise, upon notice to but without the requirement of assent by Debtor, and Debtor hereby constitutes and appoints Secured Party (and any of Secured Party's officers, employees or agents designated by Secured Party) as Debtor's true and lawful attorney-in-fact, with full power and authority to: (i) sign any of the financing statements and other documents and instruments which must be executed or filed to perfect or continue perfected, maintain the priority of or provide notice of Secured Party's security interest in the Collateral (including any notices to or agreements with any securities intermediary); (ii) assert, adjust, sue for, compromise or release any claims under any policies of insurance; and (iii) execute any and all such other documents and instruments, and do any and all acts and things for and on behalf of Debtor, which Secured Party may deem reasonably necessary or advisable to maintain, protect, realize upon and preserve the Collateral and Secured Party's security interest therein and to accomplish the purposes of this Agreement. Secured Party agrees that, except upon and during the continuance of an Event of Default, it shall not exercise the power of attorney, or any rights granted to Secured Party, pursuant to clauses (ii) and (iii). The foregoing power of attorney is coupled with an interest and irrevocable so long as the Obligations have not been paid and performed in full. Debtor hereby ratifies, to the extent permitted by law, all that Secured Party shall lawfully and in good faith do or cause to be done by virtue of and in compliance with this Section 7. SECTION 8 EVENTS OF DEFAULT. Any of the following events which shall occur and be continuing shall constitute an "Event of Default": (a) Debtor shall fail to pay when due any amount payable hereunder or under the Reimbursement Agreement or any other Document or in respect of the Obligations or an "Event of Default" shall occur under the Loan Agreement. (b) Any representation or warranty by Debtor under or in connection with this Agreement any other Document shall prove to have been incorrect in any material respect when made or deemed made. 8. (c) Debtor shall fail to perform or observe in any material respect any other term, covenant or agreement contained in this Agreement, the Reimbursement Agreement or any other Document on its part to be performed or observed and any such failure shall remain unremedied for a period of 5 days from the occurrence thereof. (d) Any material impairment in the value of the Collateral or the priority of Secured Party's Lien hereunder. (e) Any levy upon, seizure or attachment of any of the Collateral. (h) Any Event of Default shall occur under the Bank Credit Agreement. SECTION 9 REMEDIES. (a) Upon the occurrence and continuance of any Event of Default, Secured Party may declare any of the Obligations to be immediately due and payable and shall have, in addition to all other rights and remedies granted to it in this Agreement, the Reimbursement Agreement or any other Document, all rights and remedies of a secured party under the UCC and other applicable laws. (b) For the purpose of enabling Secured Party to exercise its rights and remedies under this Section 9 or otherwise in connection with this Agreement, Debtor hereby grants to Secured Party an irrevocable, non-exclusive and assignable license (exercisable without payment or royalty or other compensation to Debtor) to use, license or sublicense any intellectual property Collateral. (c) The cash proceeds actually received from the sale or other disposition or collection of Collateral, and any other amounts received in respect of the Collateral the application of which is not otherwise provided for herein, shall be applied FIRST, to the payment of the reasonable costs and expenses of Secured Party in exercising or enforcing its rights hereunder and in collecting or attempting to collect any of the Collateral, and to the payment of all other amounts payable to Secured Party pursuant to Section 13 hereof; and SECOND, to the payment of the Obligations. Any surplus thereof which exists after payment and performance in full of the Obligations shall be promptly paid over to Debtor or otherwise disposed of in accordance with the UCC or other applicable law. Debtor shall remain liable to Secured Party for any deficiency which exists after any sale or other disposition or collection of Collateral. SECTION 10 CERTAIN WAIVERS. Debtor waives, to the fullest extent permitted by law, (i) any right of redemption with respect to the Collateral, whether before or after sale hereunder, and all rights, if any, of marshalling of the Collateral or other collateral or security for the Obligations; (ii) any right to require Secured Party (A) to proceed against any Person, (B) to exhaust any other collateral or security for any of the Obligations, (C) to pursue any remedy in Secured Party's power, or (D) to make or give any presentments, demands for performance, notices of nonperformance, protests, notices of protests or notices of dishonor in connection with any of the Collateral; and (iii) all claims, damages, and demands against Secured Party arising out of the repossession, retention, sale or application of the proceeds of any sale of the Collateral. 9. SECTION 11 NOTICES. All notices or other communications hereunder shall be in writing (including by facsimile transmission) and mailed, sent or delivered to the respective parties hereto at or to their respective addresses or facsimile numbers set forth below their names on the signature pages hereof, or at or to such other address or facsimile number as shall be designated by any party in a written notice to the other parties hereto. All such notices and other communications shall be effective (i) if delivered by hand, when delivered; (ii) if sent by mail, upon the earlier of the date of receipt or five business days after deposit in the mail, first class [(or air mail, with respect to communications to be sent to or from the United States)]; and (iii) if sent by facsimile transmission, when sent. SECTION 12 NO WAIVER; CUMULATIVE REMEDIES. No failure on the part of Secured Party to exercise, and no delay in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, remedy, power or privilege preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights and remedies under this Agreement are cumulative and not exclusive of any rights, remedies, powers and privileges that may otherwise be available to Secured Party. SECTION 13 COSTS AND EXPENSES. (a) Subject to the terms of any other written fee agreement between Debtor and Secured Party or Guarantor, Debtor agrees to pay on demand: (i) [Intentionally omitted]; (ii) all audit, consulting, search, recording, filing and similar costs, fees and expenses incurred or sustained by Secured Party in connection with this Agreement or the Collateral; and (iii) all costs and expenses of Secured Party, and the fees and disbursements of counsel, in connection with the enforcement or attempted enforcement of, and preservation of any rights or interests under, this Agreement and the Reimbursement Agreement, including in any out-of-court workout or other refinancing or restructuring or in any bankruptcy case, and the protection, sale or collection of, or other realization upon, any of the Collateral. (b) Any amounts payable to Secured Party under this Section 13 or otherwise under this Agreement if not paid upon demand shall bear interest from the date of such demand until paid in full, at the default rate specified in the Loan Agreement. SECTION 14 BINDING EFFECT. This Agreement shall be binding upon, inure to the benefit of and be enforceable by Debtor, Secured Party and their respective successors and assigns. SECTION 15 GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York, except as required by mandatory provisions of law and to the extent the validity or 10. perfection of the security interests hereunder, or the remedies hereunder, in respect of any Collateral are governed by the law of a jurisdiction other than New York. SECTION 16 ENTIRE AGREEMENT; AMENDMENT. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof and shall not be amended except by the written agreement of the parties. SECTION 17 SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under all applicable laws and regulations. If, however, any provision of this Agreement shall be prohibited by or invalid under any such law or regulation in any jurisdiction, it shall, as to such jurisdiction, be deemed modified to conform to the minimum requirements of such law or regulation, or, if for any reason it is not deemed so modified, it shall be ineffective and invalid only to the extent of such prohibition or invalidity without affecting the remaining provisions of this Agreement, or the validity or effectiveness of such provision in any other jurisdiction. SECTION 18 COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. SECTION 19 TERMINATION. Upon payment and performance in full of all Obligations, this Agreement shall terminate and Secured Party shall promptly execute and deliver to Debtor such documents and instruments reasonably requested by Debtor as shall be necessary to evidence termination of all security interests given by Debtor to Secured Party hereunder; PROVIDED, HOWEVER, that the obligations of Debtor under Section 13 hereof shall survive such termination. 11. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement, as of the date first above written. NORTH AMERICAN VACCINE, INC. By: /s/ Lawrence J. Hineline ------------------------------- Title: Vice President Finance 10150 Old Columbia Road Columbia, Maryland 21046 ----------------------------------- Attn: Vice President Fax: (410) 309-4077 BAXTER INTERNATIONAL INC. By: /s/ Steven J. Meyer ----------------------- Title: Corp. Treasurer SCHEDULE 1 to the Security Agreement 1. LOCATIONS OF CHIEF EXECUTIVE OFFICE AND OTHER LOCATIONS, INCLUDING OF COLLATERAL a. Chief Executive Office and Principal Place of Business: North American Vaccine, Inc. 10150 Old Columbia Road Columbia, Maryland 21046 b. Other locations where Debtor conducts business or any Collateral is kept: North American Vaccine, Inc. 9000 Virginia Manor Road Suite 290 Beltsville, Maryland 20705 North American Vaccine, Inc. 12140 Indian Creek Court Beltsville, Maryland 20705 AMVAX, Inc. 12040 Indian Creek Court Beltsville, Maryland 20705 American Vaccine Corporation 1105 North Market Street, Suite 940 Wilmington, Delaware 19801 2. TRADE NAMES AND TRADE STYLES; OTHER CORPORATE, TRADE OR FICTITIOUS NAMES, ETC. See Schedule B attached hereto. S-1. SCHEDULE 2 to the Security Agreement 1. PATENTS AND PATENT APPLICATIONS. See Schedule A attached hereto. 2. COPYRIGHTS (REGISTERED AND UNREGISTERED) AND COPYRIGHT APPLICATIONS. None. 3. TRADEMARKS, SERVICE MARKS AND TRADE NAMES AND TRADEMARK, SERVICE MARK AND TRADE NAME APPLICATIONS. See Schedule B attached hereto. S-2
- ------------------------------------------------------------------------------------------------------------------------------------ SCHEDULE A - ------------------------------------------------------------------------------------------------------------------------------------ PATENTS AND PATENT APPLICATIONS OF ASSIGNOR - ------------------------------------------------------------------------------------------------------------------------------------ ISSUED U.S. PATENTS - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Blake, et al. NVX 08/798,760 February 11, 1997 Notice of Expression, Purification and (co-exclusive (Notice of Allowance Allowance issued Refolding of the Outer Membrane license with PMC) issued Jan. 1999) January 1999 Group B Porin Proteins (fee paid April 1999) - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Blake, et al. NVX & Rockefeller 5,439,808 August 8, 1995 Patent Expression, Purification and University Refolding of the Outer Membrane (co-exclusive Group B Porin Proteins from license with PMC) Neisseria Meningitidis - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Blake, et al. NVX 5,747,287 May 5, 1998 Patent Expression, Purification and (co-exclusive Refolding of the Outer Membrane license with PMC) Group B Porin Proteins from Neisseria Meningitidis - ------------------------------------------------------------------------------------------------------------------------------------ Group A Streptococcal Blake et al. NVX & Rockefeller 5,866,135 February 2, 1999 Patent Polysaccharide Immunogenic University Compositions and Methods - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Blake, et al. NVX 5,879,686 March 9, 1999 Patent Expression, Purification and (co-exclusive Refolding of the Outer Membrane license with PMC) Group B Porin Proteins from Neisseria Meningitidis - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ U.S. PATENT APPLICATIONS - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Tai, et al. NVX 08/096,181 July 23, 1993 Application Expression, Purification and Refolding of the Outer Membrane Protein P2 from Haemophilus Type b - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Tai, et al. NVX 08/449,358 May 24, 1995 Application Expression, Purification and Refolding of the Outer Membrane Protein P2 from Haemophilus Type b - ------------------------------------------------------------------------------------------------------------------------------------ Antigenic Group B Streptococcus Michon, et al. NVX 08/481,883 June 7, 1995 Application Type II and Type III Polysaccharide Fragments Having a 2,5-Anhydro-D-Mannose Terminal Structure and Conjugate Vaccine Thereof - ------------------------------------------------------------------------------------------------------------------------------------ Direct Methods for Molar-Mass Michon, D'Ambra NVX 08/753,242 November 22, 1996 Application Determination of Fragments of Haemophilus Type b Capsular Polysaccharides and Vaccine Preparation - ------------------------------------------------------------------------------------------------------------------------------------ Cloning of Non-IgA FC Binding Tai, Blake NVX 08/923,992 September 5, 1997 Application Forms of the Group B Streptococcal Beta Antigens - ------------------------------------------------------------------------------------------------------------------------------------ Antigenic Group B Streptococcus Michon, et al. NVX 09/025,225 February 18, 1998 Application Type II and Type III Polysaccharide Fragments Having a 2,5-Anhydro-D-Mannose Terminal Structure and Conjugate Vaccine Thereof - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Immunogenic Conjugates Comprising Blake, et al. NVX 09/118/180 July 17, 1998 Application A Group B Meningococcal Porin and an H. Influenzae Polysaccharide - ------------------------------------------------------------------------------------------------------------------------------------ Modified Immunogenic Pneumolysin Minetti, et al. NVX 09/120,044 July 21, 1998 Application Compositions as Vaccines - ------------------------------------------------------------------------------------------------------------------------------------ Group A Streptococcal Blake et al. NVX & 09/207,188 December 8, 1998 Application Polysaccharide Immunogenic Rockefeller Compositions and Methods University - ------------------------------------------------------------------------------------------------------------------------------------ Procedures for the Extraction and Michon, Blake NVX 09/221,620 December 23, 1998 Application Isolation of Bacterial Capsular Polysaccharides for Use as Vaccines or Linked to Proteins as Conjugate Vaccines - ------------------------------------------------------------------------------------------------------------------------------------ Gram Positive Bacterial Antigens Long-Rowe, Blake NVX 09/399,220 September 17, 1999 Application and Methods of Purification of the Streptococcal C-Beta Protein - ------------------------------------------------------------------------------------------------------------------------------------ Immunogenic Polysaccharide-Protein Michon et al. NVX 09/376,911 August 18, 1999 Application Conjugate Useful as a Vaccine Produced Via Conjugation Through a CZ-3 N-Acyl Portion F A Polysaccharide - ------------------------------------------------------------------------------------------------------------------------------------
A-1
- --------------------------------------------------------------------------------------------------------------------------- SCHEDULE B - --------------------------------------------------------------------------------------------------------------------------- U.S. TRADEMARKS OF ASSIGNOR - --------------------------------------------------------------------------------------------------------------------------- MARK STATUS APPL NO./ APPL./REGIS. DATE OWNER OF RECORD REGIS. NO. - --------------------------------------------------------------------------------------------------------------------------- REGISTERED U.S. TRADEMARKS - --------------------------------------------------------------------------------------------------------------------------- Globe Design Registered 1,932,111 October 31, 1995 North American Vaccine, Inc. - --------------------------------------------------------------------------------------------------------------------------- AMVAX Registered 1,967,632 April 16, 1996 North American Vaccine, Inc. - --------------------------------------------------------------------------------------------------------------------------- TRINAVACEL Registered 2,101,121 September 30, 1997 American Vaccine Corporation - --------------------------------------------------------------------------------------------------------------------------- TRIVAX Registered 2,118,360 December 2, 1997 American Vaccine Corporation - --------------------------------------------------------------------------------------------------------------------------- NAVA Registered 2,267,812 August 3, 1999 American Vaccine Corporation - --------------------------------------------------------------------------------------------------------------------------- PENDING U.S. TRADEMARK APPLICATIONS - --------------------------------------------------------------------------------------------------------------------------- THE IMPORTANCE OF OUR WORK Pending 75/190,826 October 29, 1996 American Vaccine Corporation GROWS BIGGER EVERY DAY - --------------------------------------------------------------------------------------------------------------------------- NEISVAC-C Pending Not Avail. August 26, 1999 American Vaccine Corporation - --------------------------------------------------------------------------------------------------------------------------- NEISIVA Pending Not Avail. August 26, 1999 American Vaccine Corporation - --------------------------------------------------------------------------------------------------------------------------- MENCIVA Pending Not Avail. August 26, 1999 American Vaccine Corporation - ---------------------------------------------------------------------------------------------------------------------------
B-2 EX-10.51 8 PATENT AND TRADEMARK ASSIGNMENT AND SECURITY AGREEMENT THIS PATENT AND TRADEMARK ASSIGNMENT AND SECURITY AGREEMENT (this "Agreement"), dated as of November 1, 1999, is made between NORTH AMERICAN VACCINE, INC., a Canadian corporation ("Assignor"), and BANK OF AMERICA, N.A. ("Assignee"). Assignor and Assignee are parties to a Security Agreement dated as of November 1, 1999 (as amended, modified, renewed or extended from time to time, the "Security Agreement"), which Security Agreement provides, among other things, for the assignment by Assignor to Assignee, and grant by Assignor to Assignee of a security interest in, certain of Assignor's property and assets, including, without limitation, its patents and patent applications, its trademarks, service marks and trade names, and its applications for registration of such trademarks, service marks and trade names. Pursuant to the Loan Agreement Assignor has agreed to execute and deliver this Agreement to Assignee for filing with the United States Patent and Trademark Office (the "PTO") (and any other relevant recording systems in any domestic or foreign jurisdiction), and as further evidence of and to effectuate such assignment of and grant of a security interest in such patents and patent applications, trademarks, service marks and trade names, and applications for registration of such trademarks, service marks and trade names, and the other general intangibles described herein. Accordingly, Assignor and Assignee hereby agree as follows: SECTION 1 DEFINITIONS; INTERPRETATION. (a) All capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings assigned to them in the Security Agreement. (b) In this Agreement, (i) the meaning of defined terms shall be equally applicable to both the singular and plural forms of the terms defined; and (ii) the captions and headings are for convenience of reference only and shall not affect the construction of this Agreement. SECTION 2 ASSIGNMENT AND GRANT OF SECURITY INTEREST. (a) As security for the payment and performance of the Obligations (as defined in the Security Agreement), Assignor hereby assigns, transfers and conveys and grants a security interest in and mortgage to Assignee, for security purposes, all of Assignor's right, title and interest in, to and under the following property, whether now existing or owned or hereafter acquired, developed or arising (collectively, the "Intellectual Property Collateral"): (i) all patents and patent applications, domestic or foreign, all licenses relating to any of the foregoing and all income and royalties with respect to any licenses (including, without limitation, such patents and patent applications as described in SCHEDULE A hereto), all rights to sue for past, present or future infringement thereof, all rights arising therefrom and pertaining thereto and all reissues, divisions, continuations, renewals, extensions and continuations-in-part thereof; (ii) all state (including common law), federal and foreign trademarks, service marks and trade names, and applications for registration of such trademarks, service marks and trade names, all licenses relating to any of the foregoing and all income and royalties with respect to any licenses (including, without limitation, such marks, names and applications as described in SCHEDULE B hereto), whether registered or unregistered and wherever registered, all rights to sue for past, present or future infringement or unconsented use thereof, all rights arising therefrom and pertaining thereto and all reissues, extensions and renewals thereof; (iii) the entire goodwill of or associated with the businesses now or hereafter conducted by Assignor connected with and symbolized by any of the aforementioned properties and assets; (iv) all general intangibles (as defined in the UCC) and all intangible intellectual or other similar property of the Assignor of any kind or nature, associated with or arising out of any of the aforementioned properties and assets and not otherwise described above; and (v) all products and proceeds of any and all of the foregoing. (a) This Agreement shall create a continuing security interest in the Intellectual Property Collateral which shall remain in effect until terminated in accordance with Section 17 hereof. (b) Notwithstanding the foregoing provisions of this Section 2, the grant of a security interest as provided herein shall not extend to, and the term "Intellectual Property Collateral" shall not include, (1) that certain U.S. Patent No. 5,425,946 which is covered by a security interest in favor of Bankers Trust Company as evidenced by the filing in the U.S. Patent and Trademark Office (the "Excluded Patent Collateral"), and (2) any general intangibles of Debtor (whether owned or held as licensee or lessee, or otherwise), to the extent that (i) such general intangibles are not assignable or capable of being encumbered as a matter of law or under the terms of the license, lease or other agreement applicable thereto (but solely to the extent that any such restriction shall be enforceable under applicable law), without the consent of the licensor or lessor thereof or other applicable party thereto and (ii) such consent has not been obtained; PROVIDED, HOWEVER, that the foregoing grant of security interest shall extend to, and the term "Intellectual Property Collateral" shall include, (A) any general intangible which is an account receivable or a proceed of, or otherwise related to the enforcement or collection of, any account receivable, or goods which are the subject of any account receivable, (B) any and all proceeds of any general intangibles which are otherwise excluded to the extent that the assignment or encumbrance of such proceeds is not so restricted, and (C) upon obtaining the consent of any such licensor, lessor or other applicable party's consent with respect to any such otherwise excluded general intangibles, such general intangibles as well as any and all proceeds thereof that might have theretofore have been excluded from such grant of a security interest and the term "Intellectual Property Collateral." SECTION 3 FURTHER ASSURANCES; APPOINTMENT OF ASSIGNEE AS ATTORNEY-IN-FACT. Assignor at its expense shall execute and deliver, or cause to be executed and delivered, to Assignee any and all documents and 2 instruments, in form and substance satisfactory to Assignee, and take any and all action, which Assignee may reasonably request from time to time, to perfect and continue perfected, maintain the priority of or provide notice of Assignee's security interest in the Intellectual Property Collateral and to accomplish the purposes of this Agreement. Assignee shall have the right to, in the name of the Assignor, or in the name of Assignee or otherwise, without notice to or assent by the Assignor, and the Assignor hereby irrevocably constitutes and appoints Assignee (and any of Assignee's officers or employees or agents designated by Assignee) as the Assignor's true and lawful attorney-in-fact with full power and authority, (i) to sign the name of the Assignor on all or any of such documents or instruments and perform all other acts that Assignee deems necessary or advisable in order to perfect or continue perfected, maintain the priority or enforceability of or provide notice of Assignee's security interest in, the Intellectual Property Collateral, and (ii) to execute any and all other documents and instruments, and to perform any and all acts and things for and on behalf of the Assignor, which Assignee may deem necessary or advisable to maintain, preserve and protect the Intellectual Property Collateral and to accomplish the purposes of this Agreement, including (A) to defend, settle, adjust or (after the occurrence of any Event of Default) institute any action, suit or proceeding with respect to the Intellectual Property Collateral, and, after the occurrence of any Event of Default, (B) to assert or retain any rights under any license agreement for any of the Intellectual Property Collateral, including without limitation any rights of the Assignor arising under Section 365(n) of the Bankruptcy Code, and (C) after the occurrence of any Event of Default, to execute any and all applications, documents, papers and instruments for Assignee to use the Intellectual Property Collateral, to grant or issue any exclusive or non-exclusive license or sub-license with respect to any Intellectual Property Collateral, and to assign, convey or otherwise transfer title in or dispose of the Intellectual Property Collateral; PROVIDED, HOWEVER, that in no event shall Assignee have the unilateral power, prior to the occurrence and continuation of an Event of Default, to assign any of the Intellectual Property Collateral to any Person, including itself, without the Assignor's written consent. The foregoing shall in no way limit Assignee's rights and remedies upon or after the occurrence of an Event of Default. The power of attorney set forth in this Section 3, being coupled with an interest, is irrevocable so long as this Agreement shall not have terminated in accordance with Section 17. SECTION 4 FUTURE RIGHTS. Except as otherwise expressly agreed to in writing by Assignee, if and when the Assignor shall obtain rights to any new patentable inventions or any new trademarks, or become entitled to the benefit of any of the foregoing, or obtain rights or benefits with respect to any reissue, division, continuation, renewal, extension or continuation-in-part of any patents or trademarks, or any improvement of any patent, the provisions of Section 2 shall automatically apply thereto and the Assignor shall give to Assignee prompt notice thereof. Assignor shall do all things deemed necessary or advisable by Assignee to ensure the validity, perfection, priority and enforceability of the security interests of Assignee in such future acquired Intellectual Property Collateral. Assignor hereby authorizes Assignee to modify, amend, or supplement the Schedules hereto and to reexecute this Agreement from time to time on Assignor's behalf and as its attorney-in-fact to include any such future Intellectual 3 Property Collateral and to cause such reexecuted Agreement or such modified, amended or supplemented Schedules to be filed with PTO. SECTION 5 ASSIGNEE'S DUTIES. Notwithstanding any provision contained in this Agreement, Assignee shall have no duty to exercise any of the rights, privileges or powers afforded to it and shall not be responsible to the Assignor or any other Person for any failure to do so or delay in doing so. Except for the accounting for moneys actually received by Assignee hereunder or in connection herewith, Assignee shall have no duty or liability to exercise or preserve any rights, privileges or powers pertaining to the Intellectual Property Collateral. SECTION 6 REPRESENTATIONS AND WARRANTIES. Assignor represents and warrants to Assignee that: (a) A true and correct list of all of the existing Intellectual Property Collateral consisting of U.S. patents and patent applications and/or registrations owned by the Assignor, in whole or in part, and pledged as collateral hereunder, is set forth in SCHEDULE A. (b) A true and correct list of all of the existing Intellectual Property Collateral consisting of U.S. trademarks, trademark registrations and/or applications owned by the Assignor, in whole or in part, and pledged as collateral hereunder is set forth in SCHEDULE B. (c) All patents, trademarks, service marks and trade names of Assignor are subsisting and have not been adjudged invalid or unenforceable in whole or in part. (d) All maintenance fees required to be paid on account of any patents or trademarks of Assignor have been timely paid for maintaining such patents and trademarks in force, and, to the best of Assignor's knowledge, each of the patents and trademarks constituting part of the Intellectual Property Collateral is valid and enforceable. (e) To the best of Assignor's knowledge after due inquiry, no material infringement or unauthorized use presently is being made of any Intellectual Property Collateral by any Person. (f) Except as otherwise disclosed in writing by Debtor to Secured Party, Assignor is the sole and exclusive owner of the Intellectual Property Collateral and the past, present and contemplated future use of such Intellectual Property Collateral by Assignor has not, does not and will not infringe or violate any right, privilege or license agreement of or with any other Person. SECTION 7 COVENANTS. (a) Assignor will appear in and defend any action, suit or proceeding which may affect to a material extent its title to, or Assignee's rights or interest in, the Intellectual Property Collateral. 4 (b) Assignor will not allow or suffer any Intellectual Property Collateral to become abandoned, nor any registration thereof to be terminated, forfeited, expired or dedicated to the public. (c) Assignor will diligently prosecute all applications for patents and trademarks, and file and prosecute any and all continuations, continuations-in-part, applications for reissue, applications for certificate of correction and like matters as shall be reasonable and appropriate in accordance with prudent business practice, and promptly pay any and all maintenance, license, registration and other fees, taxes and expenses incurred in connection with any Intellectual Property Collateral. SECTION 8 ASSIGNEE'S RIGHTS AND REMEDIES. (a) Assignee shall have all rights and remedies available to it under the Security Agreement, the other Documents and applicable law with respect to the security interests in any of the Intellectual Property Collateral or any other collateral. Assignor agrees that such rights and remedies include, but are not limited to, the right of Assignee as a secured party to sell or otherwise dispose of its collateral after default pursuant to the UCC. Assignor agrees that Assignee shall at all times have such royalty free licenses, to the extent permitted by law and to the extent of Assignor's rights therein, for any Intellectual Property Collateral that shall be reasonably necessary to permit the exercise of any of Assignee's rights or remedies upon or after the occurrence of an Event of Default and shall additionally have the right to license and/or sublicense any Intellectual Property Collateral upon or after the occurrence of an Event of Default, whether general, special or otherwise, and whether on an exclusive or a nonexclusive basis, any of the Intellectual Property Collateral, throughout the world for such term or terms, on such conditions, and in such manner, as Assignee in its sole discretion shall determine. In addition to and without limiting any of the foregoing, upon the occurrence and during the continuance of an Event of Default, Assignee shall have the right but shall in no way be obligated to bring suit, or to take such other action as Assignee deems necessary or advisable, in the name of the Assignor or Assignee, to enforce or protect any of the Intellectual Property Collateral, in which event the Assignor shall, at the request of Assignee, do any and all lawful acts and execute any and all documents required by Assignee in aid of such enforcement. To the extent that Assignee shall elect not to bring suit to enforce such Intellectual Property Collateral, Assignor agrees to use all reasonable measures and its diligent efforts, whether by action, suit, proceeding or otherwise, to prevent the infringement, misappropriation or violations thereof by others and for that purpose agrees diligently to maintain any action, suit or proceeding against any Person necessary to prevent such infringement, misappropriation or violation. (b) The cash proceeds actually received from the sale or other disposition or collection of Intellectual Property Collateral, and any other amounts received in respect of the Intellectual Property Collateral the application of which is not otherwise provided for herein, shall be applied as provided in the Security Agreement. SECTION 9 NOTICES. All notices or other communications hereunder shall be in writing (including by facsimile transmission) shall be mailed, sent or delivered in accordance with the Security Agreement at or to their respective 5 addresses or facsimile numbers set forth below their names on the signature pages hereof, or at or to such other address or facsimile number as shall be designated by any party in a written notice to the other parties hereto. All such notices and other communications shall be effective as provided in the Security Agreement. SECTION 10 NO WAIVER; CUMULATIVE REMEDIES. No failure on the part of Assignee to exercise, and no delay in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, remedy, power or privilege preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights and remedies under this Agreement are cumulative and not exclusive of any rights, remedies, powers and privileges that may otherwise be available to Assignee. SECTION 11 COSTS AND EXPENSES; INDEMNITY. (a) Assignor agrees to pay on demand all costs and expenses of Assignee, including without limitation all attorneys' fees, in connection with the enforcement or attempted enforcement of, and preservation of any rights or interests under, this Agreement, and the assignment, sale or other disposal of any of the Intellectual Property Collateral. (b) Assignor hereby agrees to indemnify Assignee, any affiliate thereof, and their respective directors, officers, employees, agents, counsel and other advisors (each an "Indemnified Person") against, and hold each of them harmless from, any and all liabilities, obligations, losses, claims, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever, including, without limitation, reasonable attorneys' fees and attorneys' fees incurred pursuant to 11 U.S.C., which may be imposed on, incurred by, or asserted against any Indemnified Person, in any way relating to or arising out of this Agreement, including in connection with any infringement or alleged infringement with respect to any Intellectual Property Collateral, or any action taken or omitted to be taken by it hereunder (the "Indemnified Liabilities"); PROVIDED that Assignor shall not be liable to any Indemnified Person for any portion of such Indemnified Liabilities to the extent they are found by a final decision of a court of competent jurisdiction to have resulted from such Indemnified Person's gross negligence or willful misconduct. If and to the extent that the foregoing indemnification is for any reason held unenforceable, Assignor agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. (c) Any amounts payable to Assignee under this Section 11 or otherwise under this Agreement if not paid upon demand shall bear interest from the date of such demand until paid in full, at the default rate of interest set forth in the Loan Agreement. SECTION 12 BINDING EFFECT. This Agreement shall be binding upon, inure to the benefit of and be enforceable by Assignor, Assignee and their respective successors and assigns. 6 SECTION 13 GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York, except to the extent that the validity or perfection of the assignment and security interests hereunder in respect of any Intellectual Property Collateral are governed by federal law and except to the extent that Assignee shall have greater rights or remedies under federal law, in which case such choice of New York law shall not be deemed to deprive Assignee of such rights and remedies as may be available under federal law. SECTION 14 AMENDMENT. This Agreement shall not be amended except by the written agreement of the parties. SECTION 15 SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under all applicable laws and regulations. If, however, any provision of this Agreement shall be prohibited by or invalid under any such law or regulation in any jurisdiction, it shall, as to such jurisdiction, be deemed modified to conform to the minimum requirements of such law or regulation, or, if for any reason it is not deemed so modified, it shall be ineffective and invalid only to the extent of such prohibition or invalidity without affecting the remaining provisions of this Agreement, or the validity or effectiveness of such provision in any other jurisdiction. SECTION 16 COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. SECTION 17 TERMINATION. Upon payment and performance in full of all Obligations, this Agreement shall terminate and Assignee shall promptly execute and deliver to Assignor such documents and instruments reasonably requested by Assignor as shall be necessary to evidence termination of all security interests given by Assignor to Assignee hereunder, including cancellation of this Agreement by written notice from Assignee to the PTO; PROVIDED, HOWEVER, that the obligations of Assignor under Section 11 hereof shall survive such termination. SECTION 18 SECURITY AGREEMENT. Assignor acknowledges that the rights and remedies of Assignee with respect to the security interests in the Intellectual Property Collateral granted hereby are more fully set forth in the Security Agreement and all such rights and remedies are cumulative. SECTION 19 NO INCONSISTENT REQUIREMENTS. Assignor acknowledges that this Agreement and the Security Agreement may contain covenants and other terms and provisions variously stated regarding the same or similar matters, and the Assignor agrees that all such covenants, terms and provisions are cumulative and all shall be performed and satisfied in accordance with their respective terms. 7 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement, as of the date first above written. NORTH AMERICAN VACCINE, INC. By /s/ Lawrence J. Hineline ----------------------------- Title: Vice-President Finance 10150 Old Columbia Road Columbia, Maryland 21046 Attn: Vice-President Fax: (410) 309-4077 BANK OF AMERICA, N.A. By /s/ Lawrence J. Gordon ----------------------------- Title: Vice-President Bank of America Center 700 Louisiana Street, TX4-213-08-10 Houston, Texas 77002-2700 Attn: Lawrence J. Gordon Fax: (713) 247-6719 8 STATE OF Texas ) ) ss COUNTY OF Harris ) On November 2, 1999, before me, Beth L. Erwin, Notary Public, personally appeared Larry J. Gordon, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. /s/ Beth L. Erwin ----------------- Signature [SEAL] 9 STATE OF CALIFORNIA ) ) ss COUNTY OF _________________ ) On ___________ , before me, _____________, Notary Public, personally appeared ___________________________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. ____________________________________ Signature [SEAL] 10
SCHEDULE A - ------------------------------------------------------------------------------------------------------------------------------------ PATENTS AND PATENT APPLICATIONS OF ASSIGNOR - ------------------------------------------------------------------------------------------------------------------------------------ ISSUED U.S. PATENTS - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Blake, et al. NVX 08/798,760 February 11, 1997 Notice of Expression, Purification and (co-exclusive (Notice of Allowance Allowance issued Refolding of the Outer Membrane license with PMC) issued Jan. 1999) January 1999 Group B Porin Proteins (fee paid April 1999) - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Blake, et al. NVX & Rockefeller 5,439,808 August 8, 1995 Patent Expression, Purification and University Refolding of the Outer Membrane (co-exclusive Group B Porin Proteins from license with PMC) Neisseria Meningitidis - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Blake, et al. NVX 5,747,287 May 5, 1998 Patent Expression, Purification and (co-exclusive Refolding of the Outer Membrane license with PMC) Group B Porin Proteins from Neisseria Meningitidis - ------------------------------------------------------------------------------------------------------------------------------------ Group A Streptococcal Blake et al. NVX & Rockefeller 5,866,135 February 2, 1999 Patent Polysaccharide Immunogenic University Compositions and Methods - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Blake, et al. NVX 5,879,686 March 9, 1999 Patent Expression, Purification and (co-exclusive Refolding of the Outer Membrane license with PMC) Group B Porin Proteins from Neisseria Meningitidis - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ U.S. PATENT APPLICATIONS - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Tai, et al. NVX 08/096,181 July 23, 1993 Application Expression, Purification and Refolding of the Outer Membrane Protein P2 from Haemophilus Type b - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Tai, et al. NVX 08/449,358 May 24, 1995 Application Expression, Purification and Refolding of the Outer Membrane Protein P2 from Haemophilus Type b - ------------------------------------------------------------------------------------------------------------------------------------ Antigenic Group B Streptococcus Michon, et al. NVX 08/481,883 June 7, 1995 Application Type II and Type III Polysaccharide Fragments Having a 2,5-Anhydro-D-Mannose Terminal Structure and Conjugate Vaccine Thereof - ------------------------------------------------------------------------------------------------------------------------------------ Direct Methods for Molar-Mass Michon, D'Ambra NVX 08/753,242 November 22, 1996 Application Determination of Fragments of Haemophilus Type b Capsular Polysaccharides and Vaccine Preparation - ------------------------------------------------------------------------------------------------------------------------------------ Cloning of Non-IgA FC Binding Tai, Blake NVX 08/923,992 September 5, 1997 Application Forms of the Group B Streptococcal Beta Antigens - ------------------------------------------------------------------------------------------------------------------------------------ Antigenic Group B Streptococcus Michon, et al. NVX 09/025,225 February 18, 1998 Application Type II and Type III Polysaccharide Fragments Having a 2,5-Anhydro-D-Mannose Terminal Structure and Conjugate Vaccine Thereof - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Immunogenic Conjugates Comprising Blake, et al. NVX 09/118/180 July 17, 1998 Application A Group B Meningococcal Porin and an H. Influenzae Polysaccharide - ------------------------------------------------------------------------------------------------------------------------------------ Modified Immunogenic Pneumolysin Minetti, et al. NVX 09/120,044 July 21, 1998 Application Compositions as Vaccines - ------------------------------------------------------------------------------------------------------------------------------------ Group A Streptococcal Blake et al. NVX & 09/207,188 December 8, 1998 Application Polysaccharide Immunogenic Rockefeller Compositions and Methods University - ------------------------------------------------------------------------------------------------------------------------------------ Procedures for the Extraction and Michon, Blake NVX 09/221,620 December 23, 1998 Application Isolation of Bacterial Capsular Polysaccharides for Use as Vaccines or Linked to Proteins as Conjugate Vaccines - ------------------------------------------------------------------------------------------------------------------------------------ Gram Positive Bacterial Antigens Long-Rowe, Blake NVX 09/399,220 September 17, 1999 Application and Methods of Purification of the Streptococcal C-Beta Protein - ------------------------------------------------------------------------------------------------------------------------------------ Immunogenic Polysaccharide-Protein Michon et al. NVX 09/376,911 August 18, 1999 Application Conjugate Useful as a Vaccine Produced Via Conjugation Through a CZ-3 N-Acyl Portion F A Polysaccharide - ------------------------------------------------------------------------------------------------------------------------------------
A-1
- --------------------------------------------------------------------------------------------------------------------------- SCHEDULE B - --------------------------------------------------------------------------------------------------------------------------- U.S. TRADEMARKS OF ASSIGNOR - --------------------------------------------------------------------------------------------------------------------------- MARK STATUS APPL NO./ APPL./REGIS. DATE OWNER OF RECORD REGIS. NO. - --------------------------------------------------------------------------------------------------------------------------- REGISTERED U.S. TRADEMARKS - --------------------------------------------------------------------------------------------------------------------------- Globe Design Registered 1,932,111 October 31, 1995 North American Vaccine, Inc. - --------------------------------------------------------------------------------------------------------------------------- AMVAX Registered 1,967,632 April 16, 1996 North American Vaccine, Inc. - --------------------------------------------------------------------------------------------------------------------------- TRINAVACEL Registered 2,101,121 September 30, 1997 American Vaccine Corporation - --------------------------------------------------------------------------------------------------------------------------- TRIVAX Registered 2,118,360 December 2, 1997 American Vaccine Corporation - --------------------------------------------------------------------------------------------------------------------------- NAVA Registered 2,267,812 August 3, 1999 American Vaccine Corporation - --------------------------------------------------------------------------------------------------------------------------- PENDING U.S. TRADEMARK APPLICATIONS - --------------------------------------------------------------------------------------------------------------------------- THE IMPORTANCE OF OUR WORK Pending 75/190,826 October 29, 1996 American Vaccine Corporation GROWS BIGGER EVERY DAY - --------------------------------------------------------------------------------------------------------------------------- NEISVAC-C Pending Not Avail. August 26, 1999 American Vaccine Corporation - --------------------------------------------------------------------------------------------------------------------------- NEISIVA Pending Not Avail. August 26, 1999 American Vaccine Corporation - --------------------------------------------------------------------------------------------------------------------------- MENCIVA Pending Not Avail. August 26, 1999 American Vaccine Corporation - ---------------------------------------------------------------------------------------------------------------------------
B-1 EX-10.52 9 PATENT AND TRADEMARK ASSIGNMENT AND SECURITY AGREEMENT THIS PATENT AND TRADEMARK ASSIGNMENT AND SECURITY AGREEMENT (this "Agreement"), dated as of November 1, 1999, is made between NORTH AMERICAN VACCINE, INC., a Canadian corporation ("Assignor") and BAXTER INTERATIONAL, INC., a Delaware corporation ("Assignee"). Assignor and Assignee are parties to a Security Agreement dated as of November 1, 1999 (as amended, modified, renewed or extended from time to time, the "Security Agreement"), which Security Agreement provides, among other things, for the assignment by Assignor to Assignee, and grant by Assignor to Assignee of a security interest in, certain of Assignor's property and assets, including, without limitation, its patents and patent applications, its trademarks, service marks and trade names, and its applications for registration of such trademarks, service marks and trade names. Pursuant to the Loan Agreement Assignor has agreed to execute and deliver this Agreement to Assignee for filing with the United States Patent and Trademark Office (the "PTO") (and any other relevant recording systems in any domestic or foreign jurisdiction), and as further evidence of and to effectuate such assignment of and grant of a security interest in such patents and patent applications, trademarks, service marks and trade names, and applications for registration of such trademarks, service marks and trade names, and the other general intangibles described herein. Accordingly, Assignor and Assignee hereby agree as follows: SECTION 1 DEFINITIONS; INTERPRETATION. (a) All capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings assigned to them in the Security Agreement. (b) In this Agreement, (i) the meaning of defined terms shall be equally applicable to both the singular and plural forms of the terms defined; and (ii) the captions and headings are for convenience of reference only and shall not affect the construction of this Agreement. SECTION 2 ASSIGNMENT AND GRANT OF SECURITY INTEREST. (a) As security for the payment and performance of the Obligations (as defined in the Security Agreement), Assignor hereby assigns, transfers and conveys and grants a security interest in and mortgage to Assignee, for security purposes, all of Assignor's right, title and interest in, to and under the following property, whether now existing or owned or hereafter acquired, developed or arising (collectively, the "Intellectual Property Collateral"): (i) all patents and patent applications, domestic or foreign, all licenses relating to any of the foregoing and all income and royalties with respect to any licenses (including, without limitation, such patents and patent applications as described in SCHEDULE A hereto), all rights to sue for past, present or future infringement thereof, all rights arising therefrom and pertaining thereto and all reissues, divisions, continuations, renewals, extensions and continuations-in-part thereof; 1. (ii) all state (including common law), federal and foreign trademarks, service marks and trade names, and applications for registration of such trademarks, service marks and trade names, all licenses relating to any of the foregoing and all income and royalties with respect to any licenses (including, without limitation, such marks, names and applications as described in SCHEDULE B hereto), whether registered or unregistered and wherever registered, all rights to sue for past, present or future infringement or unconsented use thereof, all rights arising therefrom and pertaining thereto and all reissues, extensions and renewals thereof; (iii) the entire goodwill of or associated with the businesses now or hereafter conducted by Assignor connected with and symbolized by any of the aforementioned properties and assets; (iv) all general intangibles (as defined in the UCC) and all intangible intellectual or other similar property of the Assignor of any kind or nature, associated with or arising out of any of the aforementioned properties and assets and not otherwise described above; and (v) all products and proceeds of any and all of the foregoing. (a) This Agreement shall create a continuing security interest in the Intellectual Property Collateral which shall remain in effect until terminated in accordance with Section 17 hereof. (b) Notwithstanding the foregoing provisions of this Section 2, the grant of a security interest as provided herein shall not extend to, and the term "Intellectual Property Collateral" shall not include, (1) that certain U.S. Patent No. 5,425,946 which is covered by a security interest in favor of Bankers Trust Company as evidenced by the filing in the U.S. Patent and Trademark Office (the "Excluded Patent Collateral"), and (2) any general intangibles of Debtor (whether owned or held as licensee or lessee, or otherwise), to the extent that (i) such general intangibles are not assignable or capable of being encumbered as a matter of law or under the terms of the license, lease or other agreement applicable thereto (but solely to the extent that any such restriction shall be enforceable under applicable law), without the consent of the licensor or lessor thereof or other applicable party thereto and (ii) such consent has not been obtained; PROVIDED, HOWEVER, that the foregoing grant of security interest shall extend to, and the term "Intellectual Property Collateral" shall include, (A) any general intangible which is an account receivable or a proceed of, or otherwise related to the enforcement or collection of, any account receivable, or goods which are the subject of any account receivable, (B) any and all proceeds of any general intangibles which are otherwise excluded to the extent that the assignment or encumbrance of such proceeds is not so restricted, and (C) upon obtaining the consent of any such licensor, lessor or other applicable party's consent with respect to any such otherwise excluded general intangibles, such general intangibles as well as any and all proceeds thereof that might have theretofore have been excluded from such grant of a security interest and the term "Intellectual Property Collateral." SECTION 3 FURTHER ASSURANCES; APPOINTMENT OF ASSIGNEE AS ATTORNEY-IN-FACT. Assignor at its expense shall execute and deliver, or cause to be executed and delivered, to Assignee any and all documents and instruments, in 2. form and substance satisfactory to Assignee, and take any and all action, which Assignee may reasonably request from time to time, to perfect and continue perfected, maintain the priority of or provide notice of Assignee's security interest in the Intellectual Property Collateral and to accomplish the purposes of this Agreement. Assignee shall have the right to, in the name of the Assignor, or in the name of Assignee or otherwise, without notice to or assent by the Assignor, and the Assignor hereby irrevocably constitutes and appoints Assignee (and any of Assignee's officers or employees or agents designated by Assignee) as the Assignor's true and lawful attorney-in-fact with full power and authority, (i) to sign the name of the Assignor on all or any of such documents or instruments and perform all other acts that Assignee deems necessary or advisable in order to perfect or continue perfected, maintain the priority or enforceability of or provide notice of Assignee's security interest in, the Intellectual Property Collateral, and (ii) to execute any and all other documents and instruments, and to perform any and all acts and things for and on behalf of the Assignor, which Assignee may deem necessary or advisable to maintain, preserve and protect the Intellectual Property Collateral and to accomplish the purposes of this Agreement, including (A) to defend, settle, adjust or (after the occurrence of any Event of Default) institute any action, suit or proceeding with respect to the Intellectual Property Collateral, and, after the occurrence of any Event of Default, (B) to assert or retain any rights under any license agreement for any of the Intellectual Property Collateral, including without limitation any rights of the Assignor arising under Section 365(n) of the Bankruptcy Code, and (C) after the occurrence of any Event of Default, to execute any and all applications, documents, papers and instruments for Assignee to use the Intellectual Property Collateral, to grant or issue any exclusive or non-exclusive license or sub-license with respect to any Intellectual Property Collateral, and to assign, convey or otherwise transfer title in or dispose of the Intellectual Property Collateral; provided, however, that in no event shall Assignee have the unilateral power, prior to the occurrence and continuation of an Event of Default, to assign any of the Intellectual Property Collateral to any Person, including itself, without the Assignor's written consent. The foregoing shall in no way limit Assignee's rights and remedies upon or after the occurrence of an Event of Default. The power of attorney set forth in this Section 3, being coupled with an interest, is irrevocable so long as this Agreement shall not have terminated in accordance with Section 17. SECTION 4 FUTURE RIGHTS. Except as otherwise expressly agreed to in writing by Assignee, if and when the Assignor shall obtain rights to any new patentable inventions or any new trademarks, or become entitled to the benefit of any of the foregoing, or obtain rights or benefits with respect to any reissue, division, continuation, renewal, extension or continuation-in-part of any patents or trademarks, or any improvement of any patent, the provisions of Section 2 shall automatically apply thereto and the Assignor shall give to Assignee prompt notice thereof. Assignor shall do all things deemed necessary or advisable by Assignee to ensure the validity, perfection, priority and enforceability of the security interests of Assignee in such future acquired Intellectual Property Collateral. Assignor hereby authorizes Assignee to modify, amend, or supplement the Schedules hereto and to reexecute this Agreement from time to time on Assignor's behalf and as its attorney-in-fact to include any 3. such future Intellectual Property Collateral and to cause such reexecuted Agreement or such modified, amended or supplemented Schedules to be filed with PTO. SECTION 5 ASSIGNEE'S DUTIES. Notwithstanding any provision contained in this Agreement, Assignee shall have no duty to exercise any of the rights, privileges or powers afforded to it and shall not be responsible to the Assignor or any other Person for any failure to do so or delay in doing so. Except for the accounting for moneys actually received by Assignee hereunder or in connection herewith, Assignee shall have no duty or liability to exercise or preserve any rights, privileges or powers pertaining to the Intellectual Property Collateral. SECTION 6 REPRESENTATIONS AND WARRANTIES. Assignor represents and warrants to Assignee that: (a) A true and correct list of all of the existing Intellectual Property Collateral consisting of U.S. patents and patent applications and/or registrations owned by the Assignor, in whole or in part, and pledged as collateral hereunder, is set forth in SCHEDULE A. (b) A true and correct list of all of the existing Intellectual Property Collateral consisting of U.S. trademarks, trademark registrations and/or applications owned by the Assignor, in whole or in part, and pledged as collateral hereunder is set forth in SCHEDULE B. (c) All patents, trademarks, service marks and trade names of Assignor are subsisting and have not been adjudged invalid or unenforceable in whole or in part. (d) All maintenance fees required to be paid on account of any patents or trademarks of Assignor have been timely paid for maintaining such patents and trademarks in force, and, to the best of Assignor's knowledge, each of the patents and trademarks constituting part of the Intellectual Property Collateral is valid and enforceable. (e) To the best of Assignor's knowledge after due inquiry, no material infringement or unauthorized use presently is being made of any Intellectual Property Collateral by any Person. (f) Except as otherwise disclosed in writing by Debtor to Secured Party, Assignor is the sole and exclusive owner of the Intellectual Property Collateral and the past, present and contemplated future use of such Intellectual Property Collateral by Assignor has not, does not and will not infringe or violate any right, privilege or license agreement of or with any other Person. SECTION 7 COVENANTS. (a) Assignor will appear in and defend any action, suit or proceeding which may affect to a material extent its title to, or Assignee's rights or interest in, the Intellectual Property Collateral. 4. (b) Assignor will not allow or suffer any Intellectual Property Collateral to become abandoned, nor any registration thereof to be terminated, forfeited, expired or dedicated to the public. (c) Assignor will diligently prosecute all applications for patents and trademarks, and file and prosecute any and all continuations, continuations-in-part, applications for reissue, applications for certificate of correction and like matters as shall be reasonable and appropriate in accordance with prudent business practice, and promptly pay any and all maintenance, license, registration and other fees, taxes and expenses incurred in connection with any Intellectual Property Collateral. SECTION 8 ASSIGNEE'S RIGHTS AND REMEDIES. (a) Assignee shall have all rights and remedies available to it under the Security Agreement, the other Documents and applicable law with respect to the security interests in any of the Intellectual Property Collateral or any other collateral. Assignor agrees that such rights and remedies include, but are not limited to, the right of Assignee as a secured party to sell or otherwise dispose of its collateral after default pursuant to the UCC. Assignor agrees that Assignee shall at all times have such royalty free licenses, to the extent permitted by law and to the extent of Assignor's rights therein, for any Intellectual Property Collateral that shall be reasonably necessary to permit the exercise of any of Assignee's rights or remedies upon or after the occurrence of an Event of Default and shall additionally have the right to license and/or sublicense any Intellectual Property Collateral upon or after the occurrence of an Event of Default, whether general, special or otherwise, and whether on an exclusive or a nonexclusive basis, any of the Intellectual Property Collateral, throughout the world for such term or terms, on such conditions, and in such manner, as Assignee in its sole discretion shall determine. In addition to and without limiting any of the foregoing, upon the occurrence and during the continuance of an Event of Default, Assignee shall have the right but shall in no way be obligated to bring suit, or to take such other action as Assignee deems necessary or advisable, in the name of the Assignor or Assignee, to enforce or protect any of the Intellectual Property Collateral, in which event the Assignor shall, at the request of Assignee, do any and all lawful acts and execute any and all documents required by Assignee in aid of such enforcement. To the extent that Assignee shall elect not to bring suit to enforce such Intellectual Property Collateral, Assignor agrees to use all reasonable measures and its diligent efforts, whether by action, suit, proceeding or otherwise, to prevent the infringement, misappropriation or violations thereof by others and for that purpose agrees diligently to maintain any action, suit or proceeding against any Person necessary to prevent such infringement, misappropriation or violation. (b) The cash proceeds actually received from the sale or other disposition or collection of Intellectual Property Collateral, and any other amounts received in respect of the Intellectual Property Collateral the application of which is not otherwise provided for herein, shall be applied as provided in the Security Agreement. SECTION 9 NOTICES. All notices or other communications hereunder shall be in writing (including by facsimile transmission) shall be mailed, sent or 5. delivered in accordance with the Security Agreement at or to their respective addresses or facsimile numbers set forth below their names on the signature pages hereof, or at or to such other address or facsimile number as shall be designated by any party in a written notice to the other parties hereto. All such notices and other communications shall be effective as provided in the Security Agreement. SECTION 10 NO WAIVER; CUMULATIVE REMEDIES. No failure on the part of Assignee to exercise, and no delay in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, remedy, power or privilege preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights and remedies under this Agreement are cumulative and not exclusive of any rights, remedies, powers and privileges that may otherwise be available to Assignee. SECTION 11 COSTS AND EXPENSES; INDEMNITY. (a) Assignor agrees to pay on demand all costs and expenses of Assignee, including without limitation all attorneys' fees, in connection with the enforcement or attempted enforcement of, and preservation of any rights or interests under, this Agreement, and the assignment, sale or other disposal of any of the Intellectual Property Collateral. (b) Assignor hereby agrees to indemnify Assignee, any affiliate thereof, and their respective directors, officers, employees, agents, counsel and other advisors (each an "Indemnified Person") against, and hold each of them harmless from, any and all liabilities, obligations, losses, claims, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever, including, without limitation, reasonable attorneys' fees and attorneys' fees incurred pursuant to 11 U.S.C., which may be imposed on, incurred by, or asserted against any Indemnified Person, in any way relating to or arising out of this Agreement, including in connection with any infringement or alleged infringement with respect to any Intellectual Property Collateral, or any action taken or omitted to be taken by it hereunder (the "Indemnified Liabilities"); provided that Assignor shall not be liable to any Indemnified Person for any portion of such Indemnified Liabilities to the extent they are found by a final decision of a court of competent jurisdiction to have resulted from such Indemnified Person's gross negligence or willful misconduct. If and to the extent that the foregoing indemnification is for any reason held unenforceable, Assignor agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. (c) Any amounts payable to Assignee under this Section 11 or otherwise under this Agreement if not paid upon demand shall bear interest from the date of such demand until paid in full, at the default rate of interest set forth in the Bank Loan Agreement. SECTION 12 BINDING EFFECT. This Agreement shall be binding upon, inure to the benefit of and be enforceable by Assignor, Assignee and their respective successors and assigns. 6. SECTION 13 GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York, except to the extent that the validity or perfection of the assignment and security interests hereunder in respect of any Intellectual Property Collateral are governed by federal law and except to the extent that Assignee shall have greater rights or remedies under federal law, in which case such choice of New York law shall not be deemed to deprive Assignee of such rights and remedies as may be available under federal law. SECTION 14 AMENDMENT. This Agreement shall not be amended except by the written agreement of the parties. SECTION 15 SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under all applicable laws and regulations. If, however, any provision of this Agreement shall be prohibited by or invalid under any such law or regulation in any jurisdiction, it shall, as to such jurisdiction, be deemed modified to conform to the minimum requirements of such law or regulation, or, if for any reason it is not deemed so modified, it shall be ineffective and invalid only to the extent of such prohibition or invalidity without affecting the remaining provisions of this Agreement, or the validity or effectiveness of such provision in any other jurisdiction. SECTION 16 COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. SECTION 17 TERMINATION. Upon payment and performance in full of all Obligations, this Agreement shall terminate and Assignee shall promptly execute and deliver to Assignor such documents and instruments reasonably requested by Assignor as shall be necessary to evidence termination of all security interests given by Assignor to Assignee hereunder, including cancellation of this Agreement by written notice from Assignee to the PTO; PROVIDED, HOWEVER, that the obligations of Assignor under Section 11 hereof shall survive such termination. SECTION 18 SECURITY AGREEMENT. Assignor acknowledges that the rights and remedies of Assignee with respect to the security interests in the Intellectual Property Collateral granted hereby are more fully set forth in the Security Agreement [and the other Documents] and all such rights and remedies are cumulative. SECTION 19 NO INCONSISTENT REQUIREMENTS. Assignor acknowledges that this Agreement and the Security Agreement may contain covenants and other terms and provisions variously stated regarding the same or similar matters, and the Assignor agrees that all such covenants, terms and provisions are cumulative and all shall be performed and satisfied in accordance with their respective terms. 7. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement, as of the date first above written. NORTH AMERICAN VACCINE, INC. By /s/ Lawrence J. Hineline --------------------------------- Title: Vice President Finance 10150 Old Columbia Road Columbia, Maryland 21046 Attn: Vice President Finance ------------------------------ Fax: (410) 309-4077 ------------------------------ BAXTER INTERNATIONAL, INC. By /s/ Steven J. Meyer --------------------------------- Title: Corp. Treasurer 8. STATE OF CALIFORNIA ) ) ss COUNTY OF ____________________________) On ___________ , before me, _____________, Notary Public, personally appeared ___________________________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. ------------------------------ Signature [SEAL] 9. STATE OF CALIFORNIA ) ) ss COUNTY OF _________________) On ___________ , before me, _____________, Notary Public, personally appeared ___________________________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. ------------------------------- Signature [SEAL] 10.
SCHEDULE A - ------------------------------------------------------------------------------------------------------------------------------------ PATENTS AND PATENT APPLICATIONS OF ASSIGNOR - ------------------------------------------------------------------------------------------------------------------------------------ ISSUED U.S. PATENTS - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Blake, et al. NVX 08/798,760 February 11, 1997 Notice of Expression, Purification and (co-exclusive (Notice of Allowance Allowance issued Refolding of the Outer Membrane license with PMC) issued Jan. 1999) January 1999 Group B Porin Proteins (fee paid April 1999) - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Blake, et al. NVX & Rockefeller 5,439,808 August 8, 1995 Patent Expression, Purification and University Refolding of the Outer Membrane (co-exclusive Group B Porin Proteins from license with PMC) Neisseria Meningitidis - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Blake, et al. NVX 5,747,287 May 5, 1998 Patent Expression, Purification and (co-exclusive Refolding of the Outer Membrane license with PMC) Group B Porin Proteins from Neisseria Meningitidis - ------------------------------------------------------------------------------------------------------------------------------------ Group A Streptococcal Blake et al. NVX & Rockefeller 5,866,135 February 2, 1999 Patent Polysaccharide Immunogenic University Compositions and Methods - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Blake, et al. NVX 5,879,686 March 9, 1999 Patent Expression, Purification and (co-exclusive Refolding of the Outer Membrane license with PMC) Group B Porin Proteins from Neisseria Meningitidis - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ U.S. PATENT APPLICATIONS - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Tai, et al. NVX 08/096,181 July 23, 1993 Application Expression, Purification and Refolding of the Outer Membrane Protein P2 from Haemophilus Type b - ------------------------------------------------------------------------------------------------------------------------------------ Method for the High Level Tai, et al. NVX 08/449,358 May 24, 1995 Application Expression, Purification and Refolding of the Outer Membrane Protein P2 from Haemophilus Type b - ------------------------------------------------------------------------------------------------------------------------------------ Antigenic Group B Streptococcus Michon, et al. NVX 08/481,883 June 7, 1995 Application Type II and Type III Polysaccharide Fragments Having a 2,5-Anhydro-D-Mannose Terminal Structure and Conjugate Vaccine Thereof - ------------------------------------------------------------------------------------------------------------------------------------ Direct Methods for Molar-Mass Michon, D'Ambra NVX 08/753,242 November 22, 1996 Application Determination of Fragments of Haemophilus Type b Capsular Polysaccharides and Vaccine Preparation - ------------------------------------------------------------------------------------------------------------------------------------ Cloning of Non-IgA FC Binding Tai, Blake NVX 08/923,992 September 5, 1997 Application Forms of the Group B Streptococcal Beta Antigens - ------------------------------------------------------------------------------------------------------------------------------------ Antigenic Group B Streptococcus Michon, et al. NVX 09/025,225 February 18, 1998 Application Type II and Type III Polysaccharide Fragments Having a 2,5-Anhydro-D-Mannose Terminal Structure and Conjugate Vaccine Thereof - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Immunogenic Conjugates Comprising Blake, et al. NVX 09/118/180 July 17, 1998 Application A Group B Meningococcal Porin and an H. Influenzae Polysaccharide - ------------------------------------------------------------------------------------------------------------------------------------ Modified Immunogenic Pneumolysin Minetti, et al. NVX 09/120,044 July 21, 1998 Application Compositions as Vaccines - ------------------------------------------------------------------------------------------------------------------------------------ Group A Streptococcal Blake et al. NVX & 09/207,188 December 8, 1998 Application Polysaccharide Immunogenic Rockefeller Compositions and Methods University - ------------------------------------------------------------------------------------------------------------------------------------ Procedures for the Extraction and Michon, Blake NVX 09/221,620 December 23, 1998 Application Isolation of Bacterial Capsular Polysaccharides for Use as Vaccines or Linked to Proteins as Conjugate Vaccines - ------------------------------------------------------------------------------------------------------------------------------------ Gram Positive Bacterial Antigens Long-Rowe, Blake NVX 09/399,220 September 17, 1999 Application and Methods of Purification of the Streptococcal C-Beta Protein - ------------------------------------------------------------------------------------------------------------------------------------ Immunogenic Polysaccharide-Protein Michon et al. NVX 09/376,911 August 18, 1999 Application Conjugate Useful as a Vaccine Produced Via Conjugation Through a CZ-3 N-Acyl Portion F A Polysaccharide - ------------------------------------------------------------------------------------------------------------------------------------
A-1.
- --------------------------------------------------------------------------------------------------------------------------- SCHEDULE B - --------------------------------------------------------------------------------------------------------------------------- U.S. TRADEMARKS OF ASSIGNOR - --------------------------------------------------------------------------------------------------------------------------- MARK STATUS APPL NO./ APPL./REGIS. DATE OWNER OF RECORD REGIS. NO. - --------------------------------------------------------------------------------------------------------------------------- REGISTERED U.S. TRADEMARKS - --------------------------------------------------------------------------------------------------------------------------- Globe Design Registered 1,932,111 October 31, 1995 North American Vaccine, Inc. - --------------------------------------------------------------------------------------------------------------------------- AMVAX Registered 1,967,632 April 16, 1996 North American Vaccine, Inc. - --------------------------------------------------------------------------------------------------------------------------- TRINAVACEL Registered 2,101,121 September 30, 1997 American Vaccine Corporation - --------------------------------------------------------------------------------------------------------------------------- TRIVAX Registered 2,118,360 December 2, 1997 American Vaccine Corporation - --------------------------------------------------------------------------------------------------------------------------- NAVA Registered 2,267,812 August 3, 1999 American Vaccine Corporation - --------------------------------------------------------------------------------------------------------------------------- PENDING U.S. TRADEMARK APPLICATIONS - --------------------------------------------------------------------------------------------------------------------------- THE IMPORTANCE OF OUR WORK Pending 75/190,826 October 29, 1996 American Vaccine Corporation GROWS BIGGER EVERY DAY - --------------------------------------------------------------------------------------------------------------------------- NEISVAC-C Pending Not Avail. August 26, 1999 American Vaccine Corporation - --------------------------------------------------------------------------------------------------------------------------- NEISIVA Pending Not Avail. August 26, 1999 American Vaccine Corporation - --------------------------------------------------------------------------------------------------------------------------- MENCIVA Pending Not Avail. August 26, 1999 American Vaccine Corporation - ---------------------------------------------------------------------------------------------------------------------------
B-1. EX-10.53 10 GUARANTY FOR VALUE RECEIVED, the sufficiency of which is hereby acknowledged, and, in consideration of any credit and/or financial accommodation heretofore or hereafter from time to time made or granted to North American Vaccine, Inc., a Canadian corporation ("BORROWER"), by BANK OF AMERICA, N.A. and any other subsidiaries or affiliates of BankAmerica Corporation and its successors and assigns (collectively "LENDER"), BAXTER INTERNATIONAL INC., a Delaware corporation (the "GUARANTOR") hereby furnishes its guaranty of the Guaranteed Obligations (as hereinafter defined) as follows: 1. GUARANTY. Guarantor hereby absolutely and unconditionally guarantees, as a guarantee of payment and not merely as a guarantee of collection, prompt payment when due, whether at stated maturity, upon acceleration or otherwise, and at all times thereafter, of any and all existing and future indebtedness and liabilities of every kind, nature and character, direct or indirect, absolute or contingent, liquidated or unliquidated, voluntary or involuntary, of Borrower to Lender arising under that certain letter loan agreement dated November 1, 1999 between Borrower and Lender (the "BORROWER CREDIT AGREEMENT") and all instruments, agreements and other documents (including without limitation the Security Agreement and the IP Security Agreement) of every kind and nature now or hereafter executed in connection with the Borrower Credit Agreement (including all renewals, extensions and modifications thereof and all costs, structuring fees, attorneys' fees and expenses incurred by Lender in connection with the collection or enforcement thereof) (collectively, the "GUARANTEED OBLIGATIONS"). Lender's books and records showing the amount of the Guaranteed Obligations shall be admissible in evidence in any action or proceeding, and shall be binding upon Guarantor and serve as a rebuttable presumption in favor of Lender for the purpose of establishing the amount of the Guaranteed Obligations, subject only to manifest error. This Guaranty shall not be affected by the genuineness of the Borrower Credit Agreement or the validity, regularity or enforceability of the Guaranteed Obligations or any instrument or agreement evidencing any Guaranteed Obligations, or by the existence, validity, enforceability, perfection, or extent of any collateral therefor, or by any fact or circumstance relating to the Guaranteed Obligations which might otherwise constitute a defense to the obligations of Guarantor under this Guaranty. The obligations of Guarantor hereunder shall be limited to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the Bankruptcy Code (Title 11, United States Code) or any comparable provisions of any applicable state law. 2. NO DEDUCTIONS. All payments by Guarantor hereunder shall be paid in full, without setoff or counterclaim or any deduction or withholding whatsoever, including, without limitation, for any and all present and future taxes. In the event that Guarantor or Lender is required by law to make any such deduction or withholding, Guarantor agrees to pay on behalf of Lender such amount directly to the appropriate person or entity, or if the Guarantor cannot legally comply with the foregoing, Guarantor shall pay to Lender such additional amounts as will result in the receipt by Lender of the full amount payable hereunder. Guarantor shall promptly provide Lender with evidence of payment of any such amount made on Lender's behalf. 3. NO TERMINATION. This Guaranty is a continuing and irrevocable guaranty of all Guaranteed Obligations now or hereafter existing and shall remain in full force and effect until all Guaranteed Obligations and any other amounts payable under this Guaranty are indefeasibly paid and performed in full and any commitments of Lender or facilities provided by Lender with respect to the Guaranteed Obligations are terminated. 4. WAIVER OF NOTICES. Guarantor waives notice of the acceptance of this Guaranty and of the extension or continuation of the Guaranteed Obligations or any part thereof, subject to the provisions of Section 6. Guarantor further waives presentment, protest, notice, dishonor or default, demand for payment and any other notices to which Guarantor might otherwise be entitled as a condition to the satisfaction of its obligations hereunder; provided that Lender shall provide notice of any Event of Default (as defined in the Borrower Credit Agreement) in accordance with the terms of Section 23 hereof. 5. SUBROGATION. Guarantor shall exercise no right of subrogation, contribution or similar rights with respect to any payments it makes under this Guaranty until (a) all of the Guaranteed Obligations and any amounts payable under this Guaranty are indefeasibly paid and performed in full and any commitments of Lender or facilities provided by Lender with respect to the Guaranteed Obligations are terminated or (b) Guarantor exercises Guarantor's Call Option (or Lender exercises Lender's Put Option) in accordance with and as more specifically described in Section 23 hereof. If any amounts are paid to Guarantor in violation of the foregoing limitation, then such amounts shall be held in trust for the benefit of Lender and shall forthwith be paid to Lender to reduce the amount of the Guaranteed Obligations, whether matured or unmatured. 6. WAIVER OF SURETYSHIP DEFENSES. Guarantor agrees that Lender may, at any time and from time to time, and without notice to Guarantor, make any agreement with Borrower or with any other person or entity liable on any of the Guaranteed Obligations or providing collateral as security for the Guaranteed Obligations, for the extension, renewal, payment, compromise, discharge or release of the Guaranteed Obligations, or for any modification or amendment of the terms thereof or of any instrument or agreement evidencing the Guaranteed Obligations or the provision of collateral, all without in any way impairing, releasing, discharging or otherwise affecting the obligations of Guarantor under this Guaranty; provided that Lender shall not (a) extend the final maturity date of the Guaranteed Obligations or any portion thereof, (b) reduce the rate or extend the time for payment of interest, (c) waive the principal amount of any Loan, (d) increase the Commitment or (e) release all or substantially all of any collateral given to secure the Guaranteed Obligations, without in each case the written consent of Guarantor. Guarantor waives any defense arising by reason of any disability or other defense of Borrower or any other guarantor, or the cessation from any cause whatsoever of the liability of Borrower, or any claim that Guarantor's obligations exceed or are more burdensome than those of Borrower and waives the benefit of any statute of limitations affecting the liability of Guarantor hereunder. Guarantor waives any right to enforce any remedy which Lender now has or may hereafter have against Borrower and waives any benefit of and any right to participate in any security now or hereafter held by Lender, subject to the provisions of Sections 23 and 24 hereof. Further, Guarantor consents to the taking of, or failure to take, any action which might in any manner or to any extent vary the risks of Guarantor under this Guaranty 2 or which, but for this provision, might operate as a discharge of Guarantor. 7. EXHAUSTION OF OTHER REMEDIES NOT REQUIRED. The obligations of Guarantor hereunder are those of primary obligor, and not merely as surety, and are independent of the Guaranteed Obligations. Guarantor waives diligence by Lender and action on delinquency in respect of the Guaranteed Obligations or any part thereof, including, without limitation any provisions of law requiring Lender to exhaust any right or remedy or to take any action against Borrower, any other guarantor or any other person, entity or property before enforcing this Guaranty against Guarantor. 8. REINSTATEMENT. Notwithstanding anything in this Guaranty to the contrary, this Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any portion of the Guaranteed Obligations is revoked, terminated, rescinded or reduced or must otherwise be restored or returned upon the insolvency, bankruptcy or reorganization of Borrower or any other person or entity or otherwise, as if such payment had not been made and whether or not Lender is in possession of or has released this Guaranty and regardless of any prior revocation, rescission, termination or reduction. 9. SUBORDINATION. Guarantor hereby subordinates the payment of all obligations and indebtedness of Borrower owing to Guarantor, whether now existing or hereafter arising, including but not limited to any obligation of Borrower to Guarantor as subrogee of Lender or resulting from Guarantor's performance under this Guaranty, to the indefeasible payment in full of all Guaranteed Obligations. If Lender so requests, any such obligation or indebtedness of Borrower to Guarantor shall be enforced and performance received by Guarantor as trustee for Lender and the proceeds thereof shall be paid over to Lender on account of the Guaranteed Obligations, but without reducing or affecting in any manner the liability of Guarantor under this Guaranty. 10. INFORMATION. Guarantor agrees to furnish promptly to Lender any and all financial or other information regarding Guarantor or its property as Lender may reasonably request in writing; provided, Guarantor shall not be obligated to furnish or deliver information to Lender in addition to the requirements set forth in the Existing Credit Agreement (as defined in Section 20 hereof). 11. STAY OF ACCELERATION. In the event that acceleration of the time for payment of any of the Guaranteed Obligations is stayed, upon the insolvency, bankruptcy or reorganization of Borrower or any other person or entity, or otherwise, all such amounts shall nonetheless be payable by Guarantor immediately upon demand by Lender. 12. EXPENSES. Guarantor shall pay on demand all out-of-pocket expenses (including reasonable attorneys' fees and expenses and the allocated cost and disbursements of internal legal counsel) in any way relating to the enforcement or protection of Lender's rights under this Guaranty, including any incurred in the preservation, protection or enforcement of any rights of Lender in any case commenced by or against Guarantor under the Bankruptcy Code (Title 11, United 3 States Code) or any similar or successor statute. The obligations of Guarantor under the preceding sentence shall survive termination of this Guaranty. 13. AMENDMENTS. No provision of this Guaranty may be waived, amended, supplemented or modified, except by a written instrument executed by Lender and Guarantor. 14. NO WAIVER. No failure by Lender to exercise, and no delay in exercising, any right, remedy or power hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy or power hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law or in equity. The unenforceability or invalidity of any provision of this Guaranty shall not affect the enforceability or validity of any other provision herein. 15. ASSIGNMENT; GOVERNING LAWS; JURISDICTION. This Guaranty shall (a) bind Guarantor and its successors and assigns, PROVIDED that Guarantor may not assign its rights or obligations under this Guaranty without the prior written consent of Lender (and any attempted assignment without such consent shall be void), (b) inure to the benefit of Lender and its successors and assigns and Lender may, without notice to Guarantor and without affecting Guarantor's obligations hereunder, assign or sell participations in the Guaranteed Obligations and this Guaranty, in whole or in part, and (c) be governed by the internal laws of the State of New York. Guarantor hereby irrevocably (i) submits to the non-exclusive jurisdiction of any United States Federal or State court sitting in New York, New York in any action or proceeding arising out of or relating to this Guaranty, and (ii) waives to the fullest extent permitted by law any defense asserting an inconvenient forum in connection therewith. Service of process by Lender in connection with such action or proceeding shall be binding on Guarantor if sent to Guarantor by registered or certified mail at its address specified below. Guarantor agrees that Lender may disclose to any prospective purchaser and any purchaser of all or part of the Guaranteed Obligations any and all information in Lender's possession concerning Guarantor, this Guaranty and any security for this Guaranty. 16. CONDITION OF BORROWER. Guarantor acknowledges and agrees that it has the sole responsibility for, and has adequate means of, obtaining from Borrower such information concerning the financial condition, business and operations of Borrower as Guarantor requires, and that Lender has no duty, and Guarantor is not relying on Lender at any time to disclose to Guarantor any information relating to the business, operations or financial condition of Borrower. 17. SETOFF. If and to the extent any payment is not made when due hereunder, Lender may setoff and charge from time to time any amount so due against any or all of Guarantor's accounts or deposits with Lender. 18. OTHER GUARANTEES. Unless otherwise agreed by Lender and Guarantor in writing, this Guaranty is not intended to supersede or otherwise affect any other guaranty now or hereafter given by Guarantor for the benefit of Lender or any term or provision thereof. 4 19. REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants that (i) it is duly organized and in good standing under the laws of the jurisdiction of its organization and has full capacity and right to make and perform this Guaranty, and all necessary authority has been obtained; (ii) this Guaranty constitutes its legal, valid and binding obligation enforceable in accordance with its terms; (iii) the making and performance of this Guaranty does not and will not violate the provisions of any applicable law, regulation or order, and does not and will not result in the breach of, or constitute a default or require any consent under, any agreement, instrument, or document to which it is a party or by which it or any of its property may be bound or affected; (iv) all consents, approvals, licenses and authorizations of, and filings and registrations with, any governmental authority required under applicable law and regulations for the making and performance of this Guaranty have been obtained or made and are in full force and effect; (v) by virtue of its relationship with Borrower, the execution, delivery and performance of this Guaranty is for the direct benefit of Guarantor and it has received adequate consideration for this Guaranty; and (vi) the financial information that has been delivered to Lender by or on behalf of Guarantor is complete and correct in all respects and accurately presents the financial condition and the operational results of Guarantor and since the date of the most recent financial statements delivered to Lender, there has been no material adverse change in the financial or operational condition of Guarantor. 20. INCORPORATION OF COVENANTS. Reference is made to that certain Credit Agreement (Facility A) dated as of November 24, 1998 (as amended or modified prior to the date of the Guaranty, the "EXISTING CREDIT AGREEMENT") among Guarantor, the financial institutions named therein, Bank of America, N.A. (formerly Bank of America National Trust and Saving Association) and The Chase Manhattan Bank, as Co-Arrangers, and The First National Bank of Chicago, as administrative agent. Reference is further made to the covenants contained in Article VIII of the Existing Credit Agreement (hereinafter referred to as the "INCORPORATED COVENANTS"). So long as principal of and interest on any Loan (as defined in the Borrower Credit Agreement) or any other amount payable under the Borrower Credit Agreement or under any other Loan Document remains unpaid or unsatisfied or the Commitment (as defined in the Borrower Credit Agreement) has not been terminated, Guarantor shall comply with the Incorporated Covenants, it being agreed that such covenants and agreements shall survive any termination, cancellation or discharge of the Existing Credit Agreement. Guarantor agrees with Lender that the Incorporated Covenants (and all other relevant provisions of the Existing Credit Agreement related thereto, including without limitation all exhibits, schedules and the defined terms contained in Section 1.01 thereof, which are used in the Incorporated Covenants) are hereby incorporated by reference into this Guaranty to the same extent and with the same effect as if set forth fully herein and shall inure to the benefit of Lender, without giving effect to any waiver, amendment, modification or replacement of the Existing Credit Agreement or any term or provision of the Incorporated Covenants occurring subsequent to the date of this Guaranty, except to the extent otherwise specifically provided for in the following paragraph of this Section. In the event a waiver is granted under the Existing Credit Agreement or an amendment or modification is executed with respect to the Existing Credit Agreement, and such waiver, amendment and/or modification affects the 5 Incorporated Covenants, then such waiver, amendment or modification shall be effective with respect to the Incorporated Covenants as incorporated by reference into this Guaranty only if consented to in writing by the Lender. In the event of any replacement of the Existing Credit Agreement with a similar credit facility (the "NEW FACILITY") the covenants contained in the New Facility which correspond to the covenants contained in Sections 8.01 and 8.02, respectively, of the Existing Credit Agreement shall become the Incorporated Covenants hereunder only if consented to in writing by Lender and, if such consent is not granted or if the Existing Credit Agreement is terminated and not replaced, then covenants contained in Sections 8.01 and 8.02, respectively, of the Existing Credit Agreement (together with any modifications or amendments approved in accordance with this paragraph) shall continue to be the Incorporated Covenants hereunder. 21. GUARANTY EVENTS OF DEFAULT. Each of the following shall be a "Guaranty Event of Default" for purposes of this Guaranty: (a) Any "Event of Default" specified in Section 9.01 of the Existing Credit Agreement occurs and is continuing, without giving effect to any waiver thereof pursuant to the Existing Credit Agreement; or (b) Guarantor fails to perform or observe any other covenant or agreement (not specified in (a) above) contained in this Guaranty or any Loan Document (as defined in the Borrower Credit Agreement) on its part to be performed or observed (including, without limitation, the failure of Guarantor to comply with any of its payments obligations in accordance with and under the terms of this Guaranty); or (c) Any representation or warranty in this Guaranty or in any certificate, agreement, instrument or other document made or delivered by Guarantor pursuant to or in connection with this Guaranty or the Borrower Loan Agreement proves to have been incorrect when made or deemed made. 22. WAIVER OF JURY TRIAL; FINAL AGREEMENT. TO THE EXTENT ALLOWED BY APPLICABLE LAW, GUARANTOR AND LENDER EACH WAIVE TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING ON OR ARISING OUT OF THIS GUARANTY. THIS GUARANTY REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 23. CALL/PUT PROVISIONS. (a) GUARANTOR'S CALL OPTION. Guarantor (or any Affiliate identified by Guarantor) shall have the right, upon three Business Days' prior written notice to Lender, to purchase all (but not less than all) of Lender's rights, interests and obligations in and to the Borrower Credit Agreement at par value and subject in all cases to the representations, warranties 6 and disclaimers set forth in Section 24 hereof (as set forth herein, "GUARANTOR'S CALL OPTION"). Notwithstanding (I) Guarantor's exercise of its call option pursuant to this section or (II) any other provision of this Guaranty to the contrary, the Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any portion of the Guaranteed Obligations received by Lender is (x) revoked, terminated, rescinded or reduced or (y) subject to a request or an action filed by Borrower, or any of its successors in bankruptcy (including a trustee or any official committee), seeking the return or restoration of any or all of such payment pursuant to the avoidance provisions of the United States Bankruptcy Code, specifically including but not limited to 11 U.S.C. ss.ss. 544, 547, 548 and 550, as if such payment had not been made and whether or not Lender is in possession of or has released this Guaranty and regardless of any prior revocation, rescission, termination or reduction. Guarantor shall be responsible for all costs and expenses (including without limitation Breakage Costs) associated with Guarantor's exercise of its rights hereunder. (b) LENDER'S PUT OPTION. Upon the occurrence of any Event of Default and written notice thereof provided by Lender to Guarantor, Lender shall sell to Guarantor all (but not less than all) of Lender's rights, interests and obligations in and to the Borrower Credit Agreement at par value and subject in all cases to the representations, warranties and disclaimers set forth in Section 24 hereof (as set forth herein, "LENDER'S PUT OPTION"). Notwithstanding (I) Lender's exercise of its put option pursuant to this section or (II) any other provision of this Guaranty to the contrary, the Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any portion of the Guaranteed Obligations is (x) revoked, terminated, rescinded or reduced or (y) subject to a request or an action filed by Borrower, or any of its successors in bankruptcy (including a trustee or any official committee), seeking the return or restoration of any or all of such payment pursuant to the avoidance provisions of the United States Bankruptcy Code, specifically including but not limited to 11 U.S.C. ss.ss. 544, 547, 548 and 550, as if such payment had not been made and whether or not Lender is in possession of or has released this Guaranty and regardless of any prior revocation, rescission, termination or reduction. Guarantor shall be responsible for all costs and expenses (including without limitation Breakage Costs) associated with Lender's exercise of its rights hereunder. PROVIDED, HOWEVER, that, (a) notwithstanding Borrower's and Guarantor's good faith efforts, if the Guarantor and Borrower do not execute a definitive agreement for the North American Vaccine Acquisition on or prior to November 16, 1999, and (b) between the date hereof and November 16, 1999, Borrower has not, directly or indirectly solicited, initiated or encouraged (including by way of furnishing or disclosing nonpublic information) any inquiries or the making or any proposal or offer (including, without limitation, any offer to its stockholders), with any third party other than Guarantor relating to any Company Competing Transaction or knowingly encouraged or otherwise entered into or maintained any discussions or negotiations with respect to any Company Competing Transaction, or agreed or endorsed any agreement, arrangement or understanding with respect to a Company Competing Transaction, or authorized or permitted any representative of Borrower to take any such action, then Guarantor agrees that it shall not, in connection with the exercise of Guarantor's Call Option or the 7 exercise of Lender's Put Option, commence the exercise of remedies set forth in the Borrower Credit Agreement if Borrower repays all amounts owing under or in connection with the Borrower Credit Agreement and any related agreements within 20 days thereafter. For purposes of this Guaranty, a "Company Competing Transaction" shall mean any of the following involving Borrower: (i) any merger, consolidation, share exchange, recapitalization, business combination, material issuance of equity or other similar transaction; (ii) any sale, lease, exchange, transfer or other disposition of 10% or more of the assets of Borrower and its subsidiaries taken as a whole in a single transaction or series of related transactions; (iii) any license, sublicense, sale or similar transaction, arrangement or agreement with respect to any material patents, trademarks, trade secrets, patent applications, know how or other intellectual property of Borrower or any of its subsidiaries; (iv) any tender offer or exchange offer for any of the outstanding voting securities of Borrower; (v) any acquisition by any person or group of persons of 10% or more of the voting securities (or securities convertible or exchangeable therefor)of Borrower; or (vi) any public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing. 24. ASSIGNMENT PROVISIONS. To the extent that Borrower's obligations under the Borrower Credit Agreement are secured by a lien or pledge of collateral to Lender in Borrower's property or assets (of whatever nature) (collectively, "BORROWER COLLATERAL"), Lender hereby agrees that upon payment in full by Guarantor of the Guaranteed Obligations (as determined by Lender), Lender shall, if requested in writing by Guarantor, assign to Guarantor or its designee all or a portion of Lender's rights (if any, and of whatever nature) in and to such Borrower Collateral. Lender does not make, shall not be obligated to make nor shall be deemed to have made any representation or warranty of any kind as to the value of the Borrower Collateral or any portion thereof, including but not limited to any representation or warranty with respect to the value of Lender's Lien in such Borrower Collateral or the attachment, perfection or priority of Lender's Lien with respect thereto. Lender hereby specifically disclaims any such representations or warranties. Lender shall not warrant nor be obligated to defend Lender's Lien or the attachment, perfection or priority of such Lien. GUARANTOR HEREBY SPECIFICALLY ACKNOWLEDGES AND AGREES THAT LENDER DOES NOT MAKE, SHALL NOT BE OBLIGATED TO MAKE NOR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE BORROWER COLLATERAL, INCLUDING WITHOUT LIMITATION THE ATTACHMENT, PERFECTION OR PRIORITY OF LENDER'S LIEN WITH RESPECT THERETO. Lender agrees to reasonably cooperate with Guarantor to execute UCC assignments and such other legal documentation as may be necessary to effect 8 the purposes of this paragraph. Guarantor shall be responsible for the costs and expenses (including without limitation reasonable attorneys' fees and expenses and the allocated cost and disbursements of internal legal counsel) associated with the assignment and/or transfer by Lender of its rights with respect to the Borrower Collateral in accordance with the terms hereof. 25. DEFINED TERMS. Capitalized terms used herein but not otherwise defined shall have the respective meaning set forth in the Borrower Credit Agreement. 9 Duly executed and delivered under seal this 1st day of November, 1999. BAXTER INTERNATIONAL INC. By: /s/ Steven J. Meyer ----------------------- Name: Steven J. Meyer Title: Corp. Treasurer Acknowledged and Agreed: BANK OF AMERICA, N.A. By: /s/ Lawrence J. Gordon ---------------------- Name: Lawrence J. Gordon Title: Vice President Acknowledged and Agreed: NORTH AMERICAN VACCINE, INC. By: /s/ Randal Chase ----------------------- Name: Randal Chase, Ph.D. ------------------- Title: Chief Executive Officer & President ----------------------------------- 10 EX-10.54 11 REIMBURSEMENT AGREEMENT THIS REIMBURSEMENT AGREEMENT (this "Agreement") dated as of November 1, 1999, is made by and among NORTH AMERICAN VACCINE, INC., a Canadian corporation ("Borrower"), and BAXTER INTERNATIONAL INC., a Delaware corporation ("Baxter"). R E C I T A L S A. Borrower and Bank of America, N.A. ("Bank") are party to that certain loan agreement dated as of November 1, 1999 (as amended, modified or restated from time to time the "Loan Agreement"), pursuant to which Bank has agreed to make a revolving credit facility available to Borrower. Borrower's obligations under the Loan Agreement are secured, in part, by liens on the collateral described in that certain Security Agreement dated as of November 1, 1999, and that certain Patent and Trademark Assignment and Security Agreement dated as of November 1, 1999 (collectively, the "Bank Security Agreements"). The Loan Agreement, Bank Security Agreements, notes, financing statements and other collateral documents related thereto are referred to herein as the "Loan Documents." C. Borrower has requested in connection with such financing that Baxter guaranty certain obligations of Borrower under the Loan Agreement. Baxter has entered into that certain Guaranty dated as of November 1, 1999, in favor of Bank (the "Guaranty") to guarantee such obligations of Borrower. D. Borrower and Baxter have a substantial business relationship independent of the Guaranty and Baxter anticipates obtaining continued benefits from that relationship as a result of Borrower's access to financing under the Loan Documents. E. In consideration of Baxter entering into the Guaranty, Borrower has agreed to indemnify and reimburse Baxter if Baxter is required to pay any amounts under or in connection with the Guaranty. The obligations of the Borrower pursuant to this Agreement shall be secured by certain collateral described in that certain Security Agreement dated as of November 1, 1999, and that certain Patent and Trademark Assignment and Security Agreement dated as of November 1, 1999 (collectively, the "Baxter Security Agreements"). NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties agree as follows: 1. INDEMNIFICATION BY BORROWER. 1. 1.1 Borrower undertakes (to the fullest extent permitted by applicable law) to indemnify Baxter and its affiliates and their respective directors, officers, employees and agents (collectively, the "Indemnified Parties") from, and hold said Indemnified Parties harmless against, any and all losses, liabilities, claims, actions, proceedings, suits, damages, costs and expenses of any nature whatsoever in connection with or arising out of the Guaranty (collectively, "Losses"), including, without limitation, the reasonable attorneys' fees and disbursements (other than attorneys' fees and disbursements incurred in connection with the preparation of the Guaranty and related documents) (the "Indemnified Matters"). 1.2 If any Indemnified Party is presented with any claim in writing or any action or proceeding is formally commenced against an Indemnified Party which may give rise to a right of indemnification hereunder, such Indemnified Party shall promptly give written notice thereof to Borrower. Borrower may, by delivery of written notice to such Indemnified Party within thirty (30) days following receipt of such notice, elect to contest such claim, action or proceeding in such manner as it deems necessary or advisable, and each Indemnified Party shall cooperate with Borrower in connection therewith. Notwithstanding Borrower's election to contest any such claim, action or proceeding, if the Indemnified Party reasonably determines that it needs its own counsel (separate from Borrower's counsel), the Indemnified Party shall have the right to participate in its own defense and to have legal counsel of its choice and participate in such defense, at the Indemnified Party's cost and expense (unless such legal counsel is retained as a result of a representation conflict with Borrower's counsel), without in any way impairing Borrower's obligations under this Section 1 to indemnify and hold harmless such Indemnified Party from all Indemnified Matters. In the event of any payment by an Indemnified Party under the Guaranty, Borrower shall immediately upon demand by the relevant Indemnified Party reimburse the Indemnified Party for such payment, plus interest from the date of payment by Indemnified Party to the date of reimbursement at an annual rate equal to _____________ percent or, if lower, the highest rate permitted by law. Nothing in this Agreement shall restrict any Indemnified Party from making any payment under the Guaranty without contesting the necessity of such payment if the Indemnified Party in good faith believes that such payment is due, and any such payment by an Indemnified Party shall be subject to reimbursement by Borrower as provided above. 2. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and warrants as follows: 2.1 ORGANIZATIONAL STATUS. Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Canada. 2.2 POWER AND AUTHORITY. Borrower has full power and authority to enter into this Agreement and perform all of its obligations hereunder. The execution, delivery and performance by Borrower of this Agreement do not contravene Borrower's charter or bylaws or violate any provision of any statute, law, rule, regulation, judgment, order or decree and will not conflict with, or constitute a breach or default under, any indenture, loan agreement, contract or other agreement or instrument to which Borrower is a party or by which Borrower or any of its property is bound. 2. 2.3 GOVERNMENTAL AUTHORIZATION. No authorization, consent or approval or other action by, and no notice to or other filing with, any governmental authority or regulatory body is required for the due execution and delivery by Borrower of this Agreement or the performance by Borrower of any of its obligations hereunder. 3. COVENANTS. Borrower covenants that until Baxter is fully released from the Guaranty and all indemnity obligations of Borrower under Section 1 above have been met with respect to then existing Losses, Borrower will comply with Sections 3 and 4 of the Loan Agreement and, if for any reason the Loan Agreement is terminated or otherwise ceases to be in effect, to comply with the provisions of Sections 3 and 4 thereof as last in effect. 4. EXPENSES. Borrower will on demand pay to Baxter the amount of any and all reasonable costs and expenses, including but not limited to the reasonable fees and disbursements of its counsel and of any experts or agents, which Baxter may incur in connection with (i) the exercise or enforcement by Baxter of any of its rights or remedies hereunder, or (ii) any failure by Borrower to perform any of its obligations hereunder. 5. ASSIGNMENT. Without the other party's prior written consent, no party may assign or delegate any of its rights or obligations hereunder, except that Baxter may assign its rights (including indemnity rights under Section 1) as part of any merger, consolidation or restructuring of Baxter or as part of a transfer of a substantial portion of Baxter's assets. If at any time or times by sale, assignment, negotiation, pledge or otherwise, Baxter transfers any of the Obligations (as defined in the Loan Agreement), such transfer shall carry with it Baxter's rights and remedies under this Agreement with respect to the Obligations transferred, and the transferee shall become vested with such rights and remedies whether or not they are specifically referred to in the transfer. If and to the extent Baxter retains any other Obligations, Baxter shall continue to have the rights and remedies herein set forth with respect thereto. 6. NOTICES. Any notice or other communication required or desired to be served, given or delivered hereunder shall be in writing to the parties at the addresses set forth below and shall be deemed to have been validly served, given or delivered if given in accordance with the notice provisions of the Loan Agreement as then in effect or, if the Loan Agreement is not then in effect, in accordance with the notice provisions of the Loan Agreement last in effect. 7. GOVERNING LAW. This Agreement shall be governed by and construed under the laws of the State of New York applicable to contracts made and to be performed in the State of New York. This Agreement shall be given a fair and reasonable construction in accordance with the intention of the parties and without regard to, or aid of, any provision of law which provides that an agreement shall be construed against the drafter thereof. 8. SECURITY. Borrower's obligations under this Agreement shall be secured by each of the Baxter Security Agreements. 9. MISCELLANEOUS. Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. This Agreement shall be binding upon 3. Borrower and its successors and assigns, and all persons claiming under or through Borrower or any of its successors or assigns, and shall inure to the benefit of and be enforceable by Baxter and its successors and assigns. 4. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. NORTH AMERICAN VACCINE, INC. By /s/ Randal Chase ------------------------------- Name: Randal Chase, Ph.D. ------------------- Title: Chief Executive Officer & President ----------------------------------- BAXTER INTERNATIONAL, INC. By: /s/ Steven J. Meyer --------------------------- Name: Steven J. Meyer --------------------------- Title: Corp. Treasurer --------------------------- [Signature Page to Reimbursement Agreement] EX-27 12
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000856573 North American Vaccine, Inc. 1,000 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 1,917 0 1,729 0 4,457 8,913 59,948 38,872 37,037 18,735 100,326 0 6,538 90,473 (180,237) 37,037 3,589 7,626 0 36,233 0 0 6,857 (34,066) 0 (34,066) 0 0 0 (34,066) (1.05) (1.05)
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