FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
REGENERATION TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 8731 59-3466543
(State or other jurisdiction (Primary Standard (I.R.S. Employer Number)
of Industrial Identification No.)
incorporation or organization) Classification Code)
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ONE INNOVATION DRIVE
ALACHUA, FLORIDA 32615
(904) 418-8888
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
JAMES M. GROOMS
CHIEF EXECUTIVE OFFICER
REGENERATION TECHNOLOGIES, INC.
ONE INNOVATION DRIVE
ALACHUA, FLORIDA 32615
(904) 418-8888
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
WITH COPIES TO:
WARREN J. NIMETZ, ESQ. JOSEPH E. MULLANEY III, ESQ.
FULBRIGHT & JAWORSKI L.L.P. PETER T. BUTTERFIELD, ESQ.
666 FIFTH AVENUE MINTZ, LEVIN, COHN, FERRIS, GLOVSKY AND POPEO, P.C.
NEW YORK, NEW YORK 10103 ONE FINANCIAL CENTER
(212) 318-3000 BOSTON, MASSACHUSETTS 02111
(617) 542-6000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the "Securities Act"), check the following box. / /
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / _________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / _________
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / _________
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE (1) REGISTRATION FEE
Common Stock, $.001 par value per share..................... $86,250,000 $22,770.00
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(1) Estimated solely for purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
Prospectus (Not Complete)
The information in this prospectus is not complete and may be changed without
notice. We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This prospectus is not
an offer to sell these securities, and we are not soliciting offers to buy these
securities, in any state where the offer or sale of these securities is not
permitted.
Issued , 2000
Shares
[LOGO]
Common Stock
Regeneration Technologies, Inc. is offering shares of common stock, and the selling stockholder is offering shares of our common stock in our initial public offering. We will not receive any of the proceeds from the sale of shares by the selling stockholder. No public market currently exists for our common stock. We anticipate that the initial public offering price will be between $ and $ per share.
We will apply to have our common stock quoted on the Nasdaq National Market under the symbol "RTIX."
Investing in our common stock involves a high degree of risk. See "Risk Factors" beginning on page 4.
Per Share Total
--------- --------
Offering Price.............................................. $ $
Discounts and Commissions to Underwriters................... $ $
Offering Proceeds to Regeneration Technologies.............. $ $
Offering Proceeds to the Selling Stockholder................ $ $
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Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
We have granted the underwriters the right to purchase up to an additional shares of our common stock to cover any over-allotments. The underwriters can exercise this right at any time within thirty days after this offering. Banc of America Securities LLC expects to deliver the shares of common stock to investors on , 2000.
Banc of America Securities LLC
Lehman Brothers
Warburg Dillon Read LLC
Stephens Inc.
, 2000
Regeneration Technologies, Inc.
Product Families
[Photograph of spinal allografts]
Spinal allografts: MD-Dowel, Cornerstone-SR, Osteofil Injectable Bone Paste, Osteofil ICM Moldable Paste, Tangent Wedge, Precision Wedge, allograft segments. Surgeons have used these allografts for spinal procedures such as discectomies.
[Two photographs of sports medicine allografts]
Sports medicine allografts: Interference screw, bone pins, Osteofil Injectable Bone Paste, meniscus, Pre-shaped BTB (Soon to be released: HTO Wedge, AlloAnchor, Interference Screw ST). These allografts have been used in a variety of sports medicine procedures, such as ACL and other ligament repair, small bone repair (hands/feet) and tissue reattachment.
[Photograph of oral/maxillofacial allografts]
Oral/Maxillofacial allografts: Regenafil Injectable Bone Paste, Regenaform Moldable Bone Paste, pericardium. Surgeons have used these in oral/maxillofacial procedures such as ridge augmentation, sinus lift, or orthognathic surgery.
[Photograph of urologic allograft]
Urologic allograft: FasLata fascia lata tissue has bee used for urinary incontinence (sling) procedures.
[Photograph of conventional tissue]
Conventional tissue: Osteoarticular grafts (femur), milled and blended bone implants (cancellous chips), fashioned bone implants (cancellous blocks, fibula wedges). These have been used for oncology procedures, mass tumor resection, hip and knee revision, trauma and ligament repair.
[Photograph of cardiovascular allograft]
Cardiovascular allograft: Heart valves, for valve replacement.
The BioCleanse-TM- Advantage
[Photograph of a cross section of a conventionally processed human femur, as well as photograph of femur bone that has been cleansed with BioCleanse technology.]
Untreated tissue
BioCleansed tissue
Removes blood and fat
Kills bacteria and fungi
Eliminates viruses
Retains tissue functionality/strength
Preserves biocompatibility
[Photograph of Class 100 packaging room.]
Class 100 packaging room: Cleaned, processed tissue being packaged for distribution
BioCleanse-TM-: Advanced Allograft Processing only from RTI
Automation: Critical steps are completely automated to ensure reproducible sterilization.
Efficient Processing: The BioCleanse sterilization process allows for processing large groups of tissue at one time.
Regulatory Compliance: This automated, validated process is designed to meet or exceed proposed tissue regulations.
Tissue Functionality: The BioCleanse process sterilizes without altering the strength or biocompatibility of allograft.
Sterile Tissue: The system sterilizes tissue, eliminating bacteria and enveloped and non-enveloped viruses such as HIV and Hepatitis.
[Photograph of BioCleanse chamber]
BioCleanse-TM- chamber
[Photograph of processing room]
Processing room: cleaning tissue in preparation for the BioCleanse-TM- process
[Photograph of chemical mix unit]
Chemical mix unit
TABLE OF CONTENTS
PAGE
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Prospectus Summary.......................................... 1
Risk Factors................................................ 4
Use of Proceeds............................................. 13
Dividend Policy............................................. 13
Capitalization.............................................. 14
Dilution.................................................... 15
Selected Consolidated Financial Data........................ 16
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 17
Business.................................................... 24
Management.................................................. 48
Related Party Transactions.................................. 56
Principal and Selling Stockholders.......................... 58
Description of Capital Stock................................ 59
Shares Eligible for Future Sale............................. 62
Underwriting................................................ 64
Legal Matters............................................... 66
Experts..................................................... 66
Where You Can Find More Information......................... 66
Index to Consolidated Financial Statements.................. F-1
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FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We based these forward-looking statements on our current expectations and projections about future events. Our actual results could differ materially from those discussed in, or implied by, these forward-looking statements. Forward-looking statements are identified by words such as "believe," "anticipate," "expect," "intend," "plan," "will," "may" and other similar expressions. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. Forward-looking statements in these documents include, but are not necessarily limited to, those relating to:
- our ability to obtain human tissue from our current and future sources;
- our ability to maintain or obtain protection for the know-how and proprietary technologies necessary to develop, market and distribute our technologies and allografts;
- current and future tissue repair or replacement treatment options offered by our competitors;
- the state of government regulation of our allografts, processes and technologies in the United States and internationally, and our ability to comply with these regulations;
- our plans to develop and market new allografts and technologies; and
- our ability to carry out our business strategy.
Factors that could cause actual results or conditions to differ from those anticipated by these and other forward-looking statements include those more fully described in the "Risk Factors" section and elsewhere in this prospectus. We are not obligated to update or revise these forward-looking statements to reflect new events or circumstances.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT MAKING AN OFFER TO SELL THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. YOU SHOULD ASSUME THAT THE INFORMATION APPEARING IN THIS PROSPECTUS IS ACCURATE AS OF THE DATE ON THE FRONT COVER OF THIS PROSPECTUS ONLY. OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND PROSPECTS MAY HAVE CHANGED SINCE THAT DATE.
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS. YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE "RISK FACTORS"
SECTION AND OUR CONSOLIDATED FINANCIAL STATEMENTS AND THE ACCOMPANYING NOTES CONTAINED HEREIN. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE UNDERWRITERS WILL NOT EXERCISE THEIR OVER-ALLOTMENT OPTION, THE CONVERSION OF ALL SHARES OF OUR OUTSTANDING PREFERRED STOCK INTO SHARES OF OUR COMMON STOCK UPON CLOSING OF THIS OFFERING, A FOR STOCK SPLIT OF OUR COMMON STOCK, THE REORGANIZATION OF OUR COMPANY AS A DELAWARE CORPORATION AND THE CLOSING OF OUR ACQUISITION OF THE TISSUE PROCESSING AND DISTRIBUTION BUSINESS OF ALABAMA TISSUE CENTER IMMEDIATELY PRIOR TO THE CLOSING OF THIS OFFERING.
REGENERATION TECHNOLOGIES, INC.
We are a leader in the use of biologics and tissue-based innovations that are used to repair and promote the natural healing of human bone and other human tissues. Using core human physiology--the basic biology of natural tissues as they function in the body--our allografts are improving surgical outcomes. Our goal is to replace conventional implant approaches, including metals, synthetics and autograft implants, with allograft and for an allograft to become the implant of choice for tissue repair. In an allograft procedure, tissue is recovered from a cadaveric donor and is then transplanted into a patient's body to make the needed repair. An autograft procedure is one in which the surgeon harvests tissue from one part of a patient's body for transplant to another part of the body to make the needed repair.
We are a leading worldwide provider of comprehensive healing and biologic tissue products in a broad range of markets. In addition, we are the largest U.S. processor and distributor of precision tooled allografts both in terms of revenues and number of surgical procedures for the year ended December 31, 1999, with our allografts being distributed in all 50 states and in nine countries internationally. We also continue to be one of the leading processors of conventional allografts in the United States. We process human musculoskeletal and other tissues, including bone, cartilage, tendon, ligament, pericardial and cardiovascular tissue in producing our allografts. These tissues are then used to repair and promote the healing of a wide variety of bone and other tissue defects, including spinal vertebrae repair, musculoskeletal reconstruction, fracture repair, periodontal repair, urinary incontinence and heart valve disorders. Our current grafts range from conventional allografts to precision tooled grafting material, including bone dowels, wedges, pastes and pins, urological allografts and heart valves. During 1999, we shipped over 90,000 processed allografts used in an estimated 60,000 procedures. Often, more than one allograft is used in a given procedure.
The overall market in the United States for tissue repair and healing through the use of surgical implants, including metals, synthetics, and allografts, has grown considerably over the last several years, with revenues in the orthopedic and cardiovascular segments of this market exceeding an estimated $6.4 billion in 1999. In these segments, procedures using allografts, either conventional graft, bone paste, or specialty tooled tissues, totaled over 310,000 during 1999, accounting for revenues of over $410.0 million.
Processors of tissue supply allografts to hospitals and surgeons for use in surgery. The need for tissue is increasing each year and currently is being served by approximately 30 tissue banks in the United States that process and/or distribute bone or cardiovascular allografts. We have one of the most extensive tissue recovery programs in the United States, recovering bone or cardiovascular tissue from over 4,000 human donors during 1999, up from over 2,300 in 1998 and 1,500 in 1997. We believe our network of recovery groups accounted for approximately 34% of the human tissue recovered in the United States during 1999.
We pursue a market-by-market approach to distribution of our allografts, including strategic distribution arrangements in order to increase our penetration of selected markets. We have an alliance
with Medtronic Sofamor Danek in the spinal market, with Exactech, Inc. in portions of the non-spinal molded bone paste market, and with C.R. Bard, Inc. in the urological market.
Using our proprietary, patent-pending BioCleanse system, we believe we are the only tissue processor currently able to safely process tissue from multiple donors simultaneously. This system, which kills or inactivates all classes of conventional pathogens, viruses, microbes, bacteria and fungi, and which cleanses tissue both before and after processing, allows us to safely process tissue from up to 100 donors at the same time thereby significantly increasing the efficiency of tissue processing. In addition, our BioCleanse system is able to remove blood, fats, lipids and cellular debris from the tissue we process more successfully than traditional aseptic processing. We believe the removal of all blood, fat, lipids and cellular debris results in faster patient healing since it eliminates the need for the patient's body to remove these substances using natural processes following surgery. In contrast to traditional aseptic processing, our BioCleanse system also permits us to process tissue at lower average cost, and to process tissue safely and economically from donors and age groups that might not have been feasible without BioCleanse.
We plan to continue to develop new allografts and technologies within the orthopedics, urological and cardiovascular markets, and to develop additional tissue-related technologies for other markets. To accomplish this, we intend to continue to make use of our core technologies and processes which include precision machined cortical bone, osteoinductive allograft bone pastes, our proprietary BioCleanse system, segmentally demineralized bone allografts, osteoarticular grafts designed to fit specific surgical instruments, growth factors to stimulate bone or tissue growth, cortical allografts assembled from various smaller bone pieces, xenograft, or animal tissue, and bone treated to reduce materials that could cause immune responses.
THE OFFERING
Common stock offered by:
Regeneration Technologies, Inc............................ shares
Selling stockholder....................................... shares
Total................................................. shares
Common stock to be outstanding after the offering........... shares
Use of proceeds............................................. To fund continued research and
development, to construct and equip a
new manufacturing facility, to
construct additional BioCleanse systems
and other automated processing systems,
to expand our tissue recovery and
distribution activities, and for
general corporate purposes, including
working capital. We will not receive
any proceeds from the shares sold by
the selling stockholder. See "Use of
Proceeds."
Proposed Nasdaq National Market Symbol...................... RTIX
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The above information excludes:
- shares of our common stock subject to options granted under our Omnibus Stock Option Plan and outstanding as of December 31, 1999 at a weighted average exercise price of $ per share; and
- shares of our common stock reserved for issuance upon the exercise of warrants outstanding as of December 31, 1999 at a weighted average exercise price of $ per share.
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
You should read the following summary consolidated financial data in conjunction with our consolidated financial statements and accompanying notes and with "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus.
Set forth below are the statement of operations data for the period from
February 12, 1998 to December 31, 1998 and the year ended December 31, 1999, and
the balance sheet data as of December 31, 1999 (1) on an actual basis and
(2) on an as-adjusted basis to give effect to the sale by us of
shares of our common stock in this offering at an assumed initial public
offering price of $ per share, after deducting underwriting discounts and
commissions and the estimated offering expenses payable by us, and the
application of net proceeds from this offering.
PERIOD FROM
FEBRUARY 12, 1998 YEAR ENDED
TO DECEMBER 31, 1998 DECEMBER 31, 1999
STATEMENT OF OPERATIONS DATA: -------------------- -----------------
Total revenues............................................. $35,257 $73,020
Net revenues............................................... 11,128 33,026
Total costs and expenses................................... 15,304 30,587
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Operating (loss) income.................................... (4,176) 2,439
Net (loss) income.......................................... $(4,142) $ 2,959
======= =======
Net (loss) income per common share--basic.................. $ $
Net (loss) income per common share--diluted................ $ $
Weighted average shares outstanding--basic.................
Weighted average shares outstanding--diluted...............
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AS OF DECEMBER 31, 1999
--------------------------
ACTUAL AS ADJUSTED
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(UNAUDITED)
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 7,536
Working capital............................................. 14,052
Total assets................................................ 48,538
Long-term debt, less current portion........................ 2,027
Total stockholders' equity.................................. 15,437
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We originally incorporated in Florida on August 21, 1997 and began operations on February 12, 1998 upon our separation from the University of Florida Tissue Bank, Inc. Prior to the closing of this offering, we intend to reorganize as a Delaware corporation. Our principal executive offices are located at One Innovation Drive, Alachua, Florida 32615 and our telephone number is (904) 418-8888. Our Web site is located at www.rtitechnology.com. We do not intend for the information contained on our Web site to be considered a part of this prospectus.
Alloanchor-TM-, BioCleanse-TM-, Cornerstone-TM- SR, FasLata-TM- Fascia Lata Allograft, MD-Series-TM- Threaded Bone Dowels, Opteform-TM-, Osteofil-TM-, Precision-TM- Cortical Bone Wedge, Regenaderm-TM-, Regenafil-TM-, Regenaform-TM-, Regeneration Technologies, Inc.-TM- and Tangent-TM- Cortical Bone Wedge are some of our trademarks. Any other trademark, trade name or service mark of any other company appearing in this prospectus belongs to its holder.
RISK FACTORS
THIS OFFERING AND AN INVESTMENT IN OUR COMMON STOCK INVOLVE A HIGH DEGREE OF
RISK. YOU SHOULD CONSIDER EACH OF THE RISKS AND UNCERTAINTIES DESCRIBED IN THIS
SECTION AND ALL OF THE OTHER INFORMATION IN THIS PROSPECTUS BEFORE DECIDING TO
INVEST IN OUR COMMON STOCK. OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF
OPERATIONS COULD BE SEVERELY HARMED BY ANY OF THE FOLLOWING RISKS. THE TRADING
PRICE OF OUR COMMON STOCK COULD DECLINE IF ANY OF THESE RISKS OR UNCERTAINTIES
DEVELOP INTO ACTUAL EVENTS. YOU MAY LOSE ALL OR PART OF THE MONEY YOU PAID TO
BUY OUR COMMON STOCK.
WE HAVE A LIMITED OPERATING HISTORY, ARE AT AN EARLY STAGE OF DEVELOPMENT
AND MAY NOT SUCCEED OR CONTINUE TO BE PROFITABLE.
We incorporated in 1997 and commenced operations as an independent entity in 1998, and are at an early stage of development. Accordingly, we have a limited operating history on which to base an evaluation of our business and prospects. We expect our operating expenses to increase and we will need to generate significant revenues to maintain profitability. We may not be able to achieve growth in our revenues at levels which will sustain or increase profitability on a quarterly or annual basis.
Many of the risks inherent in the development of a new enterprise will affect our business, including:
- market acceptance of our existing and future allografts;
- our ability to continue to develop markets for our technologies;
- our ability to raise sufficient capital to support the cost of commercializing our current allografts and technologies and developing new allografts and technologies to remain competitive; and
- our ability to attract and retain qualified management, sales, technical and scientific staff.
Our limited operating history and the uncertain nature of the markets in which we compete make it difficult for us to predict our future results of operations. As we increase our operating expenses to continue our research and development, expand manufacturing and add to our tissue recovery and distribution programs, these expenditures may not result in increased revenues and we may incur sizable losses.
WE DEPEND HEAVILY UPON A LIMITED NUMBER OF SOURCES OF HUMAN TISSUE, AND ANY FAILURE TO OBTAIN TISSUE FROM THESE SOURCES IN A TIMELY MANNER WILL INTERFERE WITH OUR ABILITY TO PROCESS AND DISTRIBUTE ALLOGRAFTS.
The University of Florida Tissue Bank, Inc., Tutogen Medical, Inc. and Allograft Resources of Wisconsin collectively supplied us with approximately 58% of the human tissue we obtained in the year ended December 31, 1999. The limited supply of human tissue has at times limited our growth, and may not be sufficient to meet our future needs. In addition, due to seasonal changes in mortality rates, some scarce tissues that we use for our allografts are at times in particularly short supply. We cannot be sure that our supply of tissue will continue to be available at current levels or will be sufficient to meet our needs. If we no longer are able to obtain tissue from these sources sufficient to meet our needs, we may not be able to locate replacement sources of tissue on commercially reasonable terms, if at all. Any interruption of our business caused by the need to locate additional sources of tissue could adversely affect our business and results of operations.
OUR SUCCESS WILL DEPEND ON THE CONTINUED ACCEPTANCE OF OUR ALLOGRAFTS AND
TECHNOLOGIES BY THE MEDICAL COMMUNITY.
Our new allografts, technologies or enhancements to existing allografts may never achieve broad market acceptance, which can be affected by numerous factors, including:
- clinical acceptance of our allografts and technologies;
- introduction of competitive tissue repair treatment options which render our allografts and technologies obsolete;
- lack of availability of third-party reimbursement; and
- our ability to train surgeons in the use of our allografts and technologies.
Market acceptance also will depend on our ability to demonstrate that our existing and new allografts and technologies are an attractive alternative to existing tissue repair treatment options. Our ability to do so will depend on surgeons' evaluations of the clinical safety, efficacy, ease of use, reliability and cost-effectiveness of these tissue repair options and technologies. For example, we believe that a small portion of the medical community has lingering concerns over the risk of disease transmission through the use of allografts. Furthermore, we believe that even if our allografts and technologies receive general acceptance within the medical community, recommendations and endorsements by influential surgeons will be important to the commercial success of our allografts and technologies.
IF WE FAIL TO ACHIEVE AND MAINTAIN THE HIGH PROCESSING AND MANUFACTURING STANDARDS THAT OUR ALLOGRAFTS REQUIRE OR IF WE ARE UNABLE TO DEVELOP ADDITIONAL MANUFACTURING CAPACITY, OUR COMMERCIAL OPPORTUNITY WILL BE REDUCED OR ELIMINATED.
Our allografts require careful calibration and precise, high-quality processing and manufacturing. Achieving precision and quality control requires skill and diligence by our personnel. If we fail to achieve and maintain these high processing and manufacturing standards, including the avoidance of the incidence of manufacturing errors, design defects or component failures, we could experience recalls or withdrawals of our allografts, delays or failures in allograft testing or delivery, cost overruns or other problems that would adversely affect our business. We can never completely eliminate the risk of errors, defects or failures. Further, to be successful, we will need to increase our manufacturing capacity, which we intend to do using a portion of the proceeds from this offering. We may experience difficulties in scaling-up manufacturing of our allografts, including problems related to yields, quality control and assurance, tissue availability, adequacy of control policies and procedures, and lack of skilled personnel. If we are unable to process and produce our allografts on a timely basis, at acceptable quality and costs, and in sufficient quantities, or if we experience unanticipated technological problems or delays in production, our business would be adversely affected.
RAPID TECHNOLOGICAL CHANGE WILL AFFECT US AND OUR CUSTOMERS, WHICH COULD
RESULT IN REDUCED DEMAND FOR OUR ALLOGRAFTS.
Our industry is characterized by rapidly changing technology and frequent introductions of new technologies. For example, steady improvements have been made in synthetic human tissue substitutes which compete with our allografts. Unlike allografts, synthetic tissue technologies are not dependent on the availability of human tissue. The successful introduction of synthetic technologies using recombinant technologies could result in a decline in demand for allografts. Although our growth strategy contemplates the introduction of new allografts and technologies, including the use of recombinant technologies, the development of these new allografts and technologies is a complex and uncertain process, requiring a high level of innovation, as well as the ability to accurately predict future technology and market trends. The allografts we currently have in development will require significant additional development, investment and testing. We may need to undertake costly and time-consuming efforts to achieve these objectives. We may not be able to respond effectively to technological changes and emerging industry standards, or to successfully identify, develop or support new technologies or enhancements to existing allografts in a timely and cost-effective manner, if at all. If we are unable to achieve the improvements in our allografts necessary for their successful commercialization, the demand for our allografts will suffer.
OUR INDUSTRY IS HIGHLY COMPETITIVE AND WE MAY NOT HAVE THE RESOURCES
REQUIRED TO COMPETE SUCCESSFULLY.
The medical technology/biotechnology industry is intensely competitive. We compete with companies in the United States and internationally that engage in the development and production of medical technologies and processes including:
- biotechnology, orthopedic, pharmaceutical, biomaterial, chemical and other companies;
- academic and scientific institutions; and
- public and private research organizations.
Allograft implants compete with autograft, metals and synthetic tissues, as well as with alternative medical procedures. For the foreseeable future, we believe a significant number of surgeons will continue to choose to perform autograft procedures when feasible, despite the necessity for performing a second operation. In addition, many members of the medical community will continue to prefer the use of metals and synthetics due in part to their familiarity with these products and the procedures required for their use.
Many of our competitors have much greater financial, technical, research, marketing, sales, distribution, service and other resources than we do. Moreover, our competitors may offer a broader array of tissue repair treatment products and technologies or may have greater name recognition than we do in the marketplace. Our competitors, including several development stage companies, may develop or market technologies that are more effective or commercially attractive than ours, or that may render our technologies obsolete. For example, the successful development of a synthetic tissue product that permits remodeling of bones could result in the eventual decline in the demand for allograft-based products and technologies.
WE ARE DEPENDENT UPON THE SUCCESS OF OUR STRATEGIC DISTRIBUTION
RELATIONSHIPS IN DISTRIBUTING OUR ALLOGRAFTS TO GENERATE OUR REVENUES.
While we market a portion of our current technologies directly to our customers, we currently derive the majority of our revenues through our relationships with a few distributors. In the year ended December 31, 1999, we derived approximately 52% of our net revenues through our management services distribution relationship with one company, Medtronic Sofamor Danek. This company provides nearly all of the instrumentation, surgeon training, distribution services and marketing materials for our line of spinal allografts. If our relationship with this distributor was terminated for any reason, it would materially and adversely affect our ability to generate revenues and profits.
We may need to obtain the assistance of additional distributors to market and distribute our new allografts and technologies, as well as to market and distribute our existing allografts and technologies to new market segments or geographical areas. We may not be able to find additional distributors who will agree to market and distribute our allografts and technologies on commercially reasonable terms, if at all. If we are unable to establish new distribution relationships or renew our current distribution arrangements on commercially acceptable terms, our operating results will suffer.
OUR ALLOGRAFTS COULD BECOME SUBJECT TO SIGNIFICANTLY GREATER REGULATION BY
THE FDA, WHICH COULD DISRUPT OUR BUSINESS.
The U.S. Food and Drug Administration has statutory authority to regulate allograft processing and allograft-based materials. Since 1997, the FDA has been working to establish a more comprehensive regulatory framework for human tissue-based allografts. The framework under FDA consideration would establish criteria for determining whether a particular human tissue-based product will be classified as human tissue, a medical device or biologic drug requiring premarket clearance or
approval. Our heart valve allografts currently are regulated as medical devices and we cannot be sure that the FDA will not seek to regulate our other allografts as medical devices or biologics in the future.
If the FDA decides to adopt and implement its proposed regulatory framework, one or more of our current allografts would then be regulated to a much greater extent. In addition to our heart valve allografts, one or more of our allografts in development may become subject to regulation as medical devices or biologic drugs. For allografts regulated as medical devices, we will need to obtain premarket clearance or approval through either the 510(k) premarket notification process, or the FDA's premarket approval process. Some of our proposed grafts also contain tissue derived from animals, commonly referred to as xenografts. Xenografts also are subject to premarket review by the FDA.
To obtain the necessary approvals or clearances, we would be required to submit premarket notifications, premarket approval applications and/or biologics license applications. The clinical testing and preparation of required applications would be time consuming and costly. In addition, we cannot be sure the FDA would approve our applications. The FDA could also require us to stop marketing our current allografts pending their approval or clearance. The FDA may require post-market testing and surveillance to monitor the effects of approved allografts, may restrict the commercial applications of our allografts, and may conduct periodic inspections of our facility and our suppliers' facilities. The FDA may withdraw our product approvals or clearances if we do not comply with its regulatory standards or if we encounter problems after the initial marketing. If we encounter delays during the FDA approval process, the period during which we have the exclusive right to commercialize any allografts for which we have received patent protection may be shortened.
From time to time, allegations may be made against us or against donor recovery groups or tissue banks, including those with which we have a relationship, about possible non-compliance with applicable FDA regulations or other relevant statutes and regulations. Allegations such as these could cause regulators or other authorities to take investigative or other action, or could cause negative publicity for us or our industry generally.
WE DEPEND ON PATENTS AND OTHER MEANS TO PROTECT OUR INTELLECTUAL PROPERTY,
WHICH MAY NOT ALWAYS BE ADEQUATE.
The law of patents and trade secrets is constantly evolving and often involves complex legal and factual questions. The coverage we seek in our patent applications can either be denied or significantly reduced before or after a patent is issued. Consequently, we cannot be sure that any particular patent we apply for will be issued, that the scope of the patent protection will exclude our competitors, that interference proceedings regarding any of our patent applications will not be filed, or that a patent will provide any other competitive advantage to us. In addition, we cannot be sure that any of our patents will be held valid if challenged or that others will not claim rights in or ownership of the patents and other proprietary rights held by us.
Because patent applications are secret until patents are actually issued and the publication of discoveries in the scientific or patent literature lags behind actual discoveries, we cannot be certain if our patent application was the first application filed covering a particular invention. If another party's rights to an invention are superior to ours, we may not be able to obtain a license to use that party's invention on commercially reasonable terms, if at all. In addition, our competitors, many of which have greater resources than we do, could seek to apply for and obtain patents that will prevent, limit or interfere with our ability to make use of our inventions either in the United States or in international markets. Further, the laws of some foreign countries do not always protect our intellectual property rights to the same extent as do the laws of the United States. Litigation or regulatory proceedings in the United States or foreign countries also may be necessary to enforce our patent or other intellectual property rights or to determine the scope and validity of our competitors' proprietary rights. These proceedings can be costly, result in product development delays, and divert our management's attention from our business.
We also rely upon unpatented proprietary technology, and we cannot assure you that others will not independently develop substantially equivalent technology or otherwise gain access to or disclose our proprietary technology. We may not be able to meaningfully protect our rights in this proprietary technology, which would reduce our ability to compete in the market.
In 1996, a law was passed in the United States that limits the enforcement of patents covering the performance of surgical or medical procedures on a human body. This law prevents medical practitioners and health care entities who practice these procedures from being sued for patent infringement. Therefore, depending upon how these limitations are interpreted by the courts, they could have a material adverse effect on our ability to enforce any of our proprietary methods or procedures deemed to be surgical or medical procedures.
ALTHOUGH WE HAVE CONFIDENTIALITY AGREEMENTS WITH OUR EMPLOYEES AND OTHERS, THESE AGREEMENTS MAY NOT ADEQUATELY PREVENT DISCLOSURE OF TRADE SECRETS AND OTHER PROPRIETARY INFORMATION.
Our policy is to execute confidentiality agreements with our employees and consultants upon the commencement of their employment or consulting arrangement with us. These agreements generally require that all confidential information developed by an individual or to which the individual is exposed during the course of his or her relationship with us must be kept confidential even after the individual has left our employment. These agreements also generally provide that inventions conceived by the individual in the course of rendering services to us shall be our exclusive property. We cannot be sure that these agreements will provide meaningful protection of our proprietary and other confidential information. In addition, in some situations, these agreements may conflict with, or be subject to, the rights of third parties with whom our employees or consultants have prior employment or consulting relationships. We may be forced to engage in costly and time-consuming litigation to determine the scope of and to enforce our proprietary rights. Even if successful, any litigation could divert our management's attention from our business.
OUR SUCCESS WILL DEPEND IN PART ON OUR ABILITY TO OPERATE WITHOUT INFRINGING
ON OR MISAPPROPRIATING THE PROPRIETARY RIGHTS OF OTHERS.
We cannot be certain that U.S. or foreign patents or patent applications of other companies do not exist or will not be issued that would materially and adversely affect our ability to commercialize our grafts. We may be sued for infringing or misappropriating the patent or other intellectual property rights of others. Intellectual property litigation is costly and, even if we prevail, the cost of this litigation could negatively affect our business. If we do not prevail in litigation, in addition to any damages we might have to pay, we could be required to stop the infringing activity or obtain a license requiring us to make royalty payments. Any license we are required to obtain may not be available to us on commercially acceptable terms, if at all. In addition, any license we are required to obtain may be non-exclusive, and therefore our competitors may have access to the same technology licensed to us. If we fail to obtain a required license or are unable to design around another company's patent, we may be unable to make use of some of our technologies or distribute our grafts.
WE DEPEND ON THE CONTINUED SERVICE OF A NUMBER OF OUR KEY EMPLOYEES, AND WE
FACE INTENSE COMPETITION FOR PERSONNEL.
We are highly dependent on the members of our management and scientific staff, the loss of one or more of whom could have a material adverse effect on us. In particular, we believe our success to be particularly dependent upon the services of our Chief Executive Officer, James M. Grooms. In addition, we believe that our future success will depend in large part upon our ability to attract and retain highly skilled, scientific, managerial and manufacturing personnel. We face significant competition for personnel from other companies, research and academic institutions, government entities and other organizations. We may not be successful in hiring or retaining the personnel we need and this could adversely affect our business.
WE MAY BE EXPOSED TO PRODUCT LIABILITY CLAIMS WHICH COULD NEGATIVELY IMPACT
OUR BUSINESS.
Our business entails an inherent risk of product liability claims, and substantial product liability claims may be asserted against us. Although we have not received any material product liability claims to date and have a $20.0 million insurance policy to cover these claims should they arise, claims could arise in the future for which our insurance will not be adequate. Moreover, insurance covering our business may not always be available in the future on commercially reasonable terms, if at all. In addition, successful product liability claims made against one of our competitors could cause claims to be made against us or expose us to a perception that we are vulnerable to similar claims. Any product liability claim, if successful, could have a detrimental effect on our financial condition. In addition, claims against us, regardless of their merit or potential outcome, may also hurt our ability to obtain surgeon endorsement of our allografts or to expand our business.
NEGATIVE PUBLICITY CONCERNING METHODS OF TISSUE RECOVERY AND SCREENING OF DONOR TISSUE IN OUR INDUSTRY COULD REDUCE DEMAND FOR OUR ALLOGRAFTS AND IMPACT THE SUPPLY OF AVAILABLE DONOR TISSUE.
Widespread market acceptance of our allografts may be limited by media reports or other negative publicity concerning both improper methods of tissue recovery from donors and the risk of disease transmission from donated tissue. Unfavorable reports of illegal tissue recovery practices, both in the United States and internationally, as well as incidents of improperly processed tissue leading to transmission of disease, may broadly affect the rate of future tissue donation and market acceptance of allograft technologies. Potential patients may not distinguish between our allografts, technologies and the tissue recovery and processing procedures we have in place, versus those of our competitors or others engaged in tissue recovery. In addition, families of potential donors may become reluctant to agree to donate tissue to "for profit" tissue processors. Any adverse consequences resulting from tissue recovery or processing practices could adversely affect patient acceptance of allografts as a tissue repair treatment option, which could materially and adversely affect our business.
WE MAY NEED TO RAISE ADDITIONAL FUNDS TO OPERATE AND GROW OUR BUSINESS, AND IF WE ARE UNABLE TO RAISE THESE FUNDS, OUR ABILITY TO EFFECT OUR GROWTH STRATEGY COULD BE DISRUPTED.
We may need additional funds to operate our business and to pursue our growth strategy. The extent of our future capital requirements and the adequacy of available funds will depend on numerous factors, including:
- market acceptance of our existing and future allografts and tissue-based technologies;
- progress in our efforts to develop new allografts and tissue-based technologies;
- our success in commercializing technologies we have in development; and
- the development of strategic distribution alliances.
We may be required to obtain additional funds through equity or debt financings, strategic alliances or other sources. The terms of any future equity financings may be dilutive to our stockholders and the terms of any debt financings likely will contain restrictive covenants that limit our ability to pursue particular courses of action, including paying dividends. Our ability to obtain financing is dependent upon the status of our future business prospects, as well as conditions prevailing in the capital markets. Additional sources of financing may not be available to us on commercially reasonable terms, if at all.
WE MAY NOT BE SUCCESSFUL IN EXPANDING OUR DISTRIBUTION ACTIVITIES INTO
INTERNATIONAL MARKETS.
We are seeking to expand our operations outside the United States. To date we have limited experience operating internationally. In the year ended December 31, 1999, international sales
comprised approximately 2.6% of our net revenues. Our international operations will be subject to a number of risks which may vary from the risks we face in the United States, including:
- the need to obtain regulatory approvals in foreign countries before we can offer our grafts and technologies for use;
- longer distribution-to-collection cycles, as well as difficulty in collecting amounts owed to us;
- dependence on local distributors;
- limited protection of intellectual property rights;
- fluctuations in the values of foreign currencies; and
- political and economic instability.
If we are unable to effectively expand our operations in international markets, our business strategy would be negatively impacted.
ANY ACQUISITIONS WE MAKE WILL CAUSE US TO INCUR A VARIETY OF COSTS AND MAY
POTENTIALLY EXPOSE US TO ADDITIONAL RISKS.
We may consider acquiring other businesses or technologies that we believe are a strategic fit with our business. If we do make acquisitions, we could:
- issue equity securities which could be dilutive to our stockholders;
- incur substantial debt; or
- assume contingent liabilities or liabilities of which we may be unaware at the time we make the acquisition or which may be larger than we believed.
In addition, we may have difficulty integrating the personnel, operations or technologies we acquire, which could disrupt our business, distract our management and employees, and increase our operating expenses. Future acquisitions also might negatively impact our strategic distribution alliances.
OUR INDUSTRY IS SUBJECT TO GOVERNMENT REGULATIONS WHICH CAN SIGNIFICANTLY
IMPACT OUR BUSINESS.
Some aspects of our business are subject to local, state, federal or international regulation. Changes in the laws or new interpretations of existing laws could negatively affect our business, revenues or prospects, and increase the costs associated with conducting our business. In particular, the procurement and transplantation of allograft tissue is subject to federal regulation under the National Organ Transplant Act, or NOTA, a criminal statute that prohibits the purchase and sale of human organs, including bone and other tissue. NOTA permits the payment of reasonable expenses associated with the transportation, processing, preservation, quality control and storage of human tissue, which are the types of services we perform. If in the future NOTA were amended or interpreted in a way that makes us unable to include some of these costs in the amounts we charge our customers, it could adversely affect our business. It is possible that more restrictive interpretations or expansions of NOTA could be adopted in the future which could require us to change one or more aspects of our method of operations, at a substantial cost, in order to continue to comply with this statute.
We also are subject to a variety of local, state and federal government laws and regulations relating to the storage, handling, generation, manufacture and disposal of medical wastes from the production of our allografts. If we fail to conduct our business in compliance with these laws and regulations, it could subject us to significant liabilities, which could have a negative impact on our financial results.
IF THIRD PARTY PAYORS FAIL TO PROVIDE APPROPRIATE LEVELS OF REIMBURSEMENT
FOR THE USE OF OUR ALLOGRAFTS, OUR REVENUES WOULD BE ADVERSELY AFFECTED.
Our revenues depend largely on the reimbursement of patients' medical expenses by government health care programs and private health insurers. Governments and private insurers closely examine medical procedures incorporating new technologies to determine whether the procedures will be covered by payment, and if so, the level of payment which may apply. We cannot be sure that third party payors will continue to reimburse us or provide payment at levels which will be profitable to us.
CHANGES TO THE EXISTING HEALTHCARE INDUSTRY COULD LOWER THE AMOUNT WE ARE
PAID FOR OUR SERVICES, DECREASING OUR REVENUES.
Political, economic and regulatory influences are subjecting the healthcare industry in the United States to fundamental change. Any new federal or state legislation could result in significant changes in the availability, delivery, pricing and payment for healthcare services and products. It is not possible to predict whether any significant new healthcare legislation will have a negative impact on our business. Any significant healthcare legislation, if adopted, could have a material adverse effect on our business, financial condition and results of operations.
OUR STOCK PRICE MAY DECLINE AFTER THIS OFFERING AND MAY BE VOLATILE IN THE
FUTURE.
The market for shares in newly public technology companies, particularly medical device or biotechnology-related companies, is subject to extreme price and volume fluctuations. These broad fluctuations may materially and adversely affect the market price of our common stock. You may not be able to resell any shares you buy from us at or above the initial public offering price due to a number of factors, including:
- actual or anticipated fluctuations in our operating results;
- changes in investors' and securities analysts' expectations as to our future financial performance or changes in financial estimates of securities analysts;
- announcement of new allografts or product enhancements by us or our competitors;
- technological innovations by us or our competitors;
- negative publicity concerning methods of tissue recovery and screening; and
- the operating and stock price performance of comparable companies.
In addition, although our common stock will be quoted on the Nasdaq National Market, an active trading market may not develop or sustain itself after this offering.
OWNERSHIP OF OUR STOCK IS HEAVILY CONCENTRATED AND THESE STOCKHOLDERS WILL
CONTROL ALL MATTERS REQUIRING STOCKHOLDER APPROVAL.
After giving effect to this offering and assuming the full exercise of the underwriters' over-allotment option, our directors, executive officers, and stockholders holding greater than 5% of our common stock beneficially owned approximately % of our outstanding common stock. As a result, these stockholders are able to control all matters requiring stockholder approval, including the election of directors and approval of significant transactions. This concentration of ownership may also have the effect of delaying or preventing a change in control of our company.
PROVISIONS OF OUR GOVERNING DOCUMENTS AND DELAWARE LAW COULD DISCOURAGE
ACQUISITION PROPOSALS OR DELAY A CHANGE IN OUR CONTROL.
Our certificate of incorporation and by-laws contain anti-takeover provisions, including those listed below, that could make it more difficult for a third party to acquire control of us, even if that change in control would be beneficial to stockholders:
- our board of directors has the authority to issue common stock and preferred stock and to determine the price, rights and preferences of any new series of preferred stock without stockholder approval;
- our board of directors is divided into three classes, with each class serving staggered three-year terms;
- supermajority voting is required to amend key provisions of our certificate of incorporation and by-laws;
- there are limitations on who can call special meetings of stockholders;
- stockholders may not take action by written consent; and
- advance notice is required for nominations of directors and for stockholder proposals to be voted upon at stockholder meetings.
In addition, provisions of Delaware law and our stock option plans may also discourage, delay or prevent a change of control of our company or unsolicited acquisition proposals.
OUR MANAGEMENT WILL HAVE BROAD DISCRETION AS TO THE USE OF PROCEEDS OF THIS
OFFERING.
Our management will have broad discretion as to how to use the net proceeds of this offering. You will be relying on the judgment of our management regarding the application of the proceeds of this offering. The results and effectiveness of the use of the proceeds are uncertain.
YOU WILL INCUR IMMEDIATE DILUTION IN THIS OFFERING.
The initial public offering price of our common stock will be substantially higher than the pro forma net tangible book value per share of our outstanding shares of common stock immediately after this offering. Therefore, if you purchase our common stock in this offering at the initial public offering price of $ per share, you will incur immediate dilution of $ in the net tangible book value per share from the price you pay for the shares you purchase.
FUTURE SALES OF OUR COMMON STOCK COULD ADVERSELY AFFECT THE MARKET PRICE OF
OUR COMMON STOCK.
Sales of our common stock in the public market following this offering could adversely affect the market price of our common stock. Of the shares that will be outstanding upon the closing of this offering:
- all of the shares offered under this prospectus will be freely tradable in the public market;
- approximately additional shares may be sold after the expiration of the 180-day lock-up agreements entered into by our officers, directors and existing stockholders; and
- approximately additional shares may be sold upon the exercise of stock options and warrants after the expiration of the 180-day lock-up period.
USE OF PROCEEDS
We estimate the net proceeds to us from the sale of the shares of common stock we are offering, after deducting underwriting discounts and commissions and the estimated offering expenses payable by us, will be approximately $ million, assuming an initial public offering price of $ per share. We will not receive any proceeds from the sale of shares by the selling stockholder. See "Underwriting."
We intend to use the net proceeds of this offering for continued research and development, to construct and equip a new manufacturing facility, to construct additional BioCleanse systems and other automated processing systems, to expand our tissue recovery and distribution activities, and for general corporate purposes, including working capital.
In addition, we may also use a portion of the net proceeds from this offering to acquire businesses, assets, technologies or product lines that complement our existing business if we could make these acquisitions on terms which we deem to be favorable. Other than our acquisition of the tissue processing and distribution business of Alabama Tissue Center immediately prior to the closing of this offering, we do not have any commitments to make any acquisition and have not allocated a specific amount of the net proceeds for this purpose.
Our management will have significant flexibility in applying the net proceeds of the offering. Pending any use as described above, we intend to invest unused proceeds in short-term, interest-bearing investment-grade instruments.
DIVIDEND POLICY
We have never declared nor paid any cash dividends on our capital stock. In addition, our current credit facility restricts our ability to pay any dividends and any future facility may contain similar restrictions. We currently anticipate that we will retain any future earnings for the development and operation of our business. Accordingly, we do not anticipate paying cash dividends on our capital stock in the foreseeable future.
CAPITALIZATION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following table sets forth our capitalization as of December 31, 1999:
(1) on an actual basis; and (2) on an as adjusted basis to reflect the
conversion of our outstanding preferred stock into common stock and the sale of
the shares of common stock to be sold by us (assuming an initial public offering
price of $ per share) after deducting underwriting discounts and
commissions and other estimated offering expenses and the application of the
estimated net proceeds. This table should be read along with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our consolidated financial statements and accompanying notes included elsewhere
in this prospectus.
AS OF DECEMBER 31, 1999
------------------------
ACTUAL AS ADJUSTED
---------- -----------
Long-term debt, including current portion................... $ 2,926 $
Stockholders' equity:
Series A preferred stock, $.001 par value, shares
authorized, issued and outstanding, actual; , as
adjusted................................................ 2
Series B preferred stock, $.001 par value, shares
authorized, issued and outstanding, actual; , as
adjusted................................................ 6,580
Series C preferred stock, $.001 par value, shares
authorized, issued and outstanding, actual; , as
adjusted................................................ 10,000
Preferred stock, $.001 par value, shares authorized;
none issued and outstanding, actual; 5,000,000 shares
authorized and none issued and outstanding, as
adjusted................................................
Common stock, $.001 par value, shares authorized and
shares issued, actual; shares issued, as
adjusted................................................ 1
Additional paid-in capital.................................. 447
Accumulated deficit......................................... (1,183)
Deferred compensation....................................... (400)
Due from stockholder-net of due to stockholder.............. (4)
Less treasury stock, shares, actual, as adjusted...... (6)
------- -------
Total stockholders' equity.................................. 15,437
------- -------
Total capitalization.................................... $18,363 $
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The above information excludes:
- shares of our common stock subject to options granted under our Omnibus Stock Option Plan and outstanding as of December 31, 1999 at a weighted average exercise price of $ per share; and
- shares of our common stock reserved for issuance upon the exercise of warrants outstanding as of December 31, 1999, at a weighted average exercise price of $ per share.
DILUTION
Our pro forma net tangible book value as of December 31, 1999 was approximately $ , or $ per share of common stock, after giving effect to the conversion of all outstanding shares of preferred stock. Pro forma net tangible book value per share is equal to the amount of our tangible net assets, less total liabilities, divided by the pro forma number of shares of our common stock outstanding as of December 31, 1999. After giving effect to the sale by us of the shares of common stock offered hereby, assuming an initial public offering price of $ per share, and the application of the net proceeds from this offering, our pro forma net tangible adjusted book value at December 31, 1999 would have been approximately $ , or $ per share of our common stock. This amount represents an immediate increase in our pro forma net tangible book value of $ per share to existing stockholders and an immediate dilution in net tangible book value of $ per share to new investors in the offering. To the extent any of these options or warrants are exercised, there will be further dilution to new investors. The following table illustrates this per share dilution:
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share at December
31, 1999................................................ $
Increase per share attributable to new investors..........
----
Pro forma net tangible book value per share after the
offering..................................................
----
Dilution per share to new investors......................... $
====
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If the underwriters' over-allotment option is exercised in full, our pro forma as adjusted net tangible book value at December 31, 1999 would have been approximately $ per share, representing an immediate increase in net tangible book value of $ per share to existing stockholders and an immediate dilution in net tangible book value of $ per share to new investors.
The following table summarizes, on a pro forma basis as of December 31, 1999, the total number of shares of our common stock purchased from us, the total consideration paid for these shares, and the average price per share paid by our existing stockholders and by new investors purchasing shares in this offering:
TOTAL
SHARES PURCHASED CONSIDERATION AVERAGE
------------------- ------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
-------- -------- -------- -------- ---------
Existing stockholders.............................. % $ % $
New investors......................................
------ ----- ------ ------
Total............................................ 100.0% $ 100.0%
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If the underwriters' over-allotment option is exercised in full, the number of shares of common stock held by our existing stockholders will be reduced to approximately % of the total number of shares of our common stock to be outstanding after this offering, and will increase the number of shares of our common stock held by the new investors to shares, or approximately % of the total number of shares of our common stock to be outstanding immediately after this offering.
The above information excludes:
- shares of our common stock subject to options granted under our Omnibus Stock Option Plan and outstanding as of December 31, 1999 at a weighted average exercise price of $ per share; and
- shares of our common stock reserved for issuance upon the exercise of warrants outstanding as of December 31, 1999 at a weighted average exercise price of $ per share.
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The statement of operations data set forth below for the period from February 12, 1998, when we began operations, to December 31, 1998 and the year ended December 31, 1999 and selected balance sheet data as of December 31, 1998 and 1999 have been derived from our consolidated financial statements, which have been audited by Deloitte & Touche LLP, independent auditors. The selected financial data in the table below should be read along with "Management's Discussion and Analysis of Financial Condition and Results of Operations," and our consolidated financial statements and accompanying notes included elsewhere in this prospectus.
PERIOD FROM
FEBRUARY 12, 1998 YEAR ENDED
TO DECEMBER 31, 1998 DECEMBER 31, 1999
-------------------- -----------------
STATEMENT OF OPERATIONS DATA:
Revenues from core operations:
Fees from tissue distribution............................ $31,892 $70,783
Other revenues from core operations...................... 3,365 2,237
------- -------
Total revenues........................................... 35,257 73,020
Management services fees................................... 24,129 39,994
------- -------
Net revenues............................................. 11,128 33,026
Cost of processing and distribution........................ 9,845 19,172
------- -------
Gross profit............................................. 1,283 13,854
Expenses:
Marketing, general and administrative.................... 3,987 9,740
Research and development................................. 1,472 1,675
------- -------
Total expenses........................................... 5,459 11,415
Operating (loss) income.................................... (4,176) 2,439
------- -------
Interest (expense) income:
Interest expense......................................... (153) (285)
Interest income.......................................... 187 187
------- -------
Total interest income (expense)--net..................... 34 (98)
------- -------
(Loss) income before income tax benefit.................... (4,142) 2,341
Income tax benefit......................................... -- 619
------- -------
Net (loss) income.......................................... $(4,142) $ 2,960
======= =======
Net (loss) income per common share--basic..................
Net (loss) income per common share--diluted................
Weighted average shares outstanding--basic.................
Weighted average shares outstanding--diluted...............
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AS OF DECEMBER 31,
-------------------
1998 1999
-------- --------
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 3,926 $ 7,536
Working capital............................................. (13) 14,052
Total assets................................................ 19,268 48,538
Long-term obligations....................................... 1,522 2,027
Total stockholders' (deficiency) equity..................... (1,431) 15,437
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
We are a leader in the use of biologics and tissue-based innovations that repair and promote the natural healing of human bone and other human tissues. We are the largest U.S. processor and distributor of precision tooled allografts both in terms of revenues and surgical procedures for the year ended December 31, 1999. These allograft implants are used in surgical reconstruction, bone healing and tissue repair, and are made from bone, cartilage, tendon, ligament and other soft tissues recovered from cadaveric tissue donors primarily through a national network of organ and tissue recovery agencies.
We were incorporated in 1997 as a wholly owned subsidiary of the University of Florida Tissue Bank, Inc., or UFTB. We began operations on February 12, 1998 when UFTB contributed to us its allograft manufacturing and processing operations, related equipment and technologies, distribution arrangements, research and development activities and certain other assets in exchange for shares of preferred stock. We also assumed various liabilities of UFTB that were related to the transferred business. At approximately the same time, we sold shares of preferred stock to a number of unrelated investors.
In addition, UFTB assigned to us various agreements to which it was party at the time of the separation, including an agreement with Medtronic Sofamor Danek under which that company was given the right to be the exclusive provider of management services for our current line of allografts for use in spinal and cranial medical procedures, including our bone dowels. Under this agreement, we are required to pay Medtronic Sofamor Danek 70% of the amount charged for our spinal allografts.
At approximately the time of our separation from UFTB, James M. Grooms, our President and Chief Executive Officer and former officer of UFTB prior to our separation from that entity, contributed his royalty rights in certain intellectual property to us in exchange for shares of our preferred stock. We recorded the assets acquired from UFTB and Mr. Grooms and the liabilities assumed from UFTB at their historical cost basis since these were deemed to be transactions between entities under common control.
On April 15, 1999, we entered into a Programs Transfer Agreement with UFTB under which UFTB transferred to us its tissue recovery operations outside of Florida and Georgia, conventional allograft distribution services, allograft inventory, certain equipment and fixtures and its interest in agreements with various tissue recovery programs in exchange for the offset of amounts owed to us by UFTB. On April 15, 1999, we also entered into a Tissue Recovery Agreement with UFTB under which UFTB functions as one of our tissue recovery agencies, supplying to us the majority of the tissue it recovers.
On November 1, 1999, we acquired the net assets of Georgia Tissue Bank, Inc. along with certain equipment owned by a director of Georgia Tissue Bank. We financed this acquisition with a cash payment of $0.5 million and promissory notes totaling $1.3 million. We recorded our acquisition of the net assets of Georgia Tissue Bank under the purchase method of accounting.
On April 27, 2000, we entered into an agreement to acquire the tissue processing and distribution business of Alabama Tissue Center. Under that agreement, we are obligated to pay the seller $3.5 million in shares of our common stock, valued at a price equal to the initial public offering price, and $0.3 million in cash, with the possible payment of an additional $0.3 million in cash if specified milestones are achieved by the acquired business following the acquisition. If our initial public offering is not consummated, we are not obligated to consummate the acquisition.
All of our operations are located in the United States, although we distribute our allografts to customers both within and outside the United States. In 1999, 97.4% of our net revenues were from
domestic tissue distribution compared to 100% of our net revenues in 1998. We expect the portion of our net revenues attributable to international operations will increase in the future.
In general, tissue recovery rates increase during the month of March and decrease during the month of August. Although this seasonality in tissue recovery affects the availability of donor tissue during these periods, it historically has not affected our ability to continue processing available donor tissue or supply needed allografts. We attempt to manage our business so that these short-term reductions in donor tissue recoveries do not affect the quarterly results of our business.
RESULTS OF OPERATIONS
The following table sets forth, in both dollars and as a percentage of net revenues, the results of our operations for the periods indicated:
PERIOD FROM
FEBRUARY 12, 1998 YEAR ENDED
TO DECEMBER 31, 1998 DECEMBER 31, 1999
STATEMENT OF OPERATIONS DATA: --------------------- ------------------
(IN THOUSANDS)
Revenues from core operations:
Fees from tissue distribution....................... $31,892 $70,783
Other revenues from core operations................. 3,365 2,237
------- -------
Total revenues........................................ 35,257 73,020
Management services fees.............................. 24,129 39,994
------- -------
Net revenues.......................................... 11,128 100.0% 33,026 100.0%
Costs of processing and distribution.................. 9,845 88.5 19,172 58.1
------- ----- ------- -----
Gross profit.......................................... 1,283 11.5 13,854 41.9
------- ----- ------- -----
Expenses:
Marketing, general and administrative............... 3,987 35.8 9,740 29.5
Research and development............................ 1,472 13.2 1,675 5.1
------- ----- ------- -----
Total expenses........................................ 5,459 49.0 11,415 34.6
------- ----- ------- -----
Operating (loss) income............................... (4,176) (37.5) 2,439 7.3
------- ----- ------- -----
Interest (expense) income:
Interest expense.................................... (153) (1.4) (285) (0.9)
Interest income..................................... 187 1.7 187 0.6
------- ----- ------- -----
Total interest income (expense)--net.................. 34 0.3 (98) (0.3)
------- ----- ------- -----
(Loss) income before income tax benefit............... (4,142) (37.2) 2,341 7.0
Income tax benefit.................................... -- -- 619 1.9
------- ----- ------- -----
Net (loss) income..................................... $(4,142) (37.2)% $ 2,960 8.9%
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YEAR ENDED DECEMBER 31, 1999 COMPARED TO PERIOD ENDED DECEMBER 31, 1998
AMOUNTS STATED BELOW FOR THE PERIOD ENDED DECEMBER 31, 1998 INCLUDE ONLY APPROXIMATELY TEN AND ONE-HALF MONTHS OF OPERATIONS, COMPARED TO A FULL 12 MONTHS FOR THE YEAR ENDED DECEMBER 31, 1999.
TOTAL REVENUES. Our total revenues increased by $37.7 million, or 106.8%, to $73.0 million for the year ended December 31, 1999 from $35.3 million for the period ended December 31, 1998.
Fees from tissue distribution increased by $38.9 million, or 121.9%, to $70.8 million for the year ended December 31, 1999 from $31.9 million for the period ended December 31, 1998. The increase in fees from tissue distribution was due largely to an increase of $26.7 million in revenues from the distribution of our spinal allografts, an increase of $8.0 million from the distribution of conventional tissue and an increase of $4.2 million from the distribution of other precision tooled allografts. The increase in our revenues from spinal allografts was due primarily to our introduction of three new spinal allografts in late 1998. Conventional tissue revenues increased due to our assumption of UFTB's conventional tissue distribution business in April 1999. Of the increase in our revenues from precision tooled allografts, $3.6 million was related to the introduction of five new allografts in 1998, and $0.6 million was related to the introduction of four new allografts in 1999.
Other revenues from core operations, which consist of tissue processing fees, biomedical laboratory fees and manufacturing royalties, decreased by $1.2 million, or 33.5%, to $2.2 million for the year ended December 31, 1999 from $3.4 million for the period ended December 31, 1998. This decrease was due largely to a reduction during 1999 of processing fees from UFTB as a result of our assumption of their conventional tissue distribution business in April 1999 rather than continuing to process its conventional tissue for a fee.
MANAGEMENT SERVICES FEES. Management services fees, which consist of amounts paid to Medtronic Sofamor Danek for distribution of our allografts for which they provide management services, increased by $15.9 million, or 66.0%, to $40.0 million for the year ended December 31, 1999 from $24.1 million for the period ended December 31, 1998. The increase in the absolute amount of these fees was due to the greater revenues generated through the management services of Medtronic Sofamor Danek. As a percentage of total revenues, however, these fees decreased from 68.4% for the period ended December 31, 1998 to 54.8% for the year ended December 31, 1999. This decrease in management fees as a percentage of total revenues was attributable to a decrease in the management services fee payable by us on certain of our allografts from 80% to 70% during the first quarter of 1999. In addition, an increase in distribution of our non-spinal allografts, for which we do not pay a management services fee, contributed to the reduction in management services fees as a percentage of total fees.
NET REVENUES. Our net revenues increased by $21.9 million, or 197.3%, to $33.0 million for the year ended December 31, 1999 from $11.1 million for the period ended December 31, 1998. As a percentage of total revenues, our net revenues increased from 31.6% for the period ended December 31, 1998 to 45.2% for the year ended December 31, 1999. This increase was due mainly to the impact of distribution of our non-spinal allografts, for which we do not pay management services fees.
COSTS OF PROCESSING AND DISTRIBUTION. Costs of processing and distribution increased by $9.4 million, or 95.9%, to $19.2 million for the year ended December 31, 1999 from $9.8 million for the period ended December 31, 1998. As a percentage of net revenues, however, these costs decreased from 88.5% for the period ended December 31, 1998 to 58.0% for the year ended December 31, 1999. This reduction was attributable primarily to improvements in processing efficiencies achieved through our introduction of automated processing machinery, as well as efficiencies associated with increased volume. In addition, the increase in our net revenues due to reduced management services fees payable by us, also resulted in a reduction of the percentage of our net revenues attributable to costs of processing and distribution.
MARKETING, GENERAL AND ADMINISTRATIVE EXPENSES. Marketing, general and administrative expenses increased by $5.7 million, or 142.3%, to $9.7 million for the year ended December 31, 1999 from $4.0 million for the period ended December 31, 1998. Contributing to this increase was an increase of $1.1 million in marketing and direct distribution payroll expense, as well as an increase of $0.7 million in administrative expenses to support the growth of our business. Also contributing to the increase was a $0.7 million increase in facilities expense during 1999 as we went from leasing one building at the beginning of 1998 to two buildings in the last quarter of 1998. Other cost increases included an increase in distributor commissions, primarily on conventional tissue, of $1.2 million, increased depreciation expense of $0.4 million, increased royalties on conventional tissue of $0.3 million and increased professional fees and travel related expenses of $0.9 million to support our distribution and marketing efforts. As a percentage of net revenues, marketing, general and administrative expenses decreased from 35.8% for the period ended December 31, 1998 to 29.5% for the year ended December 31, 1999. This decrease was due to our net revenues rising without a commensurate increase in marketing, general and administrative expenses.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses increased by $0.2 million, or 13.3%, to $1.7 million for the year ended December 31, 1999 from $1.5 million for the period ended December 31, 1998. This increase was due largely to the hiring of additional personnel to develop new allografts and technologies. All research and development costs are expensed as incurred. As a percentage of net revenues, research and development expenses decreased from 13.2% for the period ended December 31, 1998 to 5.1% for the year ended December 31, 1999. This decrease was due to our net revenues rising without a commensurate increase in research and development expenses.
INTEREST INCOME AND EXPENSE--NET. Net interest expense for the year ended December 31, 1999 was $98,000 compared to net interest income of $34,000 for the period ended December 31, 1998. The increase in the amount of interest we paid was due largely to borrowings under our line of credit facility entered into during 1999, as well as interest paid on a number of capital leases entered into during 1999.
INCOME TAX BENEFIT. In 1998 we recorded a valuation allowance with respect to a deferred tax asset since we believed at the time that it was unlikely to be realized. In 1999, as a result of achieving positive net income for that year, this valuation allowance was reversed resulting in an income tax benefit of $0.6 million for 1999.
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following tables present unaudited quarterly statement of operations data in both dollars and as percentages of net revenues for each of the quarters for the fiscal periods ended December 31, 1998 and 1999. This information is unaudited, but in our opinion has been prepared substantially on the same basis as the audited consolidated financial statements which appear elsewhere in this prospectus. All necessary adjustments, consisting only of normal recurring adjustments, have been included in the amounts to present fairly the unaudited quarterly results. You should read the quarterly data presented below in conjunction with our consolidated financial statements and the accompanying notes appearing elsewhere in this prospectus. You should not view the results of operations for any quarter as an indication of the results of operations for any future period.
QUARTER ENDED
PERIOD ENDED --------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1998 1998 1998 1998 1999 1999
------------ -------- ------------- ------------ --------- --------
(IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Revenues from core
operations:
Fees from tissue
distribution............. $4,345 $8,696 $ 8,794 $10,057 $13,901 $16,273
Other revenues from core
operations............... 713 977 897 778 919 468
------ ------ ------- ------- ------- -------
Total revenues........... 5,058 9,673 9,691 10,835 14,820 16,741
Management services fees..... 3,319 6,698 6,685 7,427 8,617 8,845
------ ------ ------- ------- ------- -------
Net revenues............... 1,739 2,975 3,006 3,408 6,203 7,896
Costs of processing and
distribution............... 956 2,467 2,791 3,631 4,398 4,592
------ ------ ------- ------- ------- -------
Gross profit............. 783 508 215 (223) 1,805 3,304
------ ------ ------- ------- ------- -------
Expenses:
Marketing, general and
administrative........... 410 861 1,118 1,598 1,673 2,346
Research and development... 157 328 484 503 376 465
------ ------ ------- ------- ------- -------
Total expenses........... 567 1,189 1,602 2,101 2,049 2,811
------ ------ ------- ------- ------- -------
Operating income (loss)...... 216 (681) (1,387) (2,324) (244) 493
------ ------ ------- ------- ------- -------
Interest (expense) income:
Interest expense........... (20) (37) (36) (60) (57) (56)
Interest income............ -- 64 57 66 67 23
------ ------ ------- ------- ------- -------
Total interest (expense)
income-net............. (20) 27 21 6 10 (33)
------ ------ ------- ------- ------- -------
Income (loss) before income
tax (expense) benefit...... 196 (654) (1,366) (2,318) (234) 460
Income tax (expense)
benefit.................... -- -- -- -- (62) 121
------ ------ ------- ------- ------- -------
Net income (loss)............ $ 196 $ (654) $(1,366) $(2,318) $ (296) $ 581
====== ====== ======= ======= ======= =======
QUARTER ENDED
----------------------------
SEPTEMBER 30, DECEMBER 31,
1999 1999
------------- ------------
(IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Revenues from core
operations:
Fees from tissue
distribution............. $18,938 $21,671
Other revenues from core
operations............... 426 424
------- -------
Total revenues........... 19,364 22,095
Management services fees..... 10,682 11,850
------- -------
Net revenues............... 8,682 10,245
Costs of processing and
distribution............... 4,725 5,457
------- -------
Gross profit............. 3,957 4,788
------- -------
Expenses:
Marketing, general and
administrative........... 2,693 3,028
Research and development... 580 254
------- -------
Total expenses........... 3,273 3,282
------- -------
Operating income (loss)...... 684 1,506
------- -------
Interest (expense) income:
Interest expense........... (76) (96)
Interest income............ 4 93
------- -------
Total interest (expense)
income-net............. (72) (3)
------- -------
Income (loss) before income
tax (expense) benefit...... 612 1,503
Income tax (expense)
benefit.................... 162 397
------- -------
Net income (loss)............ $ 774 $ 1,900
======= =======
|
QUARTER ENDED
PERIOD ENDED --------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1998 1998 1998 1998 1999 1999
------------ -------- ------------- ------------ --------- --------
PERCENTAGE OF NET REVENUES:
Net revenues................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Costs of processing and
distribution............... 55.0 82.9 92.8 106.5 70.9 58.2
----- ----- ----- ----- ----- -----
Gross profit............. 45.0 17.1 7.2 (6.5) 29.1 41.8
Expenses:
Marketing, general and
administrative........... 23.6 28.9 37.2 46.9 27.0 29.7
Research and development... 9.0 11.1 16.1 14.8 6.0 5.9
----- ----- ----- ----- ----- -----
Total expenses........... 32.6 40.0 53.3 61.7 33.0 35.6
----- ----- ----- ----- ----- -----
Operating income (loss)...... 12.4 (22.9) (46.1) (68.2) (3.9) 6.2
----- ----- ----- ----- ----- -----
Interest (expense) income:
Interest expense........... (1.1) (1.2) (1.2) (1.7) (0.9) (0.7)
Interest income............ -- 2.1 1.9 1.9 1.0 0.3
----- ----- ----- ----- ----- -----
Total interest (expense)
income-net............. (1.1) 0.9 0.7 0.2 0.1 (0.4)
----- ----- ----- ----- ----- -----
Income (loss) before income
tax (expense) benefit...... 11.3 (22.0) (45.4) (68.0) (3.8) 5.8
Income tax (expense)
benefit.................... -- -- -- -- (1.0) 1.5
----- ----- ----- ----- ----- -----
Net income (loss)............ 11.3% (22.0)% (45.4)% (68.0)% (4.8)% 7.3%
===== ===== ===== ===== ===== =====
QUARTER ENDED
----------------------------
SEPTEMBER 30, DECEMBER 31,
1999 1999
------------- ------------
PERCENTAGE OF NET REVENUES:
Net revenues................. 100.0% 100.0%
Costs of processing and
distribution............... 54.4 53.3
----- -----
Gross profit............. 45.6 46.7
Expenses:
Marketing, general and
administrative........... 31.0 29.6
Research and development... 6.7 2.4
----- -----
Total expenses........... 37.7 32.0
----- -----
Operating income (loss)...... 7.9 14.7
----- -----
Interest (expense) income:
Interest expense........... (0.9) (0.9)
Interest income............ 0.0 0.9
----- -----
Total interest (expense)
income-net............. (0.9) (0.0)
----- -----
Income (loss) before income
tax (expense) benefit...... 7.0 14.7
Income tax (expense)
benefit.................... 1.9 3.9
----- -----
Net income (loss)............ 8.9% 18.6%
===== =====
|
Our quarterly operating results have fluctuated significantly since we began operations. One of the primary reasons for these fluctuations is our historical and current dependence upon our MD-Series Threaded Bone Dowels. In an effort to smooth these fluctuations, we have attempted to diversify the allografts we offer, including the introduction of eight new allografts during 1998. While these new allografts accounted for only $2.9 million of total revenues during 1998, they accounted for $31.3 million of the $37.7 million increase in our 1999 total revenues. Also accounting for a portion of the increase in our total revenues for 1999 was an increase of $8.0 million in conventional tissue revenues when we assumed UFTB's conventional tissue processing business in April 1999.
Our revenue diversification efforts also favorably impacted our gross profit as a percentage of net revenues, which increased from 11.5% of our net revenues in 1998 to 41.9% in 1999. Adding to this impact was a decrease in the first quarter of 1999 in the management services fees we are required to pay to Medtronic Sofamor Danek for certain of our spinal allografts from 80% to 70%. The impact of this decrease was an effective increase in the net revenues from each allograft distributed through that company without any change in direct costs. Also increasing our 1999 gross margin was an increase in distribution of our bone paste allografts for the spinal market, which bear lower management services fees.
In order to permit the expansion of our business and increase revenues, we incurred additional manufacturing costs and material usage in the fourth quarter 1998. The result of these activities was a negative gross margin of $0.2 million or 6.5% of net revenues during the fourth quarter of 1998. These additional costs included higher payroll costs of approximately $0.2 million due to the hiring of additional personnel and approximately $0.3 million for additional lab testing, packaging and tools and equipment. We also incurred higher material costs of $0.4 million due to higher material usage during the early phases of production.
In addition to the higher manufacturing costs incurred in the fourth quarter of 1998, we also hired additional marketing, distribution and administrative staff in the second through fourth quarters of 1998 to support the anticipated growth in our business. These staff increases and related costs contributed to our operating losses in the second through fourth quarters of 1998 and the first quarter of 1999.
LIQUIDITY AND CAPITAL RESOURCES
Since we began operations, we have financed our operations primarily through our sale of preferred stock, totaling $6.4 million in net proceeds in 1998 and $10.0 million in net proceeds in 1999.
Our net cash used in operating activities increased by $9.9 million to $6.5 million for the year ended December 31, 1999 from net cash provided by operating activities of $3.4 million for the period ended December 31, 1998. This increase was largely due to the payment of a $4.5 million non-refundable fee by Medtronic Sofamor Danek during 1998 related to our agreement with that company and an increase in our working capital of approximately $5.5 million for the year ended December 31, 1999. For accounting purposes, we deferred the $4.5 million fee we received from Medtronic Sofamor Danek and we are recognizing it on a straight-line basis over the 20 year life of the agreement.
Our net cash used in investing activities increased by $1.0 million to $2.9 million for the year ended December 31, 1999 from $1.9 million for the period ended December 31, 1998. This increase was due primarily to the $0.5 million we paid for our acquisition of the net assets of Georgia Tissue Bank, plus an increase of $0.5 million in the amount paid for the purchase of property, plant and equipment during 1999. During the year ended December 31, 1999, $0.8 million of cash was used in the purchase of property, plant and equipment largely related to our BioCleanse processing facility.
Net cash provided by financing activities increased by $10.6 million to $13.0 million for the year ended December 31, 1999 from $2.4 million for the period ended December 31, 1998. This increase
was due primarily to the $10.0 million in net proceeds we realized from our sale of preferred stock during 1999, $2.8 million in net borrowings under our line of credit facility, and $0.7 million in proceeds due from a stockholder. In 1998, we received $6.6 million of proceeds from our sale of preferred stock and financed $3.8 million in receivables from UFTB. Our line of credit facility permits us to borrow up to $6.0 million on a revolving basis and is collateralized by our accounts receivable. This line of credit facility expires in September 2000. As of December 31, 1999, we had excess borrowing capacity of approximately $3.2 million under this facility.
On March 30, 2000, we purchased the buildings and land that we currently occupy, plus an additional 20.8 acres of land for future expansion. The purchase price for the two buildings and 6.2 acres on which they are situated was $3.6 million, with the additional parcel of land costing approximately $0.6 million. In order to finance the purchase, we entered into a 20-year term loan in the amount of $2.8 million, collateralized by the property. The remainder of the purchase price was financed with a portion of the proceeds from our sale of preferred stock during 1999. We continue to lease approximately 18,000 square feet of space in buildings adjacent to those we purchased and 8,800 square feet of warehouse space.
We currently believe that the net proceeds from this offering, cash from operations and our existing cash and cash equivalents will be sufficient to meet our anticipated cash requirements for at least the next 12 months. The completion of one or more acquisitions by us could affect our need for capital.
IMPACT OF INFLATION
Inflation generally affects us by increasing our cost of labor, equipment and processing tools and supplies. We do not believe that the relatively low rates of inflation experienced in the United States since the time we began operations has had any material effect on our business.
INTEREST RATE RISK
We are subject to market risk from exposure to changes in interest rates based upon our financing, investing and cash management activities. We use a balanced mix of debt maturities along with both fixed-rate and variable-rate debt to manage its exposure to changes in interest rates. We do not expect changes in interest rates to have a material adverse effect on our income or our cash flows in 2000. However, we cannot assure you that interest rates will not significantly change in 2000.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 137, ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES--DEFERRAL OF EFFECTIVE DATE OF FASB STATEMENT NO. 133.
SFAS No. 137 defers for one year the effective date of SFAS No. 133, ACCOUNTING
FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. The rule now will apply to
all fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS
No. 137 permits early adoption as of the beginning of any fiscal quarter after
its issuance. SFAS No. 133 will require us to recognize all derivatives on our
balance sheet at fair value. Derivatives that are not hedges must be adjusted to
fair value through income. If the derivative is a hedge, depending on the nature
of the hedge, changes in the fair value of derivatives will either be offset
against the change in fair value of the hedged assets, liabilities, of firm
commitments through earnings or recognized in other comprehensive income until
the hedged item is recognized in earnings. The ineffective portion of a
derivative's change in fair value will be immediately recognized in earnings. We
have not completed our evaluation of the impact of SFAS No. 133, if any, on our
consolidated financial statements.
BUSINESS
INDUSTRY OVERVIEW
Defects in bone and other human tissue can be caused by a variety of sources including trauma, congenital defect, infectious disease, cancer and other disease conditions. The prevalent method used by surgeons to repair and promote the healing of defective tissue is surgery, principally through the use of surgical implants. When considering a surgical procedure for tissue repair, surgeons and patients face a number of treatment options including metals and synthetics, "autograft" tissue, "allograft" tissue and "xenograft" tissue. An autograft procedure is one in which the surgeon harvests tissue from one part of a patient's body for transplant to another part of the body to make the needed repair. In an allograft procedure, tissue is recovered from a cadaveric donor and is then transplanted into the patient's body to make the repair. Procedures using xenograft tissue, while not widely used in the United States other than for heart valves, involve recovering animal tissue, typically bovine or porcine, which is then transplanted into the patient's body.
The overall market in the United States for tissue repair and healing through the use of surgical implants, including metals, synthetics, and allografts, has grown considerably over the last several years, with revenues in the orthopedic and cardiovascular segments of this market exceeding $6.4 billion in 1999. In these segments, procedures using allografts, either conventional graft, bone paste, or specialty tooled tissues, totaled over 310,000 during 1999, accounting for revenues of over $410.0 million.
Processors of tissue supply allografts consisting of bone tissue and various soft tissues, including cardiovascular and connective tissues, to hospitals and surgeons for use in surgery. The need for tissue is increasing each year and currently is being served by approximately 30 tissue banks in the United States that process and/or distribute bone or cardiovascular allografts. We believe there will continue to be an increase in the use of surgical implants for repair and healing, and in particular allograft implants. These reasons include:
- the aging of the baby boom generation will result in a greater percentage of the population requiring tissue repair products;
- as life expectancies increase overall, the need for tissue repair products will increase;
- as patients and their families become increasingly proactive in determining the nature of the health care they receive and as they increasingly use the Internet to research health care alternatives, pressure will increase on medical providers for more natural healing alternatives;
- continuing emphasis placed on health and fitness in our society will continue to drive the growth of sports medicine-related tissue repair and tissue healing;
- increasing awareness of the safety and benefits of allografts will increase the acceptance of allografts by surgeons and patients; and
- as the federal and state governments continue to promote organ and tissue donation, more allograft tissue will become available.
TISSUE REPAIR TREATMENT OPTIONS
METALS AND SYNTHETICS. Historically, the medical community turned to metals and other synthetics for implant procedures, in part because they can be precision tooled for specific uses within the body. These metal and synthetic implants also can be designed for use with instrument sets designed specifically for the implant procedure. This permits faster and more precise surgeries, with the patient spending less time on the operating table, and allows the surgeon to use a uniform process that can be repeated easily.
Metal and synthetic technologies, however, have several shortcomings. One of the principal drawbacks to the use of these materials is that they do not promote bone "remodeling." As part of normal skeletal growth and maintenance, human bones renew themselves by a continual process of breakdown and build-up known as "remodeling," the same process involved in the natural healing of fractures. Metal is stiffer than bone and its use in orthopedics can cause "stress shielding," where the bone adjoining the metal does not remodel densely enough and becomes weak and fragile or disappears altogether. This problem can be of particular concern to elderly patients, who are more likely to suffer from osteoporosis. Also, a small percentage of patients display sensitivity to certain kinds of metals, such as nickel. Additionally, a number of synthetics tend to break down in the body and slowly drift from their initial implant position. Finally, metal pins and screws used in sports medicine procedures and small bone repairs have a number of significant disadvantages including a potentially painful removal process, uncertainty over the long-term consequences of a hard metal implant adjacent to joints, and tissue inflammation due to metal particulate debris.
XENOGRAFT. While used in other parts of the world, including Europe, the use of xenograft, or animal tissue, is not prevalent in the United States other than for heart valve replacements. One of the reasons for this is a higher risk of immune system response to implanted xenograft tissue due principally to the greater difficulty in cleansing the tissue, prior to implant, of all the substances that can cause an immune response. An additional reason for limited use of xenograft tissue in the United States is the perceived risk of disease transmission. One area, however, in which the use of xenograft tissue within the United States is prevalent is in the cardiovascular market. This is due mainly to its long accepted use in this market and the reduced difficulty in cleaning this particular type of tissue due to its thinness.
AUTOGRAFT AND ALLOGRAFT. In order to overcome the drawbacks to the use of metals, other synthetics and xenograft tissue, surgeons have increasingly turned to autograft and allograft procedures. Autografts and allografts, in contrast to metals and synthetics, are not only "osteoconductive," meaning they provide a scaffold for new bone to attach itself to, but can be "osteoinductive" as well, meaning they stimulate the growth of new bone. Historically, however, allograft and autograft procedures were not as easy to perform as procedures using metals and other synthetics since grafting procedures often required the surgeon to shape the tissue by hand, using standard operating room instruments prior to implanting the tissue. This requirement generally increases the amount of time required to be spent in surgery.
In addition to a lack of pre-tooling, another drawback to autograft procedures is that they require an additional and potentially dangerous surgery to harvest the tissue from a second site on the patient's body. In approximately 20% of autograft procedures, morbidity complications arise at the harvest site, with one out of four of these considered serious. Additional possible complications involved with autograft procedures include infection, pain, nerve and arterial injury, joint instability and hernia. Moreover, a patient may not have sufficient quantities of quality autograft tissue in other parts of his or her body available for transplant, a particular problem for elderly patients, who are more likely to suffer from osteoporosis which can compromise the quality of autograft tissue transplanted. Balanced against these disadvantages is the belief among some surgeons that a patient's own bone will remodel better than allograft, as well as lingering concern over the safety of allograft.
Since the introduction of modern, precision tooled processed allograft implants, however, more surgeons are turning to allograft procedures to treat musculo-skeletal and other tissue defects. Among the reasons for this shift are that patients can enjoy the benefits of an implant that promotes bone growth and better healing without having to undergo the potentially risky second surgery to obtain autograft tissue for transplant. In addition, surgeons increasingly prefer allograft implants since, with the introduction of precision tooled allografts and accompanying custom implant instrumentation, allograft implants now share the same convenience and ease-of-use advantages as metals and synthetics without the shortcomings. Also, concerns within the medical community about the transmission of HIV
and other infectious diseases through the use of allograft largely have been addressed and more surgeons now accept allograft as safe and effective. Finally, patients and their families increasingly have become more proactive in determining the nature of the healthcare they receive, due in part to the availability of healthcare information on the Internet, and increasingly prefer natural healing alternatives such as allograft.
An historical limitation within the tissue processing industry has been the requirement that tissue processing be done using clean room technology on a donor-by-donor basis in order to eliminate the risk of cross contamination of other donor tissue potentially caused by the contaminated tissue from just one donor. As a result, tissue processors are required to process donor tissue in a labor intensive process requiring extensive use of custom machinery and tools to create these allografts.
ALLOGRAFT MARKETS
The allograft market is limited by the supply of available cadaveric donor tissue. Of the 3.6 million deaths that occurred during 1999 in the United States, of which we believe 50% would have been eligible to donate, less than 0.4% actually resulted in donated tissue.
The allograft market can be broken down into a number of distinct segments, including orthopedic, urological and cardiovascular. The following table contains selected U.S. information for 1999 about the portions of these segments that can be addressed through the use of allograft implants:
TOTAL ALLOGRAFT ALLOGRAFT
MARKET PROCEDURES PROCEDURES REVENUES
------ ---------- ---------- --------------
ORTHOPEDIC
Spinal Fusions..................................... 445,000 113,000 $226.0 million
Sports Medicine.................................... 870,000 52,000 $ 73.0 million
Oral-Maxillofacial................................. 67,900 15,000 $ 4.5 million
Conventional Tissue................................ 485,000 125,000 $ 66.0 million
UROLOGICAL(1)
Slings............................................. 250,000 37,000 $ 33.0 million
CARDIOVASCULAR(2)
Heart Valves....................................... 95,000 6,500 $ 41.0 million
|
(1) Data for 1998.
(2) Data for 1997.
ORTHOPEDIC MARKETS
The market for orthopedic tissue can be broken down into the following distinct segments:
- Spinal Fusions. The spinal market includes approximately 6.0 million people in the United States who seek treatment for back pain each year, of which approximately 650,000 to 700,000 result in surgery. Of this number, approximately 445,000 in 1999 resulted in a spinal fusion, approximately 90% of which included the use of an autograft or allograft implant. Autograft or allograft implants are commonly used to induce fusion in metal or bone spinal fusions. Surgeons also frequently use bone paste allografts as part of these procedures. The U.S. market for spinal fusions, including metals, synthetics, autograft and allograft, has grown considerably over the last several years. Total revenues in the United States for spinal fusions grew from approximately $484.6 million in 1997 to $735.7 million in 1999. Over the same period, the number of spinal fusion procedures performed in the United States grew from approximately 312,000 in 1997 to approximately 445,000 in 1999. Of these 445,000 procedures, approximately 113,000 involved the use of an allograft implant, accounting for approximately $226.0 million in revenues.
- Sports Medicine. The sports medicine market includes a number of segments, including arthroscopy, powered shavers, soft goods, video imaging and "procedure-specific" surgeries. The procedure-specific segment of this market that can be addressed through the use of allograft implants includes repairs to the anterior cruciate ligament, or ACL, rotator cuff, labrum, meniscus, posterior cruciate ligament, small bone repair, osteochondral repairs and wedge osteotomies. The number of procedures performed in the United States in the arthroscopy and procedure-specific segments of this market has grown from approximately 2.6 million in 1997 to over 3.0 million in 1999. The U.S. market for procedure-specific surgeries in the sports medicine market that used an implant has grown at a 6% average annual rate between 1997 and 1999. During 1999, there were approximately 870,000 procedure-specific surgeries in the United States that used an implant. Of these 870,000 procedures, approximately 52,000 involved the use of an allograft implant, accounting for approximately $73.0 million in revenues. We believe a significant number of surgical procedures which currently are treated only by abrasion or removal of soft tissue could benefit from allograft technologies, including a portion of the approximately 400,000 chondroplasty procedures performed in the United States in 1999. Worldwide, the procedure-specific segment of the sports medicine market grew from approximately $315.0 million in 1997 to approximately $360.0 million in 1999.
- Oral-Maxillofacial. The oral-maxillofacial market includes surgeries of the nose, face, jaw and mouth, including surgery for periodontal disease. These surgeries typically are either cosmetic or to treat disease or trauma. As with the sports medicine market, the aging population is fueling growth in this market by increasing demand for bone pastes used in jaw reconstruction and for support of dental implants as an alternative to dentures. Total revenues in the United States from oral-maxillofacial implants grew from approximately $195.0 million in 1997 to $224.0 million in 1999. During 1999, approximately 67,900 oral-maxillofacial procedures were performed in the United States, of which approximately 15,000 involved the use of an allograft implant, accounting for approximately $4.5 million in revenues.
- Conventional Tissue. The conventional allograft market encompasses tissues used in orthopedic surgery that have not been precision tooled and for which custom surgical instrumentation does not exist. Uses of conventional allograft include osteoarticular grafts for hip and knee reconstruction, ground bone and bone chips for trauma and bone filler, fashioned bone for various orthopedic procedures and soft tissue for ligament repair. During 1999, approximately 485,000 procedures were performed in the United States, of which approximately 125,000 involved the use of an allograft implant, accounting for approximately $66.0 million in revenues.
UROLOGICAL MARKET
The urological allograft market includes tissue implant procedures to treat urinary incontinence, primarily among older women. Urinary incontinence is a problem for more than 17 million Americans, approximately 85% of them women. A widely used procedure for treatment of this condition is re-suspension of the bladder neck with a "sling" of fibrous material. This sling can be made from synthetic materials or from various natural tissues. During 1998, approximately 250,000 procedures made use of this sling technique in the United States, of which approximately 37,000 involved the use of allograft implant, accounting for approximately $33.0 million in revenues. Although urinary incontinence can be improved in eight out of ten cases, less than half of those afflicted seek treatment.
CARDIOVASCULAR MARKET
The cardiovascular allograft market includes transplantation of human heart valves as an alternative to mechanical, synthetic or xenograft substitutes. An estimated 349,000 heart valve and vascular graft procedures for which allograft would be appropriate were performed in the United States in 1997, of which 95,000 were heart valve replacement procedures. Of the approximately 69,000 heart valve replacements for which more detailed data are available, approximately 6,500, or 9.4%, were performed using allograft. Total revenues in the United States from heart valve replacement procedures using allograft during 1997 totaled approximately $41.0 million.
COMPANY OVERVIEW
We are a leader in the use of biologics and tissue-based innovations that are used to repair and promote the natural healing of human bone and other human tissues. Using core human physiology--the basic biology of natural tissues as they function in the body--our allografts are improving surgical outcomes. Our goal is to replace conventional implant approaches, including metals, synthetics and autograft implants, with allograft and for our allografts to become the implant of choice for tissue repair. We are a leading worldwide provider of comprehensive healing and biologic tissue products in a broad range of markets. In addition we are the largest processor of precision tooled allografts in the United States, with our allografts being distributed in all 50 states and in nine countries internationally. We also continue to be one of the leading processors of conventional allograft in the United States.
We process human musculoskeletal and other tissue, including bone, cartilage, tendon, ligament, pericardial and cardiovascular tissue in producing our allografts. These tissues are then used to repair and promote the healing of a wide variety of bone and other tissue defects, including spinal vertebrae repair, musculoskeletal reconstruction, fracture repair, periodontal repair, urinary incontinence and heart valve disorders. Our current grafts range from conventional allografts to precision tooled grafting material, including bone dowels, wedges, pastes and pins, urological allografts and heart valves. During 1999, we shipped over 90,000 processed allografts, used in an estimated 60,000 procedures. Often, more than one allograft is used in a given procedure.
We have one of the most extensive tissue recovery programs in the United States, recovering bone or cardiovascular tissue from over 4,000 human donors during 1999, up from over 2,300 in 1998 and 1,500 in 1997. We believe our network of recovery groups accounted for approximately 34% of the human tissue recovered in the United States during 1999.
The following table outlines the markets we serve and the percentage of our revenues, net of management services fees, from core operations during 1998 and 1999 for these markets:
% OF OUR NET % OF OUR NET
REVENUES FROM REVENUES FROM
CORE OPERATIONS CORE OPERATIONS
MARKET DURING 1998 DURING 1999
------ --------------- ---------------
Spinal Fusions............................ 80.4% 55.5%
Sports Medicine........................... 2.9 8.2
Oral-Maxillofacial........................ 0.0 0.6
Conventional Tissue....................... 14.3 29.3
Urological Sling.......................... 2.4 6.4
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In addition, we will enter the cardiovascular market through our acquisition of the tissue processing and distribution business of Alabama Tissue Center, which had approximately $0.5 million in revenues during 1999.
We pursue a market-by-market approach to distribution of our allografts, including strategic distribution arrangements in order to increase our penetration of selected markets. We have an alliance
with Medtronic Sofamor Danek in the spinal market, with Exactech, Inc. in portions of the non-spinal molded bone paste market, and with C.R. Bard, Inc. in the urological market.
Using our proprietary, patent pending BioCleanse system, we believe we are the only tissue processor currently able to safely process tissue from multiple donors simultaneously. This system, which kills or inactivates all classes of conventional pathogens, viruses, microbes, bacteria and fungi, and which cleanses tissue both before and after processing, allows us to safely process tissue from up to 100 donors at the same time thereby significantly increasing the efficiency of tissue processing. In addition, our BioCleanse system is able to remove blood, fats, lipids and cellular debris from the tissue we process more successfully than traditional aseptic processing. We believe the removal of all blood, fat, lipids and cellular debris results in faster patient healing since it eliminates the need for the patient's body to remove these substances using natural processes following surgery. In contrast to traditional aseptic processing, our BioCleanse system also permits us to process tissue at lower average cost, and to safely and economically process tissue from donors and age groups that might not have been feasible without BioCleanse.
OUR STRATEGY
Our strategy is to be the leading worldwide provider of biologics and tissue-based innovations that repair and promote the natural healing of human bone and other tissue. The following are the key elements of our strategy:
CONTINUE PRODUCT INNOVATION TO CREATE NEW ALLOGRAFTS AND PROCEDURES. We pioneered the development of precision-tooled allograft bone tissue implants. We plan to continue to use this expertise to strengthen and build upon our existing platform of allografts and procedures within our core markets, and to enter or create new markets for our current and future allografts. We do this by fostering innovation in our research personnel and product development staff. We also set corporate goals that stimulate product innovation, such as launching at least one new allograft every quarter within each of our markets.
IDENTIFY ADDITIONAL SURGICAL APPLICATIONS FOR OUR TECHNOLOGIES AND PRODUCTS. While we intend to continue to introduce new grafts into our traditional core markets of orthopedics, urology and cardiovascular, we also intend to leverage our expertise in the area of biologic tissue implants to develop new technologies and to enter new markets, including the application of dermal allografts for reconstructive and cosmetic procedures. We plan to make use of our existing infrastructure, including our extensive research and development capabilities and sales and marketing infrastructure in order to establish our presence in these growing markets. In addition, we plan to make selective acquisitions in order to develop or expand our presence within particular markets, such as our recent acquisition of the tissue processing and distribution business of the Alabama Tissue Center which allowed us to enter the cardiovascular market.
CONTINUE PROCESS INNOVATION TO ESTABLISH PRODUCT DIFFERENTIATION. We intend to continue to reevaluate and enhance the processes we use in our business to increase efficiency and maintain our competitive advantage. Our proprietary BioCleanse system allows us to safely process, sterilize and virally inactivate tissue from up to 100 donors at the same time. In addition to the efficiencies and other advantages our BioCleanse technology permits, it also provides us with a number of significant research and development advantages, including the opportunity to infuse allografts with growth factor agents. Additionally, we intend to continue to introduce greater automation into the processing of our allografts in order to further enhance efficiencies and reduce processing costs.
EXPAND OUR EXTENSIVE TISSUE RECOVERY PROGRAM AND EMPLOY NEW TECHNOLOGIES TO MAKE BETTER USE OF EXISTING TISSUE SUPPLY. We intend to continue our strategy of entering into alliances with tissue sources to ensure continued growth of our tissue availability and to introduce these sources to successful tissue
recovery programs within our alliance to raise the level of tissue donation. We also intend to make selective acquisitions, such as our recent acquisition of Georgia Tissue Bank, to further enhance our tissue recovery efforts. Additionally, we plan to expand our tissue recovery efforts internationally to support our projected growth in those markets. We also seek to increase the availability of donor tissue by further improving the efficiency of our tissue processing procedures and by continuing our efforts to increase the level of tissue donation. We will continue to instill in our employees and alliance partners our philosophy of honoring the gift of tissue donation and using that gift responsibly to help as many patients as possible. Finally, we plan to augment the supply of human tissue through the use of alternative tissues, such as bovine and porcine tissue.
EXPAND OUR SALES AND MARKETING CAPABILITIES. We believe a significant opportunity exists to expand distribution of our grafts and technologies. We intend to continue to expand our presence both domestically and internationally by increasing the level of our sales and marketing activities, in the countries in which we presently operate, as well as in additional countries. We plan to continue to enter into new distribution relationships, expand existing distribution relationships, and augment our internal sales and marketing capabilities to enhance our penetration in the markets we serve. In addition, we intend to continue to educate and support the medical community by creating an Internet-based ordering and information system for surgeons. Traditional order placement will remain in place but as e-commerce becomes increasingly important within the medical community, we believe our on-line ordering system will provide a fast and convenient venue for surgeon orders and information. The level and detail of information made available through our Web site will be adjusted based upon need thereby resulting in an on-line product which is educational and useful to the medical community.
PRODUCTS AND PRODUCTS IN DEVELOPMENT
OVERVIEW
We process human musculoskeletal and other tissue, including bone, cartilage, tendon, ligament, pericardial and cardiovascular tissue, in producing our line of proprietary allografts. Our current tissues range from conventionally processed bone and soft tissue to precision tooled bone implants, soft tissue, urological allografts and heart valves. The service fees we charge for our allografts vary extensively, ranging from a list fee of less than $200 to in excess of $7,000. Our most commonly used precision-tooled spinal allografts have listed services fees ranging from approximately $1,000 to $2,000. The following table summarizes our current allograft offerings in each of the markets we serve, current distribution of these allografts and the products and technologies we have in development:
PRODUCTS AND
TECHNOLOGIES IN
MARKET CURRENT ALLOGRAFTS CURRENT DISTRIBUTION DEVELOPMENT
------ ------------------ -------------------- ----------------------------
ORTHOPEDICS
Spinal -MD-Series Threaded Bone -Medtronic Sofamor Danek -Demineralized and partially
Dowels demineralized cortical bone
-Cornerstone SR Wedge -Bovine versions of existing
-Tangent Cortical Bone Wedge precision tooled allografts
-Precision Cortical Bone
Wedge
Sports Medicine -Interference screws -Network of independent -Soft tissue tacks
-Pre-shaped bone-tendon-bone distributors -Non-frozen, viable
ligament osteochondral plugs
-Meniscus -Suture anchors
-Pins -Preshaped achilles and
quadricep tendons
-Ligament alternatives
-Soft threaded interference
screws
-Wedge used for knee re-
alignment
Bone Paste -Osteofil Injectable Bone -Pastes for spinal market -Bone pastes for use in
Paste through Medtronic Sofamor vertebroplasty
-Opteform Moldable Bone Paste Danek -Non-frozen injectable bone
-Osteofil ICM Bone Paste with -Other bone pastes through paste
cortical cancellous chips network of independent
distributors
-Certain pre-molded bone
forms through Exactech
Conventional Tissue -Frozen femoral heads -Network of independent -Pre-ground femoral heads
-Demineralized bone matrix distributors
-Cortical cancellous chips
and cancellous chips
-Fibular wedges
-Iliac crest wedges
-Bulk allograft segments
-Non precision tooled
ligaments and tendons
Oral-Maxillofacial -Regenafil Injectable Bone -Direct distribution -Demineralized plates for
Paste facial surgery
-Regenaform Moldable Bone -Orbital floor repair system
Paste -Regenaderm dermal membrane
-Pericardium membrane
OTHER MARKETS
Urological -FasLata Fascia Lata -C.R. Bard -Dermis-based urological
slings
-Soft tissue anchors
Cardiovascular -Heart valves -Network of independent -Pulmonic patches
distributors
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ORTHOPEDIC ALLOGRAFTS
SPINAL. Our principal spinal allografts are our patented MD-Series Threaded Bone Dowels, our patent-pending Cornerstone SR Wedge, Tangent Cortical Bone Wedge and patent-pending Precision Cortical Bone Wedge. These allografts, which are precision machined, are eventually replaced by the patient's own bone through the remodeling process, typically over a one- to two-year period. During 1999, we shipped more than 43,000 spinal allografts, excluding bone pastes, which accounted for approximately $14.1 million of our net revenues.
Our MD-Series Threaded Bone Dowels are used by surgeons to help restore the anatomical relationships between the disc, facet joints, vertebral bodies and foramina. As a result of trauma, abnormal wear and tear, or the aging process, damage or degenerative changes to the vertebral disc and facet joints may occur and progress over time. Among other things, this can result in pinched nerves, disc injury and severe pain. Several important features of our MD-Series dowels assist in reestablishing spinal stability and reducing pain. First, our dowels are threaded, providing rigid interface above and below the vertebral body, allowing the surgeon to restore normal alignment and provide greater stability. This alignment and stability following surgery contributes to reducing pain, greater functionality and reduced risk of reoccurrence. Second, the cylindrical shape of our dowels, together with accompanying threads, provides greater surface area contact at the junction between our graft and the patient's bone, thereby enhancing healing. Third, the pre-cut precision size and shape of each graft helps in reducing surgical time. Evolving from our early smooth cortical dowel, our present line of dowel allografts is suitable for higher load bearing situations, making them more useful for areas such as the lumbar spine.
Our Cornerstone SR Wedge, as with our MD-Series dowels, is used in similar cases in the cervical area of the spine, but is tapped in place, not threaded. Our Tangent Cortical Bone Wedge and Precision Cortical Bone Wedge allografts are also tapped or "impacted" in place. Both grafts are specially designed and contoured to promote stability and minimize disruption of the posterior elements of the spine.
We currently have several spinal allografts in development, including demineralized and partially demineralized cortical bone for ligaments for use in fixating the vertebral bodies following a spinal fusion surgery, as well as bovine versions of existing precision tooled allografts.
SPORTS MEDICINE. Our product focus in the sports medicine market addresses the highest volume procedures in sports medicine, primarily in the shoulder and knee. Our principal sports medicine allografts are our patented interference screws, patent-pending pre-shaped bone-tendon-bone ligaments, patent-pending meniscus allografts and patent-pending pins. These grafts, used for the repair of sports-related injuries such as a torn anterior cruciate ligament are precision tooled to fit surgeons' requirements, allowing the surgeon to perform the procedure without having to custom shape the implant material. Many of our sports medicine allografts are designed for specific instrumentation, making them easier and/or faster to implant. These grafts can also be osteoinductive, meaning they promote the growth of new bone. During 1999, we shipped approximately 2,500 sports medicine allografts, excluding bone pastes, which accounted for approximately $0.3 million of our net revenues.
We currently have several sports medicine allografts in development, including soft tissue tacks used for reconstruction of soft tissue tears such as rotator cuff injuries, non-frozen osteochondral allografts used for repair of articulating surfaces and joints, bone suture anchors used for securing sutures to bone, pre-shaped achilles tendons and quadriceps tendons. We also are developing ligament alternatives made from under-used tissue with demineralized tissue technology for use as ligament and tendon replacements, as well as soft threaded interference screws and wedges used for knee re-alignment. At the same time, we are developing the customized instrumentation to be used by surgeons implanting our sports medicine allografts.
BONE PASTE. Bone paste allografts, moldable and injectable, are principally used in fracture treatment, bone and joint reconstruction and periodontal applications. Our principal products in this market are our patent-pending Osteofil Injectable Bone Paste and our patent-pending Opteform Moldable Bone Paste, both of which are composed of demineralized bone matrix and biologic gel carrier. Our Opteform Moldable Bone Paste and new patent-pending Osteofil ICM Bone Paste also include cortical cancellous chips. Importantly, all of our bone pastes are osteoinductive and every batch is tested for osteoinductivity before release. In addition, our bone pastes are uniquely "sticky" and not water soluble and therefore will not easily disperse or migrate within a patient's body, a potential problem with other currently available bone pastes.
In addition, our Osteofil Injectable Bone Paste is dispensable through a syringe, an advantage not shared by all bone pastes. Our bone pastes have a gelatinous consistency which hardens at or below body temperature. Our Opteform Moldable Bone Paste, which is pliable before hardening, is shaped in molded forms useful for general orthopedic applications, typically hip and knee replacements. During 1999, we shipped more than 19,000 bone paste allografts, which accounted for approximately $5.2 million of our net revenues.
We currently have several bone paste allografts in development, including pastes for the potential use in vertebroplasty, which is the repair of degenerated vertebral bodies. We also are currently in the final stages of development of bone pastes that can be stored and distributed at room temperature and then mixed in the surgical arena, eliminating the need to keep the material frozen prior to use.
CONVENTIONAL ALLOGRAFTS. Our conventional allograft business includes a wide variety of allograft categories including our osteoarticular grafts, such as our frozen femoral heads used for oncological procedures and hip and knee reconstruction. We also produce certain types of blended and milled bone allografts, such as our demineralized bone matrix, cortical cancellous chips and ground cancellous chips, used in total hip and knee replacements and for various trauma. Additionally, we produce various types of fashioned bone, such as our fibular wedges and iliac crest wedges, used for various orthopedic procedures, as well as various soft tissue implants used for ligament and articulating surface repair, such as non-precision tooled ligaments and tendons.
This growing market is important to us since it allows us to make the best possible use of the gift of tissue donation and allows us to convert a significant portion of the conventional allografts we distribute into precision tooled allografts. We currently have a pre-ground femoral head allograft in development to be used in hip revision surgery. During 1999, we shipped more than 16,000 conventional allografts, which accounted for approximately $9.0 million of our net revenues.
ORAL-MAXILLOFACIAL ALLOGRAFTS. Our principal oral-maxillofacial products are our patent-pending Regenafil Injectable Bone Paste, our patent-pending Regenaform Moldable Bone Paste and our patent-pending pericardium membranes. Our Regenafil and Regenaform bone pastes are similar to our Osteofil and Opteform bone pastes. Our allografts have a number of uses in oral-maxillofacial medicine, including use in procedures to rebuild portions of the jaw to permit the use of dental implants. Prior to the use of these allografts, many patients receiving dental implants would instead be limited to dentures or bone would have to be harvested from their hip to complete the reconstruction. Our pericardium membrane is used to cover the site where bone paste, or autograft or allograft bone chips, have been placed, preventing the growth of fibrous tissue from filling the space and allowing the bone to remodel. During 1999, we shipped more than 1,500 oral-maxillofacial allografts, which accounted for approximately $0.2 million of our net revenues.
We currently have several oral-maxillofacial allografts in development, including demineralized plates which could be used in place of metal plating in oral and maxillofacial surgery, an orbital floor repair system for facial reconstruction and Regenaderm, our planned dermal membrane for use in the oral-maxillofacial market.
UROLOGICAL ALLOGRAFTS
Our principal allograft in the urological market is our FasLata, which is used primarily to treat urinary incontinence through re-suspension of the bladder neck. This graft is fashioned as a "sling," processed from fascia lata, the fibrous tissue covering the large muscles. Prior to the use of sling procedures, there was not an effective treatment for urinary incontinence which is caused by a specific defect to the urethra. Demand for useable tissue in this market far exceeds the supply. Additional applications we are developing for tissue in this market are soft tissue "anchors" which are precision tooled from cortical bone, and slings fashioned from alternative tissue such as dermis. During 1999, we shipped more than 12,000 urological sling allografts, which accounted for approximately $1.9 million of our net revenues.
CARDIOVASCULAR ALLOGRAFTS
Our principal cardiovascular allograft is our heart valve allograft, which is used to replace a patient's own heart valve during coronary surgery. Additional applications we are developing for tissue in this market are pulmonic patches for faulty arteries, and veins for vascular tissue replacement. During 1999, the tissue processing and distribution business of Alabama Tissue Center we are acquiring shipped approximately 70 cardiovascular allografts, generating approximately $0.5 million in revenues for that year.
TISSUE RECOVERY
BACKGROUND
Tissue recovery is the actual removal of tissue from a donor. Tissue recovery personnel recover tissue within 24 hours following a donor's death using surgical instruments and aseptic techniques similar to those used in hospitals for routine surgery. Techniques for recovery emphasize minimizing any physical alteration of a donor's body. Recovered tissue is placed on wet or dry ice and then transported by the recovery personnel to the tissue bank.
Under applicable U.S. law, human tissue cannot be sold. However, the law permits the recovery of certain costs, such as those involved in recovery, processing and storing tissue and for the advancement of tissue processing technologies, the types of activities in which we are involved.
Our network of donor recovery groups recovers a variety of tissue types from donors including tissue from the fibula, femur, tibia, humerus, ilium, pericardium, fascia lata, and hearts for valve recovery. We screen recovered tissue in numerous ways to guard against transmittable diseases. This screening process includes evaluation of risk on the basis of donor lifestyle, interviews with the donor's family and physical examination of the donor. We also perform biomedical testing at various stages during the conversion of the tissue into implantable tissue, using FDA licensed and other tests for known viruses and pathogens.
In addition to screening for safety of the tissue, tissue banks develop screening criteria to help them decide what tissue grafts may be processed from each donor. We believe our biomechanical and tissue suitability screening standards are unique in the industry. Unlike traditional tissue bank guidelines, which include arbitrary criteria such as a donor's age as a determinant of suitability, our standards and criteria are based on scientifically validated testing and studies. Tissue from each donor is first examined, including radiographic and physical examination. In addition, for each type of precision tooled graft to be produced, we perform a biomechanical evaluation. Depending upon the type of graft, our statistical validations include tests such as impact and tensile fatigue, static compression and torque, and pull-out strength. For our bone pastes, we test each batch in animals to ensure that the paste remodels bone, a step we believe is not taken by any other tissue bank. Our scientific screening standards, together with our tissue processing technology, allow us to make use of
this recovered tissue to the fullest extent possible. They also ensure the suitability of the tissue to be used for the graft being processed. For example, we routinely reject some weight-bearing grafts from donors under the age of 50 since our tests indicate those grafts would not have adequate mechanical properties, while traditional screening protocols might accept any donor under the age of 55. Unlike traditional screening protocols, our screening standards allow a greater range of age among donors, and our BioCleanse system permits us to safely and economically process tissue even from lower-yielding donors. This provides the maximum benefit for the donor family as well as the donor recipient.
TISSUE RECOVERY EXPANSION
We have one of the most extensive tissue recovery programs in the United States, recovering tissue from over 4,000 donors during 1999, compared to 2,300 in 1998 and 1,500 in 1997. At present, there are approximately 30 tissue banks in the United States that process and/or distribute bone or cardiovascular allografts, the majority of which also function as donor recovery groups. Donor recovery groups typically promote tissue donation, educate hospitals and other institutions regarding tissue donations, support the family of the donor, and physically recover and transport the donated tissue. Donor services group staff members are trained to understand and deal with the emotional elements involved in interacting and supporting the families of donors at their time of loss.
Of the approximately 80 donor recovery groups in the United States that recover bone tissue, we have sourcing arrangements with more than 35 including the University of Florida Tissue Bank, Inc., Allosource, Inc., Community Tissue Services Dayton, Allograft Resources of Wisconsin and Tissue Banks International. Of these 35 donor recovery groups, we have exclusive agreements with five, non-exclusive agreements with 16, and exclusive management services agreements with four. The remaining groups work with us on a non-contract basis or through relationships with other recovery groups in the network. This extensive supply alliance allowed us to ship over 90,000 processed allografts during 1999, used by surgeons in an estimated 60,000 procedures. Often, more than one allograft is used in a given procedure.
In particular, our exclusive relationship with the University of Florida Tissue Bank continues to provide us with a large supply of tissue for processing and distribution. We plan to continue to enhance our recovery programs in order to support our future growth by adding additional donor recovery groups to our supply alliance, particularly those presently acting as exclusive suppliers to others in the industry. Additionally, we may from time to time consider additional acquisitions of tissue banks to further enhance supply, such as our recent acquisition of Georgia Tissue Bank.
During 1999, of the more than 3.6 million deaths in the United States, of which we believe 50% would have been eligible to donate, less than 0.4% actually resulted in donated tissue. To the extent possible, we work with management of the tissue banks with which we have relationships to assist them in increasing the level of tissue donation. In areas where we have had active involvement with donor recovery groups over an extended period of time, we have increased the recovery rate to in excess of 4.0%. This involvement may include entering into a management services agreement with these tissue banks. While the terms of these agreements vary, often they involve assisting with the design or improvement of the tissue bank's donor services group to increase the level of donation.
Our strategy is to further expand our tissue recovery operations in our targeted regions, which include Florida/Georgia, Indiana/Michigan and New York, through increased professional and public education. We also plan to continue to establish relationships with medical examiners, hospitals and funeral homes in these areas. We presently have agreements with 10 donor recovery groups within these three targeted regions, two of which are management services agreements. We have a four member team operating in each of these regions consisting of one representative from each of sales, marketing, donor services, and our subsidiary, Georgia Tissue Bank. These teams are responsible for providing services to the recovery groups presently under management services agreements and also to seek to enter into management services agreements with other donor recovery groups in these regions.
Internationally, we currently are involved in expanding tissue recovery relationships in seven countries in order to support our planned international growth. In addition we currently process tissue from Europe under our agreement with Tutogen. We also have planned joint efforts with foreign partners for tissue recovery in Spain, Portugal, France, Austria, Switzerland and Italy. Tissue recovery internationally presents a number of different challenges than in the United States, including different laws, societal pressures and local customs.
We also plan to continue to recover tissue though affiliations with funeral homes, which involves presenting families of the deceased with the option of tissue donation and supplying them with the information necessary to make an informed decision. While we reimburse funeral homes for use of their facilities and materials, the principal incentive for funeral homes to participate in an affiliation with us is their ability to offer families of deceased the chance to help others through the gift of tissue donation. Since approximately two-thirds of all deaths occur outside of a hospital, we believe our strategy of recovering donor tissue from funeral homes to be important to increasing the overall level of tissue donation. Tissue recovered from funeral homes is subject to the same requirement as in a hospital setting, that it be recovered within 24 hours following a potential donor's death.
We also are exploring the use of bovine tissue in the orthopedics markets and have arrangements to procure bovine tissue from a "closed herd" of cattle. This closed herd is one for which the source, age and lineage of each animal has been documented for more than seven years, with health and pedigree records reviewed and managed so that no animal of the herd has been suspected of a disease threatening to humans, and in which each animal is kept separated from animals not in the closed herd. We already use small amounts of gelatin derived from porcine sources in the production of our bone pastes.
Donor recovery groups are part of relatively complex relationships. They deal with donor families, are regulated by the FDA and are often affiliated with hospitals, universities or Organ Procurement Groups. Our relationship with donor recovery groups can be impacted by some of the factors that impact these donor recovery groups, and that could have an effect on the supply of tissue to us. For example, during March 2000, we became aware of letters from an anonymous source being circulated which made allegations against Allograft Resources of Wisconsin, or ARW, one of the donor recovery groups with which we have a tissue recovery agreement. One of these letters was addressed to the FDA and included specific alleged violations of federal regulations by ARW, including claims that tissue recipient safety had been compromised. We promptly dispatched a team to visit ARW to review its donor records and safety procedures. We also contacted the FDA, and a team of FDA auditors conducted its own inspection of ARW. In addition, the board of directors of ARW engaged a law firm to interview every employee and a number of former employees of ARW about the allegations made.
The FDA's inspection resulted in the issuance of an inspection notice, and none of the observations noted raised concerns over the safety of ARW tissue with respect to the issues raised in the anonymous letters. Six observations were noted, however, concerning documentation and record keeping, and corrective actions were proposed. Neither the FDA, our own internal investigation nor the law firm engaged by ARW found evidence to support the safety allegations made against ARW. We plan to continue monitoring the situation with ARW, as well as the other donor recovery groups with which we have recovery arrangements.
TISSUE PROCESSING
Following recovery of tissue using recovery techniques designed to minimize physical alteration of the donor's body, recovered tissue is placed on wet or dry ice and then transported by the recovery personnel to the tissue bank. After the recovered tissue arrives at the tissue bank, we place the donor tissue in freezer storage until we complete applicable quality assurance procedures and protocols, including review and approval by one of our in-house medical directors, each of whom is a medical
doctor. We then move donor tissue into processing based upon the demand for certain recoverable tissues.
We surgically process tissue into numerous individual types of implantable allografts, with each graft being sized, evaluated and labeled. Some allografts have a much higher demand than do others, and those generally are distributed as soon as we complete processing and quality assurance. We store the remaining implantable allografts at our facility, awaiting distribution on an as-needed basis.
A variety of allografts can be derived from a single bone. For example, from a femur, we are able to produce a number of allografts including bone dowels, interference screws, wedges and bone pastes. The following illustration shows some of the allografts that can be produced from the femur:
[Illustration of femur bone appears here, depicting the various allografts that we process from the femur]
Other than a number of conventional grafts, bone pastes and soft tissue which are aseptically processed through conventional means, we process donor tissue initially through our proprietary BioCleanse system to begin the sterilization process and to remove all blood, fat and cellular debris. We believe the removal of all blood, fat, lipids and cellular debris results in faster patient healing since it eliminates the need for the patient's body to remove these substances using natural processes following surgery. Our BioCleanse tissue processing system is a proprietary, multi-step, patent-pending tissue cleaning process, using ultrasonic, temperature and pressure cycle controls.
Our validation studies of the BioCleanse system show this process kills or inactivates all classes of conventional pathogens, viruses, including HIV, microbes, bacteria and fungi present in the tissue, while retaining the tissue's useful properties. Specifically, the scope of the validation we performed on our BioCleanse system included viral inactivation studies demonstrating complete clearance of relevant enveloped and non-enveloped viruses including HIV, hepatitis A, porcine parvovirus, bovine viral diarrhea virus and pseudorabies. Additionally, the validation study showed that the system effectively eliminates both endogenous and adventitious microbial contamination from within the matrices of allograft. The validation included testing against a panel of known microorganisms including BACILLUS STEAROTHERMOPHILUS, recognized as the most resistant microbial species. The BioCleanse process also was shown to remove greater than 99.99% of blood and fat from allograft material. The resulting tissue passes the United States Pharmacopia standard test for sterility and has been validated to attain a Sterility Assurance Level of 10(-6). Biomechanical and biocompatability testing of the BioCleansed allografts demonstrated that the functionality of the allograft was not impaired by the BioCleanse process. Based on these studies, our BioCleanse technology produces sterile allografts, which we believe
to be the safest processed donor tissue in the industry. We believe the effectiveness of BioCleanse in inactivating viruses such as HIV and other harmful pathogens helps to allay the fears of disease transmission associated with allograft procedures.
Because the BioCleanse system is completely automated, we are able to reproduce our sterilization results in every group of tissue that we process. Our BioCleanse technology is also cost-effective since we are able to safely process the tissue of up to 100 donors simultaneously in our system, eliminating the risk of cross contamination to a less than one in one million probability of cross contamination. We believe we are the only tissue processor able to safely process tissue from multiple donors simultaneously.
Tissue to be precision tooled for creating our line of specialized allografts is removed from inventory after initial BioCleanse processing and placed into production for the creation of precision machined allografts. Our processing and manufacturing facilities include a suite of four class 10 certified clean rooms, six class 100 clean rooms and four class 1000 clean rooms. We recently introduced the use of automated machinery in the precision tooling of our line of proprietary allografts, a task previously performed by our staff of tissue technicians using customized tools and equipment. This increased use of automation allows us to produce precision tooled allografts faster and more efficiently, while significantly reducing processing costs. Automation also results in higher quality precision tooled allografts since our machines are able to reduce the risk of human error by repeating accurately and uniformly the tooling process countless times, instead of each graft being the product of the tissue technician's skill.
Our tissue processing equipment also includes our proprietary lathes which use hydro-infused drilling technology and custom tooling employed to thread our cortical dowels and produce bone paste. Other custom equipment includes clean-room milling machines, saws, grinders, dies and mills. After our operators and technicians precision tool the donor tissue, we repeat the BioCleanse process to complete the sterilization process. We are ISO 9001 certified, an internationally recognized standard of quality assurance in product design, development and production. Our biomedical laboratory is certified under the Clinical Laboratory Improvements Act, or CLIA. CLIA is intended to ensure the quality and reliability of clinical laboratories in the United States by mandating specific standards in the areas of personnel qualification, administration, participation in proficiency testing, patient test management, quality control, quality assurance and inspections.
MARKETING AND DISTRIBUTION
In the spinal market, we plan to continue our strategic distribution alliance with Medtronic Sofamor Danek. We have two management services agreements with Medtronic Sofamor Danek under which they provide management services in the distribution and marketing of our spinal allografts and Osteofil bone paste for spinal uses. Medtronic Sofamor Danek's 350 sales representatives interact directly with surgeons, providing the necessary instrumentation, customer support, surgeon education and training, and marketing for our current spinal allografts. In exchange for its management services, we pay Medtronic Sofamor Danek services fees. Under the agreement for management services on our bone pastes, the amount of this service fee is 60% of the amount charged to each customer until November 1, 2000, after which time the fee increases to 65%. This agreement expires upon the later of May 2018 or the expiration of our bone paste patent. Under the agreement for management services on our current line of spinal allografts, we pay Medtronic Sofamor Danek a service fee equal to 70% of the amount charged to each customer. Under this agreement, Medtronic Sofamor Danek has a 60-day right of first refusal to license our new allografts or developments relating to spinal and cranial medical procedures. This agreement expires in July 2021. Under these agreements, subject to certain exceptions, Medtronic Sofamor Danek also has exclusive rights to provide management services in the distribution of our spinal and cranial allografts internationally, though it has not done so to date.
Our allografts are distributed in all 50 states and in nine countries internationally. In the United States, we have 23 independent distributors, which distribute our allografts through approximately 150 sales representatives, specializing in general orthopedics, complemented by our internal sales and marketing staff of 26 people. Internationally, we have six distributors which distribute our allografts through approximately 320 sales representatives. We pursue a market-by-market approach to distribution, including strategic relationships in selected markets, in order to increase our penetration of these markets.
In the general orthopedics market, our pre-molded bone pastes are distributed by Exactech in the United States through its network of 50 sales agencies using approximately 139 sales representatives. We also distribute our sports medicine allografts through our network of 23 independent distributors and 150 independent sales representatives who distribute directly to hospitals and surgeons in their exclusive territory. Under the terms of our distribution arrangements, these distributors are entitled to receive a commission for the revenues they generate and have the right to maintain their status as the exclusive distributor in their territory if they reach a specified annual quota.
We distribute our bone pastes not used in the spinal and portions of the sports medicine markets through our independent network of 23 distributors specializing in general orthopedics. We also are considering creating a direct sales force in key U.S. markets to augment sales of our Osteofil Injectable Bone Paste.
For conventional tissue distribution, we use our network of 23 independent distributors with more than 150 independent sales representatives. Distributors and sales representatives receive a commission for the revenues they generate and have the right to maintain their status as the exclusive distributor in their territory if they reach a specified annual quota. Our recent acquisition of Georgia Tissue Bank significantly increased the size of our distribution organization for conventional allografts.
We use direct distribution for the oral-maxillofacial market, with an emphasis on the periodontal market. We have created direct mail product information sheets, and we attend trade shows to increase the exposure of our allografts. Our six person marketing staff supports these marketing efforts by speaking at various clinics and universities.
In the urological market, we have an exclusive distribution agreement with C.R. Bard providing for the marketing and distribution of our urological allografts. Under the terms of this agreement, we ship our urological allografts directly to C.R. Bard's customers. In return, we receive reimbursement for shipping charges and a transfer fee which is 40% of the amount charged to the customer. In order to remain our exclusive distributor of these allografts, C.R. Bard is required to achieve a specific annual distribution quota. C.R. Bard has an exclusive 90-day right to negotiate an agreement for the distribution of any new technology, invention, process or application we may develop in the future for the treatment of urinary voiding dysfunction or pelvic tissue defects. This agreement expires in June 2008, subject to a provision providing for automatic renewal.
In the cardiovascular market, we intend to distribute our heart valve allografts through one or more distributors, initially within the southern United States and then expanding to other regions after securing adequate supply of tissue.
Our current and planned international distribution strategies vary by market, as well as within each country in which we operate. For example, we distribute only a portion of our line of allografts within each country. We also have recently signed distribution agreements with distributors in several key markets internationally. These include Plus Endoprothetik, in Germany, Austria and Switzerland, Korean Bone Bank in South Korea, Best Medical, Ltd. in Turkey, Medical Development S.A., in Greece, ACORN Ltd. and UFTB Italia in Italy, and CH Werfen in Spain and Portugal.
We intend to enter into additional markets around the world, including France, the United Kingdom and Japan. During 1999, 2.6% of our net revenues were derived from international markets.
RESEARCH AND DEVELOPMENT
We plan to continue to develop new allografts and technologies within the orthopedics, urological and cardiovascular markets, and to develop additional tissue-related technologies for other markets. To accomplish this, we intend to continue to make use of our core technologies and processes, which include:
- precision machined cortical bone;
- osteoinductive allograft bone pastes;
- our patent-pending proprietary BioCleanse system;
- segmentally demineralized bone allografts;
- viable osteoarticular grafts designed to fit specific surgical instruments;
- growth factors to stimulate bone or tissue growth;
- cortical allografts assembled from various smaller bone pieces; and
- xenograft bone treated to reduce material that could cause immune responses.
We believe that these core processes and technologies, including our BioCleanse system, have far reaching uses in new markets including the use of biologic tissue implants for growth factor delivery.
As of March 31, 2000, our research and development staff consisted of 22 professional and technical personnel, including three with PhDs or MD/PhDs and six with masters of science degrees, in disciplines such as mechanical engineering, materials sciences, biochemistry, biomedical sciences, biomaterials and organic chemistry. Our research and development staff work closely with surgeons in the development of new techniques and procedures related to tissue healing.
PRODUCT DEVELOPMENT PROJECTS
We are involved in numerous development projects, including new machined orthopedic allografts for the spine and sports medicine areas which allow us to expand our existing line of allografts. Among our current product development projects are:
- Interference Screw ST--This "soft" threaded interference screw would represent an expansion to current offerings in the ACL reconstruction market.
- Preshaped Tendons for Reconstruction--Achilles and quadriceps tendons with pre-shaped bone blocks intended to allow for easier replacements and reduced surgical time.
- Alloanchor RC--Targeted at the shoulder market, this allograft, similar to a "suture anchor," could represent an allograft alternative to current metal and resorbable suture anchors.
- Osteofil II--A version of our Osteofil bone paste that can be transported and stored at room temperature by separating the elements of the paste and then allowing for mixing in the surgical room.
- Osteochondral plugs--These non-frozen viable allografts could be available in a range of plug sizes for knee repairs and will represent a new method for transplanting fresh donor cartilage.
- Tibialis tendons--An increasing popular solution for ACL reconstruction, this graft could simplify the current surgical procedures for repair of this tendon.
- Suture anchor extensions--These grafts are further adaptions of the initial Alloanchor RC, designed in smaller sizes for other procedures in the shoulder and small joints.
- HTO wedges--This graft is designed for correction of lower extremity misalignment, a cause of loading imbalances in the knee. This precision tooled allograft would reduce the amount of "customization" normally required in this procedure.
- Soft tissue tacks--These bone tacks will be used to reestablish soft tissue to bone attachments. The allograft tack achieves surgical repairs without the need for suture.
- Complementary instrumentation--Instruments required for use with our allografts during the surgical procedure are being designed to ease the demands of the surgical procedure.
- Pre-ground femoral heads--This allograft, used in hip revision surgery, should reduce the amount of time spent in surgery by freeing surgeons from the necessity of grinding femoral head tissue in the operating room.
- Dermis-based urological sling--Processed dermis used for "sling procedures" are essentially decellularized dermal allografts. Our BioCleanse process is, in addition to a tissue cleaning process, a decellularizing process. Studies are underway to determine the effectiveness of the BioCleanse process in producing such a decellularized allograft which could have application for urinary slings, duraplasties, pleuralplasties, gastric patches, burn treatment, and reconstructive facial surgery.
RESEARCH AND TECHNOLOGY PROJECTS
We also are working on a number of long-term research and technology projects that we believe hold potential. Each of these projects, however, is at a very early stage and we cannot be sure that we will ever develop a working technology from this research. Among our current long-term research and technology projects are:
- Tendon replacement--This patent-pending technology would reconfigure hard, cortical bone tissue into a tendon-like structure with tendon-like strength. Until now, most natural tissue tendons used in sports medicine are transplanted tendons, either autograft or allograft. Allograft tendons, however, continually are in short supply. The replacement under development has a wide range of applications, and would remodel into the patient's own tendon over time.
- Composite allograft--This technology involves the joining of two or more separate pieces of machined bone. This allows for a wider range of design configurations and potentially could result in higher yields per tissue donor since the bone's anatomy would no longer be a limiting factor in the size and shape of a given allograft.
- Demineralized strip/plate for facial applications--We are researching methods for processing bone into plates and strips that are somewhat flexible, yet retain a certain degree of stiffness, using demineralization or partial demineralization. These plates and strips, especially advantageous in pediatric surgeries, could then be used for a variety of oral-maxillofacial applications including orbital floor and nasal reconstruction.
- Reduced antigenicity bovine bone--We are conducting tests and validations on the use of our BioCleanse system to reduce antigenic materials (materials that can cause a rejection or immune response) from bovine tissue. A variety of grafts could potentially be processed from bovine bone. We are pursuing CE Mark and 510(k) clearance for bovine versions of the Cornerstone SRs, Tangents, Precision ALIFs, Interference screws, suture anchors and CT.
MEDICAL ADVISORY BOARD
Our Medical Advisory Board is made up of doctors, surgeons and medical experts who meet periodically as a group to provide us with advice on industry trends in product development and surgical techniques. Our Medical Advisory Board also works with members of our research and development staff in the development of new allografts and tissue technologies. Currently, this board has eight members, representing a broad range of experience in fields relevant to our technologies and technologies under development. Members of our Medical Advisory Board receive per-diem consulting fees, including payment for attendance at meetings and reimbursement of expenses. Members also may
receive royalty rights on any inventions they contribute through their service with the board. Current members are:
DENNIS ARMSTRONG, M.D. has been a private practicing orthopedic surgeon since 1977. Prior to entering private practice, Dr. Armstrong completed an orthopedic residency at Henry Ford Hospital from 1974 until 1977. Dr. Armstrong received a B.S. from Michigan State University and an M.D. from Wayne State School of Medicine.
KELVIN G.M. BROCKBANK, PH.D. has served as President of KGB Associates, Inc., a consulting company on research and development opportunities relating to implantable devices, tissue engineering and tissue transplantation since 1996. From 1994 until 1995, Dr. Brockbank served as Vice President of Research and Development for Edward's Cardio Vascular Surgery Division of Baxter Healthcare Corporation. From 1985 until 1994, he served as Director of Research and Development at CryoLife, Inc. Dr. Brockbank holds a B.A. and an M.A. from Trinity College Dublin and a Ph.D. in Experimental Pathology from the Medical University of South Carolina.
JEFFREY HOLLINGER, D.D.S., PH.D. is a professor of Surgery, Anatomy and Developmental Biology at the Oregon Health Sciences University School of Medicine, a position he has held since 1993. He also serves as President and Director of Research at the Northwest Wound Healing Center. From 1980 until 1993, Dr. Hollinger was employed by the U.S. Army Institute of Dental Research where he served as the Director of the bone program from 1982 until 1993, Chief of Physiology from 1980 until 1993, and Acting Chief of the Departments of Oral and Maxillofacial Surgery, Pathology and Biochemistry from 1982 until 1985. Dr. Hollinger received a B.A. from Hofstra University and a D.D.S. and Ph.D. from the University of Maryland.
PAUL LAROCHELLE, M.D. has been a practicing orthopedic surgeon at the Brevard Orthopedic Clinic since 1989. From 1988 until 1995, Dr. LaRochelle was the recipient of six fellowships. He received a B.A. in Ecology and Marine Sciences from Cornell University in 1977. He holds a MDCM from McGill University.
N. RAY LEE, D.D.S. has been an Assistant Clinical Professor in the Division of Oral and Maxillofacial Surgery at the Medical College of Virginia since 1986 and an Assistant Clinical Professor at Eastern Virginia Medical School since 1985. Dr. Lee served as the Director of the Division of Oral Medicine at the Eastern Virginia Medical School from 1985 until 1987 and an Instructor in Advanced Trauma Life Support from 1987 until 1995. Dr. Lee holds a B.S. in Biology from The College of William and Mary and a D.D.S. from Baylor College of Dentistry.
JACK MCCARTHY, M.D. has been in private practice as an orthopedic surgeon and a clinical instructor at the University of Nebraska since 1987. Dr. McCarthy received the Hand Fellowship from Washington University for the 1986/1987 year. Dr. McCarthy holds a B.A. in Natural Science from St. John's University and an M.D. from the University of Iowa.
HAROLD TU, D.M.D., M.D. has been a practicing Oral and Maxillofacial surgeon since 1982. In addition, Dr. Tu has been an Associate Professor of Surgery in the Department of Surgery at the University of Nebraska Medical Center since 1988. Dr. Tu holds a D.M.D. from the University of Oregon Dental School and an M.D. from the University of Nebraska School of Medicine.
JEFFREY VISOTSKY, M.D. has been an Assistant Professor of Clinical Orthopedic Surgery at Northwestern University since 1990 and a Clinical Associate Professor of Orthopedic Surgery and Rehabilitation Medicine at the University of Chicago since 1992. Dr. Visotsky has been an instructor in the Physicians Assistant Department at Finch University of Health Sciences of the Chicago Medical School since 1997 and a Special Consultant to the Division of Specialized Care for Children at the University of Chicago since 1999. Dr. Visotsky holds a B.S. from Tulane University and an M.D. from Northwestern University Medical School.
INTELLECTUAL PROPERTY
Our business depends upon the significant know-how and proprietary technology we have developed. To protect this know-how and proprietary technology, we rely on a combination of trade secret laws, patents, copyrights, trademark and confidentiality agreements with our employees and others.
We presently hold three patents covering our MD-Series cortical bone dowel and our interface screw technology and two allowed patent applications covering our segmentally demineralized graft, stent and conduit technology in the United States and one foreign patent covering our MD-Series cortical bone dowel technology and our interference screws. We also have 18 patent applications pending in the United States, 13 patent continuations pending in the United States and 40 corresponding patents pending in various foreign countries, including in Canada, Mexico, Japan, Australia and the European Union. Our patents and patents pending cover 19 allografts or technologies that are important to our business. In addition, we rely on our substantial body of know-how, including proprietary techniques and processes in tissue recovery, research and development, tissue processing and quality assurance. The following table shows the allografts and technologies for which we have patents or pending applications. A number of our technologies, such as our BioCleanse technology, are applicable to multiple markets.
COMMERCIAL APPLICATION PROPRIETARY ALLOGRAFTS PROPRIETARY TECHNOLOGIES
------------------------------------ ------------------------------------ ------------------------------------
General Tissue Healing and Reduced antigenicity implants BioCleanse
Processing Assembled implants Implant perfusion
Growth factor extraction
Carriers for growth factors
Spinal MD-Series cortical dowel Processes for making MD Series
SR cervical implant dowels;
Segmental demineralized implants. Various methods of making,
processing,
using implants.
Sports Medicine Interference screw Process of ACL reconstruction
Segmental demineralized tendons Various methods of making,
Segmental demineralized ligaments processing,
Segmental demineralized cartilage using implants.
Suture anchor
Tissue tape
Cartilage derived morphogenic
protein
Bone-tendon-bone implants.
Bone Paste Bone Paste
Bone paste tape
Oral-Maxillofacial Segmental demineralized plates
Urological and Cardiovascular Demineralized vessel grafts & stents
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COMPETITION
Competition in the bone and tissue healing industry is intense and subject to rapid technological change and evolving industry requirements and standards. Generally, competitors within the industry compete on the basis of design of related instrumentation, efficacy of products, relationships with the surgical community, depth of range of implants and pricing. Allograft implants compete with autograft, metals and synthetic tissues, as well as with alternative medical procedures. For the foreseeable future, we believe a significant number of surgeons will continue to choose to perform autograft procedures when feasible, despite the necessity of performing a second operation. In addition, many members of the medical community will continue to prefer to use metals and synthetics due in part to their familiarity with the products and the procedures required for their use. While synthetics are not osteoinductive, we believe that researchers will eventually develop methods for permitting the combination of synthetic tissue with recombinant growth stimulating materials in order to create an
osteoinductive synthetic tissue. We and a number of other companies are conducting research intended to develop this technology.
In the spinal market, we compete against other companies that produce and distribute allografts that promote spinal fusion. Spinal fusion products can be metal-based fusion cages or allograft implants. Our principal metals-based competitors include SpineTech, Surgical Dynamics, Medtronic Sofamor Danek and Acromed, a division of Johnson & Johnson. Our principal allograft-based competitors include Synthes, DePuy Orthopaedics, a division of Johnson & Johnson, and Osteotech.
In the sports medicine market, we compete against companies in the anchor and screw segment of the market and against companies in the allograft implant segment of the market. In the anchor and screw segment, our principal competitors include Mitek Products, a division of Johnson & Johnson, Arthrex, Acufex, a division of Smith & Nephew Endoscopy and Linvatec, a division of Conmed. In the allograft implant segment, our principal competitors include CryoLife and the Musculoskeletal Tissue Foundation.
Our bone pastes compete against human tissue-derived and synthetic bone fillers. In the human tissue-derived bone paste market, our principal competitors include Osteotech, Gen-Sci Regeneration Sciences and Wright Medical Technology. In the synthetic-derived bone filler market, we principally compete against Interpore International and Wright Medical Technology.
In the oral-maxillofacial market, we compete principally against companies that provide human-derived bone paste or synthetic bone fillers, and against companies that make periodontal membranes. Among our competitors producing human tissue derived oral-maxillofacial bone paste include Osteotech and Gen-Sci Regeneration Sciences. Among our competitors producing synthetic bone pastes include Geistlich Pharma AG and Interpore International. Competitors producing periodontal membranes include Gore Medical Products, a division of W.L. Gore & Associates, Geistlich Pharma AG and LifeCell.
Our principal competitors in the conventional allograft market include the Musculoskeletal Tissue Foundation, the American Red Cross Tissue Services, Allosource and LifeNet. Among the companies that market devices used for soft tissue anchoring in bladder neck suspensions are Mentor, Ethicon, a division of Johnson & Johnson, Boston Scientific, Smith & Nephew and C.R. Bard.
In the heart valve market we face competition from non-profit tissue banks that cryopreserve and distribute human tissue, as well as from companies that market mechanical, porcine and bovine heart valves for implantation. St. Jude Medical is the leading supplier of mechanical heart valves and has a marketing and distribution arrangement with a tissue bank that supplies them with cryopreserved human heart valves. Edwards Lifesciences, until recently a division of Baxter International, is the leading supplier of porcine heart valves. CryoLife is the leading supplier of cryopreserved human heart valves and at least two other tissue banks offer cryopreserved human heart valves, including the American Red Cross Tissue Services.
GOVERNMENT REGULATION
Government regulation plays a significant role in the processing and distribution of our current and proposed allografts. The production, testing, labeling, storage, record keeping, approval, advertising and promotion of these allografts are governed or influenced by the Food, Drug, and Cosmetic Act, the Public Health Service Act, and other federal and state statutes and regulations. Failure to comply with applicable requirements could result in fines, injunctions, civil penalties, recall or seizure of products, suspension of production, inability to market current products, criminal prosecution, and refusal of the government to authorize the marketing of new products.
We currently market allografts that are subject to the FDA's "Human Tissue Intended for Transplantation" regulation. Under the regulation, we are required to perform donor screening and
infectious disease testing and to document this screening and testing for each tissue we process. The FDA has authority under the rule to inspect human tissue processing facilities, and to detain, recall, or destroy tissues for which appropriate documentation is not available. We are not required to obtain premarket clearance from the FDA for products that meet the regulation's definition of "human tissue."
Some human tissues, such as heart valve allografts, corneal lenticules, and dura mater, are regulated by the FDA as medical devices. However, the FDA permits entities that processed and distributed heart valve allografts before June 26, 1991 to continue distributing heart valve allografts without obtaining 510(k) clearance or pre-market approval from the FDA. Our heart valve allografts are covered by this "grandfather" policy. It is likely that in the future the FDA will regulate additional allografts as medical devices. For allografts regulated as medical devices, we will need to obtain premarket clearance or approval through either the 510(k) premarket notification process, or the FDA's premarket approval, or PMA, process. Under the 510(k) premarket notification process, we would submit an application containing data which demonstrate the "substantial equivalence" of our product to a device marketed prior to the enactment of the Medical Device Amendments of 1976 or to a device legally marketed after that statute's enactment. The FDA may request submission of clinical information in support of the 510(k). The collection of data and preparation of a 510(k) application can be costly and time consuming.
The FDA sometimes rejects 510(k) notices or sometimes the use of a 510(k) notice may not be appropriate, requiring use of the PMA process. In addition, if a medical device is not substantially equivalent to a pre-1976 device, use of the PMA process is required. The PMA process is more complex, costly and time consuming than the 501(k) clearance procedure. To obtain premarket approval, we would be required to submit extensive preclinical and clinical data to the FDA. Upon completion and analysis of clinical studies, we then would be required to assemble and submit a PMA describing the preclinical, clinical, manufacturing and other data. Typically, the FDA also inspects the manufacturing facility for compliance with good manufacturing practice regulations. Review and approval of a PMA can take several years and some PMAs are never approved.
If clinical trials are to be conducted, we may be required to obtain FDA approval of an investigational device exemption application, or IDE. An IDE typically contains data from laboratory and animal testing and a description of the proposed study methods and clinical protocol. We must conduct our clinical studies according to a written protocol under the oversight of an institutional review board at each site where the study will be conducted, and our investigators must adhere to good clinical practices.
Some human tissue-based products, such as cellular therapies, are regulated by the FDA as biologics. While we do not at present market any allografts regulated as biologics, we may do so in the future. Before a biologic may be marketed, the FDA must approve a biologics license application, or BLA. An applicant must support a BLA with extensive data, including the results of preclinical and clinical testing which demonstrate that the product meets prescribed safety and efficacy standards. Before conducting required clinical testing with a biologic, we would be required to submit an investigational new drug application to the FDA. We would be required to conduct all clinical studies in accordance with an FDA approved protocol, subject to oversight by one or more institutional review boards. Clinical studies such as these may take several years and the FDA or sponsor may temporarily or permanently suspend a clinical study at any time. Upon completion and analysis of clinical trials, we would be required to submit a BLA containing the results of our clinical trials and other information, including a complete description of the manufacturing and control procedures. FDA review and approval of a BLA can take several years.
Products marketed under the approvals and clearances described above are subject to pervasive and continuing regulation by the FDA. To the extent our allografts are regulated by the FDA, we
would be required to register as a manufacturer and to manufacture these allografts in registered facilities and in accordance with good manufacturing practices. We would also be subject to post-marketing surveillance and reporting requirements. In addition, our manufacturing facilities and processes would be subject to periodic FDA inspection. Our labeling and promotional activities would be subject to scrutiny by the FDA and, in certain instances, by the Federal Trade Commission. The export of devices and biologics is also subject to regulation.
Our tissue processing generates by-products classified as medical hazardous waste by the U.S. Environmental Protection Agency and the Florida Department of Environmental Protection. We segregate the material and properly dispose of it in compliance with applicable environmental regulations.
We also are licensed by the states of New York, Florida, California and Maryland. These states are concerned primarily with ensuring proper donor screening, including screening for HIV and viral hepatitis. Although the state of New York also regulates the processing of tissue. We received a waiver from certain New York requirements after presenting information about the use of our BioCleanse system with pooled donor tissues.
EMPLOYEES
As of March 31, 2000, we had a total of 314 employees. The following chart shows the number of our employees involved in the various aspects of our business:
DEPARTMENT NUMBER OF EMPLOYEES ---------- ------------------- Tissue Processing and Manufacturing....................... 188 Tissue Recovery........................................... 11 Sales and Marketing....................................... 26 Research and Development.................................. 22 General and Administrative................................ 67 |
FACILITIES
Our physical facilities, located in Alachua, Florida include two company-owned buildings comprising 45,000 square feet, as well as leased space in buildings on adjoining and nearby property. These facilities include 20 clean-rooms for tissue processing and packaging, freezers for storage of tissue and biomedical laboratory facilities. We currently house our BioCleanse processing and biomedical laboratory operations in approximately 18,000 square feet of space which we currently lease for approximately $18,000 per month. This lease expires in February 2002. We sublease 3,855 square feet of space in our company owned buildings to the University of Florida Tissue Bank for approximately $5,000 per month, on a month to month basis. We also lease 8,800 square feet of warehouse space at a rate of $4,500 per month under a lease expiring in June 2002. We have the option to extend this lease for an additional year. Our wholly-owned subsidiary, Georgia Tissue Bank, operates from a leased building in Atlanta, Georgia comprising 9,300 square feet, with three clean- rooms for tissue processing and packaging, and freezers for tissue storage. This lease has a three year term, expiring in October 2002. The current base rent under this lease is $12,365 per month.
We plan to construct and equip a new 110,000 square foot facility on approximately 21 acres of recently acquired property adjacent to our existing facilities. We intend for this new facility to meet the FDA's "common good manufacturing practices" requirements. We believe the new facility will increase our capacity for tissue processing while allowing us to process tissue more economically. We also believe this new facility will allow us to be designated as an FDA approved medical device manufacturer. We expect to begin construction of this new facility during the third quarter of 2000.
LEGAL PROCEEDINGS
EXACTECH LITIGATION
On June 22, 1999, Exactech, Inc. filed a complaint against us, the University of Florida Tissue Bank and 19 of our medical distributors and sales agents. The complaint alleges that we have been marketing and distributing bone paste in violation of an agreement between the University of Florida Tissue Bank and Exactech. This agreement was assigned to us by the University of Florida Tissue Bank as part of our separation from that entity. The court granted our motion to enforce an arbitration provision in the agreement, and the matter is now in arbitration. Only we, Exactech and the University of Florida Tissue Bank remain as parties in the arbitration. None of our distributors are involved in the arbitration. The arbitration is presently proceeding through discovery. We believe that, even if this arbitration results in an outcome unfavorable to us, it would not have a material adverse effect on our business, financial condition or results of operations.
OSTEOTECH LITIGATION
On February 25, 1999, we, the University of Florida Tissue Bank and Medtronic Sofamor Danek filed a complaint in U.S. District Court against Osteotech, Inc. Our complaint alleges that Osteotech is infringing upon our patents for our Diaphysical Cortical Dowel. We are seeking injunctive relief and monetary damages. Discovery in this matter is ongoing and a trial date has not yet been set. Our legal expenses in this action are being reimbursed to us by Medtronic Sofamor Danek.
From time to time, we are party to various legal proceedings incident to operating a company of our size which we do not deem to be material to our financial conditions or the operation of our business.
MANAGEMENT
OUR EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS
Our executive officers, key employees and directors, and each of their ages and positions as of March 31, 2000 are as follows:
NAME AGE POSITION ---- -------- -------- James M. Grooms........................ 40 President, Chief Executive Officer and Chairman Richard R. Allen....................... 48 Chief Financial Officer, Secretary and Treasurer James P. Abraham....................... 40 Vice President of Sales Thomas E. Brewer....................... 52 Vice President of Marketing Nancy R. Holland....................... 53 Vice President of Donor Services Frederick C. Preiss.................... 49 Vice President of Operations Thomas W. Sander....................... 47 Director of Research and Development C. Randall Mills, Ph.D. ............... 28 Director of Regulatory and Technical Affairs Herman Baer, M.D. ..................... 67 In-house Medical Director Edward S. McIntyre, M.D. .............. 52 In-house Medical Director David J. Selman, M.D. ................. 42 In-house Medical Director Philip R. Chapman...................... 38 Director Peter F. Gearen, M.D. ................. 52 Director Michael J. Odrich...................... 36 Director Anthony C. Phillips.................... 54 Director E. Ronald Pickard...................... 51 Director Daniel L. Weber........................ 69 Director |
JAMES M. GROOMS has been our President, Chief Executive Officer and Chairman since we began operations in February 1998. From 1995 until joining us, he served as President and Chief Executive Officer of University of Florida Tissue Bank, Inc. Mr. Grooms served as the director of the University of Florida Tissue Bank from 1992 until 1995. Prior to joining the University of Florida Tissue Bank, Mr. Grooms was employed with CryoLife, Inc. from 1989 until 1992 where he served as Manager of the Orthopedic Laboratory from 1989 until 1992 and Manager of the Cardiovascular Laboratory during 1991. From 1987 until 1989, Mr. Grooms served as Manager of Operations and Manager of Technology at Osteotech Inc. Mr. Grooms was the inventor of certain of our intellectual property rights to key aspects of our allograft technology. Mr. Grooms holds a B.S. in Biology from Old Dominion University.
RICHARD R. ALLEN has been our Chief Financial Officer, Secretary and Treasurer since we began operations in February 1998. From 1997 until joining us, Mr. Allen served as director of Finance and Business Development for the University of Florida Tissue Bank. From 1990 until 1996, Mr. Allen served as Chief Financial Officer of Sabine, Inc., a manufacturer of digital audio equipment. In addition, from 1994 until 1996, Mr. Allen served as a principal of Strategies 2000, Inc. and he was a principal of Fidelity Business Consultants, Inc. from 1988 until 1997. Strategies 2000 and Fidelity Business Consultants are consulting firms specializing in technology development and licensing. Mr. Allen has been a partner in certified public accounting firms and holds two bachelor degrees from the University of Florida, including a B.S. in Accounting.
JAMES P. ABRAHAM has been our Vice President of Sales since June 1999. He was our Director of Sales from December 1998 until June 1999. From 1994 until joining us in December 1998, Mr. Abraham served as Vice President of Sales and Marketing at Encore Orthapedics, Inc. Prior to 1994, he held a number of positions including the National Sales Director for Intermedics, a division of Sulzer Medica, Vice President of Marketing and then Executive Vice President of Sales and Marketing for Implant Technology Inc., Director of Sales for Orthomet, Inc., a manufacturer of orthopedic
medical devices, and a Regional Sales Trainer for Stryker Corporation. Mr. Abraham holds a B.A. degree in business administration and finance from Creighton University.
THOMAS E. BREWER has been our Vice President of Marketing since 1999 and our Director of Marketing from 1998 until 1999. Mr. Brewer held several positions at Stryker Corporation including General Manager from 1996 until 1998, European Marketing Director for Stryker Europe from 1993 until 1996 and various other management positions from 1988 until 1993. From 1980 until 1988, he held various marketing positions with Bard Biomedical, a division of C.R. Bard, Inc. Mr. Brewer holds a B.A. from Hobart College, an M.B.A. from Widener University and has completed additional graduate work at Syracuse University.
NANCY R. HOLLAND has served as our Vice President of Donor Services since we began operations in February 1998. She is also the President, Chief Executive Officer and member of the board of directors of UFTB, where she has been employed since 1995. Ms. Holland was a National Accounts Manager for Cryolife, Inc. From 1986 until 1990, she served as the Executive Director of the American Red Cross' American Council on Transplantation and Executive Director of the Blood Commission of the American Red Cross from 1983 to 1989.
FREDERICK C. PREISS has been our Vice President of Operations since February 1998. From 1996 until 1998, Mr. Preiss was a private consultant in the medical device industry and from 1994 until 1996, he served as Executive Vice President of Operations of Wright Medical Technologies. From 1990 until 1994, he served as Vice President of Manufacturing and Engineering at U.S. Surgical Corporation. Mr. Preiss holds a B.S. in engineering and business administration from the University of New Haven.
THOMAS W. SANDER has been our Director of Research and Development since we began operations in February 1998. From 1996 until 1997, Mr. Sander was Vice President Research and Development with Howmedica Leibinger, Inc. and from 1991 until 1995, he was Senior Director with U.S. Surgical Corporation. Mr. Sander holds a B.S. in engineering analysis/bio-engineering from Clemson University and a Masters in Biomedical Engineering from Tulane University.
C. RANDALL MILLS, PH.D. has served as our Director of Regulatory and Technical Affairs since January 2000. From 1998 until 1999, he served as our Senior Technical Affairs Manager. Dr. Mills was with the University of Florida Tissue Bank from 1994 until 1998, most recently as a clinical laboratory supervisor. Dr. Mills holds a B.S. in microbiology and physiology from the University of Florida. He completed his post-graduate training in clinical pathology at the Shands Hospital of the University of Florida, where he also received his Ph.D.
DR. HERMAN BAER has been one of our In-house Medical Directors since we began operations in February 1998. Dr. Baer has been a Professor of Pathology at the University of Florida School of Medicine since 1998, where he has also served as Director of Autopsy Services in the Department of Pathology since 1981. Dr. Baer holds an M.D. from the University of Basle in Switzerland.
DR. EDWARD S. MCINTYRE has been one of our In-house Medical Directors since November 1999. Dr. McIntyre has been in private practice in Gainesville, Florida for over ten years. Dr. McIntyre holds a B.A. from Temple University and an M.D. from the Medical School of the University of Texas.
DR. DAVID J. SELMAN has been one of our In-house Medical Directors since February 2000. Dr. Selman has been in private practice since 1986. Dr. Selman holds an M.S. in Bioengineering from the University of Michigan, where he also earned his M.D.
PHILIP R. CHAPMAN has served as a member of our Board of Directors since we began operations in February 1998. He is the President of Venad Administrative Services, Inc. and has been a General Partner of Adler & Company since 1995. From 1991 until 1995, he served as a Principal of Adler & Company. From 1981 until 1989, Mr. Chapman served as a Senior Consultant at Booz Allen & Hamilton International. Mr. Chapman is also a director of Shells Seafood Restaurants, Inc. He holds a B.S. and an M.B.A. from Columbia University.
PETER F. GEAREN, M.D. has served as a member of our Board of Directors since we began operations in February 1998. Dr. Gearen was Chief of Staff at the Shands Hospital at the University of Florida and served as Assistant Dean of Clinical Affairs at the University of Florida College of Medicine, from 1992 until 1999. He also has been an Associate Professor at the University of Florida College of Medicine since 1993. Dr. Gearen is also a director of Motion Engineering, Inc. He holds a B.A. from Spring Hill College and an M.D. from the Stritch Loyola Medical School.
MICHAEL J. ODRICH has served as a member of our Board of Directors since we began operations in February 1998. Mr. Odrich has served as a director of Active Software, Inc. since 1997 and PEMSTAR, Inc. since 1998. Since 1986, he has held various banking positions at Lehman Brothers Inc. Currently, he is a Managing Director, head of the venture capital business and has served as the President of Lehman Brothers Venture Associates since 1999. Mr. Odrich holds a B.A. from Stanford University and received an M.B.A. from Columbia University.
ANTHONY C. PHILLIPS has served as a member of our Board of Directors since 1998. Mr. Phillips has served as President, Chief Executive Officer and a director of Raymedica, Inc. since 1995. From 1991 to 1995, he was Senior Vice President, Worldwide Marketing for CryoLife International, Inc., and from 1989 to 1991, was Vice President, Marketing and Strategic Planning for Organogenesis, Inc. Mr. Phillips holds a B.S. from the University of Tennessee.
E. RONALD PICKARD has served as a member of our Board of Directors since 1998. Since 1999, he has served as the President of the Medtronic Spinal and Neurological Group of Medtronic Sofamor Danek. Prior to the merger of Sofamor Danek Group and Medtronics, Mr. Pickard served in various executive capacities at Sofamor Danek, including as Chairman of the Board and Chief Executive Officer from 1994 to 1999. For 22 years prior to joining Sofamor Danek, Mr. Pickard was employed with Richards Medical Company in various capacities including Director of Manufacturing from 1975 until 1978, Group Director of Manufacturing from 1979 until 1981, Vice President of Manufacturing from 1982 until 1985, and President of Orthopaedics Division from 1986 until 1990.
DANIEL L. WEBER has served as a member of our Board of Directors since 1999. He has served as President and Chief Executive Officer of Marley Manufacturing Corporation since 1986.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
Our board of directors is comprised of seven directors. Upon the closing of this offering, our board of directors will be divided into three classes, with the members of the respective classes serving for staggered three-year terms. The initial terms of our current directors in these classes will expire upon the election and qualification of directors at our 2001, 2002 and 2003 annual meetings of stockholders. At each annual meeting of stockholders, directors will be re-elected or elected for full three-year terms. All executive officers are elected by, and serve at the discretion of, the board of directors. There are no family relationships among any of our executive officers or directors.
COMMITTEES OF THE BOARD OF DIRECTORS
The audit committee of our board of directors is charged with the responsibility of reviewing our audited financial statements and accounting practices, and considering and recommending the
appointment of independent accountants for both audit functions and for advisory and other consulting services. The audit committee is comprised of Messrs. Chapman, Phillips and Gearen.
The compensation committee of our board of directors is charged with reviewing and approving the compensation and benefits for our key executive officers, administering our employee benefit plans and making recommendations to the full board of directors regarding these matters. The compensation committee is comprised of Messrs. Chapman and Phillips.
DIRECTOR COMPENSATION
Our directors who are also our employees or officers do not receive any compensation specifically related to their activities as directors, other than reimbursement for expenses incurred relating to their attendance at meetings of the board of directors. Our directors who are not also our employees are eligible to receive a stipend of $1,000 per meeting, as well as reimbursement for their expenses incurred relating to their attendance at meetings of the board of directors. Under our Omnibus Stock Option Plan, at the discretion of our board of directors or compensation committee, our directors also are eligible to receive awards of non-qualified stock options. Our directors who are not also employees receive an annual grant of an option to purchase shares of our common stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of our compensation committee has been an employee of ours. None of our executive officers serves as a member of the board of directors or compensation committee of any other entity that has one or more executive officers serving as a member of our board of directors or our compensation committee.
EMPLOYMENT AGREEMENTS
We entered into an employment agreement with Mr. Grooms in February 1998. Mr. Grooms' current annual base salary is $225,000. The agreement expires in February 2003. The agreement provides for Mr. Grooms' reimbursement for automobile expenses and a $1,000,000 life insurance policy for Mr. Grooms' beneficiaries. Under the employment agreement, Mr. Grooms agreed to devote 100% of his working time to our business and affairs. If we terminate Mr. Grooms' employment without "cause," within the meaning of the employment agreement, he will be entitled to severance pay in an amount equal to his then-current annual salary and will be precluded from competing with us for a period of one year following the termination of employment. If we terminate Mr. Grooms' employment for "cause," he will not be entitled to any severance pay, but still will be precluded from competing with us for the same one year period.
We entered into an employment agreement with Mr. Allen in February 1998. Mr. Allen's current annual base salary is $150,000. The agreement expires in February 2003. Under the employment agreement, Mr. Allen agreed to devote 100% of his working time to our business and affairs. Under the agreement, Mr. Allen also received shares of our common stock. If we terminate Mr. Allen's employment without "cause," within the meaning of the employment agreement, he will be precluded from competing with us in the southeastern United States for a period of one year following the termination. If we terminate Mr. Allen's employment for "cause," Mr. Allen will be precluded from competing with us for a period of two years following the termination.
We entered into an employment agreement with Mr. Abraham in November 1998. Mr. Abraham's current annual base salary is $150,000. Mr. Abraham is eligible to receive an annual bonus in an amount to be determined by the board of directors provided we achieve certain specified revenue levels. The agreement expires in November 2003. Under the employment agreement, Mr. Abraham agreed to devote 100% of his working time to our business and affairs. When he entered into the employment agreement with us, Mr. Abraham received an option to purchase shares of our
common stock. The option is subject to a stock option restriction agreement under which one fifth of the options vest on each anniversary of the date of the grant. If we terminate Mr. Abraham's employment without "cause," within the meaning of the employment agreement he will be entitled to receive severance pay in an amount equal to one-half of his then-current annual salary and will be precluded from competing with us for a period of one year following the termination. In the event of termination for "cause," Mr. Abraham will not be entitled to severance pay, but will be precluded from competing with us for three years following the termination.
We entered into an employment agreement with Mr. Brewer in June 1998. Mr. Brewer's current annual base salary is $155,400. The agreement expires in June 2003. Under the employment agreement, Mr. Brewer agreed to devote 100% of his working time to our business and affairs. Mr. Brewer received an option to purchase shares of our common stock at the time he entered into the employment agreement. This option is subject to a stock option agreement under which one fifth of the options vest on each anniversary of the date of the grant. If we terminate Mr. Brewer's employment without "cause," within the meaning of the employment agreement, he will be entitled to severance pay in an amount equal to one-half his then-current annual salary and he will be precluded from competing with us for a period of two years following the termination. In the event of termination for "cause," Mr. Brewer will not be entitled to severance pay but will be precluded from competing with us for the two years following the termination.
We entered into an employment agreement with Mr. Preiss in November 1998. Mr. Preiss' current annual base salary is $150,000 for serving as our Vice President of Operations. The agreement expires in November 2003. Under the employment agreement, Mr. Preiss agreed to devote 100% of his working time to our business and affairs. We awarded Mr. Preiss an option to purchase shares of our common stock at the time he entered into his employment agreement with us. If we terminate Mr. Preiss' employment without "cause," within the meaning of the employment agreement, he will be entitled to severance pay in an amount equal to one-half of his then-current annual salary, to be paid out monthly, and he will be precluded from competing with us for a period of one year following the termination. If we terminate Mr. Preiss' employment with us for "cause," Mr. Preiss will not be entitled to severance pay but will be precluded from competing with us for a period of three years following the termination.
EXECUTIVE COMPENSATION
The following table sets forth for the periods indicated salary and certain other compensation paid or accrued by us for our Chief Executive Officer and the four other most highly compensated executive officers whose total salary and bonus exceeded $100,000 for services rendered to us during 1999.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------- --------------------
NUMBER OF SECURITIES
NAME AND PRINCIPAL POSITION YEAR(1) SALARY($) BONUS ($) UNDERLYING OPTIONS
--------------------------- -------- --------- --------- --------------------
James M. Grooms.................................
President, Chief Executive Officer and 1999 $202,304
Chairman 1998 164,770
Richard R. Allen................................
Chief Financial Officer, Secretary and 1999 131,733
Treasurer 1998 113,114
James P. Abraham................................ 1999 150,000
Vice President of Sales 1998 18,697 $56,362
Thomas E. Brewer................................ 1999 155,400
Vice President of Marketing 1998 105,029
Frederick C. Preiss............................. 1999 131,733
Vice President of Operations 1998 --
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(1) Compensation for 1998 is for the period from February 12, 1998, the date we began operations, through December 31, 1998.
STOCK OPTION GRANTS
The following table sets forth information concerning the grant of options to purchase shares of our common stock during 1999 to each of the persons named in the summary compensation table above.
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF STOCK
NUMBER OF TOTAL OPTIONS PRICE APPRECIATION
SECURITIES GRANTED TO FOR OPTION TERM(3)
UNDERLYING EMPLOYEES EXERCISE PRICE EXPIRATION ---------------------
NAME OPTIONS(1) IN 1999 ($/SH)(2) DATE 5% 10%
---- ---------- ------------- -------------- ---------- --------- ---------
James M. Grooms................... -- -- -- -- -- --
Richard R. Allen.................. -- -- -- -- -- --
James P. Abraham.................. -- -- -- -- -- --
Thomas E. Brewer.................. -- -- -- -- -- --
Frederick C. Preiss............... 21% $ 9/09 $ $
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(1) Options vest and become exercisable 20% per year over the five-year period beginning on the date of grant.
(2) The exercise price per share of each option granted was equal to the fair market value of our common stock on the date of grant.
(3) These amounts represent hypothetical gains that could be achieved for the respective options if exercised at the end of the option term. These gains are based on assumed rates of stock price
appreciation of 5.0% and 10.0% compounded annually from the date the respective options were granted to their expiration dates. These assumptions are not intended to forecast future appreciation of our stock price. The potential realizable value computation does not take into account federal or state income tax consequences of option exercises or sales of appreciated stock.
The following table sets forth at December 31, 1999 the number of options held by each of the executive officers named in the summary compensation table. In the year ended December 31, 1999, none of the officers named in the summary compensation table exercised any options.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT YEAR END AT YEAR END($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------------------- -------------------------
James M. Grooms.................................... --/-- --/--
Richard R. Allen................................... --/-- --/--
James P. Abraham................................... --/-- --/--
Thomas E. Brewer................................... --/-- --/--
Frederick C. Preiss................................ --/-- --/--
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INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY
Our Certificate of Incorporation includes a provision that eliminates the personal liability of our directors for monetary damages for breach of fiduciary duty as a director, except for liability:
- for any breach of the director's duty of loyalty to us or our stockholders;
- for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;
- under Section 174 of the Delaware General Corporation Law regarding unlawful dividends and stock purchases; and
- for any transaction from which the director derived an improper personal benefit.
Our Certificate of Incorporation also provides that:
- we must indemnify our directors, officers, other employees and agents to the fullest extent permitted by the Delaware General Corporation Law, subject to certain very limited exceptions; and
- we must pay expenses of our directors, and may pay expenses of our officers, other employees, agents or trustees, incurred in their capacity as a directors, officer, employees, agent or trustee in connection with a legal proceeding before the final disposition of such proceeding.
These provisions are permitted under the Delaware General Corporation Law. In addition, our Bylaws provide that we must indemnify our directors and officers to the fullest extent permitted by the Delaware General Corporation Law.
We intend to enter into indemnification agreements with each of our directors and executive officers in order to give them additional contractual rights regarding the scope of our indemnification obligations and to provide additional procedural protections. In addition, we maintain directors' and officers' insurance providing indemnification for our directors, officers and management employees for liabilities arising as a result of their employment with us. We believe that these indemnification provisions and agreements are necessary to attract and retain qualified directors and officers.
The limitation of liability and indemnification provisions in our Certificate of Incorporation and Bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against directors and officers,
even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder's investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers under indemnification provisions.
Except as otherwise described in this prospectus, there is at present no pending litigation or proceeding involving any of our directors, officers, or employees regarding which indemnification is sought, nor are we aware of any threatened litigation that may result in claims for indemnification.
OMNIBUS STOCK OPTION PLAN
In July 1998, our board of directors and stockholders adopted the Regeneration Technologies, Inc. Omnibus Stock Option Plan. A maximum of shares have been authorized for issuance pursuant to the plan. Through December 31, 1999, we issued options to purchase shares of our common stock to our directors, officers, employees and various third parties who provide services to us. Of these options, currently are exercisable. The exercise prices of the options granted under the Omnibus Stock Option Plan range from $ to $ . The exercise price for each option grant was set at the fair market value of the shares of our common stock on the date of grant, as determined by our board of directors. The purposes of the plan are to promote our long-term growth and profitability by providing key personal with incentives to improve stockholder value and to enable us to attract, retain and reward skilled employees. There are an additional shares of common stock available for issuance under the plan.
The plan allows for the discretionary grant of restricted stock, non-qualified stock options, incentive stock options as defined in Section 422 of the Internal Revenue Code of 1986 and other stock-based awards. Any award of an incentive stock option is limited to our employees and the employees of our subsidiaries. The exercise price per share may not be less than 100% of the fair market value of such shares on the date the option is granted.
The plan is administered by our board of directors or any committee it may designate for this purpose. The board makes the determinations with respect to awards under the plan, including which eligible individuals are to receive awards under the plan and the specific terms, vesting conditions, if any, and number of shares of stock to which each award related. Additionally, the board may grant awards with different terms and conditions and also may accelerate the vesting of outstanding awards and options at any time. At the time the options are granted, the board will set the price at which options can be exercised.
Option holders do not and will not have any rights as stockholders until they have exercised their options. The number of shares of our common stock covered by awards will be adjusted in the event of any stock split, merger, recapitalization or similar corporate event. This plan has a term of ten years, expiring in July 2009.
YEAR 2000 INCENTIVE COMPENSATION PLAN
In January 2000, our board of directors and stockholders adopted the Regeneration Technologies, Inc. Year 2000 Incentive Compensation Plan. A maximum of shares have been authorized for issuance pursuant to the plan. The board administers the Incentive Compensation Plan and grants discretionary awards to eligible participants pursuant to each program's specific goals and targets. The plan allows for the discretionary grant of restricted stock, non-qualified stock options, incentive stock options as defined in Section 422 of the Internal Revenue Code of 1986 and other stock-based awards. The program has a term of 10 years, expiring in January 2010.
RELATED PARTY TRANSACTIONS
LEGAL RELATIONSHIPS WITH THE UNIVERSITY OF FLORIDA TISSUE BANK
SEPARATION FROM UFTB
We began operations on February 12, 1998 when the University of Florida Tissue Bank or UFTB, contributed to us its allograft manufacturing and processing operations, related equipment and technologies, distribution arrangements, research and development activities and certain other assets. We also assumed certain liabilities of UFTB that were related to the transferred business. Various agreements relating to the transferred business to which UFTB was a party also were assigned to us at that time, including one of our two current management services agreements with Medtronic Sofamor Danek. At approximately the same time, we sold shares of our preferred stock to a number of unrelated investors and issued additional shares of our preferred stock to UFTB in exchange for the assets it contributed to us. Immediately prior to this offering, UFTB beneficially owned approximately 16% of our outstanding voting equity securities. Dr. Peter F. Gearen, one of our directors, presently is an Associate Professor at the University of Florida, which controls UFTB.
At approximately the same time as our separation from UFTB, James M. Grooms, our Chief Executive Officer, President and Chairman who served as an officer of UFTB prior to our separation, contributed his royalty rights in certain intellectual property to us in exchange for shares of our preferred stock. We recorded the assets acquired from UFTB and Mr. Grooms and the liabilities assumed from UFTB at their historical cost basis since these were deemed to be transactions between entities under common control.
UFTB is our largest tissue supply source. The tax-exempt status of UFTB requires our relationship with UFTB to be conducted at arm's length. For this reason, our relationship with UFTB is pursuant to a Tissue Recovery Agreement which is designed to provide for arm's-length charges for services between the two companies. Under the agreement, UFTB supplies certain of its tissues exclusively to us. Additionally, we have a right of first refusal on other tissues which UFTB is not currently providing to us. We pay UFTB recovery fees as reimbursement for expenses it incurs in tissue recovery procedures. The amount of the recovery fee depends upon the type and amount of tissue recovered. We incurred charges of approximately $2.4 million during 1998 and $5.3 million during 1999 under this agreement. This agreement expires in April 2009.
We have an employment agreement with Nancy R. Holland, our Vice President of Donor Services under which she is required to devote 50% of her working time to our business. Ms. Holland also serves as the Chief Executive Officer and a director of the University of Florida Tissue Bank, Inc. Ms. Holland recuses herself from decisions by UFTB's board of directors with respect to UFTB's relationship with us.
ASSUMPTION OF CONVENTIONAL ALLOGRAFT DISTRIBUTION BUSINESS OF UFTB
On April 15, 1999, we entered into a Programs Transfer Agreement with UFTB under which UFTB transferred to us its tissue recovery operations outside of Florida and Georgia, conventional allograft distribution services, allograft inventory, certain equipment and fixtures and its interest in various tissue recovery agreements. UFTB transferred its unprocessed donor tissue and conventional allograft implants with an assumed fair value of approximately $3.0 million, and certain equipment and fixtures with an assumed fair value of approximately $0.1 million as an offset against amounts owed to us by UFTB at the time we assumed this business. Additionally, UFTB agreed to repay the remaining balance of amounts it owed to us at that time by offsetting recovery fees from April 15, 1999 through June 30, 1999 against the outstanding balance, which fees were approximately $0.8 million, and by making monthly payments during the remainder of 1999 totaling approximately $1.2 million. Prior to
this transfer to us of UFTB's tissue recovery operations, we charged UFTB approximately $3.5 million during 1998 and approximately $2.6 million during 1999 for tissue processing services.
We also share facilities, overhead and various personnel with UFTB, the terms of which we believe are at least as favorable as those we would obtain in an arms-length relationship.
LEGAL RELATIONSHIP WITH MEDTRONIC SOFAMOR DANEK
The two management services agreements between us and Medtronic Sofamor Danek grant to that company exclusive worldwide rights to manage the distribution of our bone pastes for spinal uses and our current line of spinal allografts, including our MD-Series threaded and non-threaded dowels, tapered dowels and other spinal allografts. We pay to Medtronic Sofamor Danek management services fees as a percentage of the amount charged to customers for the allografts we distribute into these markets. We incurred charges under these agreements aggregating approximately $24.1 million during 1998 and approximately $40.0 million during 1999. These agreements terminate in May 2018 and July 2021. During 1999, Medtronic Sofamor Danek purchased shares of our preferred stock for an aggregate purchase price of $5.0 million. Upon the closing of this offering, these shares will represent approximately % of our outstanding voting equity securities. E. Ronald Pickard, one of our directors, is President of Medtronic Spinal and Neurological Group, a division of Medtronic Sofamor Danek. Prior to the merger of Sofamor Danek Group and Medtronics, Mr. Pickard served in various executive capacities at Sofamor Danek Group, including as Chairman of the Board and Chief Executive Officer.
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information regarding the beneficial ownership of our common stock as of March 31, 2000, and adjusted to give to the offering, by: (i) each person known to beneficially own more than 5% of the outstanding shares of our common stock; (ii) each of our directors; (iii) each executive officer named in the summary compensation table; and (iv) all executive officers and directors as a group. Unless indicated otherwise, the address of the beneficial owners is: c/o Regeneration Technologies, Inc., One Innovation Drive, Alachua, Florida 32615.
SHARES BENEFICIALLY
OWNED AFTER OFFERING
SHARES BENEFICIALLY IF OVER-ALLOTMENT
OWNED PRIOR TO OPTION EXERCISED
OFFERING(1) NUMBER OF IN FULL
----------------------- SHARES -----------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
------------------------ -------- -------- --------- -------- --------
James M. Grooms............................... 13.6%
Richard R. Allen.............................. 3.3
James P. Abraham.............................. *
Thomas E. Brewer.............................. *
Frederick C. Preiss........................... *
Philip R. Chapman............................. *
Peter F. Gearen............................... *
Michael J. Odrich............................. *
Anthony C. Philips............................ *
E. Ronald Pickard............................. *
Daniel L. Weber............................... *
Nancy R. Holland.............................. 6.0
The University of Florida Tissue Bank, Inc.... 16.3
One Innovation Drive
Alachua, Florida 32615
The University of Florida Research 16.3
Foundation..................................
P.O. Box 100215
Gainesville, Florida 32610
LB I Group Inc................................ 8.3
Lehman Brothers Inc.
3 World Financial Center
New York, New York 10285
Euro-America-II, L.P.......................... 5.3
Venad Administrative Services, Inc.
342 Madison Avenue, Suite 807
New York, New York 10173
RTI Advisory Group LLC........................ 4.6
530 Oak Court Drive, Suite 345
Memphis, Tennessee 38117
Stephens-Regeneration LLC..................... 5.0
111 Center Street, Suite 2500
Little Rock, Arkansas 72201
Medtronic Asset Mgt., Inc..................... 5.0
7000 Central Avenue, N.E.
Minneapolis, Minnesota 55402
All executive officers and directors as a
group (11 persons)..........................
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* Represents beneficial ownership of less than 1%.
(1) Percentage ownership is based on shares outstanding as of March 31, 2000. Shares of common stock subject to options currently exercisable or exercisable within 60 days of March 31, 2000 are deemed outstanding for the purpose of computing the percentage ownership of the person holding such options but are not deemed outstanding for the purpose of computing the percentage ownership of any other person.
DESCRIPTION OF CAPITAL STOCK
Effective as of the closing of this offering, our authorized capital stock will consist of 50,000,000 shares of common stock, $.001 par value, and 5,000,000 shares of preferred stock, $.001 par value.
COMMON STOCK
As of December 31, 1999, shares of our common stock were outstanding and held of record by stockholders after giving effect to the conversion of all outstanding shares of our then-outstanding shares of preferred stock upon the closing of this offering. Following the issuance of the shares of our common stock offered hereby, there will be shares of common stock outstanding and no shares of preferred stock upon the closing of this offering, assuming no exercise of the underwriter's over-allotment option.
Subject to preferences that may be applicable to any preferred stock outstanding at the time, the holders of outstanding shares of common stock are entitled to receive dividends out of assets legally available therefor at such times and in such amounts as the board of directors from time to time may determine. Holders of common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders. Cumulative voting for the election of directors is not authorized by our certificate of incorporation, which means that the holders of a majority of the shares voted can elect all of the directors then standing for election. Holders of our common stock are not entitled to preemptive rights and our common stock is not subject to conversion or redemption. Upon our liquidation, dissolution or winding-up, the assets legally available for distribution to stockholders shall be distributed ratably among the holders of our common stock after payment of liquidation preferences, if any, on any outstanding shares of preferred stock and payment of other claims of creditors.
There is currently no active trading market for our common stock. We will file an application to have our common stock approved for quotation on the Nasdaq National Market under the symbol "RTIX."
PREFERRED STOCK
Upon the closing of this offering, we will not have any shares of preferred stock outstanding. Our 5,000,000 authorized shares of preferred stock may by issued in one or more series without further stockholder authorization, and our board of directors is authorized to fix and determine the terms, limitations and relative rights and preferences of the preferred stock, to establish series of preferred stock and to fix and determine the variations between these series. If we issue preferred stock, it would have priority over our common stock with respect to dividends and to other distributions, including the distribution of assets upon liquidation, and we may be obligated to repurchase or redeem our preferred stock. Our board of directors can issue preferred stock without the approval of our common stockholders. Any preferred stock we issue may have voting and conversion rights which could adversely affect the rights of holders of our common stock. In addition to having a preference with respect to dividends or liquidation proceeds, if preferred stock is issued, it may be entitled to the allocation of capital gains from the sale of our assets. We do not have any present plans to issue any shares of preferred stock.
WARRANTS
As of December 31, 1999 we had outstanding warrants to purchase an aggregate of shares of our common stock at a weighted average exercise price of $ .
REGISTRATION RIGHTS
Under the terms of an agreement between us and certain of our stockholders, these stockholders are entitled to certain rights with respect to the registration of these shares under the Securities Act of 1933 commencing 180 days after the consummation of this offering. If we receive from the required number of holders of these shares a written request to effect a registration with respect to all or a part of their shares, we must use our best efforts to effect a registration, provided the offering price for these shares in the aggregate is at least $5,000,000. We are obligated to effect only two of these registrations.
When we are eligible to use a registration statement on Form S-3, our stockholders may request that we file a registration statement on Form S-3 covering all or a portion of their shares, provided that the aggregate public offering price is at least $500,000.
In addition, these and certain of our other stockholders have "piggyback" registration rights. If we propose to register any common stock under the Securities Act, other than pursuant to the registration rights described above, these stockholders may require us to include all or a portion of their securities in that registration.
We would bear all registration expenses incurred in connection with any of the above registrations. Each of these stockholders participating in any registration would pay their own underwriting discounts, selling commission and stock transfer taxes applicable to the sale of their securities.
STOCKHOLDERS' AGREEMENT
We have entered into a stockholders' agreement with our current stockholders. The stockholders have agreed to vote their shares of our voting capital stock so as to cause the board of directors to consist of seven persons, five of which are to be approved by holders of our preferred stock outstanding prior to this offering. This agreement terminates upon the closing of this offering.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
Under Section 203, certain "business combinations" between a Delaware corporation with shares that generally are publicly traded or held of record by more than 2,000 stockholders, and an "interested stockholder" are prohibited for a three-year period following the date that such stockholder became an interested stockholder, unless:
- the corporation has elected in its certificate of incorporation or bylaws not to be governed by the Delaware anti-takeover law;
- the business combination was approved by the board of directors of the corporation before the other party to the business combination became an interested stockholder;
- upon consummation of the transaction that made it an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the commencement of the transaction, excluding voting stock owned by directors who are also officers or held in employee stock plans in which the employees do not have a right to determine confidentially whether to tender or vote stock held by the plan; or
- the business combination was approved by the board of directors of the corporation and ratified by 66 2/3% of the voting stock which the interested stockholder did not own. The three-year prohibition does not apply to certain business combinations proposed by an interested stockholder following the announcement or notification of certain extraordinary transactions involving the corporation and a person who had not been an interested stockholder during the previous three years or who became an interested stockholder with the approval of a majority of the corporation's directors. The term "business combination" is defined generally to include
mergers or consolidations between a Delaware corporation and an interested stockholder, transactions with an interested stockholder involving the assets or stock of the corporation or its majority-owned subsidiaries and transactions which increase an interested stockholder's percentage ownership of stock. The term "interested stockholder" is defined generally as a stockholder who becomes beneficial owner of 15% or more of a Delaware corporation's voting stock. We have not elected in our certificate of incorporation or bylaws not to be governed by the Delaware anti-takeover law. Section 203 could have the effect of delaying, deferring or preventing a change in control of Regeneration Technologies.
Our certificate of incorporation provides for the division of our board of directors into three classes, as nearly equal in size as possible, with each class beginning its three-year term in different years. Any director may be removed only for cause by the vote of a majority of the shares entitled to vote for the election of directors.
In addition, provisions of our certificate of incorporation and bylaws summarized in the following paragraphs may have an anti-takeover effect and may delay, defer or prevent a tender offer or takeover attempt that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by our stockholders.
STOCKHOLDER ACTION; SPECIAL MEETING OF STOCKHOLDERS
Our bylaws provide that our stockholders may not take action by written consent, but only at an annual or special meeting of stockholders. Our bylaws further provide that special meetings of our stockholders may be called only by the chairman of our board of directors or a majority of our board of directors.
SUPERMAJORITY VOTING PROVISIONS
Our certificate of incorporation provides that the affirmative vote of at least 66 2/3% of our stockholders is required to amend the provisions of our certificate of incorporation and bylaws relating to the election of our board of directors, stockholder action by written consent and the calling of special meetings.
AUTHORIZED BUT UNISSUED SHARES
The authorized but unissued shares of our common stock and preferred stock are available for future issuance without stockholder approval. These additional shares may be used for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued common stock and preferred stock could render more difficult or discourage an attempt to obtain control of our company by means of a proxy contest, tender offer, merger or otherwise.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
We will enter into indemnification agreements with our current directors and executive officers. These agreements may have the practical effect in some cases of eliminating our stockholders' ability to collect monetary damages from our directors. We believe that these contractual agreements and the provisions in our certificate of incorporation and bylaws are necessary to attract and retain qualified persons as directors and officers.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is .
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the offering, there has been no public market for our common stock, and we cannot predict the effect, if any, that market sales of shares or the availability of any shares for sale will have on the market price of the common stock prevailing from time to time. Sales of substantial amounts of common stock, or the perception that such sales could occur, could adversely affect the market price of our common stock and our ability to raise capital through a sale of our securities.
Upon completion of this offering, we will have shares of common stock outstanding (or shares if the underwriters over-allotment option is exercised in full) of which will be "restricted shares." This leaves shares eligible for sale in the public market as follows:
NUMBER OF SHARES DATE
---------------- ----------------------------------------------------------------------------
..................... After 90 days from the date of this prospectus
..................... After 180 days from the date of this prospectus (subject, in some cases, to
volume limitations)
..................... After various times after 180 days from the date of this prospectus
|
The shares (or up to shares if the underwriters' over-allotment option is exercised in full) of common stock sold in this offering will be freely tradable without further restriction or further registration under the Securities Act, except for shares purchased by an affiliate (as this term is defined in the Securities Act) of ours, which will be subject to the limitations of Rule 144 under the Securities Act. Subject to certain contractual limitations, holders of restricted shares generally will be entitled to sell these shares in the public securities market without registration either pursuant to Rule 144 or any other applicable exemption under the Securities Act.
In general, under Rule 144 under the Securities Act, a person (or persons whose shares are aggregated) who has beneficially owned restricted securities within the meaning of Rule 144 for at least one year, and including the holding period of any prior owner except an affiliate, would be entitled to sell within any three-month period a number of shares that does not exceed the greater of one percent of the then outstanding shares of our common stock or the average weekly trading volume of our common stock on the Nasdaq National Market during the four calendar weeks preceding such sale. Sales under Rule 144 are also subject to certain manner of sale provisions, notice requirements and the availability of current public information about Regeneration Technologies. Any person (or persons whose shares are aggregated) who is not deemed to have been our affiliate at any time during the three months preceding a sale, and who has beneficially owned shares for at least two years (including any period of ownership of preceding non-affiliated holders), would be entitled to sell such shares under Rule 144(k) without regard to the volume limitations, manner of sale provisions, public information requirements or notice requirements. An "affiliate" is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or under common control with, an issuer.
Within approximately 180 days after the date of this prospectus, we intend to file one or more registration statements on Form S-8 under the Securities Act to register shares of common stock subject to outstanding stock options or reserved for issuance under our equity compensation plans. Upon completion of this offering, options to purchase approximately shares will be outstanding under our equity compensation plans.
Our directors and officers and some of our stockholders who hold shares in the aggregate (including options and warrants to purchase common stock) have entered into lock-up agreements pursuant to which they have agreed that they will not sell other than in connection with this offering, directly or indirectly, any shares of common stock without the prior written consent of Banc of America
Securities LLC for a period of 180 days from the date of this prospectus; provided, however, they may gift or transfer shares so long as the donee or transferee agrees to be bound by the terms of the lock-up agreement.
Under the terms of an agreement between us and the holders of shares of our preferred stock, the preferred stockholders are entitled to certain rights with respect to the registration of these Shares under the Securities Act commencing 180 days after the consummation of this offering. If we receive from the holders of at least 40% of any class of preferred stock a written request to effect a registration with respect to all or a part of their shares, we must use our best efforts to effect such a registration, provided the shares owned by the requesting stockholders cover at least 33% of the then outstanding class of security of the offering price in the aggregate is at least $5,000,000. We are only obligated to effect two of these registrations.
When we are eligible to utilize a registration statement on Form S-3 to register an offering of our securities, these stockholders may request that we file a registration statement on Form S-3 covering all or a portion of their shares, provided that the aggregate public offering price is at least $500,000.
In addition, certain of our stockholders have certain "piggyback" registration rights. If we propose to register any common stock under the Securities Act, other than pursuant to the registration rights above, these stockholders may require us to include all or a portion of their securities in such registration. We are obligated to use our best efforts to effect this registration.
UNDERWRITING
Regeneration Technologies and the selling stockholder are offering the shares of common stock described in this prospectus through a number of underwriters. Banc of America Securities LLC, Lehman Brothers Inc., Warburg Dillon Read LLC and Stephens Inc. are the representatives of the underwriters. Regeneration Technologies and the selling stockholder have entered into a firm commitment underwriting agreement with the representatives. Subject to the terms and conditions of the underwriting agreement, Regeneration Technologies and the selling stockholder have agreed to sell to the underwriters, and the underwriters have each agreed to purchase the number of shares of common stock listed next to its name in the following table:
UNDERWRITER NUMBER OF SHARES
----------- ----------------
Banc of America Securities LLC..............................
Lehman Brothers Inc.........................................
Warburg Dillon Read LLC.....................................
Stephens Inc................................................
---------
Total.....................................................
=========
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The underwriters initially will offer shares to the public at the price specified on the cover page of this prospectus. The underwriters may allow to some dealers a concession of not more than $ per share. The underwriters also may allow, and any dealers may reallow, a concession of not more than $ per share to some other dealers. If all the shares are not sold at the initial public offering price, the underwriters may change the offering price and the other selling terms. The common stock is offered subject to a number of conditions, including:
- receipt and acceptance of our common stock by the underwriters; and
- the right to reject orders in whole or in part.
The underwriters have an option to buy up to additional shares of common stock from Regeneration Technologies to cover sales of shares by the underwriters which exceed the number of shares specified in the table above, and will be sold by Regeneration Technologies in the event that the option is not exercised in full. The underwriters have 30 days to exercise this option. If the underwriters exercise this option, they will each purchase additional shares approximately in proportion to the amounts specified in the table above. Regeneration Technologies will pay the expenses associated with the exercise of the overallotment option.
The following table shows the per share and total underwriting discounts and commissions to be paid to the underwriters assuming both no exercise and full exercise of the underwriters' option to purchase additional shares.
PAID BY REGENERATION
TECHNOLOGIES
---------------------------
NO EXERCISE FULL EXERCISE
----------- -------------
Per share............................................ $ $
Total................................................ $ $
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PAID BY SELLING STOCKHOLDER
----------------------------
NO EXERCISE FULL EXERCISE
------------ -------------
Per share............................................ $ $ --
Total................................................ $ $ --
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Regeneration Technologies and substantially all holders of its stock prior to this offering, as well as substantially all holders of stock options and warrants, have entered into lock-up agreements with the underwriters. Under those agreements, Regeneration Technologies and those holders of stock, options and warrants may not dispose of or hedge any Regeneration Technologies common stock or securities convertible into or exchangeable for shares of Regeneration Technologies common stock unless permitted to do so by Banc of America Securities LLC. These restrictions will be in effect for a period of 180 days after the date of this prospectus. At any time and without notice, Banc of America Securities LLC may, in its sole discretion, release all or some of the securities from these lock-up agreements.
Regeneration Technologies and the selling stockholder will indemnify the underwriters against liabilities, including liabilities under the Securities Act. If Regeneration Technologies and the selling stockholder are unable to provide this indemnification, they will contribute to payments the underwriters may be required to make in respect of those liabilities.
In connection with this offering, the underwriters may purchase and sell shares of common stock in the open market. These transactions may include:
- short sales;
- stabilizing transactions; and
- purchases to cover positions created by short sales.
Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in this offering. Stabilizing transactions consist of bids or purchases made for the purpose of preventing or retarding a decline in the market price of the common stock while this offering is in progress.
The underwriters may also impose a penalty bid. This means that if the representatives purchase shares in the open market in stabilizing transactions or to cover short sales, the representatives can require the underwriters that sold those shares as part of this offering to repay the underwriting discount received by them.
The underwriters may engage in activities that stabilize, maintain or otherwise affect the price of the common stock, including:
- over-allotment;
- stabilization;
- syndicate covering transactions; and
- imposition of penalty bids.
As a result of these activities, the price of the common stock may be higher than the price that otherwise might exist in the open market. If the underwriters commence these activities, they may discontinue them at any time. The underwriters may carry out these transactions on the Nasdaq National Market, in the over-the-counter-market or otherwise.
The underwriters do not expect sales to discretionary accounts to exceed 5% of the total number of shares of common stock offered by this prospectus.
Prior to this offering, there has been no public market for the common stock of Regeneration Technologies. The initial public offering price will be negotiated between Regeneration Technologies and the underwriters. Among the factors to be considered in such negotiations are:
- the history of, and prospects for, Regeneration Technologies and the industry in which it competes;
- the past and present financial performance of Regeneration Technologies;
- an assessment of Regeneration Technologies' management;
- the present state of Regeneration Technologies' development;
- the prospects for future earnings of Regeneration Technologies;
- the prevailing market conditions of the applicable United States securities market at the time of this offering;
- market valuations of publicly traded companies that Regeneration Technologies and the representatives believe to be comparable to Regeneration Technologies; and
- other factors deemed relevant.
An affiliate of Banc of America Securities LLC is the lender under our $6.0 million revolving line of credit facility and our $2.8 million 20-year mortgage, and also provides to us services related to treasury management, derivative transactions and institutional investments. In addition, affiliates of Lehman Brothers Inc. and Stephens Inc., representatives of the underwriters, beneficially own approximately and shares of our common stock, respectively.
The underwriters, at our request, have reserved for sale to our employees, affiliates and strategic partners at the initial public offering price up to five percent of the shares being offered by this prospectus. The sale of shares to our employees, affiliates and strategic partners will be made by Banc of America Securities LLC. We do not know if our employees, affiliates or strategic partners will choose to purchase all or any portion of these reserved shares, but any purchases they do make will reduce the number of shares available to the general public. If all of these reserved shares are not purchased, the underwriters will offer the remainder to the general public on the same terms as the other shares offered by this prospectus.
LEGAL MATTERS
Fulbright & Jaworski L.L.P., New York, New York will pass on the validity of the common stock offered by this prospectus for us. Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Boston, Massachusetts, will pass upon certain legal matters in connection with this offering for the underwriters.
EXPERTS
The Consolidated Financial Statements of Regeneration Technologies, Inc. and Subsidiary and the Statements of Revenues and Direct Costs of the Predecessor Business of Regeneration Technologies, Inc. included in this prospectus and the related financial statement schedule included elsewhere in the registration statement have been audited by Deloitte & Touche LLP, independent auditors, as stated in their reports appearing herein and elsewhere in the registration statement, and are included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 with the Securities and Exchange Commission for the common stock we are offering by this prospectus. This prospectus does not include all of the information contained in the registration statement. You should refer to the registration statement and its exhibits for additional information. Whenever we make reference in this prospectus to any of our contracts, agreements or other documents, the references are not necessarily complete and you should refer to the exhibits attached to the registration statement for copies of the actual contract, agreement or other document. When we complete this offering, we will also be required to file annual, quarterly
and special reports, proxy statements and other information with the Securities and Exchange Commission.
We intend to furnish our stockholders with annual reports containing financial statements audited by an independent accounting firm, and to make available quarterly reports containing unaudited financial information for the first three quarters of each fiscal year.
You can read our Securities and Exchange Commission filings, including the registration statement, over the Internet at the Securities and Exchange Commission's web site at http://www.sec.gov. You may also read and copy any document we file with the Securities and Exchange Commission at its public reference facilities at 450 Fifth Street, N.W., Washington, D.C. 20549; Seven World Trade Center, Suite 1300, New York, New York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. You may also obtain copies of these documents at prescribed rates by calling the Public Reference Section of the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the operation of the public reference facilities.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
--------
CONSOLIDATED FINANCIAL STATEMENTS OF REGENERATION
TECHNOLOGIES, INC. AND SUBSIDIARY
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets--December 31, 1998 and 1999..... F-3
Consolidated Statements of Operations--Period from February
12, 1998 to
December 31, 1998 and Year Ended December 31, 1999........ F-4
Consolidated Statements of Stockholders' (Deficiency)
Equity--Period from
February 12, 1998 to December 31, 1998 and Year Ended
December 31, 1999....................................... F-5
Consolidated Statements of Cash Flows--Period from February
12, 1998 to
December 31, 1998 and Year Ended December 31, 1999........ F-6
Notes to Consolidated Financial Statements.................. F-7
CONSOLIDATED SUPPLEMENTAL SCHEDULE
Independent Auditors' Report................................ F-22
Supplemental Schedule....................................... F-23
STATEMENTS OF REVENUES AND DIRECT COSTS OF THE PREDECESSOR BUSINESS
OF REGENERATION TECHNOLOGIES, INC.
Independent Auditors' Report................................ F-24
Statements of Revenues and Direct Costs for the Year Ended
December 31, 1997 and the Period from January 1, 1998 to
February 11, 1998 F-25
Notes to Statements of Revenues and Direct Costs............ F-26
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Regeneration Technologies, Inc.:
We have audited the accompanying consolidated balance sheets of Regeneration Technologies, Inc. and subsidiary (the "Company") as of December 31, 1998 and 1999, and the related consolidated statements of operations, stockholders' (deficiency) equity and cash flows for the period from February 12, 1998 (date operations began) to December 31, 1998 and for the year ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 1998 and 1999, and the results of its operations and its cash flows for the period from February 12, 1998 (date operations began) to December 31, 1998 and for the year ended December 31, 1999 in conformity with accounting principles generally accepted in the United States of America.
/S/ DELOITTE & TOUCHE LLP Certified Public Accountants Tampa, Florida March 22, 2000 (April 27, 2000 as to Note 18) |
REGENERATION TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
-------------------------
1998 1999
----------- -----------
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 3,925,880 $ 7,536,287
Accounts receivable--less allowance of $38,500 in 1998 and
$335,087 in 1999........................................ 5,901,870 15,506,750
Product inventories....................................... 4,111,432 15,639,329
Supply inventories........................................ 245,417 592,780
Prepaid and other current assets.......................... 661,237 1,174,644
Deferred tax asset........................................ 164,738 747,997
----------- -----------
Total current assets.................................. 15,010,574 41,197,787
Property, plant and equipment--net.......................... 4,125,988 5,812,783
Deferred tax asset--net of valuation allowance of $1,534,183
in
1998 and $0 in 1999....................................... 53,033 1,229,613
Other assets--net........................................... 77,935 298,131
----------- -----------
$19,267,530 $48,538,314
=========== ===========
LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) EQUITY
Current Liabilities:
Accounts payable.......................................... $13,290,436 $21,056,808
Accrued expenses.......................................... 1,122,997 2,178,191
Current portion of deferred revenue (Note 2).............. 225,000 225,000
Line of credit............................................ -- 2,787,475
Current portion of long term debt......................... 384,647 898,735
----------- -----------
Total current liabilities............................. 15,023,080 27,146,209
Long term debt--less current portion........................ 1,482,249 2,026,796
Deferred revenue (Note 2)................................... 4,153,000 3,928,000
Other liabilities........................................... 40,000 --
----------- -----------
Total liabilities..................................... 20,698,329 33,101,005
----------- -----------
Commitments and contingencies (Notes 13, 15 and 18)
Stockholders' (deficiency) equity:
Series A Preferred stock, $.001 par value; 1,777,348
shares
authorized, issued and outstanding...................... 1,777 1,777
Series B Preferred stock, $.001 par value; 748,152 shares
authorized, issued and outstanding; at liquidation
value................................................. 6,580,000 6,580,000
Series C Preferred stock, $.001 par value; 368,990 shares
authorized, issued and outstanding; at liquidation
value................................................. -- 10,000,000
Common stock, $.001 par value; 6,000,000 shares
authorized; 765,452 and 763,672 shares issued,
respectively;
770,702 shares outstanding.............................. 770 770
Additional paid-in capital................................ 460,117 447,153
Accumulated deficit....................................... (4,141,947) (1,182,454)
Deferred compensation..................................... (531,351) (399,907)
Note receivable from stockholder.......................... (2,136,741) --
Due from stockholder--net of due to stockholder........... (1,658,961) (4,332)
Less treasury stock--5,250 and 7,030 shares,
respectively............................................ (4,463) (5,698)
----------- -----------
Total stockholders' (deficiency) equity............... (1,430,799) 15,437,309
----------- -----------
$19,267,530 $48,538,314
=========== ===========
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See notes to consolidated financial statements.
REGENERATION TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
PERIOD FROM YEAR ENDED
FEBRUARY 12, 1998 DECEMBER 31,
TO DECEMBER 31, 1998 1999
-------------------- ------------
Revenues from core operations:
Fees from tissue distribution............................. $31,892,098 $70,783,005
Other revenues from core operations....................... 3,365,387 2,237,051
----------- -----------
Total revenues.......................................... 35,257,485 73,020,056
Management services fees.................................... 24,129,406 39,994,069
----------- -----------
Net revenues............................................ 11,128,079 33,025,987
Costs of processing and distribution........................ 9,844,771 19,172,398
----------- -----------
Gross profit............................................ 1,283,308 13,853,589
----------- -----------
Expenses:
Marketing, general and administrative..................... 3,986,946 9,739,790
Research and development.................................. 1,472,410 1,675,019
----------- -----------
Total expenses.......................................... 5,459,356 11,414,809
----------- -----------
Operating (loss) income..................................... (4,176,048) 2,438,780
----------- -----------
Interest (expense) income:
Interest expense.......................................... (152,631) (285,166)
Interest income........................................... 186,732 187,017
----------- -----------
Total interest income (expense)--net.................... 34,101 (98,149)
----------- -----------
(Loss) income before income tax benefit..................... (4,141,947) 2,340,631
Income tax benefit.......................................... -- 618,862
----------- -----------
Net (loss) income........................................... $(4,141,947) $ 2,959,493
=========== ===========
Net (loss) income per common share--basic................... $ (5.37) $ 3.84
=========== ===========
Net (loss) income per common share--diluted................. $ (5.37) $ 0.84
=========== ===========
Weighted average shares outstanding--basic.................. 770,702 770,702
Weighted average shares outstanding--diluted................ 770,702 3,503,159
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See notes to consolidated financial statements.
REGENERATION TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIENCY) EQUITY
PREFERRED STOCK ADDITIONAL
----------------------------------- COMMON PAID-IN ACCUMULATED DEFERRED
A B C STOCK CAPITAL DEFICIT COMPENSATION
-------- ---------- ----------- -------- ---------- ----------- ------------
Balance, February 12, 1998........ $ -- $ -- $ -- $ -- $ -- $ -- $ --
Net liabilities assumed in
separation from UFTB.......... -- -- -- -- (39,643) -- --
Issuance of Series A Preferred
stock to related parties...... 1,777 -- -- -- (1,777) -- --
Sale of Series B Preferred
stock......................... -- 6,580,000 -- -- -- -- --
Stock issuance costs............ -- -- -- -- (152,790) -- --
Issuance of common stock to
employees..................... -- -- -- 770 654,327 -- (655,097)
Forfeited treasury stock........ -- -- -- -- -- -- 4,463
Vested deferred compensation.... -- -- -- -- -- -- 119,283
Net amounts advanced to
stockholder................... -- -- -- -- -- -- --
Net loss........................ -- -- -- -- -- (4,141,947) --
------ ---------- ----------- ---- --------- ----------- ---------
Balance, December 31, 1998........ 1,777 6,580,000 -- 770 460,117 (4,141,947) (531,351)
Purchased and forfeited treasury
stock......................... -- -- -- -- (639) -- 1,620
Stock options granted in lieu of
director and consulting
fees.......................... -- -- -- -- 20,428 -- --
Settlement of amounts due from
stockholder by transfer of
assets........................ -- -- -- -- -- -- --
Cash received for amounts due
from stockholder.............. -- -- -- -- -- -- --
Sale of Series C Preferred
stock......................... -- -- 10,000,000 -- -- -- --
Stock issuance costs............ -- -- -- -- (32,753) -- --
Vested deferred compensation.... -- -- -- -- -- -- 129,824
Net income...................... -- -- -- -- -- 2,959,493 --
------ ---------- ----------- ---- --------- ----------- ---------
Balance, December 31, 1999........ $1,777 $6,580,000 $10,000,000 $770 $ 447,153 $(1,182,454) $(399,907)
====== ========== =========== ==== ========= =========== =========
NOTE
RECEIVABLE
FROM DUE FROM TREASURY
STOCKHOLDER STOCKHOLDER STOCK TOTAL
----------- ----------- -------- -----------
Balance, February 12, 1998........ $ -- $ -- $ -- $ --
Net liabilities assumed in
separation from UFTB.......... -- -- -- (39,643)
Issuance of Series A Preferred
stock to related parties...... -- -- -- --
Sale of Series B Preferred
stock......................... -- -- -- 6,580,000
Stock issuance costs............ -- -- -- (152,790)
Issuance of common stock to
employees..................... -- -- -- --
Forfeited treasury stock........ -- -- (4,463) --
Vested deferred compensation.... -- -- -- 119,283
Net amounts advanced to
stockholder................... (2,136,741) (1,658,961) -- (3,795,702)
Net loss........................ -- -- -- (4,141,947)
----------- ----------- ------- -----------
Balance, December 31, 1998........ (2,136,741) (1,658,961) (4,463) (1,430,799)
Purchased and forfeited treasury
stock......................... -- -- (1,235) (254)
Stock options granted in lieu of
director and consulting
fees.......................... -- -- -- 20,428
Settlement of amounts due from
stockholder by transfer of
assets........................ 2,136,741 983,255 -- 3,119,996
Cash received for amounts due
from stockholder.............. -- 671,374 -- 671,374
Sale of Series C Preferred
stock......................... -- -- -- 10,000,000
Stock issuance costs............ -- -- -- (32,753)
Vested deferred compensation.... -- -- -- 129,824
Net income...................... -- -- -- 2,959,493
----------- ----------- ------- -----------
Balance, December 31, 1999........ $ -- $ (4,332) $(5,698) $15,437,309
=========== =========== ======= ===========
|
See notes to consolidated financial statements.
REGENERATION TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
PERIOD FROM YEAR ENDED
FEBRUARY 12, 1998 DECEMBER 31,
TO DECEMBER 31, 1998 1999
-------------------- ------------
Cash flows from operating activities:
Net (loss) income......................................... $(4,141,947) $ 2,959,493
Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities:
Depreciation and amortization expense................... 360,336 801,094
Bad debt expense........................................ 38,500 171,587
Amortization of deferred revenue........................ (122,000) (225,000)
Deferred income taxes................................... (217,771) (1,759,839)
Deferred compensation and nonqualified option........... 119,283 151,872
Loss on disposal of property, plant, and equipment...... -- 4,526
Changes in assets and liabilities--cash provided by
(used in) (excluding effects of acquisition):
Accounts receivable................................... (2,404,808) (9,417,525)
Product and supply inventories........................ (3,082,972) (6,715,835)
Prepaid and other current assets...................... (555,265) (240,032)
Other assets.......................................... (40,435) (230,196)
Accounts payable...................................... 7,760,983 7,391,042
Accrued expenses...................................... 1,122,997 673,468
Deferred revenue...................................... 4,500,000 --
Other liabilities..................................... 40,000 (40,000)
----------- -----------
Net cash provided by (used in) operating
activities........................................ 3,376,901 (6,475,345)
----------- -----------
Cash flows from investing activities:
Cash paid for purchase of assets--net of cash received.... -- (484,725)
Purchase of property, plant, and equipment................ (1,870,385) (2,380,808)
----------- -----------
Net cash used in investing activities............... (1,870,385) (2,865,533)
----------- -----------
Cash flows from financing activities:
Payments on capital lease and note obligations............ (212,144) (472,936)
Stock issuance costs...................................... (152,790) (32,753)
(Increase) decrease in due from stockholder............... (1,658,961) 671,374
Increase in note receivable from stockholder.............. (2,136,741) --
Line of credit borrowings--net............................ -- 2,787,475
Purchase of treasury stock................................ -- (1,875)
Proceeds from sales of Series B Preferred stock........... 6,580,000 --
Proceeds from sales of Series C Preferred stock........... -- 10,000,000
----------- -----------
Net cash provided by financing activities........... 2,419,364 12,951,285
----------- -----------
Net increase in cash and cash equivalents................... 3,925,880 3,610,407
Cash and cash equivalents, beginning of period.............. -- 3,925,880
----------- -----------
Cash and cash equivalents, end of period.................... $ 3,925,880 $ 7,536,287
=========== ===========
|
See notes to consolidated financial statements.
REGENERATION TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIOD FROM FEBRUARY 12, 1998 (DATE OPERATIONS BEGAN) TO DECEMBER 31, 1998
AND THE YEAR ENDED DECEMBER 31, 1999
1. ORGANIZATION
Regeneration Technologies, Inc. ("RTI"), was incorporated in Florida on August 22, 1997, and began operations on February 12, 1998, following a contribution of assets to RTI by the University of Florida Tissue Bank, Inc. ("UFTB"). At the time of the separation, UFTB contributed certain assets (including certain intellectual property) to RTI and RTI assumed certain related liabilities in exchange for 1,200,000 shares of Series A Preferred stock (see Note 10). In addition, an officer of UFTB contributed his royalty rights in certain intellectual property to RTI in exchange for 577,348 shares of Series A Preferred stock. RTI recorded the assets acquired and the liabilities assumed from UFTB and the assets acquired from the officer of UFTB at their historical cost basis as these were deemed to be transactions between entities under common control. As such, the $39,643 of net liabilities assumed is accounted for as a dividend, resulting in a charge to additional paid-in capital. The historical costs of the individual assets acquired and liabilities assumed by RTI at the date of the separation from UFTB are presented below:
Accounts receivable......................................... $ 3,535,562
Inventories and supplies.................................... 1,273,877
Prepaid expenses............................................ 105,972
Property, plant, and equipment.............................. 1,732,777
Intangible assets........................................... 50,000
Accounts payable............................................ (5,529,455)
Capital lease obligations................................... (1,208,376)
-----------
Net liabilities assumed..................................... $ (39,643)
===========
|
Simultaneous with the separation of RTI from UFTB, certain third parties invested approximately $6.6 million in exchange for 748,152 shares of Series B Preferred stock.
During 1999, RTI's wholly owned subsidiary, Georgia Tissue Bank ("GTB"), acquired the net assets of the National Tissue Bank Network, Georgia Tissue Bank, Inc. ("NTBN") along with certain equipment owned by a director of NTBN (see Note 6).
RTI and GTB (collectively, the "Company") process human musculoskeletal tissue received from various tissue recovery agencies. The processing transforms the tissue into either conventional or precision tooled allografts, some of which are patented. These allografts are distributed domestically and internationally, for use in spinal vertebrae repair, musculoskeletal reconstruction and fracture repair. The processed tissue includes cortical dowels, cervical implants, cortical bone interference screws, and bone paste grafts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include the accounts of RTI and its wholly owned subsidiary GTB (see Note 6). All material intercompany balance and transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS--The Company considers all funds in banks and overnight sweep accounts with an original maturity of three months or less to be cash and cash equivalents.
REGENERATION TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM FEBRUARY 12, 1998 (DATE OPERATIONS BEGAN) TO DECEMBER 31, 1998
AND THE YEAR ENDED DECEMBER 31, 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) PRODUCT AND SUPPLY INVENTORIES--Product and supply inventories are stated at the lower of cost or market, with cost determined by the first-in, first-out method.
PROPERTY, PLANT, AND EQUIPMENT--Property, plant, and equipment are stated at cost less accumulated depreciation and amortization. The cost of equipment under capital leases and leasehold improvements is amortized on the straight-line method over the shorter of the lease term or the estimated useful life of the asset. Depreciation is computed on the straight-line method over the following estimated useful lives of the assets:
Production equipment 8 to 10 years Leasehold improvements 8 to 10 years Office equipment, furniture, and fixtures 5 to 7 years Computer hardware and software 3 years |
OTHER ASSETS--Other assets consist of patents and trademarks. Patents and trademarks are amortized on the straight-line method over the shorter of the remaining protection period or estimated useful life.
RESEARCH AND DEVELOPMENT COSTS--Research and development costs are expensed as incurred. Research and development costs for the periods ended December 31, 1998 and 1999 were $1,472,410 and $1,675,019, respectively.
REVENUE RECOGNITION--Revenue is recognized at the time the Company ships the processed tissue. Revenues are reported gross of any management services fees the Company incurs to distribute its products. Any other revenues directly related to the Company's core operations are recognized when all significant contractual obligations have been satisfied. A $4,500,000 nonrefundable, up-front fee received from Sofamor Danek Group in the period ended December 31, 1998 is being deferred and recognized as revenue over the 20 year life of the exclusive management services agreement with Sofamor Danek Group on a straight-line basis. This revenue is shown in the consolidated statements of operations in other revenues from core operations.
INCOME TAXES--The Company accounts for income taxes under the asset and liability approach specified by Statement of Financial Accounting Standards ("SFAS") No. 109, ACCOUNTING FOR INCOME TAXES. SFAS No. 109 requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's consolidated financial statements or tax returns by applying enacted statutory rates applicable to future years to differences between financial statement carrying amounts and the tax basis of existing assets and liabilities.
STOCK-BASED COMPENSATION PLANS--In October 1995, the Financial Accounting Standards Board issued SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, which is effective for fiscal years beginning after December 15, 1995. Under SFAS No. 123, the Company may elect to recognize stock-based compensation expense based on the fair value of the awards or to account for stock-based compensation under Accounting Principles Board ("APB") Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and disclose in the consolidated financial statements the effects of SFAS No. 123 as if the recognition provisions were adopted. The Company has adopted the recognition provisions of APB Opinion No. 25.
REGENERATION TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM FEBRUARY 12, 1998 (DATE OPERATIONS BEGAN) TO DECEMBER 31, 1998
AND THE YEAR ENDED DECEMBER 31, 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) EARNINGS PER SHARE--Basic earnings per share ("EPS") is computed by dividing earnings available to common shareholders by the weighted average number of common shares outstanding for the periods. Diluted EPS reflects the potential dilution of securities that could share in the earnings. A reconciliation of the number of common shares used in calculation of basic and diluted EPS is presented below:
PERIOD FROM
FEBRUARY 12, 1998 TO YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1999
-------------------- -----------------
Basic EPS.................................. 770,702 770,702
Effect of dilutive securities:
Stock options............................ -- 130,103
Conversion of preferred stock............ -- 2,602,354
------- ---------
Diluted EPS................................ 770,702 3,503,159
======= =========
|
The conversion of preferred stock to common stock was not included in the computation of diluted EPS for the period ended December 31, 1998 as the inclusion would be antidilutive. Options to purchase approximately 65,000 shares of common stock at $27.10 per share were outstanding as of December 31, 1999 but were not included in the computation of diluted EPS for the year ended December 31, 1999 because the options' exercise price was greater than the average market price of the common shares.
USE OF ESTIMATES--The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures 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 those estimates.
IMPAIRMENT OF LONG-LIVED ASSETS--Periodically, the Company evaluates the recoverability of the net carrying value of its property, plant and equipment and its intangible assets by comparing the carrying values to the estimated future undiscounted cash flows. A deficiency in these cash flows relative to the carrying amounts is an indication of the need for a write-down due to impairment. The impairment write-down would be the difference between the carrying amounts and the fair value of these assets. A loss on impairment would be recognized by a charge to earnings.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The estimated fair value of amounts reported in the consolidated financial statements has been determined by using available market information and appropriate valuation methodologies. The carrying value of all current assets and current liabilities approximates fair value because of their short-term nature. The fair value of capital lease obligations approximates the carrying value, based on current market prices.
NEW ACCOUNTING STANDARDS--The Financial Accounting Standards Board recently issued SFAS No. 137, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES--DEFERRAL OF EFFECTIVE DATE OF FASB STATEMENT NO. 133 ("SFAS No. 137"). SFAS No. 137 defers for one year the effective date of SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES ("SFAS No. 133"). The rule now will apply to all fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS No. 137 permits early adoption as of the beginning of any fiscal quarter after its issuance. SFAS No. 133 will require the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges
REGENERATION TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM FEBRUARY 12, 1998 (DATE OPERATIONS BEGAN) TO DECEMBER 31, 1998
AND THE YEAR ENDED DECEMBER 31, 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of the hedged assets, liabilities, of firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. The Company has not completed its evaluation of the impact of SFAS No. 133, if any, on the financial statements.
RECLASSIFICATION--Certain 1998 amounts have been reclassified to conform to the 1999 presentation.
3. PRODUCT INVENTORIES
Product inventories by stage of completion are as follows:
DECEMBER 31,
------------------------
1998 1999
---------- -----------
Unprocessed donor tissue............................ $ 459,263 $ 2,341,998
Tissue in process................................... 2,305,805 3,453,513
Implantable donor tissue............................ 1,346,364 9,744,493
Nontissue inventory for resale...................... -- 99,325
---------- -----------
$4,111,432 $15,639,329
========== ===========
|
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant, and equipment are as follows:
DECEMBER 31,
-----------------------
1998 1999
---------- ----------
Leasehold improvements............................... $ 640,796 $1,116,467
Production equipment................................. 1,821,159 3,170,518
Office equipment, furniture, and fixtures............ 385,180 517,860
Computer hardware and software....................... 261,639 1,038,959
Equipment under capital lease........................ 1,365,050 1,107,909
---------- ----------
4,473,824 6,951,713
Less accumulated depreciation and amortization....... 347,836 1,138,930
---------- ----------
$4,125,988 $5,812,783
========== ==========
|
5. OTHER ASSETS
Other assets are as follows:
DECEMBER 31,
-------------------
1998 1999
-------- --------
Patents and trademarks................................... $50,000 $223,971
Other.................................................... 40,435 96,660
------- --------
90,435 320,631
Less accumulated amortization............................ 12,500 22,500
------- --------
$77,935 $298,131
======= ========
|
REGENERATION TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM FEBRUARY 12, 1998 (DATE OPERATIONS BEGAN) TO DECEMBER 31, 1998
AND THE YEAR ENDED DECEMBER 31, 1999
6. ASSET PURCHASE
On November 1, 1999, GTB acquired the assets and existing liabilities of NTBN and certain equipment owned by Dr. Charles Garrison, a director of NTBN. The purpose of the transaction was to expand the Company's ability to produce conventional tissue grafts and expand donor recovery and tissue distribution in areas outside of the Company's existing network for donor recovery and tissue distribution.
The acquisition was recorded under the purchase method of accounting and, accordingly, the purchase price was allocated to the assets and liabilities on the basis of estimated fair market value on the date of purchase. The fair value of the assets and liabilities at the date of acquisition recorded in conjunction with the transaction is as follows:
Accounts receivable......................................... $ 358,942
Inventories................................................. 2,129,429
Property, plant, and equipment.............................. 3,410
Accounts payable............................................ (375,330)
Accrued liabilities......................................... (381,726)
----------
Net assets acquired, excluding cash......................... 1,734,725
Cash........................................................ 15,275
----------
Net assets acquired......................................... $1,750,000
==========
Purchase financed by:
Cash payment................................................ $ 500,000
Notes payable--stated rate of 6.50% due November 2002
(effective rate of 9.25%)................................. 680,753
Note payable--9.25% due November 2002 convertible to common
stock (see Note 17)....................................... 500,000
Note payable--9.25% due November 2002....................... 69,247
----------
Total financing............................................. $1,750,000
==========
|
The unaudited pro forma results assuming GTB had been acquired on February 12, 1998 are approximately as follows:
PERIOD FROM
FEBRUARY 12, 1998 TO YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1999
-------------------- -----------------
Total revenues............................. $39,900,000 $77,000,000
Net (loss) income.......................... (3,700,000) 3,200,000
Net (loss) income per share--basic......... $ (4.80) $ 4.15
|
The pro forma information does not necessarily reflect the actual results that would have occurred nor is it necessarily indicative of future results of operations of the combined companies.
REGENERATION TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM FEBRUARY 12, 1998 (DATE OPERATIONS BEGAN) TO DECEMBER 31, 1998
AND THE YEAR ENDED DECEMBER 31, 1999
7. LONG-TERM DEBT
Long-term debt is as follows:
DECEMBER 31,
-----------------------
1998 1999
---------- ----------
Notes payable, 6.5%.................................. $ -- $ 663,577
Notes payable, 9.25%................................. -- 555,467
Capital leases....................................... 1,866,896 1,706,487
---------- ----------
Total................................................ 1,866,896 2,925,531
Less current portion................................. 384,647 898,735
---------- ----------
Long-term portion.................................... $1,482,249 $2,026,796
========== ==========
|
Contractual maturities of long-term debt are as follows:
2000........................................................ $ 898,735
2001........................................................ 983,733
2002........................................................ 753,013
2003........................................................ 150,467
2004........................................................ 48,054
Thereafter.................................................. 91,529
----------
$2,925,531
==========
|
The notes payable relate to the assets purchased from NTBN and are collateralized by the assets purchased. All notes are due in November 2002 (see Note 6).
The capital leases have interest rates ranging from 9.05% to 10% and are collateralized by the related equipment and are due from 2002 through 2006 (see Note 13).
8. LINE OF CREDIT
In March 1999, the Company entered into a revolving line of credit for an amount not to exceed $2,000,000 expiring in March 2000. This line of credit was subsequently replaced in September 1999 with a new line not to exceed $6,000,000 expiring in September 2000. The line of credit is to be utilized for the purpose of supporting accounts receivable, with accounts receivable also serving as the collateral for the line of credit. The interest rate associated with this line of credit is the 30-day LIBOR rate plus 150 basis points. At December 31, 1999, the interest rate of the line of credit is 7.97%.
The credit line agreement contains various restrictive covenants, which limit among other things, indebtedness, loans, acquisitions, dividends and stock purchases. In addition, the Company must satisfy certain financial ratios including a fixed charge ratio of 1.10 to 1.00 or greater and funded debt to earnings before interest, taxes, depreciation and amortization of not greater than 4.00 to 1.00. The Company was in compliance with all covenants and financial ratios at December 31, 1999.
The total amount outstanding on the line of credit December 31, 1999 was $2,787,475.
REGENERATION TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM FEBRUARY 12, 1998 (DATE OPERATIONS BEGAN) TO DECEMBER 31, 1998
AND THE YEAR ENDED DECEMBER 31, 1999
9. INCOME TAXES
The income tax expense consisted of the following components:
DECEMBER 31,
-----------------------
1998 1999
--------- -----------
Current:
Federal............................................ $ 179,055 $ 966,623
State.............................................. 38,716 174,354
--------- -----------
Total current........................................ 217,771 1,140,977
--------- -----------
Deferred:
Federal............................................ (179,055) (1,590,075)
State.............................................. (38,716) (169,764)
--------- -----------
Total deferred....................................... (217,771) (1,759,839)
--------- -----------
Total provision...................................... $ -- $ (618,862)
========= ===========
|
The components of the deferred tax assets and liabilities consisted of the following at December 31:
1998 1999
DEFERRED INCOME TAX DEFERRED INCOME TAX
---------------------- ----------------------
ASSET LIABILITY ASSET LIABILITY
---------- --------- ---------- ---------
Current:
Uniform capitalization of inventory cost...... $ 170,419 $ -- $ 611,576 $ --
Inventory reserve............................. 9,563 -- 74,738 --
Accrued reserves.............................. 74,160 -- 164,882 --
State taxes................................... -- (89,404) -- (103,199)
---------- --------- ---------- ---------
Total current................................... 254,142 (89,404) 851,196 (103,199)
========== ========= ========== =========
Noncurrent:
Depreciation.................................. -- (145,826) -- (412,108)
Amortization.................................. 3,731 -- 1,285 --
Unearned revenue.............................. 1,729,311 -- 1,640,436 --
Valuation allowance........................... (1,534,183) -- -- --
---------- --------- ---------- ---------
Total noncurrent................................ 198,859 (145,826) 1,641,721 (412,108)
---------- --------- ---------- ---------
Total........................................... $ 453,001 $(235,230) $2,492,917 $(515,307)
========== ========= ========== =========
|
The valuation allowance for deferred tax assets was $1,534,183 and $0, respectively, for the periods ended December 31, 1998 and 1999. The net change in the total valuation allowance was a decrease of $1,534,183 for the year ended December 31, 1999. The reduction was attributable to projections of future taxable income whereby management believes it is more likely than not that the Company will recognize the benefits of the net deductible temporary differences, which generated the deferred tax asset.
REGENERATION TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM FEBRUARY 12, 1998 (DATE OPERATIONS BEGAN) TO DECEMBER 31, 1998
AND THE YEAR ENDED DECEMBER 31, 1999
9. INCOME TAXES (CONTINUED) The Company established a valuation allowance in the period ended December 31, 1998 of $1,534,183. Management determined that it was more likely than not that the deferred tax asset in excess of the amount of current taxes paid in that year would not be realized.
The effective tax rate differs from the statutory federal income tax rate for the following reasons:
1998 1999
-------- --------
Statutory federal rate...................................... (34.00)% 34.00 %
State income taxes--net of federal tax benefit.............. (3.57) 4.10
Meals and entertainment..................................... 0.53 1.00
Stock compensation expense.................................. 1.13 1.89
Research and experimentation credit......................... (1.14) (2.30)
Change in valuation allowance............................... 37.05 (65.55)
Miscellaneous............................................... -- 0.42
------ ------
Effective tax rate.......................................... -- % (26.44)%
====== ======
|
10. STOCKHOLDERS' EQUITY
PREFERRED STOCK--Series A and B Preferred stocks are on parity with each other regarding dividends and liquidation, and are senior to the Company's common stock. Dividends, when and if declared by the Board of Directors, are cumulative and accrue at 6% of the preferred stock face value of $13,934,408 for the Series A Preferred stock (1,777,348 shares at $7.84 per share) and $6,580,000 for the Series B Preferred stock (748,152 shares at $8.80 per share). The Series A Preferred stock has been recorded at its par value rather than its face and liquidation value because the issuance of the Series A Preferred stock resulted from a transaction between entities under common control (see Note 1). The aggregate amount of cumulative Preferred dividends in arrears as of December 31, 1998 and 1999 is $1,090,453 and $2,321,317, respectively. Liquidation cannot occur unless approved by 75% of the Series A Preferred stockholders and 75% of the Series B Preferred stockholders, in which event, the Series A Preferred stockholders would receive the intellectual property rights originally contributed to the Company in exchange for the Series A Preferred shares, and the Series B Preferred stockholders would receive the $6,580,000 originally paid to the Company (see Note 1).
Series A and B Preferred stocks have voting rights equal to the number of whole shares of common stock into which the preferred stocks can be converted. Series A Preferred stock is convertible at any time into common shares at a price of $7.84 per share and Series B Preferred stock is convertible at any time into common shares at a price of $8.80 per share.
Series C Preferred stock is senior to the Series A and B Preferred stocks and common stock as to dividends and upon liquidation. Dividends, when and if declared by the Board of Directors, are cumulative and accrue at 6% of the preferred stock value of $10,000,000 (368,990 shares at $27.101 per share). The aggregate amount of cumulative preferred dividends in arrears as of December 31, 1999 is $135,000. Liquidation cannot occur unless approved by 75% of the Series C Preferred stockholders, in which event, the Series C Preferred stockholders would receive the $10,000,000 originally paid to the Company. Series C Preferred stock has voting rights equal to the number of whole shares of common
REGENERATION TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM FEBRUARY 12, 1998 (DATE OPERATIONS BEGAN) TO DECEMBER 31, 1998
AND THE YEAR ENDED DECEMBER 31, 1999
10. STOCKHOLDERS' EQUITY (CONTINUED) stock into which the preferred stock can be converted. Series C Preferred stock is convertible at any time into common shares at a price of $27.101 per share. Holders of Series C Preferred stock were issued warrants to purchase up to 46,124 shares of common stock for a period of one year from the date of issuance at a purchase price of $27.10 per share.
COMMON STOCK--The common stock's voting, dividend, and liquidation rights are subject to and qualified by the rights of the holders of the preferred stocks. Common stockholders are entitled to one vote for each share held at all stockholder meetings. Common stock is not redeemable.
STOCK OPTION PLANS--In July 1998, the Company adopted a stock option plan (the "Plan") which provides for the grant of incentive and nonqualified stock options to key employees, including officers and directors of the Company. The option price per share may not be less than 100% of the fair market value of such shares on the date such option is granted. At December 31, 1999, options to acquire up to 918,000 shares of common stock may be granted pursuant to the Plan.
Stock option activity is summarized as follows at December 31, 1998 and 1999:
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
--------- --------
Outstanding at February 1998............................. --
Granted................................................ 146,915 $ 6.25
-------
Outstanding at December 31, 1998......................... 146,915 6.25
Granted................................................ 128,910 13.70
Canceled............................................... (4,815) 6.25
-------
Outstanding at December 31, 1999......................... 271,010 $ 9.90
=======
|
Outstanding options under the Plan vest over a three- to five-year period. Options expire ten years from the date of grant. As of December 31, 1999, 32,133 options were exercisable with a weighted-average exercise price of $6.25.
The weighted average fair value of options granted during the periods ended December 31, 1998 and 1999 was $6.25 and $13.77, respectively.
The following is a summary of stock options outstanding and exercisable as of December 31, 1999:
WEIGHTED AVERAGE
EXERCISE OPTIONS REMAINING OPTIONS
PRICE OUTSTANDING CONTRACTUAL LIFE (YEARS) EXERCISABLE
-------- ----------- ------------------------ -----------
$ 6.25 172,250 3.67 32,133
9.00 12,525 4.32 --
15.00 30,750 4.46 --
18.25 55,485 4.78 --
------- ------
271,010 32,133
======= ======
|
REGENERATION TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM FEBRUARY 12, 1998 (DATE OPERATIONS BEGAN) TO DECEMBER 31, 1998
AND THE YEAR ENDED DECEMBER 31, 1999
10. STOCKHOLDERS' EQUITY (CONTINUED) Remaining non-exercisable options as of December 31, 1999 become exercisable as follows:
2000....................................... 58,040
2001....................................... 58,040
2002....................................... 52,290
2003....................................... 48,206
2004....................................... 22,301
-------
238,877
=======
|
Since the Company applies APB Opinion No. 25 in accounting for its stock options, no compensation cost has been recognized for the options granted to employees because the exercise price equaled the fair market value on the date of the grant. Had compensation cost been determined on the basis of fair value pursuant to SFAS No. 123, net income (loss) would have been affected as follows for the periods ended December 31, 1998 and 1999:
1998 1999
----------- ----------
Net (loss) income, as reported...................... $(4,141,947) $2,959,493
Net (loss) income, pro forma........................ (4,290,985) 2,836,759
Net (loss) income per common share--basic, as
reported.......................................... $ (5.37) $ 3.84
Net (loss) income per common share--basic, pro
forma............................................. $ (5.57) $ 3.68
Net (loss) income per common share--dilutive, as
reported.......................................... $ (5.37) $ 0.84
Net (loss) income per common share--dilutive, pro
forma............................................. $ (5.57) $ 0.81
|
The fair value of each grant was estimated using the minimum value method with the following weighted-average assumptions used for grants during the year ended December 31, 1999:
Dividend yield.............................................. -- Risk free interest rate..................................... 4.6%-5.92% Option term................................................. 4.77 years |
STOCK AWARDS--The Company awarded 770,702 shares of common stock to various key employees at the beginning of the Company's operations. These shares of common stock, which were valued at $0.85 per share, vest over a five-year period. At the date of issuance, $655,097 in deferred compensation was recorded by the Company. Compensation expense of approximately $119,000 and $131,000 was recognized for these stock awards for the periods ended December 31, 1998 and 1999, respectively.
11. RETIREMENT BENEFITS
The Company has a qualified 401(k) plan available to all employees who meet certain eligibility requirements. The 401(k) plan allows the employee to contribute 20% of the employee's salary up to the maximum allowed under the Internal Revenue Code. The Company has the discretion to make
REGENERATION TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM FEBRUARY 12, 1998 (DATE OPERATIONS BEGAN) TO DECEMBER 31, 1998
AND THE YEAR ENDED DECEMBER 31, 1999
11. RETIREMENT BENEFITS (CONTINUED) matching contributions up to 6% of the employee's earnings. For the periods ended December 31, 1998 and 1999, the Company's contributions to the plan were $83,846 and $156,203, respectively.
12. CONCENTRATIONS OF RISK
The Company's principal concentration of risk is related to its limited distribution channels. In 1998, nearly all of the Company's revenues are related to the distribution efforts of four independent companies, with approximately 95% of its revenues coming from one of the distribution companies. In 1999, the Company expanded to include more revenue from direct distribution. The amount of revenue from direct distribution was approximately 15% with 80% of the remaining revenue coming from one of the distribution channels.
The Company's operations are dependent on the availability of bone and related connective tissue from human donors. The Company relies on the efforts of independent procurement agencies to educate the public and increase the willingness to donate bone tissue. These procurement agencies may not be able to obtain sufficient donors to meet present or future demands.
13. COMMITMENTS AND CONTINGENCIES
MANUFACTURING RIGHTS--The Company has licensed manufacturing rights for some of its products. Under the agreement, the Company has agreed to accept and reimburse the processor for items that meet the Company's quality control guidelines.
PREPAID INVENTORY--In an effort to increase the Company's supply of donor tissue, the Company has agreed to fund several tissue recovery agencies, in exchange for the first right of refusal for any donor tissue recovered. During 1998 and 1999, the Company had advanced $1,249,383 and $2,245,842 respectively to the tissue recovery agencies and recouped $754,750 and $1,988,318 respectively in donor tissue. At December 31, 1998 and 1999, the Company has yet to recover $494,633 and $733,733 respectively of its expenditures through donor tissue recovery. Prepaid inventory is classified in prepaid and other assets in the accompanying balance sheets. The Company has no ownership or control in these agencies, and funding can be discontinued at any time when donor tissue is no longer being supplied.
FOREIGN INVESTMENT--In August 1998, the Company received a 30% ownership in UFTB-Italia for no consideration. UFTB-Italia is an entity created in late 1998, which had no operations as of December 31, 1998. UFTB-Italia plans to recover, process, and distribute tissue in conjunction with training and technology supplied by the Company at UFTB-Italia's expense. Since the Company exercises no significant control over the UFTB-Italia operation, the Company has treated this investment on the cost basis, recognizing income only upon receipt of dividends. As of December 31, 1998 and 1999, the Company has not recorded any income from its interest in UFTB-Italia. As of December 31, 1999, the Company had $172,405 of outstanding accounts receivable due from UFTB-Italia. Total tissue distributions to UFTB-Italia in 1999 were $223,704.
LEASES--The Company leases various buildings, office equipment and fixtures under non-cancelable operating leases for various periods. The Company also leases various equipment under capital leases that are included in property, plant, and equipment in the accompanying balance sheets.
REGENERATION TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM FEBRUARY 12, 1998 (DATE OPERATIONS BEGAN) TO DECEMBER 31, 1998
AND THE YEAR ENDED DECEMBER 31, 1999
13. COMMITMENTS AND CONTINGENCIES (CONTINUED) Future minimum lease commitments under noncancelable leases as of December 31, 1999 are as follows:
CAPITAL OPERATING
LEASES LEASES
---------- ----------
2000................................................. $ 660,534 $ 918,981
2001................................................. 660,534 916,464
2002................................................. 385,377 897,966
2003................................................. 172,541 762,327
2004................................................. 59,850 808,977
Thereafter........................................... 99,749 1,526,734
---------- ----------
2,038,585 $5,831,449
==========
Less amounts representing interest................... 332,098
----------
Present value of net minimum lease payments.......... $1,706,487
==========
|
Rent expense for the periods ended December 31, 1998 and 1999 was $262,698 and $748,473, respectively.
EMPLOYMENT AGREEMENTS--As of December 31, 1999, the Company had employment contracts with six officers of the Company, providing for total annual payments of approximately $815,000 through fiscal year 2003.
14. RELATED PARTIES
The Company has certain related party transactions with UFTB. Through
April 15, 1999, UFTB recovered whole donor tissue and distributed conventional
tissue. The Company processed this tissue for UFTB for a fee and compensated
UFTB for the nonconventional tissue retained from the whole donor tissue. On
April 15, 1999, the Company entered into two new agreements under which UFTB
transferred to the Company all rights to conventional tissue distribution and
national recovery programs, permitting UFTB to focus primarily on tissue
recovery and UFTB settled amounts due to the Company. As of April 15, 1999, the
total due from UFTB and the note receivable from UFTB was approximately
$5,000,000. Under the terms of the agreements, UFTB transferred its unprocessed
donor tissue and conventional tissue with a fair value of approximately
$3,000,000 and equipment and fixtures with a fair value of approximately $90,000
to the Company as an offset against the existing due from stockholder and note
receivable from stockholder. Additionally, UFTB agreed to repay the remaining
balance by (a) offsetting recovery fees from April 15, 1999 through June 30,
1999 against the outstanding balance, which fees approximate $800,000, and
(b) making monthly payments through the end of 1999 to repay the remaining
balance of approximately $1,200,000.
In addition to these operating transactions, the Company shares facilities, overhead and certain personnel with UFTB.
REGENERATION TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM FEBRUARY 12, 1998 (DATE OPERATIONS BEGAN) TO DECEMBER 31, 1998
AND THE YEAR ENDED DECEMBER 31, 1999
14. RELATED PARTIES (CONTINUED) The following is a summary of transactions and balances with UFTB as of and for the periods ended December 31, 1998 and 1999:
1998 1999
---------- ----------
Due from stockholder, net of amounts due to stockholder..... $1,658,961 $ 4,332
Note receivable from stockholder............................ 2,136,741 --
Tissue recovery fees and support services charged by UFTB to
the Company............................................... 2,386,374 5,344,475
Processing fees, tissue fees, and support services charged
to UFTB by the Company.................................... 3,467,014 2,592,347
|
In January 1999, a stockholder with a 50% ownership in the Series C Preferred shares acquired Sofamor Danek Group. The following is a summary of transactions and balances with Sofamor Danek Group as of and for the periods ended December 31, 1998 and 1999:
1998 1999
----------- -----------
Tissue distribution revenue under management services
Agreement (included in fees from tissue distribution)..... $30,471,573 $57,228,310
Management services fees.................................... 24,129,406 39,994,069
Deferred revenue recognized (included in other revenues from
core operations).......................................... 122,000 225,000
Administrative costs reimbursed by Sofamor Danek Group
(included in marketing, general and administrative
expense).................................................. 326,130 435,674
Management services fees payable (included in accounts
payable).................................................. 10,951,359 17,523,809
Deferred revenue............................................ 4,378,000 4,153,000
|
In February 2000, Dr. Garrison (see Note 6) exercised his option to convert a portion of the $500,000 9.25% note issued by the Company into common stock of the Company (see Note 18). Dr. Garrison is providing Medical Director services to GTB on a consulting basis under a three-year contract, which ends November 1, 2002. Annual compensation under the contract is $100,740 in year one, $104,340 in year two and $108,084 in year three. Dr. Garrison also owns the building in which GTB leases space. Monthly rental in year one is $12,365, $12,860 in year two and $13,374 in year three. The following is a summary of transactions and balances with Dr. Garrison as of and for the year ended December 31, 1999.
Payments on GTB leased premises (includes one month deposit).................................................. $ 37,095 Payments for Medical Director fees.......................... 16,790 Principal and interest payments on notes.................... 30,957 Notes payable............................................... 1,219,043 |
15. LEGAL ACTIONS
On June 22, 1999, Exactech, Inc. ("Exactech") filed a complaint and petition for injunctive relief in Circuit Court against the Company, UFTB and 19 medical distributors and sales agents of the Company. The complaint alleged the Company was marketing and distributing bone paste allografts in
REGENERATION TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM FEBRUARY 12, 1998 (DATE OPERATIONS BEGAN) TO DECEMBER 31, 1998
AND THE YEAR ENDED DECEMBER 31, 1999
15. LEGAL ACTIONS (CONTINUED) violation of an agreement between UFTB and Exactech, which agreement had been assigned by UFTB to the Company. The Company denied the charges in the Exactech complaint, and the court has remanded all counts listed in the lawsuit to binding arbitration. The arbitration is ongoing; consequently, management cannot estimate the impact on the Company's business or financial operations.
16. SUPPLEMENTAL CASH FLOW INFORMATION
Selected cash payments and noncash activities are as follows:
PERIOD FROM YEAR ENDED
FEBRUARY 12, 1998 DECEMBER 31,
TO DECEMBER 31, 1998 1999
-------------------- ------------
Interest paid during the period............................. $152,631 $ 285,166
Noncash capital lease obligations........................... $870,662 $ 281,571
Net liabilities assumed upon start of operations............ $ 39,643 $ --
Issuance of founders' common shares......................... $650,634 $ --
Issuance of Preferred A stock to related parties............ $ 1,777 $ --
Noncash settlement of note receivable and amount due from
stockholder............................................... $ -- $3,119,996
Notes payable issued to acquire GTB......................... $ -- $1,250,000
|
17. SEGMENT DATA
The Company processes human musculoskeletal tissue received from various tissue recovery agencies and distributes the tissue through various channels. This one line of business represents 100% of consolidated fees from tissue distribution and is comprised of three primary product lines: spinal allografts, other precision tooled allografts and conventional tissue. The following table presents fees from tissue distribution by each of the Company's three primary product lines:
PERIOD FROM
FEBRUARY 12, 1998 YEAR ENDED
TO DECEMBER 31, 1998 DECEMBER 31, 1999
--------------------- ------------------
Fees from tissue distribution:
Spinal allografts...................................... $30,374,959 $57,073,386
Other precision tooled allografts...................... 404,963 4,683,051
Conventional tissue.................................... 1,112,176 9,026,568
----------- -----------
Total................................................ $31,892,098 $70,783,005
=========== ===========
|
The Company distributes their products both within and outside the United States. During the periods ended December 31, 1998 and 1999, 100% and 97.4%, respectively, of net revenues came from the United States. Foreign net revenues of 2.6% during the year ended December 31, 1999 came primarily from Europe.
REGENERATION TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM FEBRUARY 12, 1998 (DATE OPERATIONS BEGAN) TO DECEMBER 31, 1998
AND THE YEAR ENDED DECEMBER 31, 1999
18. SUBSEQUENT EVENTS
As part of the agreement to purchase the assets of NTBN, Dr. Garrison was given the option to convert a $500,000 note due November 2002 or any portion of the note into Common Stock of the Company at the Series C Preferred stock price of $27.101. On February 15, 2000 Dr. Garrison exercised his option on 9,225 shares equivalent to $250,000. The value of the shares is a reduction of the $500,000 note payable, the balance of which at December 31, 1999 was $487,896. The $212,236 balance of the note, after exercising the stock conversion, will be repaid by April 2001, as the monthly payments will remain at the original amount until the note is paid off.
On March 30, 2000, the Company purchased the buildings and land (6.19 acres) the Company occupied under lease, plus an additional 20.82 acres of land for future expansion. The purchase price for the two buildings and 6.19 acres was $3,600,000 with the additional 20.82 acres priced at $624,600. The Company received a 20 year term loan in the amount of $2,800,000 to finance the purchase of the building and the 6.19 acres of land. Interest on the loan is at 30 day LIBOR plus 150 basis points. Simultaneous with entering into the $2,800,000 term loan, the Company entered into a swap agreement with a commercial bank which fixes its interest rate at 6.85%. The effective notional amount of the swap at March 30, 2000 was $2,800,000. The term loan is collateralized by the land and building. The term loan agreement contains various restrictive covenants, which limit among other things, leases, indebtedness, loans, and acquisitions. In addition the Company must satisfy certain financial ratios including fixed charge ratio at 1.25 to 1.00 or greater and funded debt to earnings before interest, taxes, depreciation and amortization of not greater than 4.00 to 1.00. The $1,424,600 balance of the amounts due for the building with 6.19 acres and additional 20.82 acres is financed from the $10,000,000 raised from the sale of Series C Preferred stock.
On April 27, 2000, the Company entered into a definitive agreement to acquire the net assets of a division of the University of Alabama Health Services Foundation, which has been doing business as the Alabama Tissue Center ("ATC"), in Birmingham, Alabama. The acquisition will be financed by a cash payment of $350,000 and the issuance of $3,500,000 in shares of the Company's common stock, valued at the Company's initial public offering price, plus an additional cash payment of $250,000 upon the achievement of certain milestones, with total possible consideration valued at $4,100,000. The acquisition of ATC will be accounted for under the purchase method of accounting.
19. COMMON STOCK SPLIT AND MERGER INTO DELAWARE CORPORATION (UNAUDITED)
The Company anticipates approving a common stock split. The conversion rate is not currently known. The Company's historical consolidated financial statements will be retroactively restated for this common stock split. The Company also anticipates that it will merge into a newly formed Delaware corporation.
******
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Regeneration Technologies, Inc.:
We have audited the consolidated financial statements of Regeneration Technologies, Inc. and subsidiary (the "Company") as of December 31, 1998 and 1999, and for the period from February 12, 1998 (date operations began) to December 31, 1998 and for the year ended December 31, 1999, and have issued our report thereon dated March 22, 2000 (April 27, 2000 as to Note 18) (included elsewhere in this Registration Statement). Our audits also included the accompanying consolidated financial statement schedule. The consolidated financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
/s/ DELOITTE & TOUCHE LLP CERTIFIED PUBLIC ACCOUNTANTS Tampa, Florida March 22, 2000 (April 27, 2000 as to Note 18) |
REGENERATION TECHNOLOGIES, INC. AND SUBSIDIARY
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
PERIOD FROM FEBRUARY 12, 1998 (DATE OPERATIONS BEGAN)
TO DECEMBER 31, 1998 AND THE YEAR ENDED DECEMBER 31, 1999
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
----------- ---------- ---------- ---------- ---------- ----------
Period Ended December 31, 1998:
Allowance for doubtful accounts...... $ -- $ 38,500 $ -- $ -- $ 38,500
Year Ended December 31, 1999:
Allowance for doubtful accounts...... 38,500 171,587 125,000(a) -- 335,087
|
(a) Represents allowance for doubtful accounts on accounts receivable acquired from National Tissue Bank Network, Georgia Tissue Bank, Inc.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Regeneration Technologies, Inc.:
We have audited the accompanying statements of revenues and direct costs of the predecessor business of Regeneration Technologies, Inc. (the "Company"), a part of the University of Florida Tissue Bank, Inc., for the year ended December 31, 1997 and for the period from January 1, 1998 through February 11, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenues and direct costs is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statements of revenues and direct costs. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall statements of revenues and direct cost presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the statements of revenues and direct costs present fairly, in all material respects, the revenues and direct costs of the Company for the year ended December 31, 1997 and for the period from January 1, 1998 through February 11, 1998, in conformity with accounting principles generally accepted in the United States of America.
As more fully described in Note 2 to the statements of revenues and direct costs, the Company was operated as a part of the University of Florida Tissue Bank, Inc. As a result, certain expense allocations have not been made in the accompanying statements of revenues and direct costs.
/s/ DELOITTE & TOUCHE LLP Certified Public Accountants Tampa, Florida April 17, 2000 |
PREDECESSOR BUSINESS OF REGENERATION TECHNOLOGIES, INC.
(PART OF THE UNIVERSITY OF FLORIDA TISSUE BANK, INC.)
STATEMENTS OF REVENUES AND DIRECT COSTS
PERIOD FROM
YEAR ENDED JANUARY 1, 1998
DECEMBER 31, 1997 TO FEBRUARY 11, 1998
----------------- --------------------
Revenues from core operations:
Fees from tissue distribution............................ $11,074,265 $2,416,260
Other revenues from core operations...................... 2,434,499 410,244
----------- ----------
Total revenues......................................... 13,508,764 2,826,504
Management services fees................................... 8,875,067 1,932,056
----------- ----------
Net revenues........................................... 4,633,697 894,448
Costs of processing and distribution....................... 3,344,136 590,742
----------- ----------
Gross profit........................................... 1,289,561 303,706
----------- ----------
Expenses:
Direct marketing, general and administrative expenses.... (1,356,949) (207,438)
Research and development expenses........................ (478,473) (68,237)
----------- ----------
Total expenses......................................... (1,835,422) (275,675)
----------- ----------
Revenues (less than) in excess of direct costs............. $ (545,861) $ 28,031
=========== ==========
|
See notes to statements of revenues and direct costs.
PREDECESSOR BUSINESS OF REGENERATION TECHNOLOGIES, INC.
(PART OF THE UNIVERSITY OF FLORIDA TISSUE BANK, INC.)
NOTES TO STATEMENTS OF REVENUES AND DIRECT COSTS
YEAR ENDED DECEMBER 31, 1997
AND PERIOD FROM JANUARY 1, 1998 TO FEBRUARY 11, 1998
1. ORGANIZATION
Regeneration Technologies, Inc., was incorporated in Florida on August 22, 1997, and began operations on February 12, 1998, following a contribution of assets by the University of Florida Tissue Bank, Inc. ("UFTB") of the Predecessor Business of Regeneration Technologies, Inc. (the "Company"). The Company processed human musculoskeletal tissue received from various tissue recovery agencies. The Company's processing transformed the tissue into either conventional or precision tooled allografts, some of which were patented. These allografts were distributed domestically and internationally, for use in spinal vertebrae repair, musculoskeletal reconstruction and fracture repair. The processed tissue included cortical dowels, cervical implants, cortical bone interference screws, and bone paste grafts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION--The accompanying statements of revenues and direct costs reflect the operations of the Company, operating as a part of UFTB, and may not necessarily be indicative of the financial results had the Company been operating as a separate entity. Allocations for certain expenses, such as interest, corporate overhead and income taxes by UFTB are not included in these statements, as a reasonable methodology for allocation could not be made, and any allocation may not be indicative of the actual costs incurred by the Company.
INVENTORIES--Product and supply inventories were stated at the lower of cost or market, with cost determined by the first-in, first-out method.
PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment were stated at cost less accumulated depreciation and amortization. The cost of equipment under capital leases and leasehold improvements was amortized on the straight-line method over the shorter of the lease term or the estimated useful life of the asset. Depreciation was computed on the straight-line method over the following estimated useful lives of the assets:
Production equipment........................................ 8 to 10 years Leasehold improvements...................................... 8 to 10 years Office equipment, furniture, and fixtures................... 5 to 7 years Computer hardware and software.............................. 3 years |
Depreciation and amortization expense was approximately $252,447 for the year ended December 31, 1997 and $48,272 for the period from January 1, 1998 to February 11, 1998.
RESEARCH AND DEVELOPMENT COSTS--Research and development costs were expensed as incurred.
REVENUE RECOGNITION--Revenue was recognized at the time the Company shipped the processed tissue. Revenues were reported gross of any management services fees the Company incurred to distribute its products. Any other revenues directly related to the Company's core operations were recognized when all significant contractual obligations were satisfied.
USE OF ESTIMATES--The preparation of the accompanying statements of revenues and direct costs in conformity with generally accepted accounting principles required management to make estimates and
PREDECESSOR BUSINESS OF REGENERATION TECHNOLOGIES, INC.
(PART OF THE UNIVERSITY OF FLORIDA TISSUE BANK, INC.)
NOTES TO STATEMENTS OF REVENUES AND DIRECT COSTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
AND PERIOD FROM JANUARY 1, 1998 TO FEBRUARY 11, 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) assumptions that affected the reported amounts of revenues and direct expenses during the reporting period. Actual results could differ from those estimates.
3. CONCENTRATIONS OF RISK
The Company's principal concentration of risk was related to its limited distribution channels. During 1997 and the period from January 1, 1998 to February 11, 1998, approximately 90% of the Company's revenues came from one of the distribution companies.
4. COMMITMENTS AND CONTINGENCIES
CAPITAL LEASE OBLIGATIONS--Future minimum lease payments on capital lease obligations as of December 31, 1997 were as follows:
1998........................................................ $ 342,942
1999........................................................ 342,942
2000........................................................ 342,942
2001........................................................ 147,214
----------
Total....................................................... 1,176,040
Less amount representing interest........................... (272,130)
----------
$ 903,910
==========
|
Future minimum lease payments on capital lease obligations as of February 11, 1998 approximated those represented by the schedule above.
OPERATING LEASE OBLIGATIONS--The Company leased office equipment under various operating leases expiring through 2001. On January 1, 1998, the Company entered into an additional operating lease for office equipment.
Future minimum operating lease payments required under noncancelable operating lease agreements as of December 31, 1997 and February 11, 1998 were not significant. Rent expense relating to operating leases for the year ended December 31, 1997 and for the period from January 1, 1998 through February 11, 1998 were approximately $2,900 and $375, respectively.
MANUFACTURING RIGHTS--The Company licensed manufacturing rights for some of its products. Under the agreement, the Company agreed to accept and reimburse the processor for items that met the Company's quality control guidelines.
* * * * * *
One Donor Can Help Many Recipients
[Graphic of human body]
Humerus:
MD-TM--Dowel
Cornerstone-TM-
-SR Reserve
Heart Valve:
Aortic
Pulmonary
Femur:
MD-TM--Dowels
Cornerstone-TM- SR
Precision Wedge
Tangent Wedge
Osteofil-TM- Bone Paste
Suture Anchors
Interference screw
Bone pins
Conventional allografts
Tibia:
Tangent Wedge
MD-TM--Dowel
Cornerstone-TM- SR
Fibula:
Cornerstone-TM--SR
Select
[Two photographs of recipients with text naming recipient and received tissue]
Shares
[LOGO]
Prospectus , 2000
Banc of America Securities LLC Lehman Brothers Warburg Dillon Read LLC Stephens Inc.
Until , 2000, all dealers that buy, sell or trade our common stock may be required to deliver a prospectus, regardless of whether they are participating in this offering. This is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by Regeneration Technologies in connection with the sale of the common stock being registered hereby. All the amounts shown are estimated, except the SEC registration fee, the NASD filing fee and the Nasdaq National Market listing fee.
SEC Registration Fee........................................ $22,770
NASD Filing Fee............................................. $ 9,125
Nasdaq National Market Listing Fee.......................... $ *
Printing Expenses........................................... $ *
Legal Fees and Expenses..................................... $ *
Accounting Fees and Expenses................................ $ *
Blue Sky Expenses and Counsel Fees.......................... $ *
Transfer Agent and Registrar Fees........................... $ *
Miscellaneous............................................... $ *
-------
Total................................................... $ *
=======
|
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145(a) of the General Corporation Law of the State of Delaware ("DGCL") provides that a Delaware corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation), by reason of the fact that he is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no cause to believe his conduct was unlawful.
Section 145(b) of the DGCL provides that a Delaware corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he acted in any of the capacities set forth above, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted under similar standards, except that no indemnification may be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the court in which such action or suit was brought shall determine that despite the adjudication of liability, such person is fairly and reasonably entitled to be indemnified for such expenses which the court shall deem proper.
Section 145 of the DGCL further provides that to the extent a director or officer of a corporation has been successful in the defense of any action, suit or proceeding referred to in subsections (a) and (b) or in the defense of any claim, issue or matter therein:
II-1
- he shall be indemnified against expenses actually and reasonably incurred by him in connection therewith;
- that indemnification provided for by Section 145 shall not be deemed exclusive of any other rights to which the indemnified party may be entitled;
- and that the corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise, against any liability asserted against him or incurred by him in any such capacity or arising out of his status as such whether or not the corporation would have the power to indemnify him against such liabilities under such Section 145.
Section 102(b)(7) of the DGCL provides that a certificate of incorporation may contain a provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director provided that such provision shall not eliminate or limit the liability of a director:
- for any breach of the director's duty of loyalty to the corporation or its stockholders;
- for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
- under Section 174 of the DGCL; or
- for any transaction from which the director derived an improper personal benefit.
Article Ninth of Regeneration Technologies's Certificate of Incorporation contains substantially the same provisions for indemnification as those contained in Section 145 of the DGCL. Additionally, Article Ninth provides that in any judicial proceeding in which a person seeks indemnification pursuant to Article Ninth, the burden of proving that such person is not entitled to indemnification shall be on Regeneration Technologies. Article Ninth further provides that any person who successfully establishes a right to indemnification, in whole or in part, under Article Ninth in any such proceeding shall be indemnified by Regeneration Technologies against expenses incurred (including attorneys' fees) in establishing such right to indemnification. Finally, Article Ninth provides that in the event the DGCL is amended to expand further the indemnification permitted to the persons covered by Article Ninth, Regeneration Technologies shall indemnify such persons to the fullest extent permitted by the DGCL, as so amended. Reference is made to the Regeneration Technologies' Amended Certificate of Incorporation and By-Laws filed as Exhibits 3.1 and 3.2, respectively.
Article Tenth of Regeneration Technologies's Certificate of Incorporation, states that to the fullest extent permitted by the DGCL, no director of Regeneration Technologies shall be personally liable to Regeneration Technologies, any of its stockholders or any other person or entity for monetary damages for breach of fiduciary duty owed to Regeneration Technologies, its stockholders or such other person or entity owing to such director's position as a director of Regeneration Technologies.
Regeneration Technologies intends to enter into indemnification agreements with its current directors and executive officers. Regeneration Technologies intends to insure its directors and officers against losses arising from any claim against them as such for wrongful acts or omission, subject to certain limitations.
Under Section 8 of the Underwriting Agreement, the underwriters are obligated, under certain circumstances, to indemnify officers, directors and controlling persons of Regeneration Technologies against certain liabilities, including liabilities under the Securities Act of 1933. Reference is made to the form of Underwriting Agreement filed as Exhibit 1.1 hereto.
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ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since inception, Regeneration Technologies has sold unregistered securities in the amounts, at the times, and for the aggregate amounts of consideration listed as follows:
DATE CLASS SHARES PURCHASER CONSIDERATION
--------------------- -------------------- -------------------- -------------------- -------------
February 1998 Series A Preferred 600,000 UFTB $ (39,643)
Stock 600,000 UFRF
--------------------
577,348 James M. Grooms
February 1998 Series B Preferred 748,152 16 individuals and $ 6,580,000
Stock entities
February 1998 Common stock 770,752 124 individuals 0
October 1999 Series C Preferred 368,990 and warrants Stephens- $10,000,000
Stock Warrants to purchase 46,124 Regeneration LLC
shares of common Medtronic Asset
stock Management, Inc.
February 2000 Common stock 9,225 Charles $ 250,000
Garrison, M.D.
Inception through Common stock 271,010 347 individuals 0
12/31/99 underlying options
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No underwriters were engaged in connection with the foregoing offers and
sales of securities. Such offers and sales of common stock and preferred stock
were made in reliance upon the exemption from registration set forth in
Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 of
Regulation D promulgated thereunder for transactions not involving a public
offering, and all purchasers were accredited investors as such term is defined
in Rule 501(a) of Regulation D. Issuances of options to Regeneration
Technologies's employees, directors and consultants were made pursuant to
Rule 701 promulgated under the Securities Act of 1933.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
NO. DESCRIPTION
--------------------- -----------
1.1 Underwriting Agreement*
3.1 Certificate of Incorporation of Regeneration Technologies,
Inc.*
3.2 Bylaws*
4.1 Amended and Restated Registration Rights Agreement dated as
of October 11, 1999, by and among Regeneration Technologies,
Inc. and the Stockholders listed on Exhibits A, B and C
thereto.
4.2 Stockholder's Agreement dated as of October 11, 1999, by and
among Regeneration Technologies and the Stockholders listed
on exhibits A, B and C thereto.
5.1 Opinion of Fulbright & Jaworski L.L.P. regarding the
legality of the shares*
10.1 Program Transfer Agreement between Regeneration
Technologies, Inc. and the University of Florida Tissue
Bank, Inc. dated April 15, 1999.*
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10.2 Tissue Recovery Agreement between Regeneration Technologies,
Inc. and the University of Florida Tissue Bank, Inc. dated
April 15, 1999.*
10.3 Exclusive Distributorship Agreement between Regeneration
Technologies, Inc. and C.R. Bard, Inc., dated June 6, 1998.*
10.4 Exclusive License Agreement between Regeneration
Technologies, Inc., as successor in interest to the
University of Florida Tissue Bank, Inc. and Exactech, Inc.,
dated April 22, 1997, as amended.*
10.5 Management Services Agreement between Regeneration
Technologies, Inc., as successor in interest to the
University of Florida Tissue Bank, Inc. and Sofamor Danek
Group, dated July 23, 1996.*
10.6 Management Services Agreement between Regeneration
Technologies, Inc., as successor in interest to the
University of Florida Tissue Bank, Inc., and Sofamor Danek
Group, dated May 11, 1998.*
10.7 Master Lease Agreement between Regeneration Technologies,
Inc., as successor in interest to the University of Florida
Tissue Bank, Inc., and American Equipment Leasing, dated
January 23, 1998.*
10.8 Purchase Contract between Regeneration Technologies, Inc.
and Echelon International Corp., dated January 31, 2000, as
amended.
10.9 Lease between Echelon International Corp. and Regeneration
Technologies, Inc., dated February 4, 2000.
10.10 Sublease between Regeneration Technologies, Inc. and the
University of Florida Tissue Bank, Inc., dated February 12,
1998.*
10.11 Lease between Regeneration Technologies, Inc. and First
Street Group L.C., dated June 14, 1999.
10.12 Lease agreement between Georgia Tissue Bank Inc. and Charles
P. Garrison, dated November 1, 1999.
10.13 Employment Agreements between Regeneration Technologies,
Inc. and James M. Grooms, dated February 9, 1998.
10.14 Employment Agreements between Regeneration Technologies,
Inc. and Richard R. Allen, dated February 13, 1998.
10.15 Employment Agreements between Regeneration Technologies,
Inc. and Frederick C. Preiss, dated November 25, 1998.
10.16 Employment Agreements between Regeneration Technologies,
Inc. and Thomas Brewer, dated June 15, 1998.
10.17 Employment Agreements between Regeneration Technologies,
Inc. and James P. Abraham, dated November 28, 1998.
10.18 Employment Agreements between Regeneration Technologies,
Inc. and Nancy R. Holland, dated February 13, 1998.
10.19 Omnibus Stock Option Plan.
10.20 Year 2000 Compensation Plan.
10.21 Form of indemnification agreement between Regeneration
Technologies, Inc. and its directors and executive
officers.*
10.22 Line of Credit Agreement, dated September 1999.*
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10.23 Mortgage between Regeneration Technologies, Inc. and Bank of
America, N.A., dated March 30, 2000.*
10.24 Promissory Note between Regeneration Technologies, Inc. and
Bank of America, N.A., dated March 30, 2000.*
23.1 Consent of Fulbright & Jaworski L.L.P. (included in Exhibit
5.1)*
23.2 Consent of Deloitte & Touche LLP to the consolidated
financial statements and supplemental schedule of
Regeneration Technologies, Inc. and subsidiary.
23.3 Consent of Deloitte & Touche LLP to the Statements of
Revenues and Direct Costs of the predecessor business of
Regeneration Technologies, Inc.
24.1 Power of attorney (on signature page)
27.1 Financial Data Schedule
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* To be filed by amendment
(b) Consolidated Financial Statement Schedule. The following consolidated financial statement schedule is filed herewith:
SCHEDULE II--VALUATIONS AND QUALIFYING ACCOUNTS
All other schedules are omitted because they are not required or are not applicable or the information is included in the consolidated financial statements or notes thereto.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the Underwriting Agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933, as amended, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Alachua, State of Florida, on April 27, 2000.
REGENERATION TECHNOLOGIES, INC.
By: /s/ JAMES M. GROOMS
-----------------------------------------
James M. Grooms
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
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POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below and on the following page constitutes and appoints each of James M. Grooms and Richard R. Allen as his true and lawful attorney-in-fact and agent, each acting alone, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments including post-effective amendments, to this Registration Statement, (or any other Registration Statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933), and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, and hereby ratifies and confirms all that any said attorney-in-fact and agent, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
Chairman of the Board
/s/ JAMES M. GROOMS (principal executive
------------------------------------------- officer) and Chief April 27, 2000
James M. Grooms Executive Officer
/s/ RICHARD R. ALLEN Chief Financial Officer
------------------------------------------- (principal financial and April 27, 2000
Richard R. Allen accounting officer)
/s/ PHILIP R. CHAPMAN Director
------------------------------------------- April 27, 2000
Philip R. Chapman
/s/ PETER F. GEAREN Director
------------------------------------------- April 27, 2000
Peter F. Gearen
/s/ MICHAEL J. ODRICH Director
------------------------------------------- April 27, 2000
Michael J. Odrich
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SIGNATURE TITLE DATE
--------- ----- ----
/s/ ANTHONY C. PHILLIPS Director
------------------------------------------- April 27, 2000
Anthony C. Phillips
/s/ E. RONALD PICKARD Director
------------------------------------------- April 27, 2000
E. Ronald Pickard
/s/ DANIEL L. WEBER Director
------------------------------------------- April 27, 2000
Daniel L. Weber
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EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Regeneration Technologies, Inc. and subsidiary on Form S-1 of our report dated March 22, 2000 (April 27, 2000 as to Note 18) appearing in the Prospectus, which is part of this Registration Statement, and of our report relating to the consolidated financial statement schedule dated March 22, 2000 (April 27, 2000 as to Note 18), appearing elsewhere in this Registration Statement. We also consent to the reference to us under the headings "Selected Financial Data" and "Experts" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP Tampa, Florida April 27, 2000 |
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Regeneration Technologies, Inc. and subsidiary on Form S-1 of our report relating to the statements of revenues and direct costs of the predecessor business of Regeneration Technologies, Inc. dated April 17, 2000, appearing in the Prospectus, which is part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP Tampa, Florida April 27, 2000 |
Exhibit 4.1
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of October 11, 1999, by and among Regeneration Technologies, Inc., a Florida corporation (the "Company"), the investors set forth on Exhibit A to the Purchase Agreement (as defined below) (the "Class C Investors"), the investors listed on Exhibit A hereto (the "Class B Investors"), and the investors listed on Exhibit B hereto (the "Class A Investors"). All parties to this Agreement shall be referred to herein collectively as the "Parties." The Class A Investors, the Class B Investors and the Class C Investors shall be referred to herein individually as an "Investor" and collectively as the "Investors."
WHEREAS, the Class A Investors own in the aggregate 1,777,348 outstanding shares of the Class A Convertible Preferred Stock of the Company, par value $0.001 per share (the "Class A Preferred");
WHEREAS, the Class B Investors own in the aggregate 748,152 outstanding shares of the Class B Convertible Preferred Stock of the Company, par value $0.001 per share (the "Class B Preferred");
WHEREAS, the Company and the Class C Investors are parties to that certain convertible Class C Preferred Stock and Warrant Purchase Agreement of even date herewith (the "Purchase Agreement"), pursuant to which the Class C Investors are purchasing an aggregate of 368,990 shares of Class C Convertible Preferred Stock of the Company, $0.001 par value per share (the "Class C Preferred"); and
WHEREAS, as a condition to and to effect the transfer of assets to the Company and the sale of the Class C Preferred, it is in the best interests of the Company to grant to the Investors certain registration rights.
NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I
REGISTRATION RIGHTS
1.1 Certain Definitions. As used in this Article 1 and elsewhere in this Agreement, the following terms shall have the following respective meanings:
"Class A Registrable Shares" means (i) the shares of Common Stock issued or issuable upon conversion of the Class A Preferred; (ii) any shares of Common Stock of
the Company acquired by the Class A Investors pursuant to Section 2 of that certain Stockholders' Agreement by and among the Parties and of even date herewith (the "Stockholders' Agreement"); and (iii) any other shares of Common Stock of the Company issued in respect of such shares described in clauses (i) and (ii) above (because of stock splits, stock dividends, reclassifications, recapitalizations, or similar events); provided, however, that shares of Common Stock which are Class A Registrable Shares shall cease to be Class A Registrable Shares upon any sale pursuant to a Registration Statement, Section 4(1) of the Securities Act or Rule 144 under the Securities Act. Wherever reference is made in this Agreement to a request or consent of holders of a certain percentage of Class A Registrable Shares, the determination of such percentage shall include shares of Common Stock issuable upon conversion of the Class A Preferred even if such conversion has not yet been effected.
"Class B Registrable Shares" means (i) the shares of Common Stock issued or issuable upon conversion of the Class B Preferred; (ii) any shares of Common Stock of the Company acquired by the Class B Investors pursuant to Section 2 of that certain Stockholders' Agreement by and among the Parties and of even date herewith (the "Stockholders' Agreement"); and (iii) any other shares of Common Stock of the Company issued in respect of such shares described in clauses (i) and (ii) above (because of stock splits, stock dividends, reclassifications, recapitalizations, or similar events); provided, however, that shares of Common Stock which are Class B Registrable Shares shall cease to be Class B Registrable Shares upon any sale pursuant to a Registration Statement, Section 4(1) of the Securities Act or Rule 144 under the Securities Act. Wherever reference is made in this Agreement to a request or consent of holders of a certain percentage of Class B Registrable Shares, the determination of such percentage shall include shares of Common Stock issuable upon conversion of the Class B Preferred even if such conversion has not yet been effected.
"Class C Registrable Shares" means (i) the shares of Common Stock issued or issuable upon conversion of the Class C Preferred; (ii) any shares of Common Stock of the Company acquired by the Class C Investors pursuant to Section 2 of that certain Stockholders' Agreement by and among the Parties and of even date herewith (the "Stockholders' Agreement"); (iii) any shares of Common Stock of the Company issuable upon exercise of the Warrants (as defined in that certain Convertible Class C Stock and Warrant Purchase Agreement of even date herewith); and (iv) any other shares of Common Stock of the Company issued in respect of such shares described in clauses (i) and (ii) above (because of stock splits, stock dividends, reclassifications, recapitalizations, or similar events); provided, however, that shares of Common Stock which are Class C Registrable Shares shall cease to be Class C Registrable Shares upon any sale pursuant to a Registration Statement, Section 4(1) of the Securities Act or Rule 144 under the Securities Act. Wherever reference is made in this Agreement to a request or consent of holders of a certain percentage of Class C Registrable Shares, the determination of such percentage shall include shares of Common Stock issuable upon conversion of the Class C Preferred even if such conversion has not yet been effected.
"Commission" means the Securities and Exchange Commission, or any other Federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any similar Federal statute, and the rules and regulations of the Commission issued under such Act, as they each may, from time to time, be in effect.
"Registrable Shares" means the Class A Registrable Shares, the Class B Registrable Shares and the Class C Registrable Shares, either individually or collectively, depending upon the context.
"Registration Statement" means a registration statement filed by the Company with the Commission for a public offering and sale of securities of the Company (other than a registration statement on Form S-8 or Form S-4, or their successors, or any other form for a limited purpose, or any registration statement covering only securities proposed to be issued in exchange for securities or assets of another corporation).
"Securities Act" means the Securities Act of 1933, as amended, or any similar Federal statute, and the rules and regulations of the Commission issued under such Act, as they each may, from time to time, be in effect.
"Shares" means the Class A Preferred, the Class B Preferred and the Class C Preferred, either individually or collectively, depending upon the context.
"Stockholders" means the Investors and any persons or entities to whom the rights granted under this Article 1 are transferred by the Investors, their successors or assigns pursuant to Section 3 of the Stockholders' Agreement or Article II hereof.
1.2 Sale or Transfer of Shares; Legend.
(a) The Shares and the Registrable Shares and shares issued in respect of the Shares or the Registrable Shares shall not be sold or transferred unless either (i) they first shall have been registered under the Securities Act, or (ii) the Company first shall have been furnished with an opinion of legal counsel, reasonably satisfactory to the Company, to the effect that such sale or transfer is exempt from the registration requirements of the Securities Act.
(b) Notwithstanding the foregoing, no registration or opinion of counsel shall be required for a transfer made in accordance with Rule 144 under the Securities Act or with the terms of Section 3 of the Stockholders' Agreement.
(c) Each certificate representing the Shares and the Registrable Shares and shares issued in respect of the Shares or the Registrable Shares shall bear legends substantially in the following forms:
The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, and may not be offered, sold or otherwise transferred, pledged or hypothecated unless and until such shares are registered under such Act or an opinion of counsel satisfactory to the Company is obtained to the effect that such registration is not required.
The shares of stock represented by this certificate are subject to the terms of a Stockholders' Agreement between the Company and the registered owner of this certificate (or the registered owner's predecessor in interest). Such Agreement is available for inspection without charge at the office of the Treasurer of the Company.
The foregoing legends shall be removed from the certificates representing any Registrable Shares, at the request of the holder thereof, at such time as they become eligible for resale pursuant to Rule 144(k) under the Securities Act.
(d) The Company agrees, upon the request of an Investor, to make available to an Investor and to any prospective transferee of any Shares or Registrable Shares of an Investor the information concerning the Company described in Rule 144A(d)(4) under the Securities Act.
1.3 Required Registrations.
(a) Class A Preferred.
(i) At any time after the earlier of four years from the date of the Closing or the closing of the Company's first underwritten public offering of shares of Common Stock pursuant to a Registration Statement, a Stockholder or Stockholders holding in the aggregate at least 40% of the Class A Registrable Shares may request, in writing, that the Company effect the registration on Form S-1 or Form S-2 (or any successor form) of Class A Registrable Shares owned by such Stockholder or Stockholders covering at least 33% of the then outstanding Class A Registrable Shares or any lesser percentage provided that the anticipated aggregate offering price is at least $5,000,000 (based on the then current market price or fair value), provided, however, that a Stockholder may not make such a request after such Stockholder has become eligible to sell, transfer or otherwise convey all of such Stockholder's Class A Registrable Shares pursuant to Rule 144 under the Securities Act in any three-month period. If the holders initiating the registration intend to distribute the Class A Registrable Shares by means of an underwriting, they shall so advise the Company in their request. In the event such registration involves an underwriting, the right of other Class A Stockholders to participate shall be conditioned on such Stockholders' participation in such underwriting. Upon
receipt of any such request, the Company shall promptly give written notice of such proposed registration to all Class A Stockholders. Such Stockholders shall have the right, by giving written notice to the Company within thirty (30) days after the Company provides its notice, to elect to have included in such registration such of their Class A Registrable Shares as such Stockholders may request in such notice of election, subject to the approval of the underwriter managing the offering. The Company shall, as expeditiously as possible, use its best efforts to effect the registration, on Form S-1 or Form S-2 (or any successor form), of all Class A Registrable Shares which the Company has been requested to so register.
(ii) At any time after the Company becomes eligible to file a Registration Statement on Form S-3 (or any successor form relating to secondary offerings), holders of Common Stock issued or issuable upon conversion of the Class A Preferred Stock will have the right to require the Company to effect an unlimited number of Registration Statements on Form S-3 (or such successor form) of Class A Registrable Shares having an aggregate offering price in each registration on Form S-3 in excess of $500,000 (based on the then current public market price). Such Stockholders shall have the right, by giving written notice to the Company within thirty (30) days after the Company provides its notice, to elect to have included in such registration such of their Class A Registrable Shares as such Stockholders may request in such notice of election. The Company shall, as expeditiously as possible, use its best efforts to effect the registration on Form S-3, or such successor form, of all Class A Registrable Shares which the Company has been requested to register.
(iii) Subject to the terms of Section 1.4(b) hereof, the Company shall be required to effect two registrations pursuant to paragraph (a) above and an unlimited number of registrations pursuant to paragraph (b) above; provided, however, that the Company shall not be required to effect any registration (other than on Form S-3 or any successor form relating to secondary offerings) within six (6) months after the effective date of any other Registration Statement of the Company, provided that the Class A Stockholders were provided an opportunity to effect the sale of Class A Registrable Shares pursuant to such Registration Statement; and provided further that the Company shall not be required to effect more than two registrations pursuant to paragraph (b) above in any 12-month period.
(iv) If a the time of any request to register Class A Registrable Shares pursuant to this subsection 1.3(a), the Company is engaged or has fixed plans to engage within thirty (30) days of the time of the request in a registered public offering as to which the Stockholders may include Class A Registrable Shares pursuant to subsection 1.4 or is engaged in any other activity which, in the good faith determination of the Company's Board of Directors, would be adversely affected by the requested registration to the material detriment of the Company, then the Company may at its option direct that such request be delayed for a period not in excess of 180 days from the effective date of such offering or the date of commencement of such other material activity, as the case may be, such right to delay a request to be exercised by the Company not more than once in any two year period.
(b) Class B Preferred.
(i) At any time after the earlier of four years from the date of the Closing or the closing of the Company's first underwritten public offering of shares of Common Stock pursuant to a Registration Statement, a Stockholder or Stockholders holding in the aggregate at least 40% of the Class B Registrable Shares may request, in writing, that the Company effect the registration on Form S-1 or Form S-2 (or any successor form) of Class B Registrable Shares owned by such Stockholder or Stockholders covering at least 33% of the then outstanding Class B Registrable Shares or any lesser percentage provided that the anticipated aggregate offering price is at least $5,000,000 (based on the then current market price or fair value), provided, however, that a Stockholder may not make such a request after such Stockholder has become eligible to sell, transfer or otherwise convey all of such Stockholder's Class B Registrable Shares pursuant to Rule 144 under the Securities Act in any three-month period. If the holders initiating the registration intend to distribute the Class B Registrable Shares by means of an underwriting, they shall so advise the Company in their request. In the event such registration involves an underwriting, the right of other Class B Stockholders to participate shall be conditioned on such Stockholders' participation in such underwriting. Upon receipt of any such request, the Company shall promptly give written notice of such proposed registration to all Class B Stockholders. Such Stockholders shall have the right, by giving written notice to the Company within thirty (30) days after the Company provides its notice, to elect to have included in such registration such of their Class B Registrable Shares as such Stockholders may request in such notice of election, subject to the approval of the underwriter managing the offering. The Company shall, as expeditiously as possible, use its best efforts to effect the registration, on Form S-1 or Form S-2 (or any successor form), of all Class B Registrable Shares which the Company has been requested to so register.
(ii) At any time after the Company becomes eligible to file a Registration Statement on Form S-3 (or any successor form relating to secondary offerings), holders of Common Stock issued or issuable upon conversion of the Class B Preferred Stock will have the right to require the Company to effect an unlimited number of Registration Statements on Form S-3 (or such successor form) of Class B Registrable Shares having an aggregate offering price in each registration on Form S-3 in excess of $500,000 (based on the then current public market price). Such Stockholders shall have the right, by giving written notice to the Company within thirty (30) days after the Company provides its notice, to elect to have included in such registration such of their Class B Registrable Shares as such Stockholders may request in such notice of election. The Company shall, as expeditiously as possible, use its best efforts to effect the registration on Form S-3, or such successor form, of all Class B Registrable Shares which the Company has been requested to register.
(iii) Subject to the terms of Section 1.4(b) hereof, the Company shall be required to effect two registrations pursuant to paragraph (a) above and an unlimited number of registrations pursuant to paragraph (b) above; provided, however, that the Company shall not be required to effect any registration (other than on Form S-3 or any
successor form relating to secondary offerings) within six (6) months after the effective date of any other Registration Statement of the Company, provided that the Class B Stockholders were provided an opportunity to effect the sale of Class B Registrable Shares pursuant to such Registration Statement; and provided further that the Company shall not be required to effect more than two registrations pursuant to paragraph (b) above in any 12-month period.
(iv) If a the time of any request to register Class B Registrable Shares pursuant to this subsection 1.3(b), the Company is engaged or has fixed plans to engage within thirty (30) days of the time of the request in a registered public offering as to which the Stockholders may include Class B Registrable Shares pursuant to subsection 1.4 or is engaged in any other activity which, in the good faith determination of the Company's Board of Directors, would be adversely affected by the requested registration to the material detriment of the Company, then the Company may at its option direct that such request be delayed for a period not in excess of 180 days from the effective date of such offering or the date of commencement of such other material activity, as the case may be, such right to delay a request to be exercised by the Company not more than once in any two year period.
(c) Class C Preferred.
(i) At any time after the earlier of four years from the date of the Closing or the closing of the Company's first underwritten public offering of shares of Common Stock pursuant to a Registration Statement, a Stockholder or Stockholders holding in the aggregate at least 40% of the Class C Registrable Shares may request, in writing, that the Company effect the registration on Form S-1 or Form S-2 (or any successor form) of Class C Registrable Shares owned by such Stockholder or Stockholders covering at least 33% of the then outstanding Class C Registrable Shares or any lesser percentage provided that the anticipated aggregate offering price is at least $5,000,000 (based on the then current market price or fair value), provided, however, that a Stockholder may not make such a request after such Stockholder has become eligible to sell, transfer or otherwise convey all of such Stockholder's Class C Registrable Shares pursuant to Rule 144 under the Securities Act in any three-month period. If the holders initiating the registration intend to distribute the Class C Registrable Shares by means of an underwriting, they shall so advise the Company in their request. In the event such registration involves an underwriting, the right of other Class C Stockholders to participate shall be conditioned on such Stockholders' participation in such underwriting. Upon receipt of any such request, the Company shall promptly give written notice of such proposed registration to all Class C Stockholders. Such Stockholders shall have the right, by giving written notice to the Company within thirty (30) days after the Company provides its notice, to elect to have included in such registration such of their Class C Registrable Shares as such Stockholders may request in such notice of election, subject to the approval of the underwriter managing the offering. The Company shall, as expeditiously as possible, use its best efforts to effect the registration, on Form S-1 or Form S-2 (or any successor form), of all Class C Registrable Shares which the Company has been requested to so register.
(ii) At any time after the Company becomes eligible to file a Registration Statement on Form S-3 (or any successor form relating to secondary offerings), holders of Common Stock issued or issuable upon conversion of the Class C Preferred Stock will have the right to require the Company to effect an unlimited number of Registration Statements on Form S-3 (or such successor form) of Class C Registrable Shares having an aggregate offering price in each registration on Form S-3 in excess of $500,000 (based on the then current public market price). Such Stockholders shall have the right, by giving written notice to the Company within thirty (30) days after the Company provides its notice, to elect to have included in such registration such of their Class C Registrable Shares as such Stockholders may request in such notice of election. The Company shall, as expeditiously as possible, use its best efforts to effect the registration on Form S-3, or such successor form, of all Class C Registrable Shares which the Company has been requested to register.
(iii) Subject to the terms of Section 1.4(b) hereof, the Company shall be required to effect two registrations pursuant to paragraph (a) above and an unlimited number of registrations pursuant to paragraph (b) above; provided, however, that the Company shall not be required to effect any registration (other than on Form S-3 or any successor form relating to secondary offerings) within six (6) months after the effective date of any other Registration Statement of the Company, provided that the Class C Stockholders were provided an opportunity to effect the sale of Class C Registrable Shares pursuant to such Registration Statement; and provided further that the Company shall not be required to effect more than two registrations pursuant to paragraph (b) above in any 12-month period.
(iv) If a the time of any request to register Class C Registrable Shares pursuant to this subsection 1.3(c), the Company is engaged or has fixed plans to engage within thirty (30) days of the time of the request in a registered public offering as to which the Stockholders may include Class C Registrable Shares pursuant to subsection 1.4 or is engaged in any other activity which, in the good faith determination of the Company's Board of Directors, would be adversely affected by the requested registration to the material detriment of the Company, then the Company may at its option direct that such request be delayed for a period not in excess of 180 days from the effective date of such offering or the date of commencement of such other material activity, as the case may be, such right to delay a request to be exercised by the Company not more than once in any two year period.
1.4 Incidental Registration.
(a) Whenever the Company proposes to file a Registration Statement (including pursuant to subsection 1.3) at any time and from time to time, it will, prior to such filing, give written notice to all Stockholders of its intention to do so and, upon the written request of a Stockholder or Stockholders given within twenty (20) days after the Company provides such notice (which request shall state the intended method of disposition of such Registrable Shares), the Company shall use its best efforts to cause all Registrable Shares which the Company has been requested by such Stockholder or Stockholders to register to be registered
under the Securities Act to the extent necessary to permit their sale or other disposition in accordance with the intended methods of distribution specified in the request of such Stockholder or Stockholders; provided that the Company shall have the right to postpone or withdraw any registration effected pursuant to this subsection 1.4 without obligation to any Stockholder.
(b) In connection with any offering under this subsection 1.4
involving an underwriting, the Company shall not be required to include any
Registrable Shares in such underwriting unless the holders thereof accept the
terms of the underwriting as agreed upon between the Company and the
underwriters selected by it, and then only in such quantity as will not, in the
opinion of the underwriters, have a material adverse effect on the success of
the offering by the Company. If in the opinion of the managing underwriter the
registration of all, or part of, the Registrable Shares which the holders have
requested to be included would materially and adversely affect such public
offering, then the Company shall be required to include in the underwriting only
that number of Registrable Shares, if any, which the managing underwriter
believes may be sold without causing such adverse effect; provided that no
persons or entities other than the Company, the Stockholders and persons or
entities holding registration rights granted in accordance with subsection 1.11
hereof shall be permitted to include securities in the offering. If the number
of Registrable Shares to be included in the underwriting in accordance with the
foregoing is less than the total number of shares which the holders of
Registrable Shares have requested to be included, then the number of shares to
be offered shall be reduced or limited in the following order of priority: (x)
first, the securities proposed by the Company to be sold for its own account
(except where the Company is the party that initiated such registration); (y)
second, the number of shares to be offered by all other holders of securities of
the Company other than the holder of Registrable Shares or other holders who
have registration rights to the extent necessary to reduce the total number of
shares as recommended by such managing underwriters; and (z) third, if further
reduction or limitation is required, the number of shares to be offered for the
account of the Stockholders shall be reduced or limited on a pro rata basis in
proportion to the relative number of Registrable Shares of the Stockholders
participating in such registration. Notwithstanding the foregoing sentence, in
the case of the first registration affected pursuant to Section 1.3(a), 1.3(b)
or 1.3(c) hereof, if the number of Registrable Shares to be included in such
underwriting is less than the total number of shares which the holders of
Registrable Shares have requested to be included, then the number of shares to
be offered shall be reduced or limited on a pro rata basis in proportion to the
relative number of Registrable Shares of the Stockholders participating in such
registration (regardless of whether pursuant to Section 1.3 or this Section
1.4), provided, however, that if there is a such a reduction or limitation, then
the Stockholder that has not requested such a registration shall be deemed to
have expended one of their two registrations pursuant to Section 1.3(a)(i),
1.3(b)(i) or 1.3(c)(i), as the case may be, as long as such Stockholder has been
able to include in such registration at least 66 2/3% of the Registrable Shares
that such stockholder desired to include in such registration.
(c) Withdrawal Election. If, as a result of the proration provisions of the Section 1.4, any Stockholder shall not be entitled to include at least 50% of the Registrable
Shares in such Incidental Registration pursuant to Section 1.4(a) that such Stockholder has requested to be included, such Stockholder may elect to withdraw his, her or its request to include Registrable Shares in such registration (a "Withdrawal Election") without incurring any liability for his, her or its fees and expenses; provided, however, that a Withdrawal Election shall be irrevocable and, after making a Withdrawal Election, a Stockholder shall no longer have any right to include Registrable Shares in the Registration as to which such Withdrawal Election is made.
1.5 Registration Procedures. If and whenever the Company is required by the provisions of this Agreement to use its best efforts to effect the registration of any of the Registrable Shares under the Securities Act, the Company shall:
(a) Prepare and file with the Commission a Registration Statement with respect to such Registrable Shares and use its best efforts to cause such Registration Statement to become effective; provided that before filing a Registration Statement or prospectus or any amendment or supplement thereto, including documents incorporated by reference after the initial filing of any Registration Statement, the Company shall furnish to the Stockholders of the Registrable Shares covered by such Registration Statement (such shares, "Registered Shares") and the underwriters, if any, copies of all such documents proposed to be filed, which documents will be subject to the review of such Stockholders and underwriters.
(b) Prepare and file with the Commission such amendments and
post-effective amendments to a Registration Statement as may be necessary
to keep such registration effective for a period of six (6) months or
until the Stockholder or Stockholders have completed the distribution
described in the Registration Statement relating thereto, whichever first
occurs; provided, however, that the Company, in good faith, may delay the
filing of any amendment or supplement to the Registration Statement for a
reasonable period of time, not to exceed 120 days, in order to permit the
Company (A) to effect disclosure or disposition or consummation of any
transaction requiring confidential treatment which is being actively
pursued at such time and which would require disclosure in the
Registration Statement or (B) to negotiate, effect or complete any
transaction which the Company reasonably believes might be jeopardized,
delayed or made more costly to the Company by disclosure in the
Registration Statement; and provided further, however, that (i) such 6
month period shall be extended for a period of time equal to the period
the Stockholder refrains from selling any securities included in such
registration in accordance with the provisions of Section 1.10 hereof;
(ii) such 6 month period shall be extended by the number of days during
the period from and including the date of the giving of notice pursuant to
Section 1.5(e) hereof to and including the date when each Stockholder of
Registrable Shares covered by such Registration Statement shall have
received the copies of the supplemented or amended prospectus contemplated
by Section 1.5(e) hereof; and (iii) in the case of any registration of
Registrable Shares on Form S-3 which are intended to be offered on a
continuous or
delayed basis, such 6 month period shall be extended, if necessary, to keep the Registration Statement effective until all such Registrable Shares are sold, provided that Rule 415, or any successor rule under the Securities Act, permits an offering on a continuous or delayed basis, and provided further that applicable rules under the Securities Act governing the obligation to file a post-effective amendment permit, in lieu of filing a post-effective amendment which (y) includes any prospectus required by Section l0(a)(3) of the Securities Act or (z) reflects facts or events representing a material or fundamental change in the information set forth in the Registration Statement, the incorporation by reference in the Registration Statement of periodic reports filed pursuant to Section 13 or 15(d) of the Exchange Act that contain the information required to be included in (y) and (z) above;
(c) Cause the related prospectus to be supplemented by any required prospectus supplement, and as so supplemented, to be filed pursuant to Rule 424 under the Securities Act; and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such Registration Statement or supplement to such prospects;
(d) Furnish such number of prospectuses and other documents incident thereto, including any amendment of or supplement to the prospectus as a Stockholder from time to time may reasonably request;
(e) Notify each seller of Registered Shares covered by such Registration Statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and at the request of any such seller, prepare and furnish to such seller a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such shares, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;
(f) Cause all such Registered Shares to be listed on each securities exchange on which similar securities issued by the Company are then listed or, if not then listed, cause such Registered Shares to be included in whatever exchange or national automated quotation system the Board of Directors determines is appropriate;
(g) Provide a transfer agent and registrar for all Registered Shares and a CUSIP number for all such Registered Shares, in each case not later than the effective date of such registration;
(h) Make available for inspection during regular business hours by any seller of Registrable Shares, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney, accountant or other agent retained by any such seller or underwriter (collectively, the "Inspectors"), all financial and other records, pertinent corporate documents and properties of the Company (collectively the "Records") as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company's officers, directors, employees and independent accountants to supply all information reasonably requested by such seller, underwriter, attorney or accountant in connection with such Registration Statement. Records which the Company determines, in good faith, to be confidential and which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (A) the disclosure of such Records is, in the opinion of counsel for the selling Stockholders, reasonably necessary to avoid or correct any misstatement or omission in the Registration Statement, (B) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, or (C) the disclosure of such Records is required by any governmental regulatory body with jurisdiction over any seller of Registrable Shares. Such seller, upon learning, that disclosure of such Records is sought in a court of competent jurisdiction, shall notify the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential;
(i) Cooperate with the sellers of Registered Shares and the managing underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing the Registered Shares to be sold, without any restrictive legends, in such denominations and registered in such names as the managing underwriter(s) may request at least two business days prior to any sale thereof to the underwriters, if applicable;
(j) Participate, to the extent reasonably requested by the managing underwriter for the offering or the selling Stockholders, in efforts to sell the Registrable Shares under the offering (including, without limitation, participating in "roadshow" meetings with prospective investors) that would be customary for underwritten primary offerings of a comparable percent of equity securities by the Company;
(k) Obtain from its accountants "cold-comfort" letters, dated the effective date of the Registration Statement and the date of the closing of the sale of the Registered Shares, and addressed to the Company and the selling Stockholders, in form and substance as are customarily issued in connection with underwritten public offerings;
(l) Obtain from its counsel an opinion, addressed to the selling Stockholders, with respect to the offering in form and substance reasonably satisfactory to a majority-in-interest of such Stockholders;
(m) Otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security Stockholders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first month after the effective date of the Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act;
(n) In connection with any underwritten offering pursuant to a Registration Statement filed pursuant to Section 1 hereof, the Company will enter into any underwriting agreement reasonably necessary to effect the offer and sale of Common stock, provided such underwriting agreement contains customary underwriting, indemnification and contribution provisions; provided, however, that no Stockholder will be liable for indemnification or contribution in excess of the net proceeds such Stockholder received in the offering;
(o) Use its best efforts to register or qualify such Registrable Shares under such other securities or blue sky laws of such jurisdictions as any seller reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the Registrable Shares owned by such seller provided that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph, (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction);
(p) Use its best efforts to cause such Registrable Shares covered by such Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the sellers thereof to consummate the disposition of such Registrable Shares; and
(q) Take all such other actions as the underwriters, if any, and a majority-in-interest of the selling Stockholders reasonably request in order to expedite or facilitate the disposition of such Registrable Shares (including, without limitation, effecting a stock split or combination of shares).
1.6 Allocation of Expenses. The Company will pay all Registration Expenses of all registrations under this Agreement; provided, however, that if a registration under subsection 1.3 is withdrawn at the request of the Class B or Class C Stockholders, as applicable, requesting such registration (other than as a result of information concerning the business or financial condition of the Company which is made known to the Stockholders after
the date on which such registration was requested) and if the requesting Stockholders, elect not to have such registration counted as a registration requested under subsection 1.3, the requesting Stockholders shall pay the Registration Expenses of such registration pro rata in accordance with the number of their Registrable Shares included in such registration. For purposes of this Section, the term "Registration Expenses" shall mean all expenses incurred by the Company in complying with this Article 1, including, without limitation, all registration and filing fees, exchange listing fees, printing expenses, fees and disbursements of counsel for the Company and the fees and expenses of one counsel selected by the selling Stockholders, as applicable, to represent the selling Stockholders, as applicable, state Blue Sky fees and expenses, and the expense of any special audits incident to or required by any such registration, but excluding underwriting discounts, selling commissions and the fees and expenses of the selling Stockholders' own counsel (other than the counsel selected to represent all selling Stockholders).
1.7 Indemnification and Contribution. In the event of any registration of any of the Registrable Shares under the Securities Act pursuant to this Agreement, the Company will indemnify and hold harmless the seller of such Registrable Shares, each underwriter of such Registrable Shares, and each other person, if any, who controls such seller or underwriter within the meaning of the Securities Act or the Exchange Act against any losses, claims, damages or liabilities, joint or several, to which such seller, underwriter or controlling person may become subject under the Securities Act, the Exchange Act, state securities or Blue Sky laws or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement under which such Registrable Shares were registered under the Securities Act, any preliminary prospectus or final prospectus contained in the Registration Statement, or any amendment or supplement to such Registration Statement, or arise out of or are based upon the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and the Company will promptly reimburse such seller, underwriter and each such controlling person upon demand for any legal or any other expenses reasonably incurred by such seller, underwriter or controlling person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any untrue statement or omission made in such Registration Statement, preliminary prospectus or prospectus, or any such amendment or supplement, in reliance upon and in conformity with information furnished to the Company, in writing, by or on behalf of such seller, underwriter or controlling person specifically for use in the preparation thereof.
In the event of any registration of any of the Registrable Shares under the Securities Act pursuant to this Agreement, each seller of Registrable Shares, severally and not jointly, will indemnify and hold harmless the Company, each of its directors and officers and each underwriter (if any) and each person, if any, who controls the Company or any such underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages or liabilities, joint or several, to which the Company, such directors and
officers, underwriter or controlling person may become subject under the Securities Act, Exchange Act, state securities or Blue Sky laws or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement under which such Registrable Shares were registered under the Securities Act, any preliminary prospectus or final prospectus contained in the Registration Statement, or any amendment or supplement to the Registration Statement, or arise out of or are based upon any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, if but only if, the statement or omission was made in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of such seller, specifically for use in connection with the preparation of such Registration Statement, prospectus, amendment or supplement; provided, however, that the obligations of such Stockholders hereunder shall be limited to an amount equal to the proceeds to each Stockholder of Registrable Shares sold as contemplated herein.
Each party entitled to indemnification under this subsection 1.7 (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom; provided, that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not be unreasonably withheld); and, provided, further, that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Article 1. The Indemnified Party may participate in such defense at such party's expense; provided, however, that the Indemnifying Party shall pay such expense if representation of such Indemnified Party by the counsel retained by the Indemnifying Party would be inappropriate due to actual or potential differing interests between the Indemnified Party and any other party represented by such counsel in such proceeding. No Indemnifying Party in the defense of any such claim or litigation shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect of such claim or litigation, and no Indemnified Party shall consent to entry of any judgment or settle such claim or litigation without the prior written consent of the Indemnifying Party.
In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any holder of Registrable Shares exercising rights under this Agreement, or any controlling person of any such holder, makes a claim for indemnification pursuant to this subsection 1.7 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this subsection 1.7 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any such selling
Stockholder, as applicable, or any such controlling person in circumstances for which indemnification is provided under this subsection 1.7; then, in each such case, the Company and such Stockholder will contribute to the aggregate losses, claims, damages, or liabilities to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of the Stockholder on the one hand and the Company on the other in connection with the action that resulted in such loss, claim, damage or liability, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, that in no event shall any contribution by a holder exceed the proceeds to it of all Registrable Shares sold by it pursuant to such Registration Statement, and (B) no person or entity guilty of fraudulent misrepresentation, within the meaning of Section 11(f) of the Securities Act, shall be entitled to contribution from any person or entity who is not guilty of such fraudulent misrepresentation.
1.8 Indemnification with Respect to Underwritten Offering. In the event that Registrable Shares are sold pursuant to a Registration Statement in an underwritten offering pursuant to subsection 1.3(a), 1.3(b) or 1.3(c), the Company agrees to enter into an underwriting agreement containing customary representations and warranties of an issuer of the securities being registered and customary covenants and agreements to be performed by such issuer, including without limitation customary provisions with respect to indemnification by the Company of the underwriters of such offering, provided that such agreement shall not provide that the Stockholders are subject to indemnification obligations greater than as set forth herein.
1.9 Information by Holder. Each holder of Registrable Shares included in any registration shall furnish to the Company such information regarding such holder and the distribution proposed by such holder as the Company may request in writing and as shall be required in connection with any registration, qualification or compliance referred to in this Article 1.
1.10 "Market Stand-Off Agreement.
(a) Each Stockholder, if requested by the Company and an underwriter of Common Stock or other securities of the Company, shall agree not to sell or otherwise transfer or dispose of any Registrable Shares or other securities of the Company held by such Stockholder for a specified period of time (not to exceed 180 days) following the effective date of a Registration Statement; provided, that:
(i) such agreement shall only apply to the first such Registration Statement covering Common Stock of the Company to be sold on its behalf to the public in an underwritten offering; and
(ii) all Stockholders holding not less than the number of shares of Common Stock held by such Stockholder (including shares of Common Stock issuable upon the conversion of Shares, or other convertible securities, or upon the exercise of options, warrants or rights) and all officers and directors of the Company enter into similar agreements.
(c) The agreements described in subsection (a) above shall be in writing in a form satisfactory to the Company and such underwriter. The Company may impose stop-transfer instructions with respect to the Registrable Shares or other securities subject to the foregoing restriction until the end of the stand-off period.
1.11 Limitations on Subsequent Registration Rights. The Company shall not, without the prior written consent of Stockholders holding at least 66 2/3% of the Registrable Shares, enter into any agreement (other than this Agreement) with any holder or prospective holder of any securities of the Company which would allow such holder or prospective holder (a) to include securities of the Company in any registration filed under subsection 1.3 or 1.4, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only on terms substantially similar to the terms on which holders of Registrable Shares may include shares in such registration, including the terms of Section 1.4(b) hereof; provided, however, that under the terms of such agreement the number of Registrable Shares to be included by the initiator of a demand registration pursuant to Section 1.3 hereof shall not be reduced to allow such holder or prospective holder to include securities in such registration or (b) to make a demand registration which could result in such registration statement being declared effective prior to the initial public offering.
1.12 Rule 144 Requirements. After the earliest of (i) the closing of the sale of securities of the Company pursuant to a Registration Statement, (ii) the registration by the Company of a class of securities under Section 12 of the Exchange Act, or (iii) the issuance by the Company of an offering circular pursuant to Regulation A under the Securities Act, the Company agrees to:
(a) Comply with the requirements of Rule 144(c) under the Securities Act with respect to current public information about the Company;
(b) use its best efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements); and
(c) furnish to any holder of Registrable Shares upon request
(i) a written statement by the Company as to its compliance with the
requirements of said Rule 144(c), and the reporting requirements of the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements), (ii) a copy of the most recent annual
or quarterly report of the Company, and (iii) such other reports and documents of the Company as such holder may reasonably request to avail itself of any similar rule or regulation of the Commission allowing it to sell any such securities without registration.
1.13 Selection of Underwriter. In the case of any registration effected pursuant to this Article I, the Company shall have the right to designate the managing underwriter in any underwritten offering, subject to the approval of the holders of a majority of the Registrable Shares requested to be included in such offering, which approval shall not be unreasonably withheld.
1.14 Mergers, Etc. The Company shall not, directly or indirectly,
enter into any merger, consolidation, or reorganization in which the Company
shall not be the surviving corporation unless the proposed surviving corporation
shall, prior to such merger, consolidation, or reorganization, agree in writing
to assume the obligations of the Company under this Article 1, and for that
purpose references hereunder to "Registrable Shares" shall be deemed to be
references to the securities that each Stockholder would be entitled to receive
in exchange for Registrable Shares under any such merger, consolidation, or
reorganization; provided, however, that the provisions of this Article I shall
not apply in the event of any merger, consolidation, or reorganization in which
the Company is not the surviving corporation if all Stockholders are entitled to
receive in exchange for their Registrable Shares consideration consisting solely
of (i) cash, (ii) securities of the acquiring corporation that may be
immediately sold to the public without registration under the Securities Act, or
(iii) securities of the acquiring corporation that the acquiring corporation has
agreed to register within ninety (90) days of completion of the transaction for
resale to the public pursuant to the Securities Act.
ARTICLE II
TRANSFERS OF CERTAIN RIGHTS
2.1 The rights granted to the Investors under this Agreement may be transferred by such Investor to an affiliate, partner, shareholder or immediate family member of such Investor or any transferee who after such transfer holds at least 20% of the Investor's Registrable Shares; provided, however, that the Company is given written notice by the transferee at the time of such transfer stating the name and address of the transferee and identifying the securities with respect to which such rights are being transferred, and that the Company gives its consent to the transfer of rights to any transferee which is not an affiliate, partner, shareholder, or immediate family member of the Investor, which consent shall not be unreasonably withheld.
2.2 Transferees. Any transferee to whom rights under this Agreement are transferred shall, as a condition to such transfer, deliver to the Company a written instrument by which such transferee agrees to be bound by the obligations imposed upon the Investor under this Agreement to the same extent as if such transferee were the Investor.
2.3 Subsequent Transferees. A transferee to whom rights are transferred pursuant to this Section 2 may not again transfer such rights to any other person or entity, other than as provided in Subsection 2.1 or Subsection 2.2 above
ARTICLE III
MISCELLANEOUS
3.1 No Inconsistent Agreements. The Company will not hereafter enter into any agreement with respect to its securities which is inconsistent with or violates the rights granted to the holders of Registrable Shares in this Agreement.
3.2 Adjustments Affecting Registrable Shares. The Company will not take any action, or permit any change to occur, with respect to its securities that would adversely affect the ability of the holders of Registrable Shares to include such Registrable Shares in a registration undertaken pursuant to this Agreement or that would adversely affect the marketability of such Registrable Shares in any such registration (including, without limitation, effecting a stock split or a combination of shares).
3.3 Remedies. Any person having rights under any provision of this Agreement will be entitled to enforce such rights specifically (without posting any bond or other security), to recover damages caused by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law.
3.4 Amendments and Waivers. Except as otherwise provided herein, the provisions of this Agreement may be amended and the Company may take action herein prohibited, or omit to perform any act herein required to be performed by it, if, but only if, the Company has obtained the written consent of holders of at least 2/3 of each of the Class A, the Class B and the Class C Registrable Shares then in existence.
3.5 Successors and Assigns. All covenants and agreements in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. In addition, irrespective of whether any express assignment has been made, the provisions of this Agreement that are for the benefit of purchasers or holders of Registrable Shares are also for the benefit of; and enforceable by, any subsequent holder permitted by Section 2.1.
3.6 Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Florida. Each of the Company and each Investor hereby irrevocably and unconditionally submit to the jurisdiction of the courts of the State of Florida and the United States of America located in the State of Florida (the "Florida Courts") for any litigation arising out of or relating to this Agreement and the transactions contemplated hereby (and agree not to commence any litigation relating thereto except in such courts), consent to service of process in such Florida Courts, waive any objection to the laying of
venue of any such litigation in Alachua County, Florida, and agree not to plead or claim in any Florida Court that such litigation brought therein has been brought in any inconvenient forum.
3.7 Term of Registration Rights. Notwithstanding anything to the contrary contained herein, the registration rights of each holder of Registrable Shares set forth in Section 1 shall terminate in their entirety on the fifth anniversary of a Qualified Class A, Qualified Class B or Qualified Class C Offering (each as defined in Article Fourth, Section B.5(a) of the Company's Articles of Incorporation), as the case may be.
3.8 Entire Agreement. This Agreement and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof.
3.9 Notices. Any and all notices or elections permitted or required to be made under this Agreement shall be in writing, signed by the party giving such notice or election and shall be delivered personally, by courier or sent by registered or certified mail, return receipt requested, to the Company and the Stockholders at their respective addresses below:
If to the Company to:
Regeneration Technologies, Inc.
One Innovation Drive
Alachua, Florida 32615
Attn: Richard R. Allen
with copy (which shall not constitute notice) to:
Piper & Marbury L.L.P.
1200 Nineteenth Street, N.W.
Washington, DC 20036
Attn: Theodore D. Segal, Esquire
If to the Class C Investors to:
Medtronic Asset Management, Inc.
7000 Central Avenue, N.E.
Minneapolis, MN 55402
Attn: Vice President & Chief Development Officer
with copy to:
Medtronic Asset Management, Inc. 7000 Central Avenue, N.E.
Minneapolis, MN 55402
Attn: General Counsel
and
Stephens-Regeneration LLC
111 Center Street, Suite 2500
Little Rock, AR 72201
Attn: President
with copy to:
Stephens-Regeneration LLC
111 Center Street, Suite 2500
Little Rock, AR 72201
Attn: Jackson Farrow, Esquire
If to the Class A or Class B Investors, to the addresses set forth below their respective names in Exhibit A and Exhibit B hereto.
3.10 Severability. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement or any provision of the other Agreements shall not in any way be affected or impaired thereby.
3.11 Titles and Subtitles. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.
3.12 No Registration of Preferred Stock. The registration rights contained herein apply only to the Company's Common Stock, and the Company shall never be obligated to register any of the Class A Preferred, Class B Preferred or the Class C Preferred.
3.13 Counterparts. This Agreement may be executed in one or more counterparts, each of which when so executed shall be deemed an original, and all such counterparts taken together shall constitute one and the same instrument.
[signatures begin on next page]
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of the day and year first written above.
REGENERATION TECHNOLOGIES, INC.
By: /s/ James M. Grooms -------------------------------- Name: James M. Grooms Its: President |
CLASS A STOCKHOLDERS
JAMES M. GROOMS
/s/ James M. Grooms ------------------------------ |
UNIVERSITY OF FLORIDA TISSUE BANK
UNIVERSITY OF FLORIDA RESEARCH FOUNDATION, INC.
LB I GROUP, INC.
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of the day and year first written above.
REGENERATION TECHNOLOGIES, INC.
By: /s/ James M. Grooms -------------------------------- Name: James M. Grooms Its: President |
CLASS A STOCKHOLDERS
JAMES M. GROOMS
/s/ James M. Grooms ----------------------------- |
UNIVERSITY OF FLORIDA TISSUE BANK
UNIVERSITY OF FLORIDA RESEARCH FOUNDATION, INC.
By: /s/ Thomas E. Walsh -------------------------------- Name: Thomas E. Walsh Its: Secretary 10-8-99 |
LB I GROUP, INC.
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of the day and year first written above.
REGENERATION TECHNOLOGIES, INC.
By: /s/ James M. Grooms -------------------------------- Name: James M. Grooms Its: President |
CLASS A STOCKHOLDERS
JAMES M. GROOMS
/s/ James M. Grooms ----------------------------- |
UNIVERSITY OF FLORIDA TISSUE BANK, INC. [ILLEGIBLE] 10/6/99
By: /s/ Nancy R. Holland -------------------------------- Name: Nancy R. Holland Its: President |
UNIVERSITY OF FLORIDA RESEARCH FOUNDATION, INC.
LB I GROUP, INC.
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of the day and year first written above
REGENERATION TECHNOLOGIES, INC.
CLASS A STOCKHOLDERS
JAMES M. GROOMS
UNIVERSITY OF FLORIDA TISSUE BANK
UNIVERSITY OF FLORIDA RESEARCH FOUNDATION, INC.
LB I GROUP, INC.
By: /s/ Fred Steinberg
--------------------------------
Name: Fred Steinberg
------------------------------
Its: Vice President
-------------------------------
|
By: /s/ [ILLEGIBLE] DESIGNATED SIGNATORY
--------------------------------- Pursuant to
Name: Power of Attorney
------------------------------
Its:
-------------------------------
|
FREDERICK R. ADLER
/s/ [ILLEGIBLE] DESIGNATED SIGNATORY
----------------------------- Pursuant to
Power of Attorney
|
2001 PARTNERS, L.P.
By: /s/ [ILLEGIBLE] DESIGNATED SIGNATORY
--------------------------------- Pursuant to
Name: Power of Attorney
------------------------------
Its:
-------------------------------
|
SIPAREX PME
MICHEAL LEWIS, M.D.
SIPAREX DEVELOPMENT
PHILIP R. CHAPMAN
EURO-AMERICA II, L.P.
FREDERICK R. ADLER
2001 PARTNERS, L.P.
SIPAREX PME
MICHEAL LEWIS, M.D.
SIPAREX DEVELOPMENT
PHILIP R. CHAPMAN
JACQUES VALLEE
/s/ Jacques Vallee ----------------------------- |
RTI ADVISORY GROUP, L.L.C.
PHILIP R. CHAPMAN
JACQUES VALLEE
RTI ADVISORY GROUP, L.L.C.
By: /s/ Kevin T. Foley, M.D.
---------------------------------
Name: Kevin T. Foley, M.D.
------------------------------
Its:
-------------------------------
|
/s/ [ILLEGIBLE] DESIGNATED SIGNATORY
----------------------------- Pursuant to
Power of Attorney
|
JACQUES VALLEE
RTI ADVISORY GROUP, L.L.C.
PHILIP R. CHAPMAN
/s/ Philip R. Chapman ----------------------------- |
JACQUES VALLEE
RTI ADVISORY GROUP, L.L.C.
CLASS B STOCKHOLDERS
FREDERICK R. ADLER
PHILIP R. CHAPMAN
ADLER CHILDREN TRUST
EURO-AMERICA-II, L.P.
LB I GROUP INC.
By: /s/ Fred Steinberg
--------------------------------
Name: Fred Steinberg
------------------------------
Its: Vice President
-------------------------------
|
LB MBG VC PARTNERS 1998 (A) L.P.
By: /s/ Fred Steinberg
--------------------------------
Name: Fred Steinberg
------------------------------
Its: Vice President of LBI Group Inc.
---------------------------------
Its General Partner
|
CLASS B STOCKHOLDERS
FREDERICK R. ADLER
/s/ [ILLEGIBLE] DESIGNATED SIGNATORY
------------------------------ Pursuant To
Power of Attorney
|
PHILIP R. CHAPMAN
/s/ [ILLEGIBLE] DESIGNATED SIGNATORY
------------------------------ Pursuant To
Power of Attorney
|
ADLER CHILDREN TRUST
By: /s/ [ILLEGIBLE] DESIGNATED SIGNATORY
-------------------------------- Pursuant To
Name: Power of Attorney
------------------------------
Its:
-------------------------------
|
EURO-AMERICA-II, L.P.
By: /s/ [ILLEGIBLE] DESIGNATED SIGNATORY
-------------------------------- Pursuant To
Name: Power of Attorney
------------------------------
Its:
-------------------------------
|
LB I GROUP INC.
LB MBG VC PARTNERS (A) L.P.
LB MBG VC PARTNERS (B) L.P.
CLASS B STOCKHOLDERS
FREDERICK R. ADLER
PHILIP R. CHAPMAN
/s/ Philip R. Chapman ----------------------------- |
ADLER CHILDREN TRUST
EURO-AMERICA-II, L.P.
LB I GROUP INC.
LB MBG VC PARTNERS 1998 (A) L.P.
LB MBG VC PARTNERS 1998 (B) L.P.
By: /s/ Fred Steinberg
--------------------------------
Name: Fred Steinberg
------------------------------
Its: Vice President of LB I Group Inc.
---------------------------------
Its General Partner
|
LB MGB VC PARTNERS 1998 (C) L.P.
By: /s/ Fred Steinberg
--------------------------------
Name: Fred Steinberg
------------------------------
Its: Vice President of LB I Group Inc.
---------------------------------
Its General Partner
|
LB MGB VC PARTNERS 1998 (D) L.P.
By: /s/ Fred Steinberg
--------------------------------
Name: Fred Steinberg
------------------------------
Its: Vice President of LB I Group Inc.
---------------------------------
Its General Partner
|
MICHAEL LEWIS, M.D.
2001 PARTNERS, L.P.
LB MBG VC PARTNERS (B) L.P.
LB MGB VC PARTNERS (C) L.P.
LB MGB VC PARTNERS (D) L.P.
MICHAEL LEWIS, M.D.
2001 PARTNERS, L.P.
LB MGB VC PARTNERS (C) L.P.
LB MGB VC PARTNERS (D) L.P.
MICHAEL LEWIS, M.D.
2001 PARTNERS, L.P.
By: /s/ [ILLEGIBLE] DESIGNATED SIGNATORY
-------------------------------- Pursuant To
Name: Power of Attorney
------------------------------
Its:
-------------------------------
|
SIPAREX PME
SIPAREX DEVELOPMENT
JACQUES VALLEE
/s/ Jacques Vallee ----------------------------- |
RTI ADVISORY GROUP, L.L.C.
CLASS C STOCKHOLDERS
MEDTRONIC ASSET MANAGEMENT, INC.
SIPAREX PME
SIPAREX DEVELOPMENT
JACQUES VALLEE
RTI ADVISORY GROUP, L.L.C.
By: /s/ Kevin T. Foley, M.D.
--------------------------------
Name: Kevin T. Foley, M.D.
------------------------------
Its:
-------------------------------
|
CLASS C STOCKHOLDERS
MEDTRONIC ASSET MANAGEMENT, INC.
SIPAREX PME
SIPAREX DEVELOPMENT
JACQUES VALLEE
RTI ADVISORY GROUP, L.L.C.
CLASS C STOCKHOLDERS
MEDTRONIC ASSET MANAGEMENT, INC.
By: /s/ Michael D. Ellwein
--------------------------------
Name: Michael D. Ellwein
------------------------------
Its: Vice President and Chief Development Officer
-------------------------------
|
STEPHENS-REGENERATION LLC
SIPAREX PME
SIPAREX DEVELOPMENT
JACQUES VALLEE
RTI ADVISORY GROUP, L.L.C.
CLASS C STOCKHOLDERS
MEDTRONIC ASSET MANAGEMENT, INC.
STEPHENS-REGENERATION LLC
By: /s/ Jackson Farrow, Jr. -------------------------------- Name: Jackson Farrow Jr. Its: Vice-President of Stephens Group, Inc., its manager |
EXHIBIT A
Class B Investors:
Frederick R. Adler
C/O Jay Nickse
Venad Administrative Services, Inc.
Suite 807, 342 Madison Avenue
New York, NY 10173
Philip R. Chapman
Suite 807, 342 Madison Avenue
New York, NY 10173
Adler Children Trust
C/O Jay Nickse
Venad Administrative Services, Inc.
Suite 807, 342 Madison Avenue
New York, NY 10173
Euro-America-LI, L.P.
C/O Jay Nickse
Venad Administrative Services, Inc.
Suite 807, 342 Madison Avenue
New York, NY 10173
LB I Group Inc.
Attn: Fred E. Steinberg, Vice President
Lehman Brothers, Inc.
3 World Financial Center--8th Floor
New York, NY 10285-0800
LB MBG VC Partners (A) L.P.
Attn: Fred E. Steinberg, Vice President
Lehman Brothers, Inc.
3 World Financial Center--8th Floor
New York, NY 10285-0800
LB MBG VC Partners (B) L.P.
Attn: Fred E. Steinberg, Vice President
Lehman Brothers, Inc.
3 World Financial Center--8th Floor
New York, NY 10285-0800
LB MBG VC Partners (C) L.P.
Attn: Fred E. Steinberg, Vice President
Lehman Brothers, Inc.
3 World Financial Center--8th Floor
New York, NY 10285-0800
LB MBG VC Partners (D) L.P.
Attn: Fred E. Steinberg, Vice President
Lehman Brothers, Inc.
3 World Financial Center--8th Floor
New York, NY 10285-0800
Michael Lewis, M.D.
Goldman, Sachs & Co.
Attn: IRA Department
10 Hanover Square
11th Floor
New York, NY 10005
2001 Partners, L.P.
C/O Jay Nickse
Venad Administrative Services, Inc.
Suite 807, 342 Madison Avenue
New York, NY 10173
Siparex PME
Attention: J. F. Puech
139, Rue Vendome
69477 Lyon - Cedex 06
FRANCE
Siparex Development
Attention: J. F. Puech
139, Rue Vendome
69477 Lyon - Cedex 06
FRANCE
Jacques Vallee
1835 Franklin Street
#1501
San Francisco, CA 94109
RTI Advisory Group L.L.C.
C/O Robert Hyde
530 Oak Court Drive, Suite 345
Memphis, TN 38117
EXHIBIT B
Class A Investors:
James M. Grooms
One Innovation Drive
Alachua, FL 32615
University of Florida Tissue Bank
One Innovation Drive
Alachua, FL 32615
University of Florida Research Foundation, Inc.
Attn: General Counsel
P.O. Box 100215
Gainesville, FL 32610
LB I Group, Inc.
Attn: Fred E. Steinberg, Vice President
Lehman Brothers, Inc.
3 World Financial Center --8th Floor
New York, NY 10285-0800
Euro-America II, L.P.
C/O Jay Nickse
Venad Administrative Services, Inc.
Suite 807, 342 Madison Avenue
New York, NY 10173
Frederick R. Adler
C/O Jay Nickse
Venad Administrative Services, Inc.
Suite 807, 342 Madison Avenue
New York, NY 10173
2001 Partners, L.P.
C/O Jay Nickse
Venad Administrative Services, Inc.
Suite 807, 342 Madison Avenue
New York, NY 10173
Siparex PME
Attention: J. F. Puech
139, Rue Vendome
69477 Lyon - Cedex 06
FRANCE
Michael Lewis, M.D.
Goldman, Sachs & Co.
Attn: IRA Department
10 Hanover Square
11th Floor
New York, NY 10005
Siparex Development
Attention: J. F. Puech
139, Rue Vendome
69477 Lyon - Cedex 06
FRANCE
Philip R. Chapman
Suite 807, 342 Madison Avenue
New York, NY 10173
Jacques Vallee
1835 Franklin Street
#1501
San Francisco, CA 94109
RTI Advisory Group, L.L.C.
C/O Robert Hyde
530 Oak Court Drive, Suite 345
Memphis, TN 38117
Exhibit 4.2
STOCKHOLDERS' AGREEMENT
This Stockholders' Agreement (the "Agreement") is made as of the 11th day of October 1999 by and among Regeneration Technologies, Inc., a Florida corporation (the "Company"), the investors set forth on Exhibit A to the Purchase Agreement (as defined below) (the "Class C Investors"), the stockholders listed on Exhibit A hereto (the "Class B Investors"), the stockholders listed on Exhibit B hereto (the "Class A Investors"), and the stockholders listed on Exhibit C hereto (the "Listed Stockholders"), with the Class C Investors, the Class B Investors, the Class A Investors and the Listed Stockholders sometimes being referred to herein as the "Stockholders," and the Class C, Class B and Class A Investors sometimes being referred to herein as the "Preferred Stockholders."
WHEREAS, the Class A Investors own in the aggregate 1,777,348 shares of the Class A convertible Preferred Stock of the Company, par value $0.001 per share (the "Class A Preferred Stock");
WHEREAS the Class B Investors own in the aggregate 748,152 shares of Class B Convertible Preferred Stock of the Company, par value $0.001 per share (the "Class B Preferred Stock");
WHEREAS, the Listed Stockholders own the number of shares of the Common Stock of the Company, par value $0.001 per share (the "Common Stock") set forth on Exhibit C hereto;
WHEREAS, concurrently with the execution of this Agreement, the Class C Investors are purchasing shares of the Class C Convertible Preferred Stock of the Company, par value $0.001 per share (the "Class C Preferred Stock"), pursuant to that certain Class C Preferred Stock and Warrant Purchase Agreement of even date herewith (the "Purchase Agreement");
WHEREAS, the Stockholders desire to provide for representation on the Board of Directors of the Company in the manner set forth below; and
WHEREAS, the Preferred Stockholders desire to provide for certain preemptive, co-sale and first offer rights.
In consideration of the premises and mutual covenants contained herein and the consummation of the sale and purchase of shares of Class C Preferred Stock of the Company pursuant to the Purchase Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Voting.
(a) Election of Directors. Subject to the special provisions of Sections 1(b) and 2 below, at any time at which the stockholders of the Company will have the right to vote for, or will vote for, or consent in writing to, the election of directors of the Company, each Stockholder
hereby agrees to vote or cause to be voted all Shares (as defined herein below) owned or hereafter acquired by him, her or it, or over which he, she or it has voting control, so as to fix the number Of directors of the Company at seven (7) and in favor of the following actions:
(i) to cause and maintain the election to the Board of Directors of two
(2) designated representatives of the holders of shares of Class A
Preferred Stock, by action of a majority of the Shares of Class A
Preferred Stock held by such stockholders voting as a separate class
(individually, a "Class A Preferred Director" and collectively, the
"Class A Preferred Directors");
(ii) to cause and maintain the election to the Board of Directors of two
(2) designated representatives of the holders of shares of Class B
Preferred Stock, by action of a majority of the Shares of Class B
Preferred Stock held by such stockholders voting as a separate class
(individually, a "Class B Preferred Director" and collectively, the
"Class B Preferred Directors");
(iii) to cause and maintain the election to the Board of Directors of one
(1) designated representative of the holders of shares of Common
Stock or their designees, by action of a majority of the shares of
Common Stock voting as a separate class (the "Common Stock
Director");
(iv) to cause and maintain the election to the Board of Directors of one
(1) designated representative of the holders of shares of Common
Stock, Class A Preferred Stock, Class B Preferred Stock, and Class C
Preferred Stock, by action of a majority of the shares of Common
Stock, Class A Preferred Stock, Class B Preferred Stock, and Class C
Preferred Stock, voting together as a class (the "Stockholder
Director"); and
(v) to cause and maintain the election to the Board of Directors of the Chief Executive Officer of the Company (the "CEO Director").
The current Class A Preferred Directors shall be Peter F. Gearen and Daniel Weber. The current Class B Preferred Directors shall be Michael J. Odrich and Philip R. Chapman. The current Common Stock Director shall be Anthony C. Phillips. The current Stockholder Director shall be E.R. Pickard ("Pickard"). The current CEO Director shall be James M. Grooms.
Until such time as Medtronic shall elect otherwise by giving written notice of such election to the Company (the "Medtronic Election"), the holders of shares of Common Stock, Class A Preferred Stock, Class B Preferred Stock and Class C Preferred Stock hereby agree that they shall vote, or cause to be voted, their respective shares so as to designate Pickard as the Stockholder Director.
The "Shares" shall mean and include any and all shares of Common Stock and shares of capital stock of the Company by whatever name called, the shares of Class A Preferred Stock, the shares of Class B Preferred Stock, and the shares of Class C Preferred Stock, which carry voting rights (including voting rights which arise by reason of default) and shall include any
shares now owned or subsequently acquired by a Stockholder, however acquired, including, without limitation, stock splits and stock dividends. For purposes of this Section 1, the Class A Preferred Stock, the Class B Preferred Stock, and the Class C Preferred Stock shall include any shares of Common Stock into which such Preferred Stock is converted.
The company shall cause the nomination for election to the Board of Directors of the designated representatives and shall call such stockholders' meetings as may be necessary to elect any such election. The Stockholders shall not vote their Shares in favor of the election of directors except as specified in this Section 1.
(b) Vacancies and Removal. Each of the directors designated pursuant to Section[ILLEGIBLE] shall be elected at any annual or special meeting of stockholders (or by written consent in lieu of a meeting of stockholders) and shall serve until his successor is elected and qualified or until the earlier of his death, resignation or removal.
(i) The Stockholders shall vote all their Shares to cause a Class A Preferred Director removed during his term of office, when, and only when, they are so directed in writing by the holders of a majority of the shares of Class A Preferred Stock.
(ii) The Stockholders shall vote all their Shares to cause a Class B Preferred Director to be removed during his term of office, when, and only when, they are so directed in writing by the holders of a majority of the shares of Class B Preferred Stock.
(iii) The Stockholders shall vote all their Shares to cause the Common Stock Director to be removed during his term of office, when, and only when, they are so directed in writing by the holders of a majority of the shares of Common Stock.
(iv) The Stockholders shall vote all their Shares to cause the Stockholder Director to be removed during his term of office, when, and only when, they are so directed in writing by the holders of a majority of the shares of Common Stock, Class A Preferred Stock, Class B Preferred Stock, and Class C Preferred Stock, voting together as a class.
(v) The Stockholders shall vote all their Shares to cause the CEO Director to be removed during his term of office, when, and only when, such individual no longer serves as Chief Executive Officer of the Company.
In the event of any vacancy in the position of any of the directors
elected pursuant to Section 1(a), the Company agrees to promptly nominate, and
the Stockholders agree to promptly vote their Shares, to elect such person as
has been nominated to fill such position by the respective groups set forth in
Section 1(a) or in the case of the CEO Director, the person then serving as
Chief Executive Officer of the Company.
(c) Observation Rights.
(i) Observation Rights of Stephens. The Company agrees that Stephens Regeneration LLC ("Stephens") may, for so long as it is a holder of at least 25% of the
shares of Class C Preferred Stock originally issued to Stephens by the Company, from time to time, appoint a representative to attend meetings of the Board of Directors of the Company or any committees thereof as an observer (the "Observer"). The Observer is not entitled to vote on any matters before the Board of Directors or any committees thereof. Subject to the confidentiality provisions set forth below, neither Stephens nor the Observer shall have any duties, responsibilities or liability by virtue of attendance at such meetings or the failure to attend the samee. The Company shall notify the Observer of all Board of Directors meetings at the same time as the Company notifies Directors of such meetings and the Observer shall be entitled to all written materials Directors are entitled to receive. Except as required by law, the Observer shall not disclose or use any Confidential Information (as defined below) furnished to the Observer to any person other than Stephens or its advisors. For purposes of this Section 1(c), "Confidential Information" means any information, whether or not in writing, regarding the parties to this agreement or their affiliates or any transactions or matters before the Board of Directors or any committees thereof. Confidential Information does not include information that the Observer can demonstrate (i) is generally available to or known by the public other than as a result of an improper disclosure; or (ii) is obtained by the Observer from a source other than the Company or the Board of Directors or any committees thereof.
(ii) Observation Rights of Medtronic. The Company agrees that Medtronic Asset Management, Inc. ("Medtronic") or any of its affiliates may, for so long as Medtronic or such affiliate, as the case may be, is a holder of at least 25% of the shares of Class C Preferred Stock originally issued to Medtronic by the Company, from time to time, appoint an Observer, who shall be bound by the confidentiality provisions of Section 1(c)(i) above. The Observer is not entitled to vote on any matters before the Board of Directors or any committees thereof. Subject to the confidentiality provisions set forth above, neither Medtronic nor the Observer shall have any duties, responsibilities or liability by virtue of attendance at such meetings or the failure to attend the same. The Company shall notify the Observer of all Board of Directors meetings at the same time as the Company notifies Directors of such meetings and the Observer shall be entitled to all written materials Directors are entitled to receive. Notwithstanding the foregoing, until such time as Medtronic shall exercise the Medtronic Election 1(c)(ii). Medtronic shall not have the right to appoint an Observer pursuant to this Section
(d) Notice. The Company shall provide the Stockholders with prior written notice of any intended mailing of notice to stockholders for a meeting at which directors are to be elected, and each of the groups set forth in Section 1(a) shall notify the Company in writing, prior to such mailing, of the persons designated by such group as nominees for election as directors. If a group shall fail to give notice to the Company as provided above, it shall be deemed that the designees of such group, as the case may be, then serving as directors shall be their designees for reelection.
2. Preemptive Rights.
(a) The Company hereby grants to each of the Preferred Stockholders a preemptive right to purchase, on a pro rata basis, all or any part of New Securities (as defined below) that the
Company may, from time to time, propose to sell and issue, subject to the terms and conditions set forth below. Each Preferred Stockholders' pro rata share, for purposes of this subsection 2(a), equal a fraction, the numerator of which is the aggregate number of shares of Common Stock then held by the Preferred Stockholders or issuable upon conversion or exercise of any shares, convertible securities, options, rights or warrants then held by the Preferred Stockholders, and the denominator of which is the total number of shares of Common Stock then held by the Preferred Stockholders plus the number of shares of Common Stock issuable upon conversion or exercise of then outstanding Shares, convertible securities, options, rights or warrants, then held by the Preferred Stockholders.
(b) "New Securities" shall mean any capital stock of the Company
regardless of either now authorized, and rights, options or warrants to purchase
capital stock, and securities of any type whatsoever which are, or may become,
convertible into capital stock; provided, however, that the term "New
Securities" does not include (i) the shares issuable under the Purchase
Agreement, (ii) shares of Common Stock issuable upon conversion of the Class A
Preferred Stock, the Class B Preferred Stock, or the Class C Preferred Stock;
(iii) securities offered to the public pursuant to a Registration Statement;
(iv) securities issued for the acquisition of another corporation by the Company
by merger, purchase of substantially all the assets of such corporation or other
reorganization resulting in the ownership by the Company of not less than 51% of
the voting power of such corporation; (v) up to 400,000 shares of Common C)
Stock issued to employees or consultants of the Company or UFTB pursuant to a
Board-approved stock option plan, employee stock purchase plan, restricted stock
plan or other employee stock plan or option agreement; (vi) securities issued as
a result of any stock split, stock dividend or reclassification of Common Stock,
distributable on a pro rata basis to all holders of Common Stock; (vii) shares
of Common Stock issuable upon the exercise of any warrant issued by the Company
prior to or as of the date hereof, including Common Stock Warrants issued to
each of Stephens and Medtronic in connection that certain Convertible Class C
Preferred Stock and Warrant Purchase Agreement of even date herewith; or (viii)
any shares of stock of the Company to be issued in connection with the
acquisition by the Company of Georgia Tissue Bank, Inc.
(c) In the event the Company intends to issue New Securities, it shall give the Preferred Stockholders written notice of such intention, describing the type of New Securities to be issued, the price thereof and the general terms upon which the Company proposes to effect such issuance. Each of the Preferred Stockholders shall have 30 days from the date of any such notice to agree to purchase all or part of its pro rata share of such New Securities for the price and upon the general terms and conditions specified in the Company's notice by giving written notice to the Company stating the quantity of New Securities to be so purchased. The Preferred Stockholders shall have a right of oversubscription such that if any Preferred Stockholder fails to purchase all of its pro rata share of the New Securities, the other Preferred Stockholders, among them, shall have the right to purchase up to the balance of such New Securities not so purchased.
(d) To the extent that the Preferred Stockholders fail to exercise the foregoing preemptive right with respect to any New Securities within such 30-day period, the Company may Within 90 days thereafter sell any or all of such New Securities not agreed to be purchased
by the preferred Stockholders, at a price and upon general terms no more favorable to the purchaser thereof than specified in the notice given to the Preferred Stockholders pursuant to paragraph (c) above. In the event the Company has not sold such New Securities within such 90-day period, the Company shall not thereafter issue or sell any New Securities without first offering such New Securities to the Preferred Stockholders in the mariner provided above.
3. Right of First Offer.
(a) Restrictions on Transfers.
(i) Except as otherwise provided in subsection 3(b) below, a Preferred Stockholder or a Specified Common Stockholder (as defined below) shall sell, assign, transfer, pledge, hypothecate or otherwise dispose of, by operation of law or otherwise (collectively transfer), any of the Shares, or any interest therein, only in accordance with the terms of this Section 3. A "Specified Common Stockholder" shall mean James Grooms, Richard Allen, Frank & Glowczewskie Jr. and Nancy Holland.
(ii) Notwithstanding the foregoing, a Preferred Stockholder or a Specified Common Stockholder may transfer Shares or Common Stock, as the case may be, to (i) any "affiliate" of such Stockholder (as such term are defined in the rules and regulations promulgated under the Securities Act), (ii) an immediate family member of such Stockholder, (iii) in the case of any Preferred Stockholder that is a partnership, a partner of such partnership or (iv) in the case :of any Preferred Stockholder that is a corporation, a stockholder of such corporation, provided that such Shares or Common Stock, as the case may be, shall remain subject to this Agreement (including without limitation the restrictions on transfer set forth in this Section 3) and such permitted transferee shall, as a condition to such transfer, deliver to the Company a written instrument confirming that such transferee shall be bound by all of the terms and conditions of this Agreement.
(b) Receipt and Communication of Offer. Subject to the terms of Section 3(a) hereof if at any time a Preferred Stockholder or Specified Common Stockholder (the "Selling Stockholder") desires to transfer for cash, cash equivalents or any other form of consideration (including a promissory note) all or any part of the Shares or the Common Stock, as the case may be, or any shares of Common Stock or other capital stock of the Company acquired by such Selling Stockholder subsequent to the date hereof (such shares of Common Stock and the Shares are collectively referred to as the "Selling Stockholder Shares"), the Selling Stockholder shall submit a written offer (the "Offer") to sell the Selling Stockholder Shares (the "Offered Shares") to the Company and the other Preferred Stockholders specifying the terms and conditions, including price pursuant to which the Selling Stockholder proposes to sell such Offered Shares. The Offer shall disclose the number of Offered Shares proposed to be sold, the total number of shares of all classes of the Company's capital stock owned by the Selling Stockholder, the terms and conditions, including price, of the proposed sale, and any other material facts relating to the proposed sale. The Offer shall further state that the Company may acquire, in accordance with the provisions of this Agreement or a Stock Restriction Agreement (as defined below), as the case may be, all or any portion of the Offered Shares for the price and upon the other terms and
conditions including deferred payment (if applicable), set forth therein, provided, however, that if the purchase price for the Offer is proposed to be paid, in whole or in part, in securities of a third party, the Company may instead pay cash based on the fair market value of such securities.
(c) Company's Right. The Company shall have the absolute right, by delivery of written notice to the Selling Stockholder (as hereinafter provided), to repurchase all or a portion of the Offered Shares offered by a Preferred Stockholder in accordance with the terms of subsection d hereof and of a Specified Common Stockholder in accordance with the terms of the stock restriction agreement executed by such Specified Common Stockholder upon issuance of the shares of Common Stock (the "Stock Restriction Agreement").
(d) Company Notice of Intent to Repurchase. If the Company desires to repurchase all or any part of the Offered Shares, it shall communicate in writing (the "Notification") its election to repurchase to the Selling Stockholder, which communication shall state the number of Offered Shares the Company desires to repurchase and shall be delivered in person or by facsimile to the Selling Stockholder within 25 days of the Offer Date. The Notification shall, when taken in conjunction with the Offer, be deemed to constitute a valid, legally binding and enforceable agreement for the sale and repurchase of such Offered Shares. Sales of the Offered Shares to be sold to the Company pursuant to this Section shall be made at the offices of the Company no later than the 60th day following the Offer Date (or if such 60th day is not a business day, then on the next succeeding business day). Such sales shall be effected by Selling Stockholder's delivery to the Company of a certificate or certificates evidencing ownership of the Offered Shares to be repurchased by it, duly endorsed for transfer to the Company, against payment to the Selling Stockholder of the repurchase price therefor by the Company.
(e) Preferred Stockholders' Right. If the Company elects not to exercise
its right to repurchase all the Offered Shares under this Section 3 or under the
terms of the applicable Stock Restriction Agreement, each Preferred Stockholder
shall have the option, but not the obligation, to purchase its pro rata share of
the remaining Offered Shares on the same terms as specified in the Offer. A
Preferred Stockholder's pro rata share, for purposes of this subsection 3(e),
shall equal a fraction, the numerator of which is the number of shares of Common
Stock or Common Stock issuable upon conversion of the Preferred Stock which such
Preferred Stockholder then holds (the "Preferred Stockholder's Stock"), and the
denominator of which is the aggregate number of shares of Preferred
Stockholder's Stock held by all Preferred Stockholders exercising their purchase
rights under this Section 3(e). After the expiration of the 25-day period in
Section 3(d) but within 40 days after the Offer Date, any electing Preferred
Stockholders shall give notice to the Selling Stockholder and the Company
stating whether or not it elects to exercise its option, the number of Offered
Shares, if any, it elects to purchase, and a date and time for consummation of
the purchase not more than 60 days after the Offer Date. Failure by a Preferred
Stockholder to give such notice within such time period shall be deemed an
election by it not to exercise its option. If more than one Preferred
Stockholder exercises its purchase option and the aggregate number of remaining
Offered Shares sought to be purchased by such Preferred Stockholders exceeds the
aggregate number of remaining Offered Shares, the number of remaining Offered
Shares to be purchased by each such Preferred Stockholder shall be pro rated
based on its respective equity interest in the Company on a fully diluted basis.
(f) If the aggregate number of Offered Shares that the Company and the Preferred stockholders elect to purchase is less than all of the Offered Shares, then the Company and the preferred Stockholder shall not be entitled to purchase any of the Shares. The Selling older shall thereafter be free to offer all of the Offered Shares described in the Offer to a party, at a price and on terms no less favorable to such Selling Stockholder than the price the terms set forth in the Offer. No less than 15 days prior to consummating a sale to a third (the "proposed Transferee"), the Selling Stockholder shall give the Company notice of the identity of the Proposed Transferee. If the Proposed Transferee is a Competitor of the Company defined below), then the Selling Stockholder may not consummate the proposed transfer without the approval of the Company. A "Competitor" shall mean an entity engaged in engineering, processing, distributing or developing tissue-regeneration products. The Company's approval shall be deemed to given if the Company has not objected to the transfer within 10 days of its receipt of notification of the identity of the Proposed Transferee. If the Company has not objected to the sale within such 10-day period, then the Selling Stockholder shall be free to consummate the sale to the Proposed Transferee for a period of ninety days commencing on the otermination of the Company's and the Preferred Stockholders' 40-day period to exercise their night of First Refusal pursuant to Section 3(d) above.
(g) Effect of Prohibited Transfer. The Company shall not be required (a) to transfer on its books any of the Shares or Common Stock, as the case may be, which shall have been sold or transferred in violation of any of the provisions set forth in this Agreement, or (b) to neat as owner of such Shares or Common Stock, as applicable, or to pay dividends to any transferee to whom any such Shares or Common Stock, as applicable, shall have been so sold or transferred.
(h) The restrictions of this Section 3 shall not apply to shares of Common Stock sold in connection with a public offering of shares of the Company's Common Stock pursuant to an effective registration statement under the Securities Act (a "Public Offering") and shall terminate in their entirety on the earliest of (i) the closing of the Company's initial Public Offering or (ii) the agreement of the Company and all of the Preferred Stockholders.
4. Co-Sale Rights.
(a) No Specified Common Stockholder or Preferred Stockholder (the "Co-Sale
Stockholder") shall transfer, in any one or more transactions, any shares of
stock now or hereafter held by him, other than as provided in this Section 4,
until (a) he first complies with Section 3, relating to a right of first refusal
inuring to the benefit of the Company and the other Preferred Stockholders, and
(b) thereafter, he notifies each Preferred Stockholder of the proposed
transaction and gives such Preferred Stockholders the opportunity to include in
the sale to the proposed transferee, shares of stock. The aggregate number of
shares of stock that a Preferred Stockholder shall be entitled to have included
in such sale will be that number that upon conversion into Common Stock at the
applicable conversion rate would bear the same proportion oto the total number
of shares of stock proposed to be sold by the Co-Sale Stockholder as the total
Dumber of shares of stock held by the Preferred Stockholder bears to the
aggregate number of `Shares of the Company's Common Stock (calculated on a fully
diluted basis), and each Preferred K
Stockholder shall be entitled to participate in such number pro rata on the basis of the number of shares of stock then held by him or it. Each Preferred Stockholder shall have a period of fifteen (15) days (the "Offer Period"), from the date notice of such opportunity is received to give the Co-Sale Stockholder written notice of his or its desire to participate in such sale, stating in such notice the number of shares desired to be sold; and if no such notice is given within the Offer Period, such Preferred Stockholder shall be deemed to have chosen not to participate.
(b) Notwithstanding the foregoing, the provisions of Section 4(a) shall be inapplicable to the following transactions:
(i) A transfer of any or all of a Preferred Stockholder's stock to an affiliate;
(ii) A transfer of any or all of a Preferred Stockholder's stock to its immediate family or to a trust, the beneficiaries of which are exclusively one or more of the group of persons consisting of the Preferred Stockholder and members of the Preferred Stockholder's immediate family. "Immediate family" as used herein shall mean spouse, lineal descendant, father, mother, brother or sister of the Preferred Stockholder making such transfer;
(iii) In the case of a Preferred Stockholder that is in the form of a corporation, limited liability company, or partnership, a transfer of any or all of a Preferred Stockholder's interest to its stockholders, members or partners, as the case may be;
(iv) The sale, assignment or transfer by way of bequest or inheritance upon death of a Preferred Stockholder;
(v) The sale, assignment or transfer to the Company pursuant to the right of first refusal provisions set forth in this Agreement, as they may from time to time be amended; or
(vi) Following the consummation of an underwritten public offering pursuant to the Securities Act, sales pursuant to Rule 144 under the Securities Act;
provided, that, in the case of a transaction described in clauses (i), (ii) and
(iii) above, any transferee of a Preferred Stockholder shall agree to be bound
by this Agreement and shall so signify in writing.
5. Miscellaneous.
(a) Termination. This Agreement shall terminate in its entirety on the earliest to occur of (a) the closing of the Company's first underwritten public offering of Common Stock in which the per share is at least $54.202 to price (subject to Adjustment) that results in aggregate net proceeds to the Company (after deducting underwriting commissions and offering expenses) of not less than $20,000,000; or (b) mutual agreement is reached by all the parties hereto.
(b) No Revocation. The voting agreements contained herein are coupled with an interest and may not be revoked, except by written consent of all of the Stockholders.
(c) Indemnification. Each of the Stockholders agrees not to take any action to amend either the Company's Articles of Incorporation or its By-Laws, each only with respect to indemnification of directors, as presently in effect, without the prior written consent of all of the Stockholders.
(d) Action as Director. No party hereto who is or may become a director of the company either agrees or implies that he will exercise his actions as a director in any manner other than in accordance with his considered judgment at such time with respect to the best interests of the Company and all of its stockholders.
(e) Stock Transfer Record. The Company shall maintain a stock transfer book in which shall be recorded the name and address of each Stockholder. No transfer of Shares shall be effective or valid unless and until recorded in such stock transfer book. The Company agrees that it will record any transfer of Shares in its stock transfer book unless (i) the transfer does not materially comply with all of the provisions of this Agreement or (ii) the transferee shall not have agreed in writing to be bound by all of the provisions of this Agreement applicable to the transferring Stockholders and become a party hereto.
(f) Severability; Survivability. The provisions of this Agreement are severable, so that the invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other term or provision of this Agreement, which shall remain in full force and effect. In the event that the term of this Agreement is restricted under applicable law, the parties agree to, prior to termination of this Agreement, execute an agreement on substantially similar terms.
(g) Specific Performance. In addition to any and all other remedies that may be available at law in the event of any breach of this Agreement, each Stockholder shall be entitled to specific performance of the agreements and obligations of the other parties hereunder and to such other injunctive or other equitable relief as may be granted by a court of competent jurisdiction.
(h) Subsequent Stockholders. It is understood and agreed that the terms and conditions of this Agreement shall apply to whomsoever shall receive the capital stock of the Company, including, by way of illustration and not of limitation, bona fide purchasers for value. It shall be a condition precedent to the issuance of the capital stock of the Company to any person by the Company that said person shall agree to be bound by the terms and conditions of this Agreement.
(i) Alteration or Amendment. No change, modification or amendment of this Agreement shall be valid unless the same is in writing and signed by the Company, and the holders of a majority of each class of the Company's capital stock or by all of the Stockholders if required by Section (a) or (b) above. No waiver of any provision of this Agreement shall be valid unless in writing and signed by the person against whom it is sought to be enforced. The failure of any party at any time to insist upon strict performance of any condition, promise, agreement or understanding set forth herein shall not be construed as a waiver or relinquishment of the right to insist upon strict performance of the same condition, promise, agreement or understanding at a future time. The invalidity or unenforceability of any particular provision
hereof, this Agreement shall be construed in all respects as if such invalid or unenforceable provisions were omitted.
(j) Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Florida. Each of the Parties hereby irrevocably and unconditionally submits to the jurisdiction of the courts of the State of Florida and the United States of America located in the State of Florida (the "Florida Courts") for any litigation arising out of or relating to this Agreement and the transactions contemplated hereby (and agree not to commence any litigation relating thereto except in such courts), consent to service of process in such Florida Courts, waive any objection to the laying of venue of any such litigation in Alachua County, Florida, and agree not to plead or claim in any Florida Court that such litigation brought therein has been brought in any inconvenient forum.
(k) Notices. Any and all notices or elections permitted or required to be made under this Agreement shall be in writing, signed by the party giving such notice or election and shall be delivered personally, by courier or sent by registered or certified mail, return receipt requested, to the Company and the Stockholders at their respective addresses below:
If to the Company to:
Regeneration Technologies, Inc.
One Innovation Drive
Alachua, Florida 32615
Attn: Richard R. Allen
with copy (which shall not constitute notice) to:
Piper & Marbury L.L.P.
1200 Nineteenth Street, N.W.
Washington, DC 20036
Attn: Theodore D. Segal, Esquire
If to the Class C Investors to:
Medtronic Asset Management, Inc.
7000 Central Avenue, N.E.
Minneapolis, MN 55402
Attn: Vice President & Chief Development Officer
with copy to:
Medtronic Asset Management, Inc. 7000 Central Avenue, N.E.
Minneapolis, MN 55402
Attn: General Counsel
and
Stephens-Regeneration LLC
111 Center Street, Suite 2500
Little Rock, AR 72201
Attn: President
with copy to:
Stephens-Regeneration LLC
111 Center Street, Suite 2500
Little Rock, AR 72201
Attn: Jackson Farrow, Esquire
If to the Class A or Class B Investors, to the addresses set forth below their respective names in Exhibit A and Exhibit B hereto.
(l) Complete Agreement. This Agreement constitutes the full and complete agreement of the parties hereto with respect to the subject matter hereof.
(m) Pronouns. Whenever the content may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural, and vice versa.
(n) Counterparts. This Agreement may be executed in two counterparts, each of which shall be deemed an original and both of which, when taken together, shall constitute one and the same Agreement binding on all the parties hereto.
(o) Captions. Captions of sections have been added only for convenience and shall not be deemed to be a part of this Agreement.
[signatures on following page]
IN WITNESS WHEREOF. this Agreement has been executed by the parties hereto as of the and year first written above.
REGENERATION TECHNOLOGIES, INC.
By: /s/ JAMES M. GROOMS
---------------------------------------------
Name: James M. Grooms
President
|
CLASS C INVESTORS
MEDTRONIC ASSET MANAGEMENT, INC.
By: ____________________________________________
Michael D. Ellwein
Vice President and Chief Development Officer
By:_____________________________________________
Name: __________________________________________
Its:____________________________________________
CLASS B INVESTORS
FREDERICK R. ADLER
By:_____________________________________________
Name: __________________________________________
Its:____________________________________________
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of the day and year first written above.
REGENERATION TECHNOLOGIES, INC.
CLASS C INVESTORS
MEDTRONIC ASSET MANAGEMENT, INC.
By: /s/ Michael D. Ellwein
---------------------------------------------
Michael D. Ellwein
Vice President and Chief Development Officer
|
STEPHENS-REGENERATION LLC
By:_____________________________________________
Name: __________________________________________
Its:____________________________________________
CLASS B INVESTORS
FREDERICK R. ADLER
By:_____________________________________________
Name: __________________________________________
Its:____________________________________________
EXHIBIT 10.8
CONTRACT OF PURCHASE AND SALE
THIS CONTRACT OF PURCHASE AND SALE (this "Contract") is made and entered into as of the "Effective Date" (as hereinafter defined) by and between ECHELON INTERNATIONAL CORPORATION, a Florida corporation, its successors, successors-in-title and assigns (hereinafter referred to as "Seller"), and REGENERATION TECHNOLOGIES, INC., a Florida corporation, its successors and assigns (hereinafter referred to as "Buyer").
WITNESSETH:
That for and in consideration of the mutual promises and covenants herein contained and the mutual advantages accruing to Seller and Buyer, it is covenanted and agreed by Seller and Buyer as follows:
1. Property. Seller hereby agrees to sell to Buyer, and Buyer hereby agrees to purchase from Seller, for the price and upon the terms and conditions hereinafter set forth, that certain real property located within the Replat of Progress Center, Plat Book P, Page 48, as recorded in Alachua County, Florida, the general descriptions of which are more particularly described on Exhibit "A" (consisting of approximately 6.19 acres, more or less) ("Land"), together with the following:
(a) All building and other improvements located on the Land ("Buildings");
(b) All of Seller's right, title and interest in and to all appliance, fixtures, equipment, machinery, furniture, carpet, drapes and other personal property, if any, located on or about the Land and the Building, or used exclusively in the operation and maintenance thereof ("Tangible Personal Property");
(c) All of Seller's right, title and interest in and to all of the service or maintenance contracts as set forth in Exhibit "B" attached hereto and made a part hereof ("Service Contracts");
As used in this Contract, the Land and the Buildings are collectively referred to herein as the "Real Property" and the Real Property, Leases, Tangible Personal Property, and Service Contracts. is collectively referred to herein as the "Property."
2. Deposit. Not later than 5:00 P.M. on January 31st, 2000, Buyer shall deliver to Trenam, Kemker, Scharf, Barkin, Frye, O'Neill & Mullis, P.A., as escrow agent (hereinafter called "Escrow Agent"), the sum of ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00), which sum, together with all interest earned thereon, is hereinafter collectively referred to as the "Deposit" and shall be held in escrow by Escrow Agent in an interest-bearing account and in accordance with the terms of this Contract. Escrow Agent shall notify Seller upon its receipt of the Deposit. In the event that the Deposit has not been so paid in the manner and by
the time aforesaid (time being of the essence), this Contract, at the option of Seller, shall immediately become null and void, and of no further force or effect.
3. Price and Terms. The purchase price ("Purchase Price") to be paid for the Property shall be the sum of THREE MILLION SIX HUNDRED THOUSAND AND NO/100 DOLLARS ($3,600,000.00). The Purchase Price shall be payable to Seller at Closing as follows:
(A) The Deposit shall be paid to Seller and credited to Buyer against the Purchase Price;
(B) At time of closing, Buyer shall pay to the Seller the remaining Purchase Price (or such greater or lesser amount as may be required by the credits, prorations and adjustments provided in this Contract) by wire transfer of immediately available funds.
4. As Is.
(a) EXCEPT AS EXPRESSLY PROVIDED HEREIN BUYER ACKNOWLEDGES AND
AGREES THAT THE PURCHASE AND SALE OF THE PROPERTY CONTEMPLATED BY THIS CONTRACT
IS AND WILL BE MADE ON AN "AS-IS" BASIS, WITH ALL FAULTS, PATENT AND LATENT, AND
WITHOUT RELIANCE UPON ANY REPRESENTATION OR WARRANTY OF ANY KIND OR NATURE,
EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OF
MERCHANTABILITY, HABITABILITY OR FITNESS FOR A PARTICULAR PURPOSE, GOOD, FAIR OR
ADEQUATE CONDITION OR REPAIR OR GOOD, WORKMANLIKE CONSTRUCTION, OR WARRANTIES OR
REPRESENTATIONS AS TO MATTERS OF TITLE (EXCEPT FOR WARRANTIES CONTAINED IN THE
SPECIAL WARRANTY DEED), ZONING, TAX CONSEQUENCES, PHYSICAL OR ENVIRONMENTAL
CONDITIONS, PROPERTY VALUE, OPERATING HISTORY, INCOME, EXPENSES, CHARGES, LIENS,
ENCUMBRANCES, RIGHTS OR CLAIMS, OR ANY OTHER MATTER OR THING RELATING TO OR
AFFECTING THE PROPERTY. IN ADDITION TO AND WITHOUT LIMITING THE GENERALITY OF
THE FOREGOING SENTENCE, EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS
CONTRACT, SELLER MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND WHATSOEVER AS
TO (I) THE NATURE OR CONDITION OF THE SOILS, GEOLOGY OR ANY GROUNDWATER ON THE
REAL PROPERTY; (II) THE DRAINAGE OF OR RELATING TO THE REAL PROPERTY; (III) THE
CONDITION OR REPAIR OF THE REAL PROPERTY INCLUDING ANY IMPROVEMENTS THEREON;
(IV) THE NATURE OR SUITABILITY OF ANY ZONING, LAND USE PLAN CLASSIFICATION, OR
EXISTING GOVERNMENTAL PERMITS, LICENSES OR APPROVALS; (V) THE FINANCIAL POSITION
OR NET OPERATING INCOME OF THE REAL PROPERTY, INCLUDING THE REVENUES AND
EXPENSES THEREOF; OR, (VI) THE PRESENCE OR ABSENCE OF ANY HAZARDOUS OR TOXIC
SUBSTANCES OR MATERIALS, WASTES, POLLUTANTS, CONTAMINANTS, OIL OR PETROLEUM
PRODUCTS ON, UNDER OR WITHIN THE REAL PROPERTY OR ON, UNDER OR WITHIN ANY LAND,
2.
IMPROVEMENTS, WATERCOURSE OR BODY OF WATER NEAR THE REAL PROPERTY. Buyer REPRESENTS THAT IT IS A KNOWLEDGEABLE Buyer OF REAL ESTATE AND THAT IT IS RELYING SOLELY ON ITS OWN EXPERTISE AND THAT OF Buyer'S CONSULTANTS, AND THAT PRIOR TO CLOSING, BUYER WILL HAVE HAD A FULL AND FAIR OPPORTUNITY TO COMPLETE ALL INSPECTIONS AND INVESTIGATIONS OF THE PROPERTY, INCLUDING BUT NOT LIMITED TO, THE PHYSICAL AND ENVIRONMENTAL CONDITIONS THEREOF AS IT DEEMS NECESSARY, AND SHALL RELY UPON SAME, AND UPON CLOSING, SHALL ASSUME THE RISK OF ALL ADVERSE MATTERS, INCLUDING, BUT NOT LIMITED TO, ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS.
(b) By its acceptance of the Deed to the Real Property at the
Closing, Buyer shall be conclusively deemed to have acknowledged and agreed that
(i) any information or materials furnished to Buyer by Seller are provided as an
accommodation and Buyer acknowledges and agrees that Seller does not warrant,
represent or guarantee the accuracy or completeness of any documents,
information or item (other than copies of the Service Contracts) provided by
Seller or Seller's agent to Buyer, and that Seller will not be liable or
responsible for any errors, omissions or inaccuracies contained in any document,
information or item prepared by any party or entity, other than copies of the
Service Contracts and documents executed and delivered by Seller to Buyer at
Closing, and then only strictly in accordance with the terms of such closing
documents; and (ii) Buyer has relied solely on its independent investigations
and inspections and the documents to be delivered by Seller at closing in making
the decision to purchase the Property. The provisions of this Paragraph 4 shall
survive the Closing.
5. New Lease. Buyer and Seller each agree, prior to Closing, to enter into
an amended and restated lease pertaining to space leased and to be leased to
Buyer at 13709 Progress Boulevard ("Progress Building"). The amended and
restated lease shall be in substitution of any and all existing lease agreements
between Buyer, as tenant, and Seller, as landlord, pertaining to Suites 130,
135, 1-7, 113 and 144 in the Progress Building, and shall provide the following
terms and conditions. Suites 130, 135, 1-7. 113 and 144, comprising of
approximately 7,492 rentable square feet, together with an additional 4,242
rentable square feet located on or within the areas known as Suites No. 102 and
118, (and, at tenant's option, up to an additional 4,260 rentable square feet of
space in the Progress Building, to the extent available) shall be leased to
tenant for a term that shall expire two (2) years from the date of the amended
and restated lease, at the rental rate of $15.00 per rentable square foot
(gross), all in its "as-is" condition, for office use and such other use
approved by landlord that will not require additional leasehold modifications
and building penetrations to the existing space. Tenant shall not have the right
to make any modifications or alterations to the premises. without the consent of
the landlord. Tenant shall also furnish the landlord with a security deposit
equal to one month's rent of the existing and additional space (or $14,667.50).
All other terms and conditions shall be substantially similar to the terms and
conditions of the lease governing Buyer's leased space at Innovation Drive.
3.
6. Title Insurance. Within ten (10) days after the Effective Date, Seller shall, at Seller's sole expense, furnish Buyer with a written commitment for the issuance of an owner's policy of title insurance (ALTA Form B policy) on the Real Property (the "Commitment") in the full amount of the Purchase Price, issued by Lawyers Title Insurance Corporation ("Title Company"). If the Commitment contains any exceptions that are not acceptable to Buyer in the exercise of Buyer's sole discretion (other than the matters set forth in Exhibit "C" attached hereto and incorporated by reference herein ("Existing Exceptions")), then Buyer shall notify Seller in writing of such exceptions within ten (10) days of its receipt of the Commitment (any such exceptions of which Buyer gives Seller written notice within such ten (10) day period as aforesaid being hereinafter defined as "Unauthorized Exceptions"); provided, however, in no event (i) shall Seller have any obligation to undertake to cure, remove or modify any of such Unauthorized Exceptions. The Existing Exceptions, together with any other exceptions to which Buyer does not object within such ten (10) day period as aforesaid, shall constitute "Permitted Exceptions" hereunder, and Buyer shall be conclusively deemed to have waived its right to object thereto. Seller shall have until the date of the Closing in which to cause Title Company to remove any Unauthorized Exceptions.
If Seller shall fail to cause any Unauthorized Exceptions to be removed
within the time period aforesaid, then: (a) Buyer may, at its option, elect to
terminate this Contract and to secure the return of the Deposit, whereupon this
Contract shall be null and void and, except as otherwise provided by Paragraph 5
hereof, Seller shall have no further obligations or liabilities hereunder; or
(b) Buyer may elect to close the purchase and sale of the Property in the same
manner as if no such Unauthorized Exceptions had arisen, without diminution in
the Purchase Price, in which case such Unauthorized Exceptions shall be deemed
to be a Permitted Exception. The immediately preceding sentence sets forth the
sole remedies of Buyer in the case of Seller's failure to cure any Unauthorized
Exceptions. Within a reasonable period of time following closing the title
insurance policy insuring Buyer's title to the Property. in the form prescribed
by the Commitment, shall be delivered to Buyer.
7. Survey. Seller has previously delivered to Buyer a survey of the Real Property and other adjacent lands dated as of September 9, 1999, prepared by Eng, Denman & Associates, Inc., bearing Project Number 99-299 ("Existing Survey"). Buyer, at Buyer's expense, shall have ten (10) days from and after the Effective Date to have the Existing Survey modified, updated and recertified to Buyer, Seller, and the Title Company ("Updated Survey"), which Updated Survey shall show the boundaries and legal description of the land depicted on the attached Exhibit "A", certify as to the actual number of acres contained within the perimeters of the Land, and meet the minimum technical standards set forth by Chapter 61G17-6, Florida Administrative Code, and the requirements of Section 627.7842, Florida Statutes ("Standards"), to enable the Title Company to delete or modify the standard survey exception set forth in the Title Commitment. The Surveyor shall (a) show all encroachments, ground improvements, easements reflected on Exhibit "C" or otherwise shown on the Commitment or otherwise visible to Surveyor, the flood zone designation of the Real Property and all ground improvements affecting the Real Property necessary to comply with the Standards. In the event that either the Survey shows any encroachments of and improvements upon, from, or onto the Real Property, or an easement not disclosed by the Permitted Exceptions, or shows any evidence of use which indicates that an unrecorded easement may exist
4.
except as may be disclosed by the Permitted Exceptions or otherwise acceptable to Buyer, in Buyer's sole discretion, Buyer shall deliver written notice to that effect to Seller upon the later of (i) the expiration of the Inspection Period, or (ii) five (5) days following delivery of the Updated Survey. Seller shall have the same option to cure and curative period with respect to objections to the Updated Survey as is described in Paragraph 6, above. If Buyer fails to deliver written notice to Seller of any survey defects within such survey review period, Buyer shall be deemed to have waived any Survey defects.
8. Property Sold "As-Is"; Disclaimer of Warranties. Except as expressly provided in this Contract, Seller makes no representations or warranties of any kind whatsoever to Buyer. Buyer acknowledges and agrees as follows:
(a) Reliance on Own Investigations. Buyer hereby acknowledges and agrees that has been given the opportunity to inspect the Property as Buyer sees fit, and Buyer shall rely solely on such investigations and not on any information furnished by Seller in making Buyer's decision to purchase or not purchase the Property. Buyer further acknowledges and agrees that any information concerning the Property furnished by Seller was obtained from a variety of sources and that Seller did not and is not required to make any independent investigation or verification of any such information with respect to accuracy, completeness or any other matter.
(b) Assumption of Risk. From and after the Closing, Buyer hereby assumes all risks associated with ownership of the Property and any defects that may be located thereon or associated therewith of any the or nature whatsoever, and Buyer shall be solely responsible for and shall indemnify, protect, defend and hold Seller harmless from, all costs (including attorneys fees and court costs), expenses and all other claims incurred in or associated with such ownership and with the presence, removal or repair of any such defect. The foregoing indemnity shall not apply to any claims against Seller by third parties which accrue prior to the Closing.
(c) General Release and Waiver. Buyer acknowledges and agrees that the unconditional "as is" nature of this transaction is a material inducement to Seller to enter into this Contract and to sell the Property to Buyer at the Purchase Price and upon the other terms and conditions set forth herein. As further consideration and material inducement to Seller, Buyer, on behalf of its principals, agents, successors and assigns, forever releases and discharges Seller, and Seller's officers, directors, shareholders, principals, agents, successors and assigns, from and against all claims, causes of action, losses, costs, damages, liabilities, and expenses of any kind which Buyer or any such other persons may now or at any time hereafter incur or realize in any manner from the Property, this Contract, and/or any matter arising herefrom or from the transactions contemplated hereby. Buyer has consulted with independent counsel of its choice regarding this Contract and the foregoing release and is knowingly and voluntarily entering into this Contract and agreeing to each provision hereof.
5.
The provisions of this Paragraph 8 shall survive the Closing.
9. Closing Date. The Closing shall take place at the offices of Darryl A. Tompkins, P.A. in Alachua County, Florida, on March 30, 2000, time being of the essence.
10. Closing Costs. Seller shall pay the premium for the owner's title insurance policy and all search costs incidental to issuance of the Commitment, and for documentary stamps on the deed. Buyer shall pay for the Updated Survey, and any required updates thereto, for recording the deed, and any additional title insurance endorsements requested by Buyer. Seller and Buyer shall each pay their own attorneys' fees and legal assistants' fees in connection with negotiating and closing this transaction.
11. Seller's Closing Documents and Deliveries.
(a) The Special Warranty Deed from Seller conveying the Property to Buyer, subject to the lien for real property taxes and assessments for the year of closing and subsequent years, the rights of parties in possession under unrecorded leases, and the Permitted Title Exceptions, together with the Florida Department of Revenue Form D-219;
(b) An affidavit of an appropriate officer of Seller to permit the deletion of the construction lien exception and the "gap" exception from the Title Commitment and final title insurance policy, and to replace the parties in possession exception with the rights of tenants in possession under the Leases in effect as of Closing.
(c) Closing statements;
(d) A non-foreign affidavit as contemplated by 26 USCS Section 1445, as amended (the "FIRPTA Affidavit");
(e) a Termination of the existing Lease between Seller and Buyer, together with the security deposits in Seller's possession, in form reasonably acceptable to Seller ("Lease Termination");
(f) Originals of the Service Contracts, which Service Contracts shall be all of the Service Contracts set forth in Exhibit "B" attached hereto, together with letters to each service contractor from Seller advising each of them of the sale of the Property and, the transfer of its contract;
(g) A Bill of Sale conveying all of Seller's right, title and interest in and to the Tangible Personal Property, in its "AS-IS, WHERE-IS" condition, without representation or warranty of fitness or condition;
(h) Possession of the Property.
6.
12. Buyer's Closing Documents and Deliveries. At Closing, Buyer shall deliver to Seller the following:
(a) The balance of the Purchase Price as provided in Section 3 of this Contract, subject to prorations provided for in this Contract;
(b) Closing statements;
(c) A Lease Termination Agreement.
13. Representations and Warranties of Buyer.
In the event Buyer assigns its rights under this Contract to a corporation or a limited liability company, Buyer shall then represent and warrant to Seller, at the time of such assignment, that it is a duly organized Florida limited liability company or corporation, validly existing and in good standing, and is duly authorized and has all requisite power and authority to execute this Contact and to consummate the transactions contemplated herein.
14. Representations and Warranties of Seller. Seller hereby represents and warrants to Buyer that:
(a) Seller is a duly organized Florida corporation, validly existing and in good standing, and is duly authorized and has all requisite power and authority to execute this Contract and to consummate the transactions contemplated herein. Seller further represents and warrants that the officer of Seller who is executing this Contract and the documents to be delivered by Seller at Closing has been duly authorized to do so by all necessary corporate action of Seller. Seller's execution of this Contract and the performance by Seller of its obligations hereunder do not and will not violate or breach any document, instrument, agreement, order, rule, or regulation by which Seller or the Property is bound or subject. If and to the extent, Seller transfers the Property and assigns this Contract to a third party ("Assignee") prior to the closing, Seller shall cause this representation and warranty to be restated, as appropriate, for the status of the Assignee.
(b) There are no suits, actions or proceedings pending against or affecting Seller which may in any way adversely affect the Property or the transaction provided herein; before or by any court or administrative agency or officer, or, to Seller's knowledge, threatened, and, to Seller's knowledge, Seller is not in default with respect to any judgment, order, writ, injunction, rule or regulation of any court, or governmental agency to which it may be subject, in any way that may adversely affect the Property or the transaction provided herein.
(c) Seller represents and warrants that it has complete and fall authority to convey to Buyer the Property unencumbered by any right of first offer or right of first refusal.
7.
(d) There are no pending or, to Seller's knowledge, threatened actions or proceedings to condemn all or any portion of the Property.
(e) To Seller's knowledge, except as disclosed on the attached Exhibit "D" and except as may be disclosed in that certain report prepared by Matrix Compliance Services, Inc., dated as of August 19, 1999, no Hazardous Materials (as hereinafter defined) have ever been dumped, discharged or otherwise disposed of nor are any of the same located on the Property. The term "Hazardous Materials" as used herein includes hazardous materials, hazardous wastes, hazardous or toxic substances, polychlorinated biphenyls or related or similar materials, or any other substance or material in such quantities as may be defined as a hazardous or toxic substance by any federal, state or local environmental law, ordinance, rule, or regulation including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Sections 9601, et seq.), the Hazardous Materials Transportation Act, as amended (49 U.S.C. Sections 1801, et seq.), the Resource Conservation and Recovery Act, as amended (42 U.S.C. Sections 1251 et seq.), the Clean Air Act (42 U.S.C. Sections 7401 et seq.), Chapter 376, Florida Statutes, and in the regulations adopted and publications promulgated pursuant thereto.
(f) The Property is part of a development of regional impact development order, entitled "Progress Center Development of Regional Impact". To Seller's knowledge, except as may be disclosed in that certain Memorandum dated August 17, 1999, prepared by Nancy G. Linnan of Carlton Fields ("DRI Memo"), the Property is in material compliance with all Progress Center DRI, as amended. To Seller's knowledge, the Property is not vested against concurrency on certain regional facilities, and that such concurrency is determined as such time an owner of the Property or any portion thereof, seeks a building permit, as more particularly set forth in the DRI Memo. The current zoning classification of the Property will permit all of the uses granted to the Property under the Progress Center DRI, as amended, including PUD zoning classification.
(g) As of the Effective Date, there are no leases or service contracts affecting the Real Property or any portion thereof which will survive the Closing, other than the Service Contacts. There are no management contracts that affect the Property that will survive the Closing.
As utilized in this Paragraph 11, the term "Seller's knowledge" shall mean the actual present knowledge of Darryl A. LeClair, Sandy Burgess, and Mark Stroud, without having conducted any independent investigation, inquiry or review.
It shall be a condition to Buyer's obligations hereunder that the foregoing covenants and representations of Seller shall be true as of the date of Closing. The foregoing representations of Seller shall survive the Closing, provided that any action or claim based upon the failure of the representations or warranties set forth hereinabove must be commenced within six months following the Closing. In the event that Seller has made a representation herein which, at the time and in the light of circumstances under which it is made, is false or misleading with respect to any material fact,
8.
or omits to state any material fact necessary in order to make any statement contained therein not false or misleading in any material respect, and Buyer has knowledge of such misrepresentation prior to Closing, then Buyer, as Buyer's sole remedy, may elect to terminate this Contract whereupon the Deposit shall be returned to Buyer. In the event any of Seller's representations or warranties shall prove to be false or incorrect and Buyer becomes aware of such false or incorrect representations after Closing and within the time period provided in this Section 14, Buyer shall have the right to collect from Seller its actual damages on account thereof up to a maximum of Fifty Thousand and 00/100 Dollars ($50,000.00).
15. Affirmative Covenants of Seller.
(a) From and after the expiration of the Inspection Period until Closing, Seller shall not execute or record any leases or modifications thereto, or any mortgages or liens encumbering the Real Property, without the prior written consent of Buyer, which consent shall not be unreasonably withheld or delayed. Seller reserves the right, in its usual and customary course of business, to amend, modify or terminate any of the Leases or to enter into new Leases during the Inspection Period, and Seller agrees to deliver to Buyer copies of any such instruments within two (2) business days following the full execution of such instruments, but in all cases prior to the expiration of the Inspection Period.
(b) Seller agrees to continue to maintain the Property and all of its improvements, parking areas and landscaping in the same fashion and condition as in existence as of the Effective Date.
(c) Seller agrees to immediately notify Buyer in the event Seller receives any written notice of the commencement of any legal action or proceeding that affects the Property or the transaction contemplated by this Agreement, or in the event that Buyer receives written notification that the Property is not in compliance with any applicable governmental rule or regulation.
(d) Seller shall maintain the Property in material compliance with the Declaration.
16. Affirmative Covenants of Buyer.
(a) Buyer acknowledges and understands that the chiller system located within the Building located on the Real Property also serves to furnish the chilled water to building located in the commercial park and owned by Seller. In addition, the pump and irrigation wells to furnish irrigation to portions of landscaping to portions of the commercial park are also located on the Real Property. Buyer also acknowledges that Seller has entered into a contract to sell the remainder of the commercial park to Phil Hawley or its assigns. Buyer acknowledges and agrees that it shall negotiate, in good faith, with either Seller or Seller's successors-in-title, an agreement to permit and maintain the continuing chilled water service to the adjacent other building(s) in the park in
9.
exchange for a commercially reasonable fee, and to grant an easement to Seller or its successor-in-title or assign for the maintenance, replacement, repair and operation of the irrigation system so located on the Real Property.
17. Conditions to Closing. The respective obligations of the parties to consummate the Closing is subject to the satisfaction of each of the following conditions prior to Closing:
(a) Seller shall have obtained and delivered to Buyer a letter or certificate from the City of Alachua or other governmental agency having jurisdiction over the Property that the Property is in material compliance with the Progress Center DRI. In addition, if so required by the terms of the Progress Center DRI, Buyer shall be approved as an acceptable developer by such agency having jurisdiction thereover.
(b) Seller shall not have received any written notice from any governmental agency of any pending or threatened condemnation or taking, or that the Property is in violation of any applicable code, rule or ordinance.
(c) Seller and Phil Hawley shall have entered into an amendment to the Hawley Contract to release the Property subject to the terms of this Contract from the terms and conditions of the Hawley Contract.
In the event that any of the above-stated conditions have not been or are not fulfilled at or prior to Closing, then either party may terminate this Agreement, whereupon the Deposit shall be refunded to Buyer and all rights and obligations arising hereunder shall cease.
18. Buyer's Default. If Buyer fails to consummate the purchase and sale of the Property in accordance with the terms and conditions of this Contract, then the Deposit shall be delivered by Escrow Agent to and retained by Seller as agreed to and liquidated damages, and in full settlement of all claims by Seller for such failure. This shall be Seller's sole remedy in the event of Buyer's breach or default hereunder.
19. Seller's Default. If Seller defaults in the performance of its obligations under this Contract, then, at the option of Buyer, (a) Buyer may terminate this Contract and, upon such termination, Buyer shall be entitled, on demand, to the return of the Deposit paid by Buyer, or (b) Buyer shall have only the right of specific performance without diminution in the Purchase Price. These shall be the sole remedies of Buyer in the event of Seller's breach or default hereunder.
20. Damage or Destruction. Seller agrees to provide Buyer with prompt written notice of any damage to or destruction of the Property of which Seller has knowledge. In such event the parties' rights and obligations shall be as follows:
(a) If the "Repair Cost" is ten percent (10%) of the Purchase Price or less, then (i) at Closing, Buyer shall accept the Property subject to such damage or destruction, (ii) the
10.
Purchase Price shall be reduced by the amount of the Repair Cost, and
(iii) Seller shall retain the right to all proceeds of insurance. As used
herein, the term "Repair Cost" means an estimate of the actual cost to
repair the damage attributable to such damage or destruction and obtained
by Seller within thirty (30) days following the event of damage or
destruction from a reputable, licensed independent contractor selected by
Seller and licensed to do business in the jurisdiction in which the
Property is located.
(b) If the Repair Cost exceeds ten percent (10%) of the Purchase
Price, then either Buyer or Seller shall have the right to terminate this
Contract, exercisable by giving written notice to the other party of such
election within thirty (30) days after the determination of the Repair
Cost, whereupon the Deposit shall be returned to Buyer with all interest
accrued thereon. If neither party exercises such termination right, then
(i) Buyer shall accept the Property at Closing subject to such damage or
destruction, (ii) the Purchase Price shall be reduced by the amount of the
Repair Cost, and (iii) Seller shall retain the right to all insurance
proceeds.
21. Attorneys' Fees. In the event either party is required to interpret or enforce this Contract against the other, the prevailing party in any litigation or other proceeding shall be entitled to recover, in addition to any other remedy, its reasonable attorneys' fees, legal assistants' fees and costs: and court costs, including those incurred on appeal and in bankruptcy or creditor's reorganization proceedings.
22. Prorations. The following items shall be paid. apportioned, and prorated (based on the actual number of days in the month in which the Closing Date occurs, assuming the Closing occurs at 12:01 a.m. on the Closing Date) between Seller and Buyer:
(a) Real property taxes for the then-current tax fiscal year shall be prorated based on the current year's tax, with full discount as permitted by law. If the current year's tax is not then available and the Closing occurs at a date when the current year's millage is not fixed and current year's assessment is available, taxes will be prorated based on such assessment and the prior year's millage. If the current year's assessment is not then available, taxes will be prorated on the prior year's tax, with full discount. Any tax proration based on an estimate, at request of either Buyer or Seller, may be readjusted after receipt of the tax bill. This provision shall survive the Closing.
(b) All current installments for certified, confirmed, and ratified special assessment liens as of the Closing Date shall be paid by Seller, and the balance shall be assumed by Buyer. All liens for public improvements pending as of the Closing Date shall be assumed by Buyer.
(c) Sums paid by Seller for fuel, water, and sewer service, and waste collection charges, and charges for electricity, telephone, and all other public utilities shall be prorated at Closing. Seller shall pay all utility bills in Seller's name that are due as of the Closing
11.
Date. Buyer shall arrange for utility service in Buyer's name to commence on the Closing Date. Utility deposits previously paid b Seller shall be returned to Seller.
(d) Rents and refundable security deposit (which will be assigned to and assumed by Buyer and credited to Buyer at Closing). This subparagraph of this Contract shall survive the Closing and the delivery and recording of the Deed.
(e) All other usual and customary expenses, revenues, assessments, and other proratable items associated with the ownership, maintenance and operation of the Property shall be prorated as of the Closing Date.
23. Brokers. Seller hereby (i) warrants and represents to Buyer that it has had no dealings with any person or entity from which a valid claim for any brokerage commission or similar fee could arise in connection with this Contract or the transactions contemplated hereby; and (ii) agrees to defend. indemnify and hold Buyer harmless from and against any claim by any third parties for brokerage, commission, finders' or other fees relative to this Contract or the sale of the Property and alleged to be due by authorization of, or as a result of any actions taken by, Seller or its agents. together with any court costs, attorneys' fees or other costs or expenses arising therefrom. Buyer hereby (i) warrants and represents to Seller that it has had no dealings with any person or entity from which a valid claim for any brokerage commission or similar fee could arise in connection with this Contract or the transactions contemplated hereby; and (ii) agrees to defend, indemnify and hold Seller harmless from and against any claim by any third parties for brokerage, commission, finders' or other fees relative to this Contract or the sale of the Property and alleged to be due by authorization of, or as a result of any actions taken by, Buyer or its agents, together with any court costs, attorneys' fees or other costs or expenses arising therefrom. The representations, warranties and indemnification obligations set forth in this Paragraph shall survive the Closing.
24. Condemnation. If at any time prior to the delivery of the executed Deed of conveyance to Buyer as herein provided, the Real Property or any portion thereof is taken by eminent domain, or if any preliminary steps in any taking by eminent domain of the Real Property any part thereof occurs prior to such deliver or recording, Buyer may, at its option, within ten (10) days after receipt of written notice of such fact from Seller, rescind this Contract, and upon such rescission all monies deposited by Buyer under the terms hereof, together with all interest earned thereon, shall be returned to Buyer upon demand and thereupon all rights and liabilities arising hereunder shall terminate. Seller shall notify Buyer in writing of any such taking by eminent domain and all steps preliminary thereto as soon as the Seller has knowledge thereof. In the event Buyer does not elect to rescind this Contract under such circumstances, Buyer shall be entitled to all proceeds received or to be received from any condemning authority, and Seller shall (i) pay to Buyer at closing all such proceeds received by Seller, and (ii) assign to Buyer at closing all such proceeds to be thereafter received from any condemning authority by instrument of assignment in form reasonably acceptable to Buyer.
12.
25. Entire Agreement. No agreements, representations or warranties, unless expressly incorporated or set forth in this Contract, shall be binding upon any of the parties. Neither the Closing hereunder nor any termination of this Contract shall extinguish or otherwise impair any indemnification obligations for which provision is made herein, regardless of whether or not the provision imposing any such obligation expressly so states. All of the covenants, warranties and representations set forth in this Contract shall be merged with the Deed and shall not survive Closing (or any termination of this Contract), unless and to the extent such covenant, warrant, and representation is expressly provided to survive such Closing or termination of this Contract.
26. Successors and Assigns; Singular and Plural Usages. The covenants contained herein shall bind, and the benefits and advantages shall inure to, the respective successors and assigns of the parties hereto. Seller reserves the right to transfer the Property to a third party prior to closing, together with an assignment to and assumption by such third party, of all of the benefit and obligations of Seller under this Contract, whereupon Seller and Buyer each acknowledge and agree that Buyer shall look to both Seller and to such third party transferee for the performance and fulfillment of the obligations of the seller under this Contract. Whenever used herein, the singular number shall include the plural, the plural the singular, and the use of any gender shall include all genders.
27. Notification. Any notice, demand, consent, approval or other communication to be given to or served upon any party hereto, in connection herewith, must be in writing, and may be given by facsimile transmission, certified mail return receipt requested or guaranteed overnight delivery service. If a notice is delivered by United States Mail, it shall be deemed to have been given and received two (2) days following the deposit of a certified letter containing such notice, properly addressed, with postage prepaid, with the United States Mail. If delivered by facsimile transmission or by guaranteed overnight delivery service, it shall be deemed to have been given and received the same day that the notice is faxed or delivered into the custody of the overnight delivery service. If the notice is given otherwise than by certified mail, facsimile transmission or guaranteed overnight delivery service, it shall be deemed to have been given when delivered to and received by the party to whom it is addressed. Notices shall be given to the parties hereto at the following addresses:
IF TO BUYER: Regeneration Technologies, Inc.
WITH A COPY TO: Marvin W. Bingham, Jr., P.A.
14811 NW 140th St.
P.O. Box 1930
Alachua, FL 32616-1930
Attn: Marvin W. Bingham, Jr., Esquire
Telephone: (904) 462-5120
Telecopy: (904) 462-1996
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13.
IF TO SELLER: Echelon International Corporation
450 Carillon Parkway Suite 200
St. Petersburg, Florida 33716
Attn: Mark Stroud
Telecopy: (727) 803-8202
WITH A COPY TO: Trenam, Kemker, Scharf, Barkin, Frye, O'Neill, & Mullis,
Professional Association
101 East Kennedy Boulevard
2700 Barnett Plaza
Tampa, Florida 33602
Attn: Mary H. Quinlan, Esquire
Telephone: (813) 223-7474
Telecopy: (813) 229-6553
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Failure or refusal of Seller or Buyer to accept delivery of or to claim a notice that is required by the terms of this Contract to be received by the party for which intended will not invalidate such notice, and such notice will be effective and will be deemed received an the date of the refusal or failure to claim the notice by the party for which intended. Any party hereto may change its address for the service of notice hereunder by delivering written notice of said change to the other parties hereunder. Any notice required or permitted hereunder may be given by the attorney for a party to this Contract.
28. Escrow Instructions. Escrow Agent shall incur no liability whatsoever in connection with its good faith performance as Escrow Agent hereunder. The parties hereby jointly and severally release and waive any claims they may have against Escrow Agent which may result from its performance in good faith of such function hereunder, specifically including, but not limited to, any delay in the electronic wire transfer of funds. In its capacity as Escrow Agent hereunder, Escrow Agent shall be liable only for loss or damage caused directly by its acts of gross negligence or intentional misconduct while performing the duties attendant thereto.
In the event of any disagreement between the parties resulting in conflicting instructions to, or adverse claims or demands upon, Escrow Agent with respect to the release of any escrowed funds or documents, Escrow Agent may refuse to comply with any such instruction, claim or demand so long as such disagreement shall continue, and in so refusing Escrow Agent shall not be obligated to release such funds or documents. Escrow Agent shall not be or become liable in any way for its failure or refusal to comply with any such conflicting instructions, or adverse claims or demands, and it shall be entitled to continue to refrain from acting until such conflicting instructions, or adverse claims or demands (i) have been adjusted by agreement and Escrow Agent has been notified in writing thereof by the parties, or (ii) have finally been determined in a court of competent jurisdiction. In the alternative, Escrow Agent shall have the right to interplead the Deposit with the Clerk of the Circuit Court of Alachua County. Florida, and upon notifying both Seller and Buyer of
14.
such action, all liability of Escrow Agent hereunder shall terminate, except to the extent of accounting for the Deposit.
In the event of any suit between Seller and Buyer wherein Escrow Agent is made a party by virtue of acting as escrow agent hereunder, or in the event of any suit wherein Escrow Agent interpleads the Deposit, Escrow Agent shall be entitled to recover reasonable fees (including but not necessarily limited to fees for the services of attorneys and legal assistants) and costs incurred, with such fees and costs to be charged and assessed as court costs in favor of the prevailing party.
Bu7yer acknowledges that Escrow Agent has acted as Seller's legal counsel in connection with the negotiation and preparation of this Contract, and agrees that Escrow Agent's capacity as escrow agent hereunder shall not disqualify Escrow Agent from representing Seller in connection with any matters evidenced or contemplated hereby or related hereto, including any litigation arising hereunder.
29. Time. Time is of the essence of this Contract and of each of its provisions. Unless otherwise expressly provided in this Contract, any reference herein to time periods of fewer than seven (7) days will in the computation thereof exclude Saturdays, Sundays and all legal holidays. Notwithstanding any provision of this Contract to the contrary, any time period which ends on a Saturday, Sunday or legal holiday will automatically extend to 5:00 p.m. of the next full day which is not a Saturday, Sunday or legal holiday. Wherever used in this Contract, the term "Business Days" will mean Monday through Friday. excluding legal holidays as expressly so defined in Florida Statutes Chapter 683 (1997).
30. Effective Date. The "Effective Date" shall be the date of the later of the execution date of this Contract by Seller and Buyer.
31. Multiple Originals. This Contract may be executed in multiple counterparts, each of which shall be deemed for all purposes to be an original, but all of which shall constitute one and the same contract. At least one full executed original of this Contract shall be delivered to each of Seller, Buyer and Escrow Agent.
32. Radon Gas. As required by applicable Florida statute, Seller hereby discloses to Buyer the following:
Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from your county public health unit.
15.
33. Controlling Law. This Contract shall be construed, governed, interpreted and enforced in accordance with the laws of the State of Florida.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals effective as of the later of the dates of execution hereof by Seller and Buyer.
Signed, sealed and delivered SELLER:
in the presence of:
ECHELON INTERNATIONAL
CORPORATION, a Florida corporation
/s/ Sharon McBride By: /s/ Julio A. Maggi
-------------------------------- -----------------------------------------
JULIO A MAGGI, Vice President
/s/ [ILLEGIBLE] Date: 31 JAN , 2000
-------------------------------- -----------------
As to Seller
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BUYER
/s/ [ILLEGIBLE] Date: 1/31/00 , 2000 -------------------------------- ----------------- As to Buyer |
JOINDER
The undersigned Escrow Agent joins in the execution of this Contract to agree to comply with the obligations of Escrow Agent hereunder.
TRENAM KEMKER SCHARF BARKIN FRYE
O'NEILL & MULLIS, P.A.
16.
EXHIBIT "A"
[SKETCH OR LEGAL DESCRIPTION OF PROPERTY]
LEGAL DESCRIPTION - EB&TP
Parcel "C" of 'REPLAT OF PROGRESS CENTER' as per plat thereof recorded in Plat Book P, pages 48 and 49 of the Public Records of Alachua County, Florida.
Exhibit B Service and Maintenance Agreements Echelon Business and Technology Park
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30 Day Termination
Vendor Description Amount Clause Date
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W W Gay Mechanical Preventive Maint on
Mechanical Equipment $7,492.00 per year Yes Oct-00
(Applies to both - can easily be split)
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York International Preventive Maint on
Bldg 2 Chillers $4,860.00 per year No Feb-00
Building 2 Only
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Premier Water Chemical for Cooling
Towers $17,184.00 per year Yes 9/15/00
Applies to both - can be split
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Boone Waste Solid Waste disposal $565.00 per month No Feb-00
Building 1 Only
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Quality Carpet/Janitorial Cleaning Service $3,620.00 per month Yes Dec-99 (has been re bid but no
contract has been signed
Building 1 Only for 2000)
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Earthgroomers Landscaping $6,400.00 per month Yes Dec-99 (has been re bid but no
contract has been signed
All properties - can be split for 2000)
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Jacksonville Sound Alarm Monitoring $75.00 per month Yes Until notice is given
Can be split
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EXHIBIT "C"
[EXISTING PERMITTED EXCEPTIONS]
1. General or special taxes and assessments for the year of closing and all subsequent years.
2. "Progress Center Unit I Declaration of Covenants and Restrictions" dated March 19, 1985, and recorded in the Public Records of Alachua County, Florida, in Official Records Book 1588. Page 2207, as modified and amended by that certain First Amendment to Progress Center Unit 1 Declaration of Covenants and Restrictions dated February 12, 1990, and as further amended and modified pursuant to the terms of the "Second Amendment" recorded in O.R. Book 2161, Page 1701, all as recorded in the Public Records of Alachua County, Florida, in Official Records Book 1762, Page 1883, as joined in by Eye Research Laboratory, Inc., in that certain Joinder in Declaration and Restrictions dated March 18, 1985, and recorded in the Public Records of Alachua County, Florida, in Official Records Book 1588, Page 2205, (collectively, the "Declaration").
3. Any easements, restrictions or other matters as shown on the Replat of Progress Center, Plat Book P, Page 49, as recorded in Alachua County, Florida.
4. Easement from Context Development Company to City of Alachua, recorded in O.R. Book 1241, Page 113;
5. Terms and conditions of Agreement executed by and between Apalachee Development and the State of Florida D.C.A, recorded in O.R. Book 1605, Page 1374; amendment thereto recorded in O.R. Book 1617, Page 613;
6. Terms and conditions set forth in Notice of Development Order approving the Development of Regional Impact known as Progress Center recorded in O.R. Book 1692, Page 1378, as amended ("Progress Center DRI"):
7. Easement from Talquin Development Company, successor of Apalachee Development Company, to City of Alachua, Florida, recorded in O.R. Book 1668, Page 982;
8. Distribution Right of Way easement from Talquin Development Company to Clay Electric Cooperative, Inc. recorded in O.R. Book 1751, Page 1007;
9. Easement from Talquin Development Company to City of Alachua, recorded in O.R. Book 1822, Page 727;
10. Terms and conditions set forth in Drainage Easement Agreement recorded in O.R. Book 1830, Page 345;
11. Easement from Talquin Development Company to City of Gainesville recorded in O.R. Book 1870 Page 2987;
12. Easement from Talquin Development Company to the Board of Trustees of the Internal Improvement Trust Fund of the State of Florida recorded in O.R. Book 1993, Page 358;
13. Public Utilities and Drainage Easement shown on the Progress Center Plat recorded in Plat Book M, Page 82;
14. Twenty (20) foot drainage easement set forth in Warranty Deed recorded in O.R. Book 1959;
15. Rights of tenants under unrecorded Leases.
All recording in the public records of Alachua County, Florida
EXHIBIT "D"
Seller advises Buyer that on or around 1990, some anti-freeze material was released from a chiller line. Seller voluntarily caused the removal of all of the contaminated soils to the county landfill. Seller advised the local office of environmental protection for Alachua County of the incident. A representative of the agency visited the site of the spill and verbally advised Seller of Its acceptance of the condition and clean-up.
February 17, 2000
Legal Description
For: Regeneration Technologies, Inc.
A portion of Government Lots 1 and 2 in Section 24, Township 8 South, Range 18 East, and being a portion of Replat of Progress Center as per plat thereof recorded in Plat Book "P", pages 48 and 49 of the Public Records of Alachua County, Florida; all lying and being in the City of Alachua, Alachua County, Florida and being more particularly described as follows:
Parcel C of Replat of Progress Center as per plat thereof recorded in Plat Book P, pages 48 and 49 of the Public Records of Alachua County, Florida.
Containing 6.20 acres (269,847 square feet), more or less.
2404 NW 43RD STREET o GAINESVILLE, FLORIDA 32606-6602 o
TEL. (352) 373-3541 o FAX (352) 373-7249
February 17, 2000
Legal Description
For: Regeneration Technologies, Inc.
A portion of Government Lots 1 and 2 in Section 24, Township 8 South, Range 18 East, and being a portion of Replat of Progress Center as per plat thereof recorded in Plat Book "P", pages 48 and 49 of the Public Records of Alachua County, Florida; all lying and being in the City of Alachua, Alachua County, Florida and being more particularly described as follows:
PARCEL 1:
Commence at the northwest corner of Parcel C of Replat of Progress Center as per Plat thereof recorded in Plat Book "P", pages 48 and 49 of the Public Records of Alachua County, Florida and run thence North 87(degree)15'29" East along the northerly boundary of said Parcel C, a distance of 135.00 feet; thence South 49(degree)23'12" East along said northerly boundary, a distance of 100.76 feet to the POINT OF BEGINNING (#1); thence continue South 49(degree)23'12" East along said northerly boundary, a distance of 279.24 feet; thence North 70(degree)36'48" East along said northerly boundary, a distance of 23.73 feet to a point on the northwesterly right-of-way line of Innovation Drive (100' R/W), said point being hereinafter referred to as Point A and being on the arc of a curve concave northwesterly and having a radius of 200.00 feet; thence northeasterly along the arc of said curve and along said northwesterly right-of-way line through a central angle of 27(degree)56'18", an arc distance of 97.52 feet to the end of said curve, said arc being subtended by a chord having a bearing and distance of North 56(degree)38'39" East, 96.56 feet; thence North 42(degree)40'31" East, along said northwesterly right-of-way line, a distance of 377.75 feet to a point at the intersection of said northwesterly right-of-way line with the southerly right-of-way line of Research Circle (80' R/W), said point being on the arc of a curve concave southwesterly and having a radius of 560.00 feet; thence northwesterly along the arc of said curve, and along said southerly right-of-way line, through a central angle of 32(degree)05'54", an arc distance of 313.73 feet to the end of said curve, said arc being subtended by a chord having a bearing and distance of North 68(degree)29'48" West, 309.64 feet; thence North 84(degree)32'45" West along said southerly right-of-way line, a distance of 256.00 feet to a point at the northeasterly corner of that certain parcel of land as described in Official Records Book 2264, pages 2522 et seq. of said Public Records; thence South 05(degree)27'15" West along the easterly boundary of said parcel (OR 2264, pgs 2522 et seq.), a distance of 296.09 feet to the POINT OF BEGINNING.
TOGETHER WITH:
Commence at Point A as described above and run thence South 19(degree)23'12" East, along the easterly boundary of said Parcel C of Replat of Progress Center, and along the southwesterly end of the
2404 NW 43RD STREET o GAINESVILLE, FLORIDA 32606-6602 o
TEL. (352) 373-3541 o FAX (352) 373-7249
right-of-way of Innovation Drive (100' R/W), a distance of 100.00 feet to a point on the southeasterly right-of-way line of said Innovation Drive and the POINT OF BEGINNING (#2); thence South 70(degree)36'48" West along the easterly boundary of said Parcel C, a distance of 23.73 feet; thence South 10(degree)36'48" West along said easterly boundary, a distance of 478.17 feet to a point on the southerly boundary of said Parcel C; thence North 79(degree)23'12" West along said southerly boundary, a distance of 64.00 feet; thence North 13(degree)16'55" West along said southerly boundary, a distance of 86.41 feet; thence North 79(degree)23'12" West, a distance of 290.65 feet to the southwesterly corner of said Parcel C; thence South 02(degree)55'52" West, a distance of 624.31 feet to a point on the northerly right-of-way line of Research Circle (80' R/W), as per deed recorded in Official Records Book 2213, pages 2412 et seq. of said public records; thence South 87(degree)04'08" East along said northerly right-of-way line, a distance of 155.06 feet to the beginning of a curve concave northwesterly and having a radius of 810.00 feet; thence northeasterly along the arc of said curve and along the northerly and westerly right-of-way line of said Research Circle through a central angle of 94(degree)23'11", an arc distance of 1334.36 feet to the end of said curve, said arc being subtended by a chord having a bearing and distance of North 45(degree)44'17" East, a distance of 1188.51 feet; thence North 01(degree)27'18" West along said westerly right-of-way line, a distance of 217.62 feet to the beginning of a curve concave southwesterly and having a radius of 410.00 feet; thence northwesterly along the arc of said curve and along said westerly right-of-way line through a central angle of 41(degree)54'28", an arc distance of 299.89 feet to a point at the intersection of said westerly right-of-way line with the southeasterly right-of-way line of said Innovation Drive, said arc being subtended by a chord having a bearing and distance of North 22(degree)24'33" West, a distance of 293.25 feet; thence South 42(degree)40'31" West along said southeasterly right-of-way line, a distance of 379.00 feet to the beginning of a curve concave northwesterly and having a radius of 300.00 feet; thence southwesterly along the arc of said curve and along said southeasterly right-of-way line through a central angle of 27(degree)56'18", an arc distance of 146.28 feet to the POINT OF BEGINNING, said arc being subtended by a chord having a bearing and distance of South 56(degree)38'39" West, a distance of 144.84 feet.
Containing in aggregate 20.82 acres (907,292 square feet), more or less.
FIRST AMENDMENT TO CONTRACT OF
PURCHASE AND SALE
THIS FIRST AMENDMENT is entered into as of this ____ day of ________, 2000, by and between Echelon International Corporation, a Florida corporation, its successors, successors-in-title, and/or assigns, as "Seller", and Regeneration Technologies, Inc., a Florida corporation, its successors and/or assigns, as "Buyer."
WHEREAS, the parties have entered into that certain Contract of Purchase and Sale dated the 31st day of January, 2000, for the property located in Alachua County, Florida, more particularly described therein; and
WHEREAS, Buyer and Seller have requested an amendment to the Contract of Purchase and Sale.
NOW, THEREFORE, the Buyer and Seller agree as follows:
1. Exhibit "A", the Legal Description, is hereby amended to increase by 20.82 acres of land as described on the exhibit attached hereto to and made a part hereof.
2. Paragraph III, Section 3, is hereby amended to increase the purchase price by $624,600.00 ($30,000.00 x 20.82 acres).
All provisions of the original Agreement not amended herein shall remain unchanged and in full force and effect. This Amendment may be executed in counterparts, via facsimile, and signed counterparts, when combined, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have set their hands and seals this ________ day of _____________, 2000.
In the presence of: "BUYER"
REGENERATION TECHNOLOGIES, INC.,
a Florida corporation
/s/ Robert W. Clark By: /s/ Richard R. Allen
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Printed Name: Richard R. Allen
---------------------------
Its: CFO/Sec/Treas
------------------------------------
/s/ [ILLEGIBLE]
-----------------------------
As to Buyer
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"SELLER"
ECHELON INTERNATIONAL
CORPORATION, a Florida Corporation
By:
----------------------------- -------------------------------------
Printed Name:
---------------------------
Its:
------------------------------------
-----------------------------
As to Seller
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February 17, 2000
Legal Description
For: Regeneration Technologies, Inc.
A portion of Government Lots 1 and 2 in Section 24, Township 8 South, Range 18 East, and being a portion of Replat of Progress Center as per plat thereof recorded in Plat Book "P". pages 48 and 49 of the Public Records of Alachua County, Florida; all lying and being in the City of Alachua, Alachua County, Florida and being more particularly described as follows:
PARCEL 1:
Commence at the northwest corner of Parcel C of Replat of Progress Center as per Plat thereof recorded in Plat Book "P", pages 48 and 49 of the Public Records of Alachua County, Florida and run thence North 87(degree)15'29" East along the northerly boundary of said Parcel C, a distance of 135.00 feet; thence South 49(degree)23'12" East along said northerly boundary, a distance of 100.76 feet to the POINT OF BEGINNING (#1); thence continue South 49(degree)23'12" East along said northerly boundary, a distance of 279.24 feet; thence North 70(degree)36'48" East along said northerly boundary, a distance of 23.73 feet to a point on the northwesterly right-of-way line of Innovation Drive (100' R/W), said point being hereinafter referred to as Point A and being on the arc of a curve concave northwesterly and having a radius of 200.00 feet; thence northeasterly along the arc of said curve and along said northwesterly right-of-way line through a central angle of 27(degree)56'18", an arc distance of 97.52 feet to the end of said curve, said arc being subtended by a chord having a bearing and distance of North 56(degree)38'39" East, 96.56 feet; thence North 42(degree)40'31" East, along said northwesterly right-of-way line, a distance of 377.75 feet to a point at the intersection of said northwesterly right-of-way line with the southerly right-of-way line of Research Circle (80' R/W), said point being on the arc of a curve concave southwesterly and having a radius of 560.00 feet; thence northwesterly along the arc of said curve, and along said southerly right-of-way line, through a central angle of 32(degree)05'54", an arc distance of 313.73 feet to the end of said curve, said arc being subtended by a chord having a bearing and distance of North 68(degree)29'48" West, 309.64 feet; thence North 84(degree)32'45" West along said southerly right-of-way line, a distance of 256.00 feet to a point at the northeasterly corner of that certain parcel of land as described in Official Records Book 2264, pages 2522 et seq. of said Public Records; thence South 05(degree)27'15" West along the easterly boundary of said parcel (OR 2264, pgs 2522 et seq.), a distance of 296.09 feet to the POINT OF BEGINNING.
TOGETHER WITH:
Commence at Point A as described above and run thence South 19(degree)23'12" East, along the easterly boundary of said Parcel C of Replat of Progress Center, and along the southwesterly end of the
2404 NW 43RD STREET o GAINESVILLE, FLORIDA 32606-6602 o
TEL. (352) 373-3541 o FAX (352) 373-7249
right-of-way of Innovation Drive (100' R/W), a distance of 100.00 feet to a point on the southeasterly right-of-way line of said Innovation Drive and the POINT OF BEGINNING (#2); thence South 70(degree)36'48" West along the easterly boundary of said Parcel C, a distance of 23.73 feet; thence South 10(degree)36'48" West along said easterly boundary, a distance of 478.17 feet to a point on the southerly boundary of said Parcel C; thence North 79(degree)23'12" West along said southerly boundary, a distance of 64.00 feet; thence North 13(degree)16'55" West along said southerly boundary, a distance of 86.41 feet; thence North 79(degree)23'12" West, a distance of 290.65 feet to the southwesterly corner of said Parcel C; thence South 02(degree)55'52" West, a distance of 624.31 feet to a point on the northerly right-of-way line of Research Circle (80' R/W), as per deed recorded in Official Records Book 2213, pages 2412 et seq. of said public records; thence South 87(degree)04'08" East along said northerly right-of-way line, a distance of 155.06 feet to the beginning of a curve concave northwesterly and having a radius of 810.00 feet; thence northeasterly along the arc of said curve and along the northerly and westerly right-of-way line of said Research Circle through a central angle of 94(degree)23'11", an arc distance of 1334.36 feet to the end of said curve, said arc being subtended by a chord having a bearing and distance of North 45(degree)44'17" East, a distance of 1188.51 feet; thence North 01(degree)27'18" West along said westerly right-of-way line, a distance of 217.62 feet to the beginning of a curve concave southwesterly and having a radius of 410.00 feet; thence northwesterly along the arc of said curve and along said westerly right-of-way line through a central angle of 41(degree)54'28", an arc distance of 299.89 feet to a point at the intersection of said westerly right-of-way line with the southeasterly right-of-way line of said Innovation Drive, said arc being subtended by a chord having a bearing and distance of North 22(degree)24'33" West, a distance of 293.25 feet; thence South 42(degree)40'31" West along said southeasterly right-of-way line, a distance of 379.00 feet to the beginning of a curve concave northwesterly and having a radius of 300.00 feet; thence southwesterly along the arc of said curve and along said southeasterly right-of-way line through a central angle of 27(degree)56'18", an arc distance of 146.28 feet to the POINT OF BEGINNING, said arc being subtended by a chord having a bearing and distance of South 56(degree)38'39" West, a distance of 144.84 feet.
Containing in aggregate 20.82 acres (907,292 square feet), more or less.
Exhibit 10.9
LEASE
THIS LEASE ("Lease") is entered into and effective as of February 4, 2000 ("Effective Date") by and between ECHELON INTERNATIONAL CORPORATION, a Florida corporation, its successors and assigns ("Landlord"), and REGENERATION TECHNOLOGIES, INC. ("Tenant").
W I T N E S S E T H:
WHEREAS, Landlord and Tenant entered into that certain "Progress Center Lease" dated as of June 30, 1998, which lease was amended to permit Tenant to occupy and lease portions of additional space in the building located at 13709 Progress Boulevard, Alachua, Florida ("Building"), and
WHEREAS, the parties desire to lease additional space in the Building and to supercede and replace, in part, the existing Progress Center Lease as so amended, to the extent the same governed by the terms of leasing space in the Building, with a separate lease agreement;
NOW, THEREFORE, for and in consideration of the sum of Ten and no/100 Dollars ($10.00) paid by Landlord to Tenant, and the mutual covenants and conditions set forth herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that commencing as of the "Effective Date". Landlord agrees to lease to Tenant, and Tenant agrees to lease from Landlord, the "Leased Premises" (as defined in Section 1.1g), subject to the following terms and conditions:
ARTICLE 1. SUMMARY OF LEASE PROVISIONS
1.1. BASIC DATA. Certain fundamental provisions of this Lease are presented in this summary format in this Article to facilitate convenient reference by the parties hereto. All references in this Lease to the following terms shall be accorded the meanings or definitions given in this Article, as though such meaning or definition were fully set forth throughout the text hereof, unless such meanings are expressly modified, limited or expanded elsewhere in this Lease. This Article, together with the terms herein referenced, shall constitute an integral part of this Lease.
(a) "Annual Gross Rent" shall be Fifteen Dollars ($15.00) per rentable square foot, per Lease Year. as scheduled below:
ANNUAL ANNUAL MONTHLY
LEASE GROSS GROSS PAYMENT
YEAR RENT/RSF: RENT: RENT:
1 $15.00 $176,010.00 $14,667.50
2 $15.23 $178,708.80 $14,892.40
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(note: The above schedule does not include any sales or use tax assessed on rental)
(b) "Building" shall mean the building located on certain real property located in the City of Alachua, Alachua County, Florida having a current address of 13709 Progress Boulevard, Alachua, Florida.
(c) "Business Days" shall mean all days, except Saturdays, Sundays, New Year's Day, President's Day, Memorial Day, Independence Day, Christmas Day, Labor Day, Thanksgiving, and other recognized holidays.
(d) "Commencement Date" shall mean the Effective Date of this Lease.
(e) "Default Rate" means interest at the highest rate permitted by Chapter 689, Florida Statutes, or its successor legislation.
(f) "Lease Year" shall mean each twelve (12)-month period beginning on the Commencement Date and each anniversary thereof, provided the Commencement Date is on the first day of a month. If the Commencement Date falls on a day other than the first day of a month, then the first Lease Year shall begin on the first day of the calendar month next following the Commencement Date. If the Commencement Date falls on a day other than the first day of a month, then the Term shall be extended by the period of time ("Partial Lease Year") from such Commencement Date through the end of the calendar month in which the Commencement Date falls.
(g) "Leased Premises" shall be deemed to mean approximately 11,734 square feet of rentable area, which area shall be located in Suites 130, 135, 1-7, 102 113 and 144 in the Building, which Building is located in Progress Center and depicted on the site plan attached hereto and made a part hereof as Exhibit "A".
(h) "Normal Business Hours" shall mean from 8:00 am, to 500 p.m. during all Business Days.
(i) "Rentable Area" or "Rentable Square Footage" shall mean the total area (as it exists from time to time). Rentable Area of the Leased Premises is hereby deemed to mean 11,734 square feet.
(j) "Term" shall mean two (2) Lease Years (plus a Partial Lease Year, if applicable) commencing on the Commencement Date and ending at 11:59 p.m. on the last day of the twenty-fourth (24th) full calendar month following the Commencement Date ("Expiration Date") or on such earlier date in which the Term of this Lease shall expire or be canceled or terminated pursuant to any of the conditions or covenants of this Lease or pursuant to law, and furthermore, shall include any renewal term, if such renewal term come into existence.
(k) "Use" shall mean general office use, activities relating to the procurement, processing, packaging, storage, and shipment of human tissue, and laboratory use, biomedical and medical device research, manufacturing and distribution, and for no other purpose whatsoever.
ARTICLE 2. LEASED PREMISES AND TERM
2.1. Leased Premises. Subject to the rent, terms and conditions herein set
forth, Landlord hereby leases to Tenant and Tenant hereby rents from Landlord
the Leased Premises, subject to the terms and provisions of this Lease to have
and to hold for the Term, unless the Term shall be sooner terminated as
hereinafter provided. In addition, if and to the extent there are other third
party tenants occupying a portion of the Building, then Tenant shall have the
general and non-exclusive right to use the Common Area subject to the terms and
conditions of this Lease. For purposes of this Lease, Common Area shall include
all areas, improvements, facilities and equipment from time to time designated
by Landlord for the general and nonexclusive common use or benefit of Tenant,
other tenants of the Building, Landlord, and their respective officers,
partners, directors, employees, agents, licensees, contractors, customer and
invitees, to the extent customers and invitees are under the principals control
or direction, including the following: (1) any areas in the Building devoted to
lobbies, hallways, rest rooms, janitorial closets, mailrooms, and other similar
facilities provided for the common use or benefit of tenants generally and/or
for the public located in the Building (but shall not include any such areas
designated for the exclusive use or benefit of a particular tenant); (ii)
portions of the Building used for mechanical rooms, electrical facilities,
telephone closets, fire towers and building stairs (but shall not include any
such areas designated for the exclusive use or benefit of a particular tenant);
(iii) vents, stacks, pipe shafts and vertical ducts; and (iv) those portions of
the Building which are provided and maintained for the common use and benefit of
Landlord and tenants of the Building only and employees and invitees and
licensees of Landlord and such tenants; including, without limitation, all
atriums, walkways, parking areas, and all streets, sidewalks and landscaped
areas appurtenant to the Building.
2.2. Landlord's Reservation Landlord shall retain absolute dominion and control over the Common Area and shall operate and maintain the Common Area in such manner as Landlord in its sole discretion, shall determine; provided, however, such exclusive right shall not operate to prohibit Tenant from its material benefit and enjoyment of the Lease Premises for the permitted Use as defined in Section 1(o). Tenant acknowledges
that without advance notice to Tenant and without any liability to Tenant in any respect, Landlord shall have the right to:
(a) Close off any of the Common Area to whatever extent required in the opinion of Landlord to prevent a dedication of any of the Common Area or the accrual of any rights by any person or the public to the Common Area, provided such closure does not materially deprive Tenant of the benefit and enjoyment of the Leased Premises for its permitted use;
(b) Temporarily close any of the Common Area for maintenance, alteration or improvement purposes;
(c) Select, appoint or contract with any person for the purpose of operating and maintaining the Common Area, on such terms and conditions as Landlord deems reasonable;
(d) Change the size, use, shape or nature of any such Common Area, provided such change does not materially deprive Tenant of the benefit and enjoyment of the Leased Premises. So long as Tenant is not thus deprived of the use and benefit of the Leased Premises, Landlord will also have the right at any time to change the arrangement or location of, or both, or to regulate or eliminate the use of any concourse or any stairs, toilet or other public conveniences in the Building, without incurring any liability to Tenant or entitling Tenant to any abatement of rent;
(e) Expand the existing Building to cover a portion of the Common Area, convert the Common Area to a potion of the Building or convert any potion of the Building (excluding the Leased Premises). Upon erection of any buildings or expansion of the Building, or change in Common Area, the potion of the Building upon which such structures have been erected will no longer be deemed to be a part of be Common Area. In the event of any such changes in the size or use of a building or Common Area. Landlord may make an appropriate adjustment in the rentable square feet of the Building.
(f) In addition to the other rights of Landlord under this Lease, Landlord
reserves to itself and its respective successors and assigns the right to:
(i) change the street address and/or name of the Building; (ii) erect, use
and maintain pipes and conduits in and through the Leased Premises; (iii)
control the use of the roof and exterior walls of the Building; and (iv)
use Tenant's name in promotional materials (featuring Tenant only) and
relating to the Building or Progress Center, with written permission from
Tenant, which permission shall not be unreasonably withheld (it being
understood that Landlord shall have the right, without obtaining the
consent of Tenant, to use Tenant's name in promotional materials that
feature a list of all or major tenants of the Building and/or Progress
Center). Landlord may exercise any or all of the foregoing rights without
being deemed to be guilty of an eviction or disturbance or interruption of
the business of Tenant or Tenant's use or occupancy of the Leased
Premises.
2.3. Term. The Term of this Lease shall commence on the Commencement Date
as defined in Section 1, above, and shall extend to the last day of the second
(2nd) Lease Year at 11:59 p.m. or on such earlier date on which the term of this
Lease may expire or be terminated pursuant to the provisions of this Lease or
pursuant to law.
ARTICLE 3. RENT AND SECURITY DEPOSIT
3.1. Rent. Tenant agrees to pay to the order of Landlord, without demand, set-off or deduction during the Term, the Annual Gross Rent, in an amount equal to the sums specified in Section 1.1(a). The Annual Gross Rent shall be due and payable in twelve (12) equal monthly installments, in advance, commencing on the Commencement Date and continuing on the first day of each and every subsequent calendar month during the Term, in the amount as scheduled in Section 1.1(a); provided, however, that the installment of the Annual Gross Rent payable for the first full calendar month following the Commencement Date (and if the Commencement Date occurs on a date other than on the first day of a calendar month, the installment of Annual Gross Rent prorated from such date until the first day of the following month) shall be due and payable at the time of execution and delivery of this Lease. Tenant shall pay the Annual Gross Rent by good check or in lawful currency of the United States of America. All forms of Rent due under this Lease shall be paid to Landlord at c/o Echelon Real Estate Services, Inc., 13709 Progress Boulevard, Alachua, Florida or such other location as Landlord may designate in writing from time to time.
3.2. Late Payment Charge. Tenant hereby acknowledges that late payment by Tenant to Landlord of Rent and other sums due hereunder after the expiration of any applicable grace period will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Accordingly, other remedies for nonpayment of Rent notwithstanding, and except as expressly provided herein, in the event any installment payment of Annual Gross Rent due Landlord hereunder shall not be paid within ten (10) days after the due date, Tenant shall pay Landlord a late payment fee of five percent (5%) of the unpaid past due amount, in addition to such other amounts owed under this Lease. In addition, Tenant shall pay Landlord interest on any delinquent payment due Landlord hereunder at the Default Rate: provided that interest shall not be payable on late charges incurred by Tenant or on any amounts upon which late charges are paid by Tenant to the extent such interest would cause the total interest to be in excess of that legally permitted.
3.3. Increase in Insurance Premiums. If an increase in any insurance premiums paid by Landlord for the Building is caused by Tenant's use of the Leased Premises, or if Tenant vacates the Leased Premises and causes an increase in such premiums, then Tenant shall pay as Additional Rent the amount of such increase to Landlord.
3.4. Holding Over. In the event that Tenant does not vacate the Leased Premises upon the expiration or termination of this Lease and continues to hold over in possession of the Leased Premises without the written consent of Landlord, Tenant shall be a tenant at will for the holdover period and all of the terms and provisions of this Lease shall be applicable during that period, including the obligation to pay Rent, except that Tenant shall pay Landlord as an installment of the Annual Gross Rent for the period of such holdover an amount equal to two times (200%) The Annual Gross Rent which would have been payable by Tenant had the holdover period been a part of the original term of this Lease. The rental payable during the holdover period shall be payable to Landlord on demand.
3.5. Sales Tax. In addition to the Annual Gross Rent, and all other Additional Rent to be paid by Tenant hereunder, Tenant shall be liable and pay to Landlord all rental, sales and use taxes, if any, levied or imposed by any city, state, county or other governmental body having authority, such payments to be in addition to all other payments required to be paid to Landlord by Tenant under the terms of this Lease. Any such payment shall be paid concurrently with the payment of the Rent or other charge upon which the tax is based as set forth above.
3.6. Rights to Additional Rent. Any and all sums of money or charges, other than Annual Gross Rent, required to be paid by Tenant under this Lease, whether or not the same be so designated, shall be considered "Additional Rent." Landlord shall have the same rights and remedies with respect to Additional Rent as with respect to Annual Gross Rent. The term "Rent" is hereby defined to mean the Annual Gross Rent, and any additional charge, fee or rent payable by Tenant to Landlord under this Lease.
3.7. Security Deposit. Tenant has deposited with the Landlord the sum of $14,667.50 ("Security Deposit"). The Security Deposit constitutes security for Tenant's satisfactory performance of the terms. covenants and conditions of this Lease including the payment of Annual Gross Rent and Additional Rent.
(a) Landlord may use, apply or retain the whole or any part of the security so deposited to the extent required for the payment of any Annual Gross Rent, Additional Rent or any other sum as to which Tenant is in default or for any sum which Landlord may expend or may be required to expend by reason of Tenant's default in respect of any of the terms, covenants and conditions of this Lease, including any damages or deficiency in the re-letting of the Leased Premises or other reentry by Landlord.
(b) If Landlord uses, applies or retains the whole or any part of the Security Deposit, Tenant shall replenish it to the sum provided in Section 1.7 within five (5) Business Days after being notified by the Landlord of the amount due. Tenant shall be in default of this Lease if the amount due is not paid within the required time period.
(c) In the event of a sale or master leasing of the Building, or any part thereof, of which the Leased Premises form a part, Landlord shall have the right to transfer the security to the new landlord, and Landlord shall ipso facto be released by Tenant from all liability for the return of the Security Deposit. In such event, Tenant agrees to look solely to the new landlord for the return of the Security Deposit and it is agreed that the provisions hereof shall apply to every transfer or assignment made of the Security Deposit to a new landlord.
(d) Tenant covenants that it shall not assign or encumber the Security Deposit given to Landlord pursuant to this Lease. Neither Landlord, its successors or assigns shall be bound by any such assignment or encumbrance or any attempted assignment or encumbrance. The Security Deposit shall not be used as any part of the Annual Gross Rent or Additional Rent by Tenant. Landlord will not be obligated to pay Tenant interest on the Security Deposit, nor to segregate the Security Deposit from Landlords other funds.
(e) In the event that Tenant shall fully and faithfully comply with all the terms, covenants and conditions of this Lease, any part of the Security Deposit not used or retained by Landlord shall be returned to Tenant after the expiration of the Lease and after delivery of exclusive possession of the Leased Premises to Landlord.
ARTICLE 4. OCCUPANCY AND USE
4.1. Use. Tenant warrants and represents to Landlord that the Leased Premises shall be used and occupied solely for the purposes set forth in Article 1 and for no other purposes whatsoever. Tenant shall occupy the Leased Premises, conduct its business and control its agents, employees, invitees and visitors (to the extent such invitees and visitors are within the Leased Premises) in such a manner as is lawful, reputable and will not create a nuisance. Tenant shall not permit any operation which emits any excessive or offensive odor or matter which intrudes into other portions of the Building, use any apparatus or machine which makes undue noise or causes undue vibration in any portion of the Building or otherwise materially interfere with, annoy or disturb any other lessee in its normal business operations or Landlord in its management of the Building. Tenant shall neither permit any waste on the Leased Premises nor allow the Leased Premises to be used in any way which would, in the reasonable opinion of Landlord, be extra hazardous on account of fire or which would in any way increase or render void the fire insurance on the Building. If any governmental license or permit shall be required for the proper and lawful conduct of Tenant's business in the Leased Premises, Tenant shall, at its expense, duly procure and thereafter maintain such license or permit and shall at all times comply with the terms and conditions of same. Tenant shall not at any time knowingly suffer the Leased Premises to be used or occupied in violation of (i) the Certificate of Occupancy for the Leased Premises or for the Building, (ii) any of the provisions of this Lease, or (iii) zoning ordinances, and rules and regulations of governmental and quasi governmental authorities having jurisdiction over the Building.
4.2. Signs. Except as expressly permitted hereinafter, Tenant shall not place any signs or other advertising matter or material on the exterior of the Building, anywhere upon the Common Areas, or in any portion of the interior of the Leased Premises which is visible beyond the Leased Premises, except those signs submitted to Landlord in writing and approved by Landlord in writing, which approval shall not be unreasonably withheld, If any prohibited sign, advertisement or notice is exhibited by Tenant, Landlord shall have the right
to remove the same, and Tenant shall pay upon demand any and all expenses incurred by Landlord in such removal, together with interest thereon at the Default Rate.
4.3. Compliance with Laws, Rules and Regulations. Tenant, at Tenant's sole cost and expense, shall comply with all present and future laws, ordinances, orders, and rules and regulations of all state, federal, municipal, and local governments, departments, commissions, and boards having jurisdiction over the Leased Premises, Tenant's business, or any activity or condition on or about the Leased Premises, including, without limitation, all environmental laws and any other laws relating to the improvements on the Leased Premises or the air in and around the Leased Premises (collectively, the "Laws"). Tenant warrants that its business and all activities to be conducted or performed in, on, or about the Leased Premises shall comply with all of the Laws. Tenant agrees to change, reduce, or stop any such activity, or install necessary equipment, safety devices, pollution control systems, or other installations at any time during the Term hereof to so comply. Without limitation to the foregoing, Tenant agrees:
(a) If, during the Term hereof, Landlord or Tenant is required to alter, convert, or replace the HVAC system serving the Leased Premises in order to comply with any of the Laws concerning indoor air pollution or quality, or in order to meet any applicable limitation on, standard for, or guideline relating to indoor air quality or the emission of any indoor air pollutant, including, without limitation, those adopted by the Occupational Safety and Health Administration, the American Society of Heating, Refrigeration, and Air Conditioning Engineers, or the Environmental Protection Agency, Tenant acknowledges and agrees that such costs of any such conversion or replacement, including without limitation, the purchase and installation of new equipment, and the alteration of existing HVAC equipment in the Leased Premises to accommodate any new equipment, shall either be paid by Tenant or shall be includable in the Operating Costs.
(b) Tenant will comply with the reasonable rules and regulations of the Building adopted from time to time by Landlord, a current copy of which are set forth on Exhibit "B" attached to this Lease. Landlord shall have the right at all times to change and amend the rules and regulations in any reasonable manner as may be deemed advisable for the safety, care, cleanliness, preservation of good order and operation or use of the Building or the Leased Premises. The Rules and Regulations, as changed in accordance with this section from time to time, are hereinafter called the "Rules and Regulations."
4.4. Warranty of Possession. Landlord warrants that it has the right and authority to execute this Lease. Landlord covenants and agrees that, upon Tenant's paying on a monthly installment basis the Annual Gross Rent and any Additional Rent required hereunder and performing all of the other covenants herein on its part to be performed, Tenant shall and may peaceably and quietly hold and enjoy the Leased Premises without hindrance by Landlord or persons claiming through or under Landlord (including, without limitation, any mortgagee of Landlord), subject to the terms, covenants and conditions of this Lease. Landlord shall not be responsible for the acts or omissions of any other lessee or third party not claiming through or under Landlord that may interfere with Tenant's use and enjoyment of the Leased Premises.
4.5. Inspection. Landlord and Landlord's agents shall have the right during Normal Business Hours to enter the Leased Premises, to examine the areas of same designated by Tenant as "public," and to show such designated public areas to prospective purchasers or lenders of the Building. Tenant shall allow Landlord entry into the non-public portions of the Leased Premises upon 24 hours notice by Landlord to Tenant and upon execution of Tenant's standard Non-Disclosure Agreement by each person desiring such entry. Normal Business Hours for the Building are 8:00 a.m. to 5:00 p.m. each Business Day. Upon reasonable prior notice and upon execution of Tenant's standard Non-Disclosure Agreement by each person desiring such entry (except in the case of an emergency), Landlord and Landlord's agents shall have the right outside of Normal Business Hours to enter the Leased Premises to make such repairs or alterations as required under this Lease or as Landlord may reasonably deem necessary or desirable, and Landlord shall be allowed to take all material into and upon the Leased Premises that may be required therefore without the same constituting an eviction of Tenant in whole or in part, and the Rent reserved herein shall in no way abate while said repairs or alterations are being made; provided, however, if the necessity of such repairs do not arise due to the fault of Tenant and Tenant is prevented from operating in the Leased Premises in whole or in part, then in such event the Annual Gross Rent shall be proportionately abated during said period. During the twelve (12) months prior to the expiration of the Term hereof, Landlord may during Normal Business Hours exhibit the Tenant-designated
public portions of the Leased Premises to prospective tenants. Nothing herein contained, however, shall be deemed or construed to impose upon Landlord any obligation, responsibility or liability whatsoever, for the care, maintenance or repair of the Leased Premises or the Building or any part thereof, except as otherwise herein specifically provided. Landlord shall at all times have and retain a key with which to unlock all of the doors in, upon and about the Tenant-designated public areas of the Leased Premises. Tenant shall not change Landlord's lock system unless Tenant provides Landlord with a pass key, or in any other manner prohibit Landlord from entering the Tenant-designated public areas of the Leased Premises. Landlord shall have the right to use any and all means which Landlord may deem proper to open any door in an emergency without liability therefor.
ARTICLE 5. UTILITIES AND SERVICE
5.1. Building Services. Landlord shall provide routine maintenance and painting to the exterior of the Building and to the heating, ventilating and air conditioning equipment, lighting, electrical, plumbing and other mechanical systems, in the manner and to the extent deemed by Landlord to be standard and in accordance with the standards of first class office buildings in the Gainesville/Ocala area. Landlord will not be liable to Tenant or any other person, for direct or consequential damage, or otherwise, for any failure of Tenant to obtain any heat, air conditioning, lighting, or other service Landlord has agreed to supply during any period when Landlord uses reasonable diligence to supply such services. Landlord reserves the right temporarily to discontinue such services, or any of them, at such times as may be necessary by reason of accident, repairs, alterations or improvements, strikes, lockouts, riots, acts of God, governmental preemption in connection with a national or local emergency, any rule, order or regulation, conditions of supply and demand which make any product unavailable, Landlord's compliance with any mandatory or voluntary governmental energy conservation or environmental protection program, or any other happening beyond the control of Landlord. Except as expressly provided hereinafter, Landlord will not be liable for damages to persons or property or for injury to, or interruption of, business for any discontinuance permitted under this Section, nor will such discontinuance in any way be construed as an eviction of Tenant or cause an abatement of rent or operate to release Tenant from any of Tenant's obligations under this Lease. Landlord reserves the right from time to time to make changes in the services provided by Landlord to the Building provided such changes do not detract from the level of the existing services. Landlord shall not be liable for any damages to persons or property or for injury to, or interruption of, business arising from the interruption of any utility service to the Building. If there is a failure by Landlord to furnish the services specified in this Section, and further provided such interruption is not due to Tenant's negligence or willful misconduct, and further provided, should the unavailability of such service render all or any portion of the Leased Premises unusable by Tenant for Tenant's permitted use, Tenant may, after and upon the giving of five (5) days written notice to Landlord, deduct the rent for that portion of the Leased Premises which is so unusable provided same is not due to Excusable Delays. Landlord reserves the right from time to time to make changes in the services provided by Landlord to the Building provided such changes do not detract from the level of the existing services.
5.2. Security and Theft or Burglary. Landlord shall not be liable to Tenant for losses to Tenant's property or personal injury caused by criminal acts or entry by unauthorized persons (other than the gross negligence or willful misconduct of Landlord, or Landlord's agents or contractors) into the Leased Premises or the Building.
5.3. Janitorial Service. Tenant shall keep the interior of the Building cleaned and well maintained. Landlord shall provide daily (Business Days) janitorial services and office cleaning of a nature and of a quality equal to that of other first class office buildings in the Gainesville/Ocala area, and shall replace building standard light bulbs and ballasts.
5.4. Utilities. Tenant shall pay all electrical and gas, and telephone utility charges for service to the Leased Premises. Tenant shall pay all additional improvement costs occasioned by high electrical consumption electrodata processing machines, advanced telecommunications equipment, computers and other equipment of high electrical consumption, including without limitation, the cost of installing, servicing and maintaining any special or additional inside or outside riders, wiring or lines, meters or submeters, transformers, poles, or air conditioning costs. Landlord shall furnish all water and sewer services to the Leased Premises and all electrical and gas services to the common areas, at Landlord's expense.
ARTICLE 6. REPAIRS AND MAINTENANCE
6.1. Landlord Repairs. Landlord shall not be required to make any improvements, replacements or repairs of any kind or character to the Leased Premises or the Building during the term of this Lease except as are set forth in this Lease. Landlord shall maintain only (a) the roof, structure, columns exterior walls, foundation, in sound, watertight condition and good state of repair; and (b) all Building electrical systems, including, but not limited to, the base building electrical, mechanical and HVAC supplied to the Leased Premises in good operating condition, maintenance and repair; and (c) the sidewalks, curbs, driveways, parking areas (if any) and landscaping in good condition and repair, open and free of debris or other obstruction. Landlord shall not be liable to Tenant, except as expressly provided in this Lease, for any damage or inconvenience, and Tenant shall not be entitled to any abatement or reduction of rent by reason of any repairs, alterations or additions made by Landlord under this Lease. Tenant understands and agrees that Landlord may, at any time or from time to time during the term of this Lease, perform substantial renovation work in and to the Building or the mechanical systems serving the Building (which work may include, but need not be limited to, the repair or replacement of the Building's exterior facade, electrical systems, air conditioning and ventilating and other systems), any of which work may require access to the same from within the Leased Premises Tenant agrees that:
(a) Landlord shall have access to the Leased Premises at all reasonable times, subject to the restrictions set forth in Section 4.5, upon reasonable notice, for the purpose of performing such work; and
(b) Landlord shall incur no liability to Tenant, nor shall Tenant be entitled to any abatement of rent on account of any noise, vibration, or other disturbance to Tenant's business at the Leased Premises (provided that Tenant is not denied access to said Leased Premises) which shall arise out of said access by Landlord or by the performance by Landlord of the aforesaid renovations at the Building.
Landlord shall use reasonable efforts (which shall not include any obligation to employ labor at overtime rates) to avoid disruption of Tenant's business during any such entry upon the Leased Premises by Landlord. Landlord shall not be liable to Tenant, except as expressly provided in this Lease, for any damage or inconvenience, and Tenant shall not be entitled to any abatement or reduction of rent by reason of any repairs alterations or additions made by Landlord under this Lease.
6.2. Tenant Repairs. Tenant, at Tenant's expense, shall provide for storage disposal of all biomedical and hazardous materials and waste delivered, generated from or stored within the Leased Premises, all in strict compliance with all Federal, State and local rules, regulations, laws, ordinances and guidelines. Tenant shall not suffer any damage, waste or deterioration to occur to the Leased Premises and shall maintain the interior non-structural portions of the Leased Premises and the fixtures and appurtenances therein in good repair and clean and sightly condition, and shall make all repairs necessary to keep them in good working order and condition (including structural repairs when those are necessitated by the negligence or willful misconduct of Tenant or its agents, employees, invitees, licensees or visitors) ordinary wear and tear and Acts of God excepted, and subject to the provisions of Articles 8 and 11 hereof. All repairs, replacements and restorations made by Tenant shall be equal in quality and class to the originals thereof and shall be completed in compliance with applicable law. Tenant covenants that any repairs or replacements (as the case may be) required by the terms of this Lease to be made by Tenant shall be commenced and completed expeditiously; provided, however, if Tenant fails to make the repairs or replacements, in an emergency promptly after notice, or otherwise fails to make the repairs or replacements within thirty (30) days after notice or in the event that such repair or replacement is of such a nature as cannot with diligent effort be cured within said thirty (30) day period, Tenant shall have failed to commence to cure within said period or failed to diligently prosecute remedial efforts to completion within a reasonable time thereafter, then Landlord may, at its option, make the repairs or replacements, and the cost of such repairs or replacements shall be charged to Tenant as Additional Rent and shall become payable by Tenant with the payment of the rent next due hereunder.
6.3. Request for Repairs. Tenant must notify Landlord of its request for repairs or maintenance to the Leased Premises that are the responsibility of Landlord pursuant to any provision of this Lease and such request must be made to Landlord at the address provided for in the notice section.
6.4. Tenant Damages. At the termination of this Lease, by lapse of time or otherwise, Tenant shall deliver the Leased Premises to Landlord in as good condition as existed at the Commencement Date of this Lease, ordinary wear and tear excepted. The reasonable cost and expense of any repairs necessary to restore the condition of the Leased Premises, as documented by Landlord with reasonable documentation of such costs, shall be borne by Tenant.
ARTICLE 7. ALTERATIONS AND IMPROVEMENTS
7.1. Leasehold Improvements. If construction to the Leased Premises is to be performed by Landlord prior to or during Tenant's occupancy, Landlord will complete the construction of the improvements to the Leased Premises in accordance with plans and specifications agreed to by Landlord and Tenant. Notwithstanding the foregoing, Tenant shall not undertake any alterations or improvements to any portion of the Leased Premises or the Building which may cause or create penetrations to the roof, ceiling or floors thereof. Within seven days of receipt of plans and specifications, Tenant shall execute a copy of the plans and specifications and, if applicable, change orders setting forth the amount of any costs to be borne by Tenant. In the event Tenant fails to execute the plans and specifications and change order within the seven day period, Landlord may, at its sole option, declare this Lease canceled or notify Tenant that the Annual Gross Rent shall commence on the completion date even though the improvements to be constructed by Landlord may not be complete. Any changes or modifications to the approved plans and specifications shall be made and accepted by written change order or agreement signed by Landlord and Tenant and shall constitute an amendment to this Lease.
7.2. Tenant Improvements. Tenant acknowledges that in the event Tenant intends to undertake improvements or alterations to the Leased Premises following the Effective Date, Tenant must obtain the prior written consent and approval of Landlord to such improvements or alterations ("Alterations"), which consent may in the sole and absolute discretion of Landlord be denied. Landlord's approval of any such Alterations may also be conditioned upon Landlord's approval of plans, contractors, contractor lien indemnification, and terms of access for construction. Any Alterations to the Leased Premises made by Tenant shall at once become the property of Landlord and shall be surrendered to Landlord upon the termination of this Lease provided, however, Landlord, at its option, may require Tenant to remove and/or repair any Alterations in order to restore the Leased Premises to the condition existing at the time Tenant took possession, all costs of removal and/or repair and restoration to be borne by Tenant. This clause shall not apply to moveable equipment of furniture owned by Tenant which may be removed by Tenant at the end of the term of this Lease if Tenant is not then in default and if such equipment and furniture are not then subject to any other rights, liens and interests of Landlord. Following the completion of the initial leasehold improvements, all Alterations must be in accordance with the requirements of this Lease. Tenant, at its expense, shall obtain all necessary governmental permits and certificates for the commencement and prosecution of the Alterations and for final approval thereof upon completion and shall cause the Alterations to be performed in a good and workmanlike manner in accordance with the requirements of all applicable governmental authorities. All Alterations shall be diligently performed in a good and workmanlike manner, using materials and equipment at least equal in quality and class to the original installations of the Leased Premises.
7.3. Liens. Nothing contained in this Lease shall be construed as a consent on the part of the Landlord to subject the estate of Landlord to liability under the Construction Lien Law of the State of Florida, it being expressly understood that the Landlord's estate shall not be subject to such liability. Tenant shall strictly comply with the Construction Lien law of the State of Florida, as set forth in Chapter 713, Florida Statutes. Notwithstanding the foregoing, Tenant, at its expense, shall cause any lien filed against the Tenant's interest under this Lease, the Leased Premises, the Building or the Parking Area for work, services or materials claimed to have been furnished to or for the benefit of Tenant (other than on account of the Leasehold Work) to be satisfied or transferred to bond within twenty (20) days after Tenant's having received notice thereof. In the event that Tenant fails to satisfy or transfer to bond such claim of lien within said twenty (20) day period the Landlord may do so and thereafter charge the Tenant as additional rent, all costs incurred by the Landlord in
connection with the satisfaction or transfer of such claim, including attorneys' fees plus interest thereon at the Default Rate. Further, the Tenant agrees to indemnify, defend, and save the Landlord harmless from and against any damage or loss incurred by the Landlord as a result of any such mechanic's Claim of Lien. This Section shall survive the termination of this Lease.
ARTICLE 8. CASUALTY
8.1. Substantial Destruction. If the Leased Premises shall be substantially damaged by fire, windstorm, or otherwise during the Lease Term, Landlord shall have the right to either terminate this Lease, provided that notice thereof is given to Tenant not later than one hundred twenty (120) days after such damage or destruction, or to proceed to repair such damage and restore the Leased Premises to substantially their condition at the time of such damage (but only to the extent of Landlord's original obligation to construct pursuant hereto and to the extent only of proceeds received by Landlord from its insurers. Tenant, at its sole cost and expense, shall repair and restore whatever trade fixtures, equipment and improvements it had installed prior to the damage or destruction. The terms "substantially damaged" and "substantial damage," as used in this Article, shall have reference to damage of such a character as cannot reasonably be expected to be repaired or such that the Leased Premises cannot be restored within ninety (90) days after the commencement of construction.
8.2. Partial Destruction. If during the Term hereof the Leased Premises shall be partially damaged (as distinguished from "substantially damaged") by fire or other casualty, Landlord shall forthwith proceed to repair such damage and restore the Leased Premises to substantially their condition at the time of such damage (but only to the extent of Landlord's original obligation to construct pursuant hereto and to the extent only of proceeds received by Landlord from its insurerers), except Tenant, at its sole cost and expense, shall repair and restore whatever trade fixtures, equipment and other improvements it had installed prior to the damage or destruction.
8.3. Abatement of Rent. If the provisions of Subsection 8.1 or 8,2 of this
Article 8 shall become applicable, the Annual Gross Rent and all other charges
specified in this Lease shall be abated or equitably reduced proportionately
during any period in which, by reason of such damage or destruction, there is
substantial interference with the operation of the business of Tenant in the
Leased Premises, and such abatement or equitable reduction shall continue for
the period commencing with such destruction or damage and ending with the
completion by Landlord of such work of repair and/or restoration as Landlord is
obligated to do. In the event of the termination of this Lease pursuant to this
Section 8, this Lease, and the Term hereof, shall cease and come to an end as of
the date of such damage or destruction. Any Annual Gross Rent or other charges
paid in advance by Tenant shall be promptly refunded by Landlord.
8.4. Landlord's Limitation of Obligation. Despite anything contained in this Lease to the contrary, and without limiting Landlord's right or remedies hereunder:
(a) If damage or destruction occurs to the Leased Premises or any part thereof by reason of any cause in respect of which there are no proceeds of insurance available to Landlord, or
(b) If the proceeds of insurance are insufficient to pay Landlord for the costs of rebuilding or making fit the Leased Premises), or
(c) If any mortgagee or other person entitled to the proceeds of insurance does not consent to the payment to Landlord of such proceeds for such purpose, or
(d) If in Landlord's reasonable opinion any such damage or destruction is caused by any fault, neglect, default negligence, act, or omission of Tenant or those for whom Tenant is in law responsible, or any other person entering upon the Leased Premises under express or implied invitation of Tenant,
then Landlord may, without obligation or liability to Tenant, terminate this Lease on 30 days' written notice to Tenant and all Rent shall be adjusted as of, and Tenant shall vacate and surrender the Leased Premises on, such termination date.
8.5. Landlord's Right to Terminate. In the event that the Building has been damaged or destroyed by fire or other casualty to the extent that the cost of restoration of the Building will exceed a sum constituting sixty percent (60%) of the total replacement cost thereof, Landlord shall have the right to terminate this Lease provided that notice thereof is given to Tenant not later than sixty (60) days after such damage or destruction and Landlord elects not to restore the Building and terminates all other leases for space in the Building.
ARTICLE 9. INSURANCE
9.1. Tenant's Insurance. Tenant shall, at its sole expense, maintain in effect at all times during the Term insurance coverage with limits not less than those set forth below with insurers licensed to do business in the state of Florida: a) Workers Compensation Insurance - statutory limits as required by State law, and as same may be amended from time to time; b) Employer's Liability Insurance - minimum limit $500,000.00; and c) Commercial General Liability Insurance, with a combined single limit of $1,000,000 per occurrence and general aggregate limits of $3,000,000.00. These policies shall be endorsed to include Landlord and Landlord's mortgagee, if any, as an additional insured, state that the insurance is primary over any insurance carried by Landlord, and the commercial general liability policy shall be written on a standard Insurance Services Office, Inc. (ISO) policy form with a 1988 or later edition date or its equivalent. The policy must be written on an occurrence basis and include Coverage A (Bodily Injury and Property Damage Liability), Coverage B (Personal and Advertising Injury Liability) and Coverage C (Medical Payments). Upon Tenant's default in obtaining or delivering the policy or certificate for any such insurance or Tenant's failure to pay the charges therefor, Landlord may, upon ten (10) days notice to Tenant, procure or pay the reasonable charges for any such policy or policies (for not more than a 12 month period) and charge the Tenant therefor plus interest thereon at the Default Rate as additional rent.
9.2. Tenant's Personal Property Insurance. Tenant shall at all times during the term hereof and at its cost and expense, maintain in effect policies of insurance covering all of Tenant's personal property, trade fixtures and equipment located in the Leased Premises, in an amount equal to their full replacement value, providing protection against any peril included within the standard classification of "Fire and Extended Coverage", together with insurance against sprinkler damage, vandalism, theft and malicious mischief. The proceeds of such insurance, so long as this Lease remains in effect, shall be used to repair or replace the personal property, trade fixtures and equipment so insured.
9.3. Landlord's Insurance. Landlord shall maintain at all times during the term of this Lease standard all-risk fire and casualty insurance, covering the Building in amounts at least equal to the full replacement cost of the Building at the time in question, but in no event less than such coverage as is required to avoid coinsurance provisions; and b) comprehensive public liability insurance and such other insurance coverage as is customarily carried in respect of comparable buildings
9.4. General Requirements. All policies of insurance required under this article shall provide that they will not be cancelled upon less than thirty (30) days prior written notice to Landlord and Tenant. Tenant shall furnish to Landlord a certificate or certificates of insurance certifying that the insurance coverage required is in force, upon request. The coverage shall be issued by companies licensed to do business in the State of Florida and rated A:VIII or better in Best's Insurance Guide (or similar rating in an equivalent publication if no longer published) and shall otherwise be reasonably satisfactory to the parties. Not less than thirty (30) days prior to expiration of the coverage, renewal policies or certificates of insurance evidencing renewal shall be provided. Any insurance required by the terms of this Lease may be under a blanket policy (or policies) covering other properties of Tenant and/or its related or affiliated corporations. If such insurance is maintained under a blanket policy, the respective party shall procure and deliver to the other party a statement from the insurer or general agent of the insurer setting forth the coverage maintained and the amount thereof allocated to the risk intended to be insured hereunder.
ARTICLE 10. INDEMNIFICATION
10.1. Tenant's Indemnification. Tenant shall indemnify, defend and save Landlord harmless from and against any and all claims, actions, damages, liability and expense in connection with loss of life, personal injury and/or damage to or destruction of property arising from or out of any occurrence in, upon or at the Leased
Premises, or the occupancy or use by Tenant of the Leased Premises or any part thereof, or occasioned wholly or in part by any act or omission of Tenant, its agents, contractors, employees, servants, subtenants or concessionaires. In case Landlord shall be made a party to any such litigation commenced by or against Tenant, then Tenant shall protect and hold Landlord harmless and pay all costs and attorney's fees incurred by Landlord in connection with such litigation, and any appeals thereof.
10.2. Landlord Not Liable. Except for the gross negligence or intentional misconduct of Landlord or its agents, employees or contractors, Tenant agrees Landlord shall not be liable to Tenant, Tenants employees, agents, invitees, licensees or visitors, or to any other person, for an injury to person or damage to property on or about the Leased Premises caused by any act or omission of Tenant, its agents, servants or employees, or of any other person entering upon the Leased Premises under express or implied invitation by Tenant, or caused by the improvements located on the Leased Premises becoming out of repair, the failure or cessation of any service provided by Landlord (including security service and devices), or caused by leakage of gas, oil, water or steam or by electricity emanating from the Leased Premises.
ARTICLE 11. CONDEMNATION
11.1. Substantial Taking. If, after the Commencement Date and before the termination of this Lease: (i) any portion of the Leased Premises is taken by eminent domain or conveyed in lieu thereof; or (ii) as a result of a taking by eminent domain or the action of any public or quasi-public authority or a conveyance in lieu thereof, the means of ingress or egress to and from the Building is so permanently altered as to materially and adversely affect the flow of traffic in, to, from or about the Building; then, in any of the foregoing events, the Lease Term shall, at the option of Tenant, cease and terminate as of the day possession shall be taken by the acting governmental or quasi-governmental authority (the "Date of Taking"). Such option to terminate shall be exercisable by Tenant giving written notice to Landlord on or before thirty (30) days after the Date of Taking, which notice shall provide for a termination date (the "Termination Date") not later than ninety (90) days after the Date of Taking and Tenant shall pay Rent up to the Termination Date, and Landlord shall refund such Annual Gross Rent and other payments as shall have been paid in advance and which cover a period subsequent to the Termination Date. In the event Tenant does not terminate this Lease, Landlord shall promptly and diligently restore the Building and the Leased Premises and the Building and Common Areas to as near to their condition prior to such taking or conveyance as is reasonably possible, and, during the course of such restoration, there shall be a fair and equitable abatement of all Annual Gross Rent, taking into account the extent to which Tenant shall be required to close down all or a portion of its operations until restoration has been completed; and, after such restoration, there shall be fair and equitable abatement of Annual Gross Rent on a permanent basis, taking into account the reduction in the size of the Leased Premises, reduction in Common Areas, and the like. If fifty percent (50%) or more of the rentable area in the Building is taken by eminent domain or conveyed in lieu thereof, then Landlord shall have the right to terminate this Lease by giving written notice to Tenant on or before thirty (30) days after the Date of Taking; provided that Landlord also terminates all leases for premises within the Building.
11.2. Restoration. If any portion of the Leased Premises shall be so taken or conveyed and this Lease is not terminated, then the Lease Term shall cease only with respect to that portion of the Leased Premises so taken or conveyed, as of the day possession shall be taken, and Tenant shall pay Annual Gross Rent and all other payments up to that day, with an appropriate refund by Landlord of such Rent as may have been paid in advance for a period subsequent to the date of the taking of possession and, Thereafter, the Annual Gross Rent and all other payments shall be equitably adjusted. Landlord shall, at its expense, make all necessary repairs or alterations so as to constitute the remaining portion of the Leased Premises a complete architectural unit. It is understood and agreed that Tenant shall not have the right to claim damages for the value of its leasehold estate, nor shall Tenant have the right to share in any award granted to Tenant, nor shall Tenant have the right to claim damages that in any way may be in derogation of Landlord's award.
ARTICLE 12. ASSIGNMENT OR SUBLEASE
12.1. Landlord Assignment. Landlord shall have the right to sell, transfer or assign, in whole or in part, its rights and obligations under this Lease and in the Building. Any such sale transfer or assignment shall operate to release Landlord from any and all liabilities under this Lease arising after the date of such sale, assignment or transfer, provided such transferee or assignee assumes such liabilities in writing. The acceptance of rent by any such transferee or assignee shall constitute assumption of such liabilities.
12.2. Tenant Assignment.
(a) Tenant shall not assign, in whole or in part, this Lease, or allow it to be assigned, in whole or in part, by operation of law or otherwise or mortgage or pledge the same, or sublet the Leased Premises, in whole or in part, without the prior written consent of Landlord, which consent shall not be unreasonably withheld. In no event shall any such assignment or sublease ever release Tenant or any guarantor from any obligation or liability hereunder.
(b) If Tenant desires to assign or sublet all or any part of the Leased Premises to any party, it shall so notify Landlord at least thirty days in advance of the date on which Tenant desires to make such assignment or sublease. Tenant will simultaneously with such request give Landlord (i) the name and address of the proposed assignee or subtenant (ii) the terms of the proposed assignment or sublease, (iii) reasonably satisfactory and complete information about the nature, financial condition, business and business history of the proposed assignee or subtenant, and its proposed initial use of the Leased Premises, and (iv) a fee in the amount of $1,000.00 to reimburse Landlord for all its expenses including, without limitation, reasonable attorneys fees associated with Tenant's request to assign, sublet or otherwise encumber the Leased Premises under the terms of the Lease. The consent by Landlord to any assignment or subletting shall not constitute a waiver of the necessity for such consent to any subsequent assignment or subletting. Within fifteen days after Landlord's receipt of Tenants proposed assignment or sublease and all required information concerning the proposed sublessee or assignee, Landlord shall have the following options: (1) as to a requested sublease with a sublease term that coincides with ninety-five percent or more of the remaining term of this Lease, cancel this Lease as to the Leased Premises or portion Thereof proposed to be sublet (provided, however, that Tenant shall have ten (10) days to nullify Landlord's cancellation of this Lease by written notice to Landlord that it is withdrawing the sublease request); (2) consent to the proposed assignment or sublease, and, if the rent due and payable by any assignee or sublessee under any such permitted assignment or sublease (or a combination of the rent payable under such assignment or sublease plus any bonus or any other consideration or any payment incident thereto) exceeds the rent payable under this Lease for such space, Tenant shall pay to Landlord all such excess rent and other excess consideration, less Tenant's reasonable expenses incurred in connection with such subletting, including without limitation, reasonable brokerage commissions, improvements allowances, and alteration costs, within ten days following receipt thereof by Tenant or (3) refuse, in Landlord's reasonable judgment, to consent to the proposed assignment or sublease, which refusal shall be deemed to have been exercised unless Landlord gives Tenant written notice providing otherwise. Upon the occurrence of an event of default, if all or any part of the Leased Premises are then assigned or sublet, Landlord, in addition to any other remedies provided by this Lease or provided by law may, at its option, collect directly from the assignee or sublessee all rents becoming due to Tenant by reason of the assignment or sublease. Any collection directly by Landlord from the assignee or sublessee shall not be construed to constitute a novation or a release of Tenant or any guarantor from the further performance of its obligations under this Lease. Tenant shall deliver to Landlord within twenty (20) days after any assignment or subletting a copy of the executed assignment or sublease agreement. Any assignment or sublease shall provide that the assignee or subtenant shall comply with all applicable terms and conditions of this Lease to be performed by Tenant hereunder. The permitted use of the Leased Premises shall not change in connection with any assignment or sublease.
ARTICLE 13. SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT
13.1. Rights of Mortgagee. Tenant acknowledges and agrees that this Lease shall be subject and subordinate to the lien of all existing and future mortgages on the Leased Premises and shall, within 15 days of Landlord's request, execute such subordination agreements as my be submitted by the holders of such mortgages. Tenant will, upon request of the lienholder, will agree that, if such lienholder succeeds to the interest of Landlord, Tenant will recognize said lienholder (or successor in interest of the lienholder) as its landlord under the terms of this Lease. Tenant hereby constitutes and appoints Landlord as Tenant's attorney-in-fact to execute any such instrument on behalf of Tenant.
ARTICLE 14. LANDLORD'S LIEN
14.1. Uniform Commercial Code. This Lease is intended as and constitutes a security agreement within the meaning of the Uniform Commercial Code of the state in which the Leased Premises are situated. Landlord, in addition to the rights prescribed in this Lease and by law, shall have all of the rights, titles, liens and interests in and to Tenant's property (but expressly excluding any of Tenant's interests in intellectual property and human tissue in any form), now or hereafter located upon the Leased Premises, which may be granted a secured party, as that term is defined, under the Uniform Commercial Code to secure to Landlord payment of all sums due and the full performance of all Tenant's covenants under this Lease. Tenant will on request execute and deliver to Landlord a financing statement for the purpose of perfecting Landlords security interest under this Lease or Landlord may file this Lease or a copy thereof as a financing statement. Unless otherwise provided by law and for the purpose of exercising any right pursuant to this section, Landlord and Tenant agree that reasonable notice shall be met if such notice is given by ten days written notice, certified mail, return receipt requested, to Landlord or Tenant at the addresses specified herein.
ARTICLE 15. DEFAULT AND REMEDIES
15.1. Default by Tenant. The following shall be deemed to be events of
default by Tenant under this Lease: (i) Tenant shall fail to pay any installment
of Annual Gross Rent or any other Additional Rent, or any other charge or
assessment against Tenant pursuant to the terms hereof and such failure to pay
shall continue for more than ten (10) days after the same is due; (ii) Tenant
shall fail to comply with any term, provision, covenant, agreement or warranty
made under this Lease by Tenant, other than the payment of any installment of
Annual Gross Rent or any other Additional Rent or other charge or assessment
payable by Tenant, and shall not cure such failure within thirty (30) days after
written notice thereof to Tenant; (iii) a petition in bankruptcy or insolvency
or for reorganization or for the appointment of a receiver or trustee of all or
substantially all of Tenant's assets is filed against Tenant in any court
pursuant to any statute either of the United States or of any state and Tenant
fails to secure or diligently proceed to secure a discharge thereof within sixty
(60) days, or if Tenant voluntarily files a petition in bankruptcy or makes an
assignment for the benefit of creditors or petitions for or enters into an
arrangement with creditors; or (iv) Tenant shall do or permit to be done
anything which creates a lien upon the Leased Premises for work performed by,
through or under Tenant which Tenant fails to remove or bond off within thirty
(30) days after written notice thereof.
15.2. Remedies for Tenant's Default.
(a) Upon the occurrence of any event of default set forth in this Lease, Landlord, besides other rights or remedies that it may have and without prior notice (except as specified in Subsection 15.1 above), shall have the right to (i) terminate Tenant's right of continued possession of the Leased Premises and declare the entire remaining unpaid Rent for the balance of the then existing Term of this Lease to be immediately due and payable forthwith and take action to recover and collect the same either by distress or otherwise, but in the event Landlord is able to relet the Leased Premises during such periods from time to time, Tenant shall consent to such reletting and Tenant shall be entitled to a credit against such damages in the amount of the rents and other sums received by Landlord from any such reletting of the Leased Premises, less any reasonable costs incurred by Landlord in connection with the repossessing of the Leased Premises, including, without limitation, reasonable attorneys' fees, brokerage commissions and any costs of allowance, repairs or alterations, or (ii) terminate this Lease, in which event Tenant shall immediately surrender the Leased Premises to Landlord, or (iii) terminate Tenant's right of continued possession of the Leased Premises and from time to time, without terminating this Lease, relet the Leased Premises or any part thereof for the account and in the name of Tenant, for any such lease term or terms and conditions as Landlord, in its reasonable discretion, may deem advisable, and with the right to make alterations, additions and repairs to the Leased Premises deemed by Landlord to be necessary in conjunction with such reletting Notwithstanding any other remedy set forth in this Lease, in the event Landlord has made rent concessions of any type or character, or waived any base rent, and Tenant fails to take possession of the Leased Premises on the commencement or completion date or otherwise defaults at any time during the term of this Lease, the rent concessions, including any waived base rent, shall be cancelled and the amount of the base rent or other rent concessions shall be due and payable immediately as if no rent concessions or waiver of any base rent had ever been granted. A rent concession or waiver of the base rent shall not relieve Tenant of any obligation to pay any other charge due and payable under this Lease including without limitation any sum due under Section 2. Notwithstanding anything contained in this Lease to the contrary, this Lease may be terminated by Landlord only by mailing or delivering written notice of such termination to Tenant, and no other act or omission of Landlord shall be construed as a termination of this Lease.
(b) Should Landlord terminate Tenant's right of possession of the Leased
Premises pursuant to Subsection (a) (iii) above, then Tenant shall pay to
Landlord, within ten (10) days of Landlord's demand, all of the following:
(i) any unpaid Rent and other charges to be paid by Tenant hereunder up to
the date when Landlord shall have so terminated Tenants right of
possession, plus interest thereon at the Default Rate from the due date
together with the total cost of brokerage commissions and initial
leasehold or tenant improvements or allowances incurred by Landlord in
connection with the execution of this Lease (prorated for the unexpired
portion of the Term); (ii) the reasonable costs of recovering possession
of the Leased Premises and any reasonable legal fees and expenses directly
related to the breach, the recovery of possession, and the collection of
unpaid Rent and other charges; (iii) the reasonable costs incurred by
Landlord in repairing and restoring the Leased Premises to the condition
which same were to have been surrendered to Landlord at the expiration of
the Lease term or to a condition required to lease premises to a new
tenant; (iv) the reasonable costs of removing any of Tenant's property
from the Leased Premises and, if same be stored, the reasonable cost of
transporting and storing same (if Landlord shall store such property in a
Building then Landlord shall be entitled to a reasonable storage fee
hereunder); and (v) all reasonable brokerage fees and commissions and
allowances (prorated for the unexpired portion of the Term) incurred by
Landlord in reletting the Leased Premises.
(c) Rents received by Landlord from any reletting pursuant to Subsection
(a)(iii) above, shall be applied first to the payment of any of the items
enumerated in Subsection (b) above, in such order as Landlord shall deem
appropriate, and second to the payment of rent and other sums due and
unpaid by Tenant hereunder as of the date of Landlord's receipt of said
rents. The residue, if any, shall be held by Landlord and applied in
payment of future rent or damages in the event of termination as the same
may become due and payable hereunder.
(d) No such reletting of the Leased Premises by Landlord pursuant to Subsection (a)(iii) above shall be construed as an election on its part to terminate this Lease unless a notice of such intention be given by Landlord to Tenant or unless the termination thereof be decreed by a court of competent jurisdiction; and
notwithstanding any such reletting without termination, Landlord may at any time thereafter elect to terminate this Lease for such previous breach provided it has not been cured.
(e) Should Landlord at any time terminate this Lease for any breach
pursuant to Subsection (a)(ii) above, then in addition to any other remedy
Landlord may have by reason of such breach, Landlord shall have the right
to recover from Tenant all or any of the following: (i) any unpaid rent
and other charges to be paid by Tenant hereunder up to the date of
termination, plus interest thereon at the Default Rate from the due date;
(ii) the reasonable costs of recovering possession of the Leased Premises
and collecting said arrearages in rent and other charges, including any
reasonable legal fees and expenses directly related to the breach, the
recovery of possession, and the collection of unpaid Rent and other
charges to be paid by Tenant and the total cost of brokerage commissions
and initial leasehold or tenant improvements or allowances incurred by
Landlord in connection with the execution or renewal of this Lease
(prorated for the unexpired portion of the Term); (iii) costs, as
reasonably estimated by Landlord which would be incurred in repairing or
restoring the Leased Premises to the condition in which the same were to
have been surrendered to Landlord at the expiration of the Lease term:
(iv) the reasonable costs of removing any of Tenant's property from the
Leased Premises, and, if same be stored, the reasonable cost of
transporting and storing same (if Landlord shall store such property in a
Building then Landlord shall be entitled to a reasonable storage fee
hereunder); (v) all brokerage fees and commissions (prorated for the
unexpired portion of the Term)incurred by Landlord in reletting the Leased
Premises; and (vi) compensation for the loss of profits occasioned by the
breach and resultant termination of this Lease, which loss the parties
agree shall be determined by calculating the total amount of Rent to be
paid by Tenant, and any other charges to be paid by Tenant, as if this
Lease had not been terminated, from the date of termination to the
expiration date and deducting therefrom The fair market rent value of the
Leased Premises for a like period expected to be collected by Landlord
during such period.
(f) Landlord shall have the right to recover, in execution of judgment(s) rendered in legal proceedings or otherwise, either jointly or from time to time severally, the applicable sums specified in clauses (i)through (v) of Subsection (b) and clauses (i) through (vi) of Subsection (e), and Landlord's recovery of one or more of such sums shall not constitute a waiver of Landlord's right to recover from Tenant the remaining sum(s).
(g) Tenant hereby waives all rights of redemption, now or hereafter granted, to the extent such rights may be lawfully waived.
(h) Pursuit of any of the foregoing remedies shall not preclude pursuit of any other remedy herein provided or any other remedy provided by law or at equity, nor shall pursuit of any remedy herein provided constitute an election of remedies thereby excluding the later election of an alternate remedy, or a forfeiture or waiver of any Annual Gross Rent, or other Additional Rent or other charges and assessments payable by Tenant and due to Landlord hereunder or of any damages accruing to Landlord by reason of violation of any of the terms, covenants, warranties and provisions herein contained. All of Tenant's and Landlord's obligations under this Section shall survive the termination of this Lease.
(i) Notwithstanding anything herein to the contrary, in the event that Tenant abandons the Leased Premises for a continuous period of three weeks or more for any reason other than casualty or condemnation or force majeure not relating to Tenant's business operations, Landlord shall have the sole and exclusive remedy to terminate this Lease without prior notice. "Abandon" means the vacating of all or substantially all of the Leased Premises by Tenant, whether or not Tenant is in default of the rental payments due under this Lease or any other provision of this Lease.
15.3. Tenant's Bankruptcy. In addition to Landlord's remedies under this Article 15, Landlord may, at its sole discretion and without notice, invoke the following provisions:
(a) Upon a Tenant's bankruptcy, this Lease and all rights of Tenant hereunder shall automatically terminate with the same force and effect as if the date of any such event were the date stated herein for the expiration of the Term, and Tenant shall vacate and surrender the Leased Premises, but shall remain liable as herein provided. Landlord reserves any and all remedies provided herein or at law or in equity
(b) If this Lease is not terminated in accordance with subsection (a) above because such termination is not allowed under the Bankruptcy Code (hereinafter defined), upon the filing of a petition by or against Tenant under the Bankruptcy Code, Tenant, as debtor and as debtor in possession, and any trustee who may be appointed, agree:
(1) to perform promptly each and every obligation of Tenant under this Lease until such time as this Lease is either rejected or assumed by order of a United States Bankruptcy Court or other United States Court of competent jurisdiction; or deemed rejected by operation of law, pursuant to 11 U.S.C. ss. 365(c)(4);
(2) to pay monthly in advance on the first day of each month as reasonable compensation for use and occupancy of the Leased Premises an amount equal to all Annual Gross Rent and all other Additional Rent;
(3) to reject or assume this Lease within sixty (60) days of the filing of such petition under Chapter 7 of the Bankruptcy Code or within thirty (30) days of the filing of a petition under any other Chapter;
(4) to give Landlord at least forty-five (45) days prior written notice of any proceeding relating to any assumption of this Lease;
(5) to give Landlord at least thirty (30) days prior written notice of any abandonment of the Leased Premises;
(6) to be deemed conclusively to have rejected this Lease in the event of the failure to comply with any of the above;
(7) to have consented to the entry of an order by an appropriate United States Bankruptcy Court providing all of the above, waiving notice and hearing of the entry of same; and
(8) that this is a "lease of real property" as such term is used in the Bankruptcy Code.
(c) Notwithstanding anything in this Lease to the contrary, all amounts
payable by Tenant to or on behalf of Landlord hereunder, whether or not
expressly denominated as Rent, shall constitute "rent" for the purposes of
Section 502(b)(7) of the Bankruptcy Code, including, without limitation,
reasonable attorneys' fees incurred by Landlord by reason of Tenant's
bankruptcy.
(d) Nothing contained in this Section 15.3 shall be deemed in any manner
to limit Landlord's rights and remedies under the Bankruptcy Code, as
presently existing or as may hereafter be amended. In the event that the
Bankruptcy Code is interpreted or amended during the term of this Lease to
so permit, or is superseded by an act so permitting, the following
additional acts shall be deemed an event of default under this Lease: (i)
if Tenant is adjudicated insolvent by the United States Bankruptcy Code or
(ii) if a petition is filed by or against Tenant under the Bankruptcy Code
and such petition is not vacated within one hundred twenty (120) days. In
either of such events, this Lease and all rights of Tenant hereunder shall
automatically terminate with the same force and effect as if the date of
either such event were the date stated herein for the expiration of the
Term, and Tenant shall vacate and surrender the Leased Premises, but shall
remain liable as herein provided. Landlord reserves any and all rights and
remedies provided herein or at law.
ARTICLE 16. TENANT'S REPRESENTATIONS
16.1. Tenant's Representations. Tenant, in order to induce Landlord to enter into this Lease, hereby represents that: Tenant has full power and authority to conduct its business as presently conducted and to enter into this Lease; that this Lease has been duly authorized, executed and delivered by Tenant and constitutes and legal and binding obligation of Tenant; and that no litigation or proceedings (or threatened litigation or proceeding or basis therefor) exists which could materially and adversely affect the ability of Tenant to perform its obligations under this Lease or which would constitute a default on the part of Tenant under this Lease, or which would constitute such a default with the giving of notice or lapse of time, or both.
ARTICLE 17. DELETED
ARTICLE 18. DELETED
ARTICLE 19. MISCELLANEOUS
19.1. Waiver. Failure of Landlord or Tenant to declare an event of default immediately upon its occurrence, or delay in taking any action in connection with an event of default, shall not constitute a waiver of the default, but Landlord or Tenant shall have the right to declare the default at any time and take such action as is lawful or authorized under this Lease. Pursuit of any one or more of the remedies set forth in Article 15 above shall not preclude pursuit of any one or more of the other remedies provided elsewhere in this Lease or provided by law, nor shall pursuit of any remedy constitute forfeiture or waiver of any rent or damages accruing to Landlord or Tenant by reason of the violation of any of the terms, provisions or covenants of this Lease. Failure by Landlord or Tenant to enforce one or more of the remedies provided upon an event of default shall not be deemed or construed to constitute a waiver of the default or of any other violation or breach of any of the terms, provisions and covenants contained in this Lease. Without limiting the generality of the foregoing, no action taken or not taken by Landlord or Tenant under the provisions of this Section or any other provision of this Lease (including, by way of example rather than of limitation, the Landlord's acceptance of the payment of rent after the occurrence of any event of default) shall operate as a waver of any right to be paid a late charge or of any other right or remedy which the either party hereto would otherwise have against the other party on account of such event of default under the provisions of this Lease or applicable law (each party hereto hereby acknowledging that, in the interest of maintenance of good relations between Landlord and Tenant, there may be instances in which the other party chooses not immediately to exercise some or all of its rights on the occurrence of an event of default).
19.2. Attorney's Fees. In The event that it shall become necessary for either Landlord or Tenant to employ the services of attorneys to enforce any of their respective rights under this Lease or to collect any sums due to them under this Lease or to remedy the breach of any covenant of this Lease on the part of the other to be kept or performed, the nonprevailing party (Tenant or Landlord as the case may be) shall pay to the prevailng party such reasonable fees as shall be charged by the prevailing party's attorneys for such services, including services at all trial and appellate levels and post judgment proceedings and such prevailing party shall also have and recover from the nonprevailing party (Landlord or Tenant as the case may be) all other costs and expenses of such suit and any appeal thereof or with respect to any postjudgment proceedings.
19.3. Successors. Except as provided in Section 19.11, this Lease shall be binding upon and inure to the benefit of Landlord and Tenant and their respective heirs, personal representatives, successors and assigns.
19.4. Cautions. The captions appearing in this Lease are inserted only as a matter of convenience and in no way define, limit, construe or describe the scope or intent of any section.
19.5. Notice. Any notice, demand, consent, approval or other communication to the given to or served upon any party hereto, in connection herewith, must be in writing, and may be given by facsimile transmission, certified mail or guaranteed overnight delivery service, return receipt requested. If a notice is delivered by United States Mail, it shall be deemed to have been given and received two (2) days following the deposit of a certified letter containing such notice, properly addressed, with postage prepaid, with the United States Mail. If delivered by facsimile transmission or by guaranteed overnight delivery service, it shall be deemed to have been given and received the same day that the notice is faxed or delivered into the custody of the overnight delivery service. If the notice is given otherwise than by certified mail, facsimile transmission or guaranteed overnight delivery service, it shall be deemed to have been given when delivered to and received by the party to whom it is addressed. Notices shall be given to the parties hereto at the following addresses:
To Landlord: Echelon International Corporation
450 Carillon Parkway
Suite 200
St. Petersburg, Florida 33716
Attention: Mr. Mark Stroud
Facsimile Number: (727) 603-8201
Copy To: Echelon Real Estate Services, Inc.
One Progress Boulevard, Box 10
Alachua, Florida 32615
Attn: Ms. Sandy Burgess
Facsimile Number: (904) 462-3932
To Tenant: Regeneration Technologies, Inc.
One Innovation Drive
Alachua, FL 32615
Attn: Richard Allen
Facsimile Number: (904) 462-5131
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Either party hereto may, at any time by giving five (5) business days' written notice to the other party hereto, designate any other address in substitution of the foregoing address to which notice shall be given and other parties to whom copies of all notices hereunder shall be sent.
19.6. Severability. If any provision of this Lease or the application thereof to any person or circumstance shall be invalid or unenforceable to any extent, the remainder of this Lease and the application for such provisions to other persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law.
19.7. Landlord's Liability. Tenant shall look solely to the estate and property of the Landlord in the Building for the collection of any judgment, or in connection with any other judicial process, requiring the payment of money by Landlord in the event of any default by Landlord with respect to any of the terms, covenants and conditions of this Lease to be observed and performed by Landlord, and no other property or estates of Landlord shall be subject to levy, execution or other enforcement procedures for the satisfaction of Tenant's remedies and rights under this Lease. The provisions of this Section are not designed to relieve Landlord from the performance of any of its obligations hereunder, but rather to limit Landlord's liability in the case of a recovery of a money judgment against Landlord. The foregoing limitation shall not apply to or limit any injunctive or other equitable declaratory or other forms of relief which Tenant may be entitled to. The word "Landlord" as used in this Lease shall mean only the owner from time to time of Landlord's interest in this Lease. In the event of any assignment of Landlord's interest in this Lease, the assignor shall no longer be liable for the performance or observation of any agreements or conditions on the part of Landlord to be performed or observed subsequent to the effective date of such assignment provided the assignee specifically assumes all such obligations.
19.8. Estoppel Certificates. Tenant agrees at any time and from time to time, upon not less than fifteen (15) days prior written request of Landlord, to execute, acknowledge and deliver to Landlord a statement in writing certifying that this Lease is unmodified and in full force and effect (or, if there have been modifications, that the same is in full force and effect as modified, and stating the modifications), the date to which the rental and other charges have been paid in advance, if any, and whether or not any violations are in existence as of the date of said statement, that Tenant has accepted possession of the Leased Premises, the date on which the term commenced; and, as to whether, to the best knowledge, information and belief of the signer of such certificate, the other party is then in default in performing any of its obligations hereunder (and, if so, specifying the nature of each such default); and as to any other fact or condition with respect to this Lease reasonably requested by the other party hereto or such other addressee, it being intended that any such statement delivered pursuant to this Section may be relied upon by any prospective purchaser of the fee or mortgagee or assignee of any mortgage upon the fee.
19.9. No Recording. Tenant shall not record this Lease or any memorandum or short form hereof without the written consent and joinder of Landlord.
19.10. Waiver of Jury Trial. The parties hereto waive trial by jury in connection with any proceedings or counterclaims brought by either of the parties hereto against the other.
19.11. [Intentionally Deleted]
19.12. Corporate Authority. If Tenant executes this Lease as a corporation, each of the persons executing this Lease on behalf of Tenant does hereby personally represent and warrant that Tenant is a duly authorized and existing corporation, that Tenant is qualified to do business in the state in which the Leased Premises are located, that the corporation has full right and authority to enter into this Lease, and that each person signing on behalf of the corporation is authorized to do so. In the event any representation or warranty is false, all persons who execute this Lease shall be liable, individually, as Tenant.
ARTICLE 20. OTHER PROVISIONS
20.1. Hazardous and Biomedical Substances.
(a) Hazardous Substances. The term "Hazardous Substances," as used in this Lease, shall include, without limitation, flammables, explosives, radioactive materials, asbestos, polychlorinated biphenyls (PCBs), chemicals known to cause cancer or reproductive toxicity, pollutants, contaminants, hazardous wastes, toxic substances or related materials, petroleum and petroleum products, and substances declared to be hazardous or toxic under any law or regulation now or hereafter enacted or promulgated by any governmental authority.
(b) Tenant Restrictions. Tenant shall not cause or permit to occur:
(i) Any violation of any federal, state, or local law, ordinance, or regulation now or hereafter enacted, related to environmental conditions on, under, or about the Leased Premises, or arising from Tenant's use or occupancy of the Leased Premises, including, but not limited to, soil and ground water conditions; or
(ii) The use, generation, release, manufacture, refining, production, processing, storage, or disposal of any Hazardous Substance or biomedical materials or waste on, under, or about the Leased Premises, or the transportation to or from the Leased Premises of any Hazardous Substance or biomedical materials or waste. Notwithstanding the foregoing, Landlord acknowledges that Tenant intends to use, store, process, and dispose of biomedical materials, wastes and human tissue in conjunction with its use of the Leased Premises and agrees that such activities shall not be deemed a default under this Lease provided Tenant complies with all applicable rules and regulations governing such activities. In addition, Tenant and its agents and employees shall properly and securely enclose and contain any such Hazardous Substances or biomedical materials or waste when transporting the same on, across or through any location in or about the Building.
(c) Environmental Clean-up.
(i) Tenant shall, at Tenant's own expense, comply with all Laws regulating the use, generation storage, transportation, or disposal of Hazardous Substances and biomedical wastes and materials.
(ii) Tenant shall, at Tenant's own expense, make all submissions to, provide all information required by, and comply with all requirements of all governmental authorities (the "Authorities") under the Laws.
(iii) Should any Authority or any third party demand that a cleanup plan be prepared and that a cleanup be undertaken because of any deposit, spill, discharge, or other release of Hazardous Substances that occurs during the term of this Lease, at or from the Leased Premises, or which arises at any time
from Tenant's use or occupancy of the Leased Premises, then Tenant shall, at Tenant's own expense, prepare and submit the required plans and all related bonds and other financial assurances and Tenant shall carry out all such cleanup plans.
(iv) Tenant shall promptly provide all information regarding the use, generation, storage transportation, or disposal of Hazardous Substances that is requested by Landlord. If Tenant fails to fulfill any duty imposed under this Section (c) within a reasonable time, Landlord may do so: and in such case, Tenant shall cooperate with Landlord in order to prepare all documents Landlord deems necessary or appropriate to determine the applicability of the Laws to the Leased Premises and Tenant's use thereof, and for compliance therewith, and Tenant shall execute all documents promptly upon Landlord's request. No such action by Landlord and no attempt made by Landlord to mitigate damages under any Law shall constitute a waiver of any of Tenant's obligations under this Section (c).
(v) Tenant's obligations and liabilities under this Section (c) shall survive the expiration of this Lease.
(d) Tenant's Indemnity.
(i) Tenant shall indemnify, defend, and hold harmless Landlord, the manager of The property, and their respective officers, directors, beneficiaries, shareholders, partners, agents, and employees from all liabilities, obligations, penalties, fines, claims, litigation, demands, defenses, judgments, suits, proceedings, actions, costs, disbursements or expenses of any kind or of any nature whatsoever (including without limitation, attorneys' and experts' fees and disbursements) arising out of or in any way connected with any deposit, spill, discharge, or other release of Hazardous Substances that occurs during the term of this Lease, at or from the Leased Premises, or which arises at any time from Tenant's use or occupancy of the Leased Premises, or from Tenant's failure to provide all information, make all submissions, and take all steps required by all Authorities under the Laws and all other environmental laws.
(ii) Tenant's obligations and liabilities under this Section (d) shall survive the expiration of this Lease.
20.2. Radon Gas. Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it overtime. Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from the county health public health unit.
20.3. Americans with Disabilities Act. Tenant covenants and agrees, at its expense without reimbursement or contribution by Landlord, to keep, maintain, alter and replace, if necessary, the interior non-structural portions of the Leased Premises so as to maintain compliance of same with the Americans with Disabilities Act of 1990, 42 U.S.C. 12101 et seq. (the "Act"), as amended from time to time, and all rules and regulations promulgated to further the purpose of and to enforce the Act (the "ADA").
20.4. Time of Essence. Time is of the essence of each and every provision and term of this Lease.
20.5. Exhibits and Riders. Exhibit A - Leased Premises Site Plan; Exhibit B - Work Agreement; Exhibit C - Rules and Regulations.
20.6. Complete Understanding, This Lease represents the complete understanding between the parties hereto as the subject matter hereof, and supersedes all prior written or oral negotiations, representations, warranties, statements or agreements between the parties hereto as the same. No inducements, representations, understandings or agreements have been made or relied upon in the making of this Lease, except those specifically set forth in the provisions of this Lease. Neither party hereto has any right to rely on any other prior or contemporaneous representation made by anyone concerning this Lease which is not set forth herein. This Lease may not be altered, waived, amended or extended except by an instrument in writing signed by Landlord and Tenant Landlord and Tenant acknowledge that each of them and their counsel have had an opportunity to review this lease and that this lease will not be construed against Landlord merely
because Landlord has prepared it. If there are more than one persons or entities named as "Tenant," each named person or entity shall be jointly and severally liable for all obligations of Tenant under this Lease.
20.7. Governing Law. This Lease shall be governed in all respects by the laws of the State of Florida
20.8. Counterparts, This Lease may be signed in any number of counterparts. Each counterpart shall be an original, but all such counterparts shall constitute one Lease.
ARTICLE 21. SIGNATURES
In Witness Whereof, this Lease was executed as of "Effective Date" as specified hereinabove.
WITNESSES: REGENERATION TECHNOLOGIES, INC.
/s/ Anna Marie Martin By: /s/ [ILLEGIBLE]
---------------------------------
Its: CFO/Sec/Treas.
(Corporate Seal)
"TENANT"
WITNESSES: ECHELON INTERNATIONAL CORPORATION, a Florida
corporation
/s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
/s/ [ILLEGIBLE] ---------------------------------
Vice President
"LANDLORD"
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EXHIBIT "A"
[GRAPHIC OMITTED]
EXHIBIT "B"
RULES AND REGULATIONS
1. Landlord agrees to furnish Tenant ten (10) keys without charge Additional keys will be furnished at a nominal charge. Tenant shall not change locks or install additional locks on doors without prior written consent of Landlord. Tenant shall not make or cause to be made duplicates of keys procured form Landlord without prior approval of Landlord. All keys to Leased Premises shall be surrendered to Landlord upon termination of this Lease.
2. Tenant will refer all contractors, contractor's representatives and installation technicians rendering any service on or to the Leased Premises for Tenant to Landlord for Landlord's approval before performance of any contractual service. Tenant's contractors and installation technicians shall comply with Landlord's rules and regulations pertaining to construction and installation. This provision shall apply to all work performed on or about the Leased Premises, including installation of telephone, telegraph equipment or any other physical portion of the Leased Premises or Building.
3. Tenant shall not at any time occupy any part of the Leased Premises or Building as sleeping or lodging quarters.
4. Tenant shall not place, install or operate on the Leased Premises or in any part of the Building any engine or stove or cook thereon or therein, or place or use in or about the Leased Premises or Building any explosives, gasoline, kerosene, oil, acids, caustics, or any flammable, explosive or hazardous material without written consent of Landlord.
5. Landlord will not be responsible for lost or stolen personal property, equipment, money or jewelry from the Leased Premises or the Building regardless of whether such loss occurs when the area is locked against entry or not.
6. No dogs, cats, fowl, or other animals shall be brought into or kept in or about the Leased Premises or Building.
7. Employees of Landlord shall not receive or carry messages for or to any Tenant or other person or contract with or render free or paid services to any Tenant or to any of Tenant's agents, employees or invitees.
8. None of the parking, plaza, recreation or lawn areas, entries, passages, doors, hallways or stairways shall be blocked or obstructed or any rubbish, litter, trash, or material of any nature placed, emptied or thrown into these areas or such area used by Tenant's agents, employees or invitees at any time for purposes inconsistent with their designation by Landlord.
9. The water closets and other water fixtures shall not be used for any purpose other than those for which they were constructed, and any damage resulting to them from misuse or by the defacing or injury of any part of the Building shall be borne by the person who shall occasion it. No person shall waste water by interfering with the faucets or otherwise.
10. No person shall disturb occupants of the Building by the use of any radios, record players, tape recorders, musical instruments, the making of unseemly noises or any unreasonable use.
11. Nothing shall be thrown out of the windows of the Building or down the stairways or other passages.
12. Movement in or out of the Building of furniture or office supplies and equipment, or dispatch or receipt by Tenant of any merchandise or materials which requires use of stairways, or movement through the Building entrances or lobby, shall be restricted to hours designated by Landlord. All such movement shall be under supervision of Landlord and carried out in the manner agreed between Tenant and Landlord by prearrangement before performance. Such prearrangement will include determination by Landlord of
time, method, and routing of movement and limitations imposed by safety or other concerns which may prohibit any article, equipment or any other item from being brought into the Building. Tenant assumes and shall indemnify Landlord against, all risks and claims of damage to persons and properties arising in connection with any said movement.
13. Tenant shall not lay floor covering within the Leased Premises without written approval of the Landlord. The use of cement or other similar adhesive materials not easily removed with water is expressly prohibited.
14. There shall be no smoking in any area inside the Building.
15. Landlord reserves the right to exclude from the Buildings, between the hours of 5:00 p.m. and 8.00 a.m. on weekdays and at all hours on Saturday and on Sunday and legal holidays, all persons who are not known to the Buildings security personnel and who do not present a pass to the Buildings signed by the Tenant. Each Tenant shall be responsible for all persons for whom it supplies a pass. To preserve the safety and security of the persons and property of all tenants in the Building, Tenant shall not unlock or "prop open" any of the Building exit and entrance doors or doorways during non Business Hours.
Exhibit C
Work Agreement
The following Tenant Improvements will be furnished in suite 102:
Area 2 Remove 2 fume hoods
Area 5 Install seamless flooring
Install non particulate ceiling tiles
Install door opening
Block off existing exhaust and make up duct
Area 4 Remove designated cabinets
Relocate designated cabinets
Isolate electric circuits and provide GFI
Install compressed air lines from building system
Area 6 Remove designated cabinets
Build support for counter tops where cabinets are removed
Area 2 Remove fume hoods
All areas Tile floors will be cleaned or replaced as needed.
Cabinets will be repainted
Walls will be patched and repainted
Cost to tenant $7,680.
Payable within 10 days of completion
Estimated time of completion of all work- February 25, 2000
The six offices will be available for occupancy upon execution of
this document.
Area I (room 128) will be available for occupancy by Wednesday 2/9.
All other areas will be turned over to tenant as work is completed.
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EXHIBIT 10.11
LEASE
THIS LEASE made at Alachua, Florida on the 14 day of JUNE, 1999, between FIRST STREET GROUP, L.C., a Florida limited liability company, whose address is 3728 North Main Street, Gainesville, Florida 32609, hereinafter called the "Landlord", and REGENERATION TECHNOLOGIES, INC., a Florida corporation, whose address is One Innovation Drive, Alachua, Florida 32615, hereinafter called the "Tenant."
WITNESSETH:
ARTICLE I
PREMISES
Landlord, in consideration of the rents to be paid and the covenants and agreements to be performed and observed by Tenant, does hereby lease unto Tenant, and Tenant does hereby lease and take from Landlord, for Tenant's exclusive use, certain real property located at 15301 Martin Luther King Boulevard, Alachua, Florida 32615, (referred to as the "Premises"), as further described on Exhibit "A" attached hereto.
ARTICLE II
TERM
The term of this lease shall begin on five (5) days from completion of the leasehold improvements, (the "Commencement Date"), and shall continue for three years thereafter, subject to one (1) one-year option.
Provided Tenant is not in default hereunder, Tenant shall have one (1) one-year option beginning on the last day of the lease, subject to the terms and conditions contained herein. Said option shall be exercised by delivery of written notice to the Landlord prior to ninety (90) days before the expiration of the then current lease period. If Tenant fails to deliver its written notice of intent to exercise said option prior to ninety (90) days before the expiration of the then current Lease period, Tenant shall have waived its right to said option. Base Rent during the option term shall be increased to $5,200.00
ARTICLE III
RENT
Tenant agrees to pay Landlord, at such place as Landlord shall from time to time direct by written notice to Tenant, without demand or set off, base Rent, hereinafter "Rent" during the term in an annual amount of FIFTY-FOUR THOUSAND AND 00/100 DOLLARS ($54,000.00), payable in equal monthly installments of FOUR THOUSAND FIVE HUNDRED AND 00/100 ($4,500.00) each. Rent shall be payable during each year in advance in equal monthly installments as set forth above on the 1st day of each and every calendar month during the term of this Lease, commencing on the Commencement Date.
The rental and other charges provided for in this Lease do not include Florida State Tax on commercial tenancies, the payment of which is the responsibility of the Tenant and will be paid to the Landlord, together with the rental installments and other charges, on the same dates such rental payments and other charges are required to be paid in this Lease. Acceptance by Landlord of rental payments from any entity other than Tenant herein shall not constitute a waiver of any rights of Landlord and shall not constitute an acknowledgment of any rights of said entity. (See Addendum attached hereto as Exhibit "B".)
ARTICLE IV
4.1 Personal Property Taxes. Tenant shall be liable for all taxes levied against personal property and trade fixtures placed by Tenant in the Premises.
4.2 Real Estate Taxes.
(a) Tenant shall pay, as additional rent, any Taxes (defined below) imposed upon the Premises during the term hereof, promptly upon receipt from Landlord of all tax bills for the Premises. For the calendar years in which this Lease commences and terminates, such Taxes shall be subject to a pro rata adjustment based on the number of days of said calendar years during which the term of this Lease is in effect
(b) For purposes of this Lease, the term "Taxes" shall include all real property taxes and any general or special assessments, water and sewer rents and other governmental impositions imposed upon or against the Premises of every kind and nature whatsoever, extraordinary as well as ordinary, foreseen and unforeseen, and each and every installment thereof, which shall or may during the lease term be levied, assessed or imposed upon or against the Premises.
ARTICLE V
5.1 Landlord's Repairs. Landlord, at Landlord's expense, shall deliver the Premises to the Tenant in good, sound, and watertight condition. Upon Lessee taking possession of the Leased Premises, Tenant hereby acknowledged that it has accepted the Premises "As Is" and thereafter shall be responsible for all maintenance and/or repairs of the premises. Landlord, however, shall be responsible for the maintenance and repair of the building structure, plumbing, sewer, and electrical.
5.2 Tenant's Repairs. Tenant, at Tenant's expense, shall make all ordinary wear and tear repairs and replacements to keep and maintain the Premises in good condition, including, but not limited to, the heating, hot water, air conditioning and other mechanical installations serving the Premises, all doors, all windows including hardware and other appurtenances, and the parking areas, landscaped areas, sidewalks, access routes, light facilities, and all other portions of the Premises, including but not limited to, stripe painting, repaving, patching, mowing, and the removal of standing water, snow and ice therefore, and the removal of rubbish and other refuse and debris. Any and all items that Tenant shall replace during the term of this Lease shall be of equal type and style than the item being replaced. Tenant shall not permit any waster, damage or injury to the Premises. Tenant shall keep in full force and effect a contract with a reputable heating contractor for not less than the quarterly inspection, maintenance and repair of the air-conditioning and heating systems servicing the Premises, including oiling, filter changes, belt repair and/or replacements, refills of freezing compound to the air conditioning and similar maintenance and minor repair procedures. Landlord, however, shall be responsible for any major air conditioning or heating system repairs, which exceed $1,000.00. Tenant shall furnish a copy of said contract to Landlord upon request. Tenant shall further keep the Premises clean, attractive and free of rubbish, rubble, debris, insects, rodents and other pests. Tenant shall not do, order of cause any work to be done or installations to be made in, on or to the roof of the Premises without first obtaining Landlord's prior written consent. Tenant shall be responsible for any damage as a result of misuse or neglect of the sewer system.
5.3 Tenant's Alterations. Tenant shall have the right, at its sole expense, from time to time, to redecorate the Premises and to make such alterations, additions, improvement and changes in such parts thereof as Tenant shall deem expedient or necessary for its purposes; provided, however, that such alterations, additions, improvements and changes when completed shall neither impair the structural soundness nor diminish the value of the Premises. Upon the expiration of this Lease, Tenant may, at its option, remove all such redecorations, alterations, additions, improvements and changes. Tenant shall repair all damage caused by such removal. Notwithstanding the foregoing, all floor and wall coverings, sinks, vanities, light fixtures (other than special decorative lighting fixtures), and the complete electrical, plumbing, air conditioning and heating systems, including ducts, diffusers, grills, controls and all other equipment and parts related to such systems, shall be and remain in the Premises at all times for the benefit of Landlord. All such alterations, additions, or improvements shall be done in accordance with all applicable laws, rules regulations, and orders, including applicable building codes. Landlord shall execute and deliver upon request of Tenant such instrument or instruments embodying the approval of Landlord which may be required by an public or quasi public authority for the purpose of obtaining any licenses or permits for the making of such alterations, additions, improvements, changes and/or installations in, to or upon said Premises and Tenant agrees to pay for such licenses or permits. Tenant will indemnify and hold Landlord
harmless from and against all claims by reason of such alterations, additions, or improvements which may be made by Tenant on the Premises, and Tenant shall promptly repair any damage to the Premises caused by any such alterations, additions, improvements, or changes. Anything contained in this Section 5.3 to the contrary notwithstanding, Tenant shall not make changes to the exterior or structural portions for the Premises without Landlord's prior approval, which approval shall not be withheld or delayed unreasonably.
5.4 Mechanics' Liens. Tenant shall not suffer any mechanics' lien to be filed against the Premises by reason of work, labor, services or materials performed or furnished to Tenant in connection with any alterations, additions, or improvements to the Premises by Tenant hereunder. If any such mechanics' lien shall at any time be filed against the Premises, Tenant shall have the right to contest and any and all such liens; provided, however, that Tenant shall cause the same to be discharged of record by payment, bond, order of a court of competent jurisdiction or otherwise within thirty (30) days written notice by Landlord. If Tenant shall fail to cause such lien to be discharged within such thirty (30) day period, then, in addition to any other right or remedy, Landlord may, but shall not be obligated to discharge the same by paying the amount claimed to be due or by bonding or other proceeding deemed appropriate by Landlord, and the amount so paid by Landlord and/or all reasonable costs and expense, including reasonable attorneys' fees, incurred by Landlord in procuring the discharge of such lien, together with interest thereon at the Default Rate of 18% from the date paid until repaid by Tenant to Landlord, shall be deemed to be additional rent for the Premises and shall be due and payable by Tenant to Landlord on the first day of the next following month.
Pursuant to the provisions of Florida Statutes (1977) 713.10, all parties hereto acknowledge that the interest of the Landlord herein, as owner of the underlying real property, shall not be subject to liens for improvements made by the Tenant and the imposition of such a lien is expressly prohibited. The Tenant shall notify the contractor making any such improvements of this provision and the knowing or willful failure of Tenant to provide such notice to the contractor shall render the contract between the Tenant and the contractor voidable at the option of the contractor. The interest of the Landlord shall not be subject to liens for improvements made by Tenant and the parties acknowledge that a short form of the Lease Agreement may be recorded in the public records expressly referencing this paragraph.
ARTICLE VI
UTILITIES
Tenant shall pay all charges for water, gas, heat, electricity, sewer and any other utility used upon for furnished to the Premises. Tenant shall keep the Premises sufficient heated to avoid the freezing or bursting of all pipes therein. The obligation of Tenant to pay for such utilities shall commence as of the Commencement Date.
ARTICLE VII
7.1 Use of Premises. Tenant shall use and occupy the Premises for purposes of an office and biomedical use.
7.2 Tenant's Covenants. Tenant covenants and agrees as follows:
(a) Tenant shall procure any and all licenses and permits required for Tenant's use of the Premises, and upon the expiration or termination of this Lease, Tenant shall remove its goods and effects and those of all persons claiming under it and shall yield up the same peaceably to Landlord in good order, repair and condition in all respects, except for damage by fire and casualty, which is either insured against or required to be insured against hereunder, structural defects (not caused by Tenant's use of the Premises), required repairs by landlord, and reasonable wear and tear.
(b) Tenant shall permit Landlord and its agents on reasonable notice and at reasonable times to examine the Premises and to show the Premises to prospective purchasers and/or mortgagees. Landlord may show the Premises to prospective tenants during the last three months of the lease term provided that Landlord shall not
thereby unreasonably interfere with the conduct of Tenant's business. During the last three (3) months of the Term of this Lease, Landlord shall have the right to display on the Premises a "for rent" and/or "for sale" sign, which notice shall not be removed, obliterated, or hidden by Tenant.
(c) Tenant shall use and occupy the Premises in a careful, safe and proper manner and shall keep the Premises in a clean, safe and health condition in accordance with local ordinances and lawful directions of proper public officers. Tenant shall not permit the Premises to be used for any unlawful purpose, commit any waste thereof, or commit any nuisance. Notwithstanding the foregoing, Tenant shall have the right to contest the legality of any law, order, rule, regulations or requirement applicable to Tenant's use of the Premises, and Tenant shall indemnify and hold Landlord harmless from any liabilities, suits or penalties that may result from any such contest. Upon the final determination of any such contest, Tenant shall comply with any such law, order, ordinance, rule, regulation or requirements to the extent held to be valid or legal.
7.3 Tenant's Use of Hazardous Substances.
(a) The term "Hazardous Substance, would be substances used and brought onto the Leased Premises and shall include, but not be limited to, flammables, explosives, radioactive materials, asbestos, polychlorinated biphenyls, chemicals known to cause cancer or reproductive toxicity, pollutants, contaminates, hazardous waste, toxic substances or related materials, petroleum and petroleum products, and substances declared to be hazardous or toxic under any law or regulation now or hereafter enacted or promulgated by any governmental authority.
(b) Landlord acknowledges that Tenant intends to use, store, process and/or dispose of biomedical materials, wastes, and human tissue in conjunction with its use of the Leased Premises and agrees that such activities shall not be deemed a default under this Lease provided that Tenant complies with all applicable rules and regulations governing such activities.
(c) Tenant shall not cause or permit any violation of any federal, state or local law, ordinance or regulation now or hereafter enacted related to environmental conditions on, under, or about the Leased Premises, or arising from Tenant's use or occupancy of the Leased Premises, including, but not limited to, soil and ground water conditions.
(d) Tenant shall, at Tenant's own expense, comply with all Laws regulating the use, generation, storage, transportation, or disposal of Hazardous Substances. Tenant's obligations and liabilities under this Section 7.3 shall survive the term of this Lease.
(e) Tenant shall indemnify, defend, and hold harmless Landlord, its agents or representatives from all liabilities, obligations, penalties, fines, claims, litigation, demands, damages, expenses (including attorney fees) arising out of or in any way connected with Hazardous Substances brought to the Leased Premises by the Tenant for use or storage during the term of this Lease, or from any act or omission of Tenant to comply with all Laws regulating the use, storage, transportation or disposal of Hazardous Substances.
(f) Upon expiration of the Lease, Tenant agrees to remove all Hazardous Substances it may have brought to the Premises.
ARTICLE VIII
8.1 Assignment and Subletting. Tenant shall not assign, transfer, mortgage or encumber this Lease in whole or in part, nor sublet all or any part of the Premises, nor suffer or permit the occupation of all or any part thereof by any other party, without the prior written consent of the Landlord, which consent shall not be unreasonably withheld or delayed. The consent by Landlord
to any assignment or subletting shall not constitute a waiver of the necessity for such consent to any subsequent assignment or subletting.
8.2 Tenant to Remain Liable. If, at any time during the term of this Lease, Tenant sublets all or any part of the Premises or assigns this Lease as provided herein, Tenant shall nevertheless remain fully liable under all the terms and conditions of this Lease.
ARTICLE IX
FIXTURES
All equipment and all other trade and light fixtures installed by or at the expense of Tenant in or on the Premises shall remain the property of Tenant and Tenant may, but shall not be obligated to, remove the same or any part thereof within thirty (30) days after the end of the term hereof, and provided that Tenant, at its sole cost and expense, shall make any repairs occasioned by such removal.
ARTICLE X
10.1 Indemnity. Tenant shall indemnify and hold Landlord harmless from any claims, damages, liabilities and expenses (including attorneys' fees and costs) for damage or injury to any person or any property occurring on the Premises, or any part thereof, arising as a result of the tortious or negligent acts or commissions of Tenant, its agents, employees, independent contractors and invitees.
10.2 Liability Insurance. During the Term of this Lease, Tenant shall maintain comprehensive public liability insurance, including insurance against the assumed or contractual liability of Tenant hereunder, to afford protection to the limit for each occurrence of not less than $1,000,000.00 combined single limit for bodily injury, death and $300,000.00 for damage to the property. The policy carried by Tenant hereunder shall name Landlord (and Landlord's mortgagee) as an additional insured, and such policy shall provide that no cancellation, reduction or other material changes therein shall be effective until at least thirty (30) days after mailing of written notice thereof to Landlord (and Landlord's mortgagee). Certificates evidencing all such insurance shall be delivered to Landlord prior to the Commencement Date, and prior to the expiration of any such policies.
10.3 Property Insurance. Landlord shall, at the expense of the Tenant and for the duration of this Lease, maintain all risk, fire, and casualty insurance covering the Premises in an amount not less than the replacement costs of the building and shall include coverage against vandalism and malicious mischief. Lessor shall not be liable for any damage to property of Lessee or of others located on the Leased Premises, nor for any loss or damage caused by theft or criminal activity committed on the Leased Premises.
Lessor shall not be liable to Lessee for any claims arising from injury or death of persons or damage to property resulting from fire, explosion, falling plaster, steam, gas, electricity, water, flood, air pollution, rain, or leaks from any part of the Leased Premises or from the pipes, appliances, or plumbing works, or by dampness, unless caused by the negligent act or omission of Lessor, its agents or representatives.
Lessor's liability for any damage, injury, or loss of any kind whatsoever whether a willful act or negligence shall be limited to its rights in the property.
Tenant shall be responsible for carrying full coverage of its personal property in or on the Leased Premises, including but not limited to, inventory, trade fixtures, furniture, and all leasehold improvements.
10.4 Indemnity. Landlord shall indemnify, defend and save Tenant, its agents, contractors or employees harmless from and against all claims, actions, damages, liability and expense (including attorney fees) arising out of the gross negligence or intentional misconduct of Landlord, its agents or representatives.
ARTICLE XI
11.1 Damage or Destruction. If the Leased Premises shall be damaged by fire or casualty during the term of this Lease, Landlord or Tenant may (1) have the right to terminate this Lease by giving written notice within 30 days after such damage has occurred, or (2) Landlord, within 30 days of damage occurrence, shall proceed to repair such damage and restore the Leased Premises to the condition existing prior to the time of damage.
Any damage to Tenant's personal property, inventory, or trade fixtures shall be covered solely by Tenant's insurance. In the event Landlord and Tenant agree to terminate this Lease, all advanced rents shall be prorated to the date of the damage, and the balance refunded to the Tenant.
11.2 Reconstruction of Premises. If the Leased Premises is damaged by fire or other insured casualty to an extent which may be repaired within one hundred twenty (120) days of damage. Lessor will promptly begin and diligently pursue repairing the damages. In that event, this Lease shall continue in full force and effect. Rents shall be abated according to the unusable portion of the Leased Premises and the period of time between the date damage occurred to the date repairs are completed. If repairs should require more than one hundred twenty (120) days, Lessee shall have the option to terminate the Lease and any unearned rents shall be refunded.
ARTICLE XII
12.1 Total Taking. If the whole of the Premises shall be taken under power of eminent domain by any public or private authority, or conveyed by Landlord to said authority in lieu of such taking, then this Lease shall terminate as of the date of such taking.
12.2 Partial Taking. Landlord or Tenant may, at their election, terminate this Lease upon the occurrence of any condemnation or conveyance in lieu of condemnation, which affects twenty-five percent (25%) or more of the floor area of the Premises. Upon the occurrence of such event, either party shall give the other party notice of such election within thirty (30) days after receipt of notice of such pending condemnation. If either party fails to give the other party such written notice within such thirty (30) day period, such party shall be conclusively deemed to have elected not to terminate this Lease. Notwithstanding any termination of this Lease hereunder, Tenant, at its election, may continue to occupy the Premises, subject to the terms and provisions of this Lease, for the period between the date of such taking and the date when possession of the Premises shall be taken by the appropriate authority.
12.3 Restoration. If this Lease is not terminated under Section 12.2 above, Landlord, at Landlord's sole cost and expense, shall promptly negotiate and settle its claim for compensation with the condemning authority and upon receipt of the condemnation award shall promptly restore the remaining portions of the Premises, including any and all improvements made theretofore, to an architectural whole in substantially the same condition that the same were in prior to such taking. Upon any condemnation of a portion of the Premises, the Rent and any other charges payable by Tenant hereunder shall be proportionately reduced based upon the floor area of the Premises remaining after said taking,
12.4 The Award. All compensation awarded for any taking, whether for the whole or a portion of the Premises, shall be the sole property of Landlord whether such compensation shall be awarded for diminution in the value of, or loss of, the leasehold or for diminution in the value of, or loss of the fee, or otherwise, and Tenant hereby assigns to Landlord all of Tenant's right and title to and interest in any and all such compensation; provided, however, Landlord shall not be entitled to and Tenant shall have the sole right to retain any separate award made by the appropriating authority to Tenant for the cost of removal of leasehold improvements, fixtures, and personalty improvements installed in the Premises by, or at the expense of; Tenant and for relocation expenses, and any separate award made by the appropriating authority directly to Tenant.
12.5 Release. In the event of any termination of this Lease as the result of the provisions of this ARTICLE XII, Rent and any other charges, if any, paid in advance by Tenant shall be refunded to Tenant, and the Parties, effective as of such termination, shall be released from all liability and obligations thereafter arising under this Lease.
ARTICLE XIII
13.1 Events of Default: Remedies. If Tenant shall at any time be in default in the payment of rental or any other charges hereunder or in the performance of any of the covenants of this Lease, and Tenant shall fail to remedy such default within (a) ten (10) days after receipt of written notice thereof from Landlord if such default is as to payment of Rent, or any other charges payable by Tenant hereunder, or (b) within fifteen (15) days after receipt of written notice thereof if such default is non-monetary (but Tenant shall not be deemed in default is such default cannot be cured in fifteen (15) days and Tenant commences to remedy such default within said fifteen (15) day period and proceeds therewith with due diligence until completion), or if Tenant shall be adjudged a bankrupt or shall make an assignment for the benefit of creditors, or if a receiver of any property of Tenant in or upon the Premises be appointed in any action, suit or proceeding by or against Tenant and not removed within sixty (6) days after appointment, or if the interest of Tenant in the Premises shall be sold under execution or other legal process, or if the Premises are sublet or this Lease is assigned without Landlord's consent, or if Tenant shall commit waste, Landlord may terminate this Lease, or without terminating this Lease, re-enter the Premises by summary proceedings, proceedings in forcible entry and detainer, eviction, or otherwise, and may dispossess Tenant.
13.2 Landlord's Right to Relet. If Tenant abandons the Premises and/or if Landlord elects to terminate Tenant's right to possession only without terminating this Lease as above provided, Landlord may remove from the Premises any and all property found therein and such repossession shall not release Tenant from Tenant's obligation to pay the rental herein. After any such repossession by Landlord without termination of the Lease, Landlord may relet the Premises or any part thereof to any person, firm or corporation and for such time and upon such terms as Landlord in Landlord's sole discretion may determine. Landlord may make repairs, alterations and additions in and to the Premises and redecorate the same to the extent deemed by Landlord necessary or desirable and Tenant, upon demand in writing, shall pay the reasonable cost thereof, (excluding tenant improvements for the replacement tenant) together with Landlord's reasonable expenses of reletting, including any commissions and attorneys' fees relative thereto. If the rents collected by Landlord upon any such reletting are not sufficient to pay monthly the full amount of the monthly rent and other charges reserved herein, together with the reasonable costs of such repairs, alterations (excluding tenant improvements for any replacement tenant), additions, redecorating, and expenses, Tenant shall pay to Landlord the amount of each monthly deficiency upon demand in writing.
13.3 Damages. Tenant agrees to be liable for and to pay to Landlord (i) all rent and other charges and sums due under this Lease at the time of termination of this Lease or upon the termination of Tenant's right of possession, as the case maybe, and (ii) damages equal to the present value (discounted at the annual rate of interest then being paid on U.S. Treasury Bonds which mature upon the expiration of this Lease) of the excess amount, if any, of the rent and all other charges and sums due under this Lease for the entire term over the rental received by Landlord for the Premises for such term, which damages shall be payable at such time as said damages as discounted by agreement of Landlord and Tenant, or by judicial decision, or at such time that said rent and other charges are payable under this Lease, which liability shall survive the termination of this Lease, the re-entry into the Premises by Landlord, and the commencement of the action to secure possession of the Premises.
13.4 Landlord's Right to Remove Chattels. Any and all property which may be removed from the Premises by Landlord in accordance with the terms of this Lease may be handled, removed, stored or otherwise disposed of by Landlord at the risk and expense of Tenant, and Landlord in no event shall be responsible for the preservation of safekeeping thereof. Tenant shall pay to Landlord upon demand in writing, any and all reasonable expenses incurred in connection with such removal and all storage charges against such property so long as the same shall be in Landlord's possession or under Landlord's control. If any property shall remain in the Premises or in the possession of Landlord and shall not be retaken by Tenant within a period of (10) days from and after the time when the Premises are either abandoned by Tenant or repossessed by Landlord under the terms of this Lease, said property shall conclusively be deemed to have been forever abandoned by Tenant.
13.5 Condition of Premises. If this Lease be terminated for any reason whatsoever of if Landlord should re-enter the Premises as a result of any breach of Tenant hereunder without terminating the Lease, Tenant covenants, any other covenant herein to the contrary notwithstanding
(except where this Lease is terminated following eminent domain proceedings), that (a) the Premises shall then be in the condition required by all applicable provisions of this Lease, and (b) Tenant shall perform any covenant contained in this Lease for the making of any repair, improvement, alteration or betterment to the premises or for restoring or rebuilding any part thereof. For the breach of either of the foregoing obligations Landlord shall be entitled to recover and Tenant shall pay forthwith, without notice or other action by Landlord, the then cost of performing such obligation(s), together with interest at the Default Rate.
13.6 Landlord's Nonwaiver. No failure by Landlord to insist upon the strict performance of any agreement, term, covenant or condition hereof or to exercise any right or remedy consequent upon a breach thereof, and no acceptance of full or partial rent during the continuance of any such breach, shall constitute a waiver of any such breach or of such agreement, term, covenant, or condition. No agreement, term, covenant, or condition hereof to be performed or complied with by Tenant, and no breach thereof, shall be waiver, altered or modified except by a written instrument executed by Landlord. No waiver of any breach shall affect or alter this Lease, but each and every agreement, term, covenant and condition hereof shall continue in full force and effect with respect to any other then existing or subsequent breach thereof. No surrender of the Premises shall be effected by Landlord's acceptance of rent, or by Landlord's acceptance of the keys of the Premises, or by any other means whatsoever, unless the same is evidenced by Landlord's written agreement to accept surrender of the Premises; and if Landlord does accept surrender of the Premises, Tenant's obligations to pay rents and to perform the duties and provisions of this Lease required of Tenant hereunder shall not be released or terminated but shall continue for the remainder of the term of this Lease.
13.7 Remedies Cumulative. Each right and remedy provided for in this Lease shall be cumulative and shall be in addition to every other right or remedy provided for in this Lease or now or hereafter existing at law or in equity or by statue or otherwise, and the exercise or beginning of the exercise by Landlord of any one or more of the rights or remedies provided for in this Lease or now or hereafter existing at law or in equity or by statute or otherwise shall not preclude the simultaneous or later exercise by Landlord of any or all other rights or remedies provided for in this Lease or now or hereafter existing at law or in equity or by statute or otherwise. In the event of a default or threatened default by Tenant of any of the terms, provisions, covenants, conditions, rules and regulations of this Lease, Landlord shall have the right to injunction and the right to invoke any remedy permitted to Landlord in law or in equity.
ARTICLE XIV
SELF-HELP
If Tenant shall default in the performance or observance of any agreement or condition in this Lease contained on its part to be performed or observed and shall not cure such default within any applicable cure period set forth herein, Landlord may, at its option, without waiving any claim for damages for reach of agreement, at any time thereafter cure such default for the account of Tenant, and any amount paid or any contractual liability incurred by Landlord in so doing shall be deemed paid or incurred for the account of Tenant and Tenant agrees to immediately reimburse Landlord therefor and save Landlord harmless therefrom; provided that Landlord may cure any such default as aforesaid prior to the expiration of said waiting period, without notice to Tenant, if any emergency situation exists, or after notice to Tenant, if the cure of such default prior to the expiration of said waiting period if reasonably necessary to protect the Premises or Landlord's interest therein, or to prevent injury to damage to persons or property. If Tenant fails to reimburse Landlord upon demand for any amount paid for the account of Tenant hereunder, said amount (and all accrued interest thereon) shall be added to and become due as a part of the next payment of rent due hereunder.
ARTICLE XV
15.1 Subordination. Tenant hereby subordinates this Lease to the lien of any deed of trust, mortgage or mortgages now or hereafter placed upon Landlord's interest in the Premises; provided, however, that Landlord shall procure from any such mortgagee an agreement, in writing, in form and substance reasonably acceptable to Tenant, which acceptance shall be deemed given if such agreement provides in substance that so long as Tenant substantially performs the obligations imposed upon Tenant hereunder within the applicable grace or cure period, its tenancy will not be
disturbed, nor its rights under this Lease affected by, any default under such mortgage nor shall Tenant be named as a defendant in any foreclosure proceeding, and such agreement is otherwise customary in form and substance.
15.2 Quiet Enjoyment. Landlord covenants and agrees with Tenant that upon Tenant paying the Rent and observing and performing all of the terms, covenants and conditions on Tenant's part to be observed and performed hereunder, Tenant may peaceably and quietly have, hold, occupy and enjoy the Premises without hindrance or molestation from Landlord or any persons lawfully claiming through Landlord.
ARTICLE XVI
SECURITY DEPOSIT
Tenant herewith deposits with Landlord the sum of FOUR THOUSAND FIVE HUNDRED AND 00/100 DOLLARS ($4,500.00) as a guarantee of the fulfillment of the terms and conditions of this Lease. Said deposit shall remain with the Landlord upon the same terms if Tenant exercises its option to renew this Lease. Upon all rents and other charges due to Landlord as herein agreed. Tenant's deposit shall be refunded in full to Tenant within (10) days of the expiration of this Lease.
ARTICLE XVII
17.1 Holding Over. In the event that Tenant or anyone claiming under Tenant shall continue occupancy of the Premises after the expiration of the original or renewal term of this Lease without any agreement in writing between Landlord and Tenant with respect thereto, such occupancy shall not be deemed to extend or renew the term of this Lease, but such occupancy shall continue as a tenancy from month to month upon the covenants, provisions and conditions herein contained and at two hundred percent (200%) of the Rental in effect upon the expiration of the term, prorated and payable for the period of such occupancy, and Landlord shall have the right to terminate such tenancy upon five (5) days' written notice to Tenant.
17.2 Waivers. Failure of either party to complain of any act or omission on the part of the other party, no matter how long the same may continue, shall not be deemed to be a waiver by said party of any of its rights hereunder. No waiver by either party at anytime, express or implied, of any breach of any provision of this Lease shall be deemed a waiver of a breach of any other provisions of this Lease or a consent to any subsequent breach of the same or any other provisions. If any action by either party shall require the consent or approval of the other party, the other party's consent to or approval of such action on any one occasion shall not be deemed a consent to or approval of said action on any subsequent occasion or a consent to or approval of any other action on the same or any subsequent occasion.
17.3 Notices. All notices and other communications authorize or required hereunder shall be in writing and shall be given by mailing the same by certified mail or registered mail, return receipt requested, postage prepaid, and any such notice or other communication shall be deemed to have been given when received by the party to whom such notice or other communication shall be addressed, or on the date noted that the addressee has refused delivery or on the date that the notice is returned to sender due to the inability of the postal authorities to deliver. Notices shall be mailed to the address hereinabove set forth or such other address as either party may hereafter designate by notice to the other.
17.4 Attorney's Fees. If either party hereto be made or becomes a party to any litigation commenced by or against the other party involving the enforcement of any of the rights and remedies of such party, or arising on of the default of the other party in the performance of such party's obligations hereunder, then the prevailing party in any such litigation, or the party becoming involved in such litigation because of a claims against such and reasonable attorneys' fees incurred by such party in such litigation.
17.5 Force Majeure. In the event that Landlord or Tenant shall be delayed or hindered in or prevented from the performance of any act (other than Tenant's obligation to make payments of Rent and other charges required hereunder), by reason of strikes, lockouts, unavailability of materials, failure of power, restrictive governmental laws or regulations, riots, insurrections, the act,
failure to act, or default of the other party, war or other reason beyond its control, then performance of such act shall be excused for the period for the delay and the period of the performance of such act shall be extended for a period equivalent to the period of such delay. Notwithstanding the foregoing, lack of funds shall not be deemed to be a cause beyond control of either party.
17.6 Estoppel Certificates. At any time and from time to time, Landlord and Tenant each agree, within five (5) days after request in writing from the other, to execute, acknowledge and deliver to the other or to any person designated by the other a statement in writing certifying that this Lease is unmodified and is in full force and effect, or if there have been modifications, that the same is in full force and effect as modified (stating the modifications), that the other party is not in default in the performance of its covenants hereunder, or if there have been such defaults, specifying the same and the dates to which the rent and other charges have been paid, and such other matters as the requesting party may reasonably request.
17.7 Invalidity of Particular Provision. If any term or provision of this Lease or the application hereto to any person or circumstance shall, to the any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable shall not be affected thereby, and each term and provision of this Lease shall be valid and be enforced to the fullest extent permitted by law.
17.8 Captions and Definitions. The captions of the Sections of this Lease are for convenience only and are not a part of this Lease and do not in any way limit or amplify the terms and provisions of this Lease. The word "Landlord" and the pronouns referring thereto, shall mean, where the context so admits or requires, the persons, firm or corporation made herein as landlord or the mortgagee in possession for the time being of the land and building comprising of the Premises. Any pronoun shall be read in the singular or plural number and in such gender as the context may require. Except as in this Lease otherwise provided, the terms and provisions of this Lease shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
17.9 Entire Agreement. This instrument contains the entire and only agreement between the parties and no oral statement or representations or prior written matter not contained in this instrument shall have any force and effect. This Lease shall not be modified in any way except by a writing executed by both parties.
17.10 No Partnership. Landlord is not and shall not become by this Lease or by any rights granted or reserved herein a partner or joint venturer of or with Tenant in the conduct of Tenant's business or otherwise.
17.11 Liability of Landlord.
(a) If Landlord should sell or otherwise transfer Landlord's interest in the Premises, Tenant agrees that Landlord shall thereafter have no liability to Tenant under this Lease or any modification or amendment thereof or extensions or renewals thereof, except for such liabilities which might have accrued prior to the date of such sale or transfer of Landlord's interest. Landlord shall be liable under this Lease only while owner of the Premises provided that any successor in interest to Landlord hereunder shall assume such obligations and liabilities as of the date Landlord's interest in the Premises is sold, assigned, or otherwise transferred hereunder.
(b) If Landlord shall fail to perform any covenant, term or condition of this Lease upon Landlord's part to be performed or if Landlord shall be liable to Tenant in any way arising out of this Lease, or pursuant to statute, law, ordinance or regulation, or under the common law, and, as a consequence, if Tenant shall recover a money judgment against Landlord, such judgment shall be satisfied only out of the proceeds received at a judicial sale upon execution and levy against the right, title and interest of Landlord in the Premises. If Landlord is an individual, a trustee of a trust or a partnership, Landlord's obligations hereunder shall not be binding upon, nor shall there be any personal liability by, Landlord individually, the trustees of said trust, the beneficiaries of said trust, the partnership, or the partners of the partnership.
ARTICLE XVIII
This Lease shall be governed by and construed in accordance with the laws of the State of Florida.
IN WITNESS WHEREOF, the parties hereto have executed this Lease the day and year first above written.
Signed in the presence of: "LANDLORD" /s/ Stacey L. Bachmann FIRST STREET GROUP, L.C., a Florida --------------------------------- limited liability company Printed Name: Stacey L. Bachmann /s/ Shannon L. Price By: /s/ Phillip L. Hawley --------------------------------- ---------------------------------- Printed Name: Shannon L. Price PHILLIP L. HAWLEY, President |
STATE OF FLORIDA
COUNTY OF ALACHUA
The foregoing instrument was acknowledged before me this 17 day of June, 1999, by PHILLIP L. HAWLEY as PRESIDENT of FIRST STREET GROUP, L.C., a Florida limited liability company, on behalf of the company. The above named officer is personally known to me or has produced ______________________________ as identification, and who did take an oath.
NOTARY PUBLIC OFFICIAL NOTARY SEAL /s/ Stacey L. Bachmann
[SEAL] STACEY L. BACHMANN -------------------------------------
STATE OF FLORIDA COMMISSION NUMBER NOTARY PUBLIC STATE OF FLORIDA
CC737952 Printed Name: Stacey L. Bachmann
MY COMMISSION EXPIRES ------------------
APR. 28, 2002 My Commission Expires: 4-28-02
----------------------------------------
Signed in the presence of: "TENANT"
/s/ [ILLEGIBLE] REGENERATION TECHNOLOGIES, INC.,
---------------------------- a Florida corporation
Printed Name: [ILLEGIBLE]
---------------
/s/ [ILLEGIBLE] By: /s/ Jamie M. Grooms
---------------------------- ----------------------------------
Printed Name: [ILLEGIBLE] Jamie M. Grooms
--------------- Its: President and CEO
---------------------------------
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STATE OF FLORIDA
COUNTY OF ALACHUA
The foregoing instrument was acknowledged before me this 15 day of JUNE 1999, by Jamie M. Grooms as President and CEO of REGENERATION TECHNOLOGIES, INC., a Florida corporation, on behalf of the corporation. The above named officer is personally known to me or has produced ______________________________ as identification, and who did take an oath.
/s/ Kathleen M. Davis
-------------------------------------
NOTARY PUBLIC STATE OF FLORIDA
Printed Name:
------------------
My Commission Expires:
|
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NOTARY PUBLIC Kathleen M. Davis
[SEAL] Notary Public, State of Florida
STATE OF FLORIDA Commission Number CC612535
My Commission Exp. 1/8/2001
Bonded Through Fla. Notary Service & Bonding Co.
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EXHIBIT "A"
LEGAL DESCRIPTION
A TRACT OF LAND SITUATED IN SECTION 10, TOWNSHIP 8 SOUTH, RANGE 18 EAST, ALACHUA COUNTY, FLORIDA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCE AT THE S.W. CORNER OF THE AFOREMENTIONED SECTION 10 AND RUN
N.88(degree)24'02"E., ALONG THE SOUTH LINE OF SAID SECTION 10, A DISTANCE OF
792.27 FEET TO A POINT ON THE NEXT DESCRIBED LINE; THENCE RUN
N.00(degree)39'21"W., ALONG THE EAST LINE OF THE WEST 792.16 FEET OF THE S.W.
1/4 OF THE S.W. 1/4 OF SAID SECTION 10, A DISTANCE OF 137.65 FEET TO THE
NORTHERLY RIGHT-OF-WAY LINE OF "OLD STATE ROAD NO. 2" (60 FOOT RIGHT-OF-WAY) AND
THE TRUE POINT OF BEGINNING; THENCE CONTINUE ALONG THE LAST DESCRIBED COURSE, A
DISTANCE OF 165.83 FEET TO A POINT ON THE NEXT DESCRIBED LINE; THENCE RUN
S.77(degree)38'36"E., ALONG THE SOUTHERLY RIGHT-OF-WAY LINE OF STATE ROAD NO.
20-25 (US HIGHWAY 441), A DISTANCE OF 257.24 FEET; THENCE RUN
S.12(degree)17'20"W., A DISTANCE OF 127.94 FEET TO A POINT ON THE NEXT DESCRIBED
LINE; THENCE RUN N.86(degree)19'55"W., ALONG THE AFOREMENTIONED NORTHERLY
RIGHT-OF-WAY LINE OF "OLD STATE ROAD NO. 2", A DISTANCE OF 222.61 FEET TO THE
TRUE POINT OF BEGINNING, CONTAINING 0.800 ACRES, MORE OR LESS.
EXHIBIT "B"
ADDENDUM
1. Leasehold Improvements/Additional Rent:
Notwithstanding the provisions contained in the Lease to the contrary, the Landlord agrees to install, at its cost and expense, the following leasehold improvements:
a.) 800 Amp 120/208V, 3 Phase Electrical Service (Burgess & Dudley)
o 800A Manual Transfer Switch
o (4) 200A panelboards 42 Ckt.
o Main Distribution Panel
b.) City of Alachua Utilities (Transformers to Meter)
c.) Build-out (Phil Hawley)
o Approx. 190 linear feet of walls
o Approx. 2600 sq. ft. lay-in ceiling
o Insulated walls and ceiling
o HVAC System
o Double door
o Light Fixtures
o Freezer branch circuiting
o 10 power poles
The total cost for said leasehold improvements shall not exceed $80,700.00. Any expenses required by Tenant beyond $80,700.00 shall be paid by the Tenant. The leasehold improvements shall be repaid to the Landlord over the three (3) year term of the Lease in the form of additional rent, at a rate of $2,547.50 per month. Said additional rent shall be subject to sales tax and shall be due on the first day of each month, together with Rent.
1. Leasehold Improvements/Subletting:
a.) Should Tenant desire to relocate during the term of the Lease, Landlord shall consent to a sublease subject to approving subtenant's credit worthiness and Tenant's repayment of the balance due Landlord for leasehold improvements. Tenant, however, shall continue to remain liable under the Lease for the payment of Rent.
b.) Should Tenant relocate onto Landlord's additional property, Landlord agrees to release Tenant from its obligations under this lease upon the final payment of the balance due and owing Landlord for all leasehold improvements. The date for said release shall be upon the
closing or relocation of Tenant onto Landlord's additional property.
Exhibit 10.12
COMMERCIAL LEASE AGREEMENT
STATE OF GEORGIA
COUNTY OF FULTON
THIS LEASE AGREEMENT, is, made and entered into this 1st day of Nov, 1999 by and between Charles P. Garrison (hereinafter referred to as "Lessor") and Georgia Tissue Bank (hereinafter referred to as "Lessee");
W I T N E S S E T H:
1. Premises. Lessor, for and in consideration of the rents, covenants, agreements and stipulations hereinafter mentioned, reserved and contained to be paid, kept and performed by Lessor, has leased and rented and by these presents does lease and rent unto Lessee, and Lessee hereby agrees to lease and take upon the terms and conditions which hereinafter appear, the following described property (hereinafter called "premises"), to-wit;
The entire building which is represented by the attached floor plan at Exhibit A representing a 9.275 square building known as 120-138 Hammond Drive, and the parking spaces and common areas appurtenant thereto.
2. Term. To have and to hold the same for a term beginning on the 1st day of November, 1999 and terminating at 12:00 Midnight on October 31, 2002, unless sooner terminated as hereinafter provided.
3. Rental. Lessee agrees to pay to Lessor promptly on the 1st day of each month in advance during the term of this lease a monthly rental of $12,365. Said monthly rental payments shall be payable to Lessor at such location as Lessor shall from time to time specify. If the rental is not received by the 10th day of the month, a 5% delinquency penalty is due.
Schedule 3.11(b)(i)
The monthly rental payment for any partial month shall be prorated based upon the number of days.
The monthly lease payments shall be increased as follows:
November, 2000 through October, 2001 - $12,860
November, 2001 through October, 2002 - $13,374
4. Utility Bills. Lessee shall be responsible for and pay all utilities, including but not limited to water, sewer, gas, electricity, fuel, telephone, light and heat bills for the leased premises; and Lessee shall pay all charges for janitorial, garbage collection services or other sanitary services rendered to the leased premises or used by Lessee in connection therewith. If Lessee fails to pay any of said utility bills or charges for garbage collection or other sanitary services, Lessor may pay the same; and such payment may be added to the rental of the premises next due as additional rent.
5. Use of the Premises. Premises shall be used for General office space and/or Laboratory/Medical Facility purposes and no other. Premises shall not be used for any illegal purposes nor in any manner to create any nuisance or trespass nor in any manner to vitiate the insurance or increase the rate of insurance on premiums.
6. Abandonment of Leased Premises. Lessee agrees not to abandon or vacate the leased premises during the period of this lease and agrees to use said premises for the purposes herein leased until the expiration hereof.
7. Repairs by Lessor. Lessor agrees to keep in good repair the roof, foundations and exterior walls of the premises (exclusive of all glass and exclusive of all exterior doors) and underground utility and sewer pipes outside the exterior walls of the building, except repairs rendered necessary by the negligence of Lessee or Lessee's agents, employees or invitees. Lessor gives Lessee exclusive control over the premises and shall be under no obligation to inspect said premises. Lessee shall promptly report in writing to Lessor any defective condition known to Lessee which Lessor is required to repair; and failure to so
report such defects shall make Lessee responsible to Lessor for any liability incurred by Lessor by reason of such defects.
If Lessor does not within 45 days of written request by Lessee, make required repairs, Lessee may contract to have such repairs made, provided any repairs exceeding $7,500 may not be made without Lessor's express written consent. If Lessor does not pay for such repairs upon presentment of an invoice after completion of the repairs, Lessee may set-off such amounts against Lessee's rent obligations.
8. Repairs by Lessee. Lessee accepts the leased premises in their present condition and as suited for the uses intended by Lessee. Lessee shall, throughout the initial term of this lease and all renewals hereof, at Lessee's expense, maintain in good order and repair the leased premises, including the building and other improvements located thereon except those repairs expressly required to be made by Lessor. Lessee further agrees to care for the grounds around the building, including the mowing of grass, paving, care of shrubs and general landscaping. Lessee agrees to return said premises to Lessor at the expiration of prior to termination of this lease in as good condition and repair as when first received, natural wear and tear, damage by storm, fire, lighting, earthquake or other casualty alone excepted. Elevators, if any, are accepted by Lessee as in satisfactory operating condition on this date; and Lessee shall, as Lessee's own expense, maintain said elevators in good operating condition during the term of this lease and any extensions hereof.
9.1 Taxes and Association Fee. Lessee shall pay as additional rental during the term of this lease and any extension or renewal thereof, the association fees and the taxes (including but not limited to ad valorem taxes, special assessments and any other governmental charges) attributable to the premises for each tax year. In the event the premises are less than the entire property, the association fee and taxes for any such year applicable to the premises shall be determined by proration on the basis that the rental floor area of the premises bears to the total rentable floor area of the entire property. Lessee's pro rata portion of the association fee and taxes, as provided herein, shall be payable on a monthly basis based upon the prior year's actual association fees or taxes. Such estimated amounts shall be adjusted annually.
9.2 Insurance. Lessee shall, upon demand, pay as additional rental during the term of this lease and any extension or renewal thereof the property and casualty insurance on the premises for each tax year.
9.3 Mutual Waiver of Subrogation. The Landlord agrees that he will have inserted in each property and casualty policy or policies of insurance, which he may be required to carry (if any), a provision substantially as follows: "It is hereby stipulated that this insurance shall not be invalidated should the insured waive in writing prior to a loss any or all right of recovery against any party for loss occurring to the property described herein" and Landlord hereby waives, during the term of this lease, any or all rights of recovery against the Tenant, its officers, employees, and agents for loss occurring to the premises to the extent that indemnification would be due under such insurance protection.
Likewise, the Tenant agrees that he will have inserted in each property and casualty policy or policies of insurance, which it may be required to carry, (if any), a provision substantially as follows: "It is hereby stipulated that this insurance shall not be invalidated should the insured waive in writing prior to a loss any or all right of recovery against any party for loss occurring to the property described herein" and Tenant does hereby waive, during the term of this Lease, any and all rights of recovery against the Landlord, its officers, employees, and agents to the extent that indemnification would be due under such insurance protection.
10. Destruction of or Damages to Premises. If premises are totally destroyed by storm, fire, lightning, earthquake or other casualty, this lease shall terminate as of the date of such destruction; and rental shall be accounted for as between Lessor and Lessee as of that date. If premises are damaged but not wholly destroyed by any such casualties, rental shall abate in such proportion as use of the premises has been destroyed; and Lessor shall restore premises to substantially the same condition as before damage as speedily as practicable, whereupon full rental shall recommence.
Notwithstanding the foregoing, if Lessor has not within 6 months restored the premises to substantially the same condition as before damage, the Lessee may terminate this lease without being treated as in default.
11.1 Indemnity. Lessee agrees to indemnify and save harmless Lessor against all claims for damages to persons or property by reason of the use or occupancy of the leased premises and all expenses incurred by Lessor because thereof, including reasonable attorney's fees and court costs.
11.2 Indemnity. Lessor agrees to indemnify and save harmless Lessee against all claims for damages to persons or property by reason of the use or occupancy by Lessor or Lessor's agents of the leased premises and all expenses incurred by Lessee because thereof, including reasonable attorney's fees and court costs.
12. Governmental Orders. Lessee agrees, at Lessee's own expense, to promptly comply with all requirements of any legally constituted public authority made necessary by reason of Lessee's occupancy of said premises. Lessor agrees to promptly comply with any such requirements if not made necessary by reason of Lessee's occupancy. However, it is mutually agreed between Lessor and Lessee that, if in order to comply with such requirements, the cost to Lessor or Lessee, as the case may be, shall exceed a sum equal to one year's rent, then Lessor or Lessee who is obligated to comply with such requirements is privileged to terminate this lease by giving written notice of termination to the other party via Certified Mail, Return Receipt Requested, which termination shall become effective sixty (60) days after receipt of such notice and which notice shall eliminate the necessity of compliance with such requirement by party giving such notice unless the party receiving such notice of termination shall, before such termination becomes effective, pays to the party giving notice all costs of compliance in excess of one year's rent or secures the payment of said sum in a manner satisfactory to the party giving notice.
13. Condemnation. If the whole of the leased premises or such portion thereof as will make the premises unusable for the purposes herein leased shall be condemned by any legally constituted authority for any public use or purpose, then in either of said events the term hereby granted shall cease from the date when possession thereof is taken by public authorities; and rental shall be accounted for as between Lessor and Lessee as of said date. Such termination, however, shall be without prejudice to the rights of either Lessor or Lessee to recover compensation and damage caused by condemnation from the condemnor. It is
further understood and agreed that neither Lessee nor Lessor shall have any rights in any award made to the other by any condemnation authority notwithstanding the termination of the lease as herein provided.
14. Assignment and Subletting. Lessee may sublease portions of the leased premises to others provided such sublessee's operation is a part of the general operation of Lessee and under the supervision and control of Lessee and provided such operation is within the purposes for such said premises shall be used. Except as provided in the preceding sentence, Lessee shall not assign this lease or any interest hereunder or sublet premises or any part thereof or permit the use of premises by any party other than Lessee without the prior written consent of Lessor (not to be unreasonably withheld) endorsed hereon. At the option of Lessor, Assignee or Lessee shall become directly liable to Lessee for all obligations of Lessee hereunder; but no sublease or assignment by Lessee shall relieve Lessee of any liability hereunder.
15. Removal of Fixtures. If Lessee is not in default under this lease, Lessee may remove all fixtures and equipment which Lessee owns, provided Lessee repair all damage to premises caused by such removal and provided that Lessee, at Lessee's expense, return the space to standard office space comparable to other office space within the leased premises.
16. Cancellation of Lease by Lessor. It is mutually agreed that, in the event Lessee shall default in the payment of rent, including additional rent herein reserved, when due and fails to cure said default within five (5) days after written notice thereof from Lessor; or if Lessee shall be in default in performing any of the terms or provisions of this lease other than the provision requiring the payment of rent and fails to cure such default within thirty (30) days after the date of receipt of written notice of default from Lessor; or if Lessee is adjudicated bankrupt; or if a permanent receiver is appointed for Lessee's property and such receiver is not removed within sixty (60) days after written notice form Lessor to Lessee to obtain such removal; or if, whether voluntarily or involuntarily, Lessee takes advantage of any debtor relief proceedings under any present or future law, whereby the rent or any part thereof is or is proposed to be reduced or payment thereof deferred; or if Lessee makes an assignment for the benefit of creditors; or if Lessee's effects should be levied upon or
attached under process against Lessee and not satisfied or dissolved within thirty (30) days after written notice from Lessor to Lessee to obtain satisfaction thereof; then and in any of said events, Lessor (at Lessor's option) may at once or within six (6) months thereafter (but only during continuance of such default or condition), terminate this lease by written notice to Lessee, whereupon this lease shall end. After an authorized assignment or subletting of the entire premises covered by this lease, the occurring of any of the foregoing defaults or events shall affect the lease only if caused by or happening to the assignee or sublessee. Any notice provided in this Paragraph may be given by Lessor or Lessor's Attorney. Upon such termination by Lessor, Lessee will at once surrender possession of the premises to Lessor and remove all of Lessee's effects therefrom; and Lessor may forthwith re-enter the premises, repossess same and remove all persons and effect therefrom using such force as may be necessary without being guilty of trespass, forcible entry, detainer or other tort.
17. Re-entry by Lessor. Lessor, as Lessee's agent, may (at Lessor's option), without terminating this lease upon Lessee's breaching this lease, enter upon and rent the premises at the best price obtainable by reasonable effort without advertisement and by private negotiations and for any term Lessor deems proper. Lessee shall be liable to Lessor for the deficiency, if any, between Lessee's rent hereunder and the price obtained by Lessor on reletting.
18. Exterior Signs. Lessee shall place no signs upon the outside walls or roof of the leased premises except with the written consent of Lessor. Any and all signs placed on the premises by Lessee shall be maintained in compliance with rules and regulations governing such signs; and Lessee shall be responsible to Lessor for any damages caused by installation, use or maintenance of said signs. Lessee agrees to repair all damage incident to the removal of said signs upon removal of same.
19. Entry for Carding. Etc.. Lessor may card premises "For Rent" or "For Sale" ninety (90) days before the termination of this lease. Lessor or his agents may enter the premises at reasonable hours to exhibit same to prospective purchasers or tenants and to make repairs required of Lessor under the terms hereof.
20. Effect of Termination of Lease. No termination of this lease prior to the normal ending thereof by lapse of time or otherwise shall affect Lessor's right to collect rent for the period prior to termination thereof.
21. Mortgagee's Rights. Lessee's rights shall be subject to any bona fide mortgage or deed to secure debt which is now or may hereafter be placed upon the premises by Lessor.
22. No Estate in Land. This lease shall create the relationship of landlord and tenant between the parties hereto; and no estate shall pass out of Lessor. Lessee has only a usufruct not subject to levy and sale and not assignable by Lessee except by Lessor's consent (not to be unreasonably withheld).
23. Holding Over. If Lessee remains in possession of premises after the expiration of the term hereof with Lessor's acquiescence an without any express agreement of the parties, Lessee shall be a tenant at will at the rental rate in effect at the end of this lease; and there shall be no renewal of this lease by operation of law.
24. Attorney's Fees and Homestead. If any rent owing under this lease is collected by or through an attorney at law, Lessee agrees to pay reasonable attorney's fees incurred by Lessor. Lessee waives all homestead rights and exemptions which Lessee may have under the law as against any obligation owing under this lease. Lessee hereby assigns to Lessor all Lessee's homestead and exemption.
25. Rights Cumulative. All rights, powers and privileges conferred hereunder upon parties hereto shall be cumulative but not restrictive to those given by law.
26. Service of Notice. Lessee hereby appoints as Lessee's agent to receive service of all dispossessory or distraint proceedings and notices hereunder and all notices required under this lease, the person in charge of the leased premises at the time or the person occupying said premises, and if no person is in charge of or occupying said premises, then such service or notice may be made by attaching the same on the main entrance to said
premises. A copy of all notices under this lease shall also be sent to Lessee's last-known address if different from said premises.
27. Waiver of Rights. No failure of Lessor to exercise any power given Lessor hereunder or to insist upon strict compliance by Lessee with Lessee's obligations hereunder and no custom or practice of the parties at variance with the terms hereof shall constitute a waiver of Lessor's right to demand exact compliance with the terms hereof.
28. Time of Essence. Time is of the essence of this lease agreement.
29. Definitions. "Lessor" as used herein shall include first party and first party's heirs, representatives, assigns, and successors in title to the premises. "Lessee" shall include second party and second party's heirs and representatives and, if this lease shall be validly assigned or sublet, shall include also Lessee assignees or sublessees as to the premises covered by such assignment or sublease. "Lessor" and "Lessee" shall include male and female, singular and plural, corporation, partnership or individual as may fit the particular parties.
30. Security Deposit. Upon execution of this lease, Lessee shall pay a security deposit in the amount of Twelve Thousand Three Hundred Sixty-Five Dollars ($12,365.00) to Lessor. Upon termination of this lease and surrender of the premises by Lessee to Lessor, the security deposit shall be returned to Lessee, provided that Lessor may hold the security deposit for a period of thirty (30) days following surrender of possession and may deduct from the amount refunded any rental due and payable, the costs of repairing any damage or replacing any damaged portion of the premises and costs of cleaning the premises if Lessee fails to do so prior to surrender of possession.
31. Special Stipulations. In so far as the following stipulations conflict with any of the foregoing provisions, the following shall control:
32. Entire Agreement. This lease contains the entire agreement between the parties hereto; and no representations, inducements, promises or agreements, oral or otherwise between the parties and not embodied herein shall be of any force or effect.
33. Lease Contingent Upon Simultaneous Closing. This lease is void unless simultaneous with the execution of this lease, the contracts dated November __, 1999 between NTBN-GTB, Inc., Georgia Tissue Bank, Inc. and Dr. Charles P. Garrison are also consummated.
IN WITNESS WHEREOF, the parties have hereunto executed this lease agreement as of the day and year first above written.
AS TO LESSOR:
SIGNED, SEALED AND DELIVERED /s/ Charles P. Garrison, M.D.
IN THE PRESENCE OF: --------------------------------------
CHARLES P. GARRISON, M.D.
|
/s/ W. Courtney Lafon [SEAL]
----------------------------------- W. Courtney Lafon
NOTARY PUBLIC NOTARY
EXPIRES
GEORGIA
AUG. 27, 2002
PUBLIC
FULTON COUNTY
AS TO LESSEE: GEORGIA TISSUE BANK, INC.
SIGNED, SEALED AND DELIVERED /s/ Jamie M. Groom
IN THE PRESENCE OF: --------------------------------------
By: Jamie M. Groom, PRESIDENT
/s/ [ILLEGIBLE]
-----------------------------------
|
WITNESS
/s/ Marsha D. Foreman [SEAL] Marsha D. Foreman
----------------------------------- NOTARY PUBLIC Commission # CC747340
NOTARY PUBLIC STATE OF FLORIDA Expires July 12, 2002
BONDED THRU
ATLANTIC BONDING CO., INC.
|
Guaranty of Lease
All provisions of the above lease and any extension thereto, are fully guaranteed by Regeneration Technologies, Inc.
REGENERATION TECHNOLOGIES, INC.
SIGNED, SEALED AND DELIVERED /s/ Jamie M. Groom
IN THE PRESENCE OF: --------------------------------------
By: Jamie M. Groom, PRESIDENT
/s/ [ILLEGIBLE]
-----------------------------------
WITNESS
/s/ Marsha D. Foreman [SEAL] Marsha D. Foreman
----------------------------------- NOTARY PUBLIC Commission # CC747340
NOTARY PUBLIC STATE OF FLORIDA Expires July 12, 2002
BONDED THRU
ATLANTIC BONDING CO., INC.
|
Exhibit 10.13
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into by and between REGENERATION TECHNOLOGIES, INC., a Florida corporation (the "Corporation") and JAMES M. GROOMS ("Employee").
WHEREAS, the Corporation is engaged in the business of manufacturing products from human and animal tissue in Alachua, Florida; and
WHEREAS, the Corporation desires to employ Employee and Employee desires to accept such employment during the term of this Agreement and upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and the benefits accruing to the parties hereto, the parties agree as follows:
1. Employment. The Corporation hereby agrees to employ Employee, and Employee hereby agrees to accept such employment, to render services on behalf of the Corporation as Chief Executive Officer and President. The duties of Employee shall be those established by the Corporation's Board of Directors from time to time.
2. Devotion to Employment. During the term of this Agreement, Employee shall devote his full time on behalf of the Corporation, and he shall not engage in any other gainful employment without the written consent of the Corporation; provided, however, that nothing contained herein shall prohibit Employee from investing or trading in stocks, bonds, commodities or other forms of investment, including real property.
3. Term of Agreement. This Agreement shall be effective as of February 9, 1998, and it shall continue in full force and effect for a period of five (5) years unless sooner terminated as hereinafter provided.
4. Compensation.
(a) Annual Salary. The Corporation shall pay to Employee as compensation for his services a salary of One Hundred Ninety-Two Thousand Three Hundred Ninety-Five Dollars ($192,395.00) per year, payable in equal monthly installments. Employee's salary shall be reviewed annually by the Corporation's Board of Directors, at which time Employee's salary may be adjusted as agreed upon by Corporation's Board of Directors.
(b) Performance Bonus. To provide greater incentive for Employee by rewarding him with additional compensation, a cash bonus may be paid to Employee at any time during the year, or after the close of the year, based upon the performance of the Corporation and the performance of Employee during such year; provided, however, that the payment of any such bonus and the amount thereof shall be within the sole discretion of the Corporation's Board of Directors. In making such determination, the Directors will consider the following:
(i) The net profits of the Corporation for the year;
(ii) The base salary of Employee;
(iii) Employee's overall performance as an employee of the Corporation;
(iv) A comparison of Employee's performance with the performance of the other employees of the Corporation; and
(v) Such other matters as may be considered appropriate by the Directors.
(c) Withholding, FICA, FUTA. Employee's compensation hereunder shall be subject to, and reduced by, applicable federal income tax withholding and FICA tax, and any other taxes imposed by law.
5. Fringe Benefits. During the term of this Agreement, Employee shall be entitled to all fringe benefits offered generally to the Corporation's managerial employees as established or modified from time to time by the Corporation, subject always to the rules in effect regarding participation in such plans. In addition, the Corporation shall obtain and maintain in force during the term of this Agreement a life insurance policy covering Employee's life in a face value of not less than one million dollars ($1,000,000.00). The death benefit of such policy shall be made payable to the beneficiary or beneficiaries Employee may from time to time designate in writing.
6. Business Expenses. Except as otherwise provided herein, the Corporation shall pay, either directly or by reimbursement to Employee, such reasonable and necessary business expenses incurred by him, in the course of his employment by the Corporation as are consistent with the Corporation's policies in existence from time to time, subject to such dollar limitations and verification and record keeping requirements as may be established from time to time by the Corporation.
7. Vacation Time. Employee shall be entitled to four (4) weeks paid vacation time each calendar year, prorated in accordance with Corporation policy. All vacations shall be taken by Employee at such time or times as may be approved by the Corporation. There
will be no carryover of unused vacation time from one year to another, and no compensation for such unused vacation or sick leave, if any.
8. Time Off. Employee shall be entitled to such time off with pay for attendance at seminars, courses, meetings and conventions as is authorized by the Corporation from time to time. The specific seminars, courses, meetings and conventions to be attended by Employee shall be subject to the Corporation's prior approval.
9. Automobile. Employee shall provide an automobile for his use in the conduct of the Corporation's business as a condition of his employment. During the term of this Agreement, the Corporation shall reimburse Employee for Employee's use of his automobile and all incidental costs associated therewith (including, but not limited to, gas, oil, repairs, maintenance, insurance and car telephone) in the conduct of the Corporation's business based upon the standard mileage rate as announced from time to time by the Internal Revenue Service for use in computing deductible costs for operating a passenger automobile; provided, however, Employee shall be required to submit written verification to the Corporation of the mileage, destination and purpose of each trip for which reimbursement is requested pursuant to this Paragraph
10. Termination of Employment.
(a) Voluntary Termination. Employee or the Corporation may voluntarily terminate Employee's employment with the Corporation (and, except as otherwise specifically provided hereunder, this Agreement) at any time, by delivering to the other party written notice of such intention not less than thirty (30) days prior to the effective date of termination. Notwithstanding the foregoing, if notice of termination is given by Employee to the Corporation, then the Corporation shall have the option of advancing the effective date of such
termination to any date after receipt of such notice from Employee, which option shall be exercised by the Corporation within three (3) business days of receipt of such notice.
(b) Termination for Cause. The Corporation may immediately terminate Employee's employment with the Corporation (and, except as otherwise specifically provided hereunder, this Agreement) for "cause" by giving written notice (without regard to the thirty (30) day period provided above) of such termination to Employee specifying the grounds therefor. A termination for "cause" shall only be for any one or more of the following reasons:
(i) Willfully or negligently damaging the Corporation's property, business, reputation or goodwill.
(ii) Willfully injuring any employee of the Corporation.
(iii) Willfully injuring any person in the course of the performance of services for the Corporation.
(iv) Lawfully charged with commission of a felony.
(v) Stealing, dishonesty, fraud or embezzlement.
(vi) Deliberate and continuous neglect of duty.
(vii) Use of alcohol or narcotics to the extent it prevents, in the sole judgment of the Corporation's Board of Directors, Employee from effectively performing the duties set forth in Paragraph 1 above.
(viii) Violating the covenants set forth in Paragraphs 11 or 12 of this Agreement.
The decision to terminate Employee's employment for "cause" shall be made by the Corporation's Board of Directors in its sole discretion.
(c) Termination Upon Death, Incompetency or Disability. Notwithstanding Subparagraph 10(a) above, the Corporation shall have the right to terminate Employee's employment with the Corporation (and, except as otherwise specifically provided hereunder, this Agreement) immediately and without prior written notice to Employee in the event that Employee dies or is adjudicated incompetent, or is "permanently disabled" as hereinafter defined. As used herein, the term "permanently disabled" shall mean that Employee is unable to adequately perform his regular duties hereunder as a result of sickness or accident and such condition appears to be permanent. The determination of "permanent disability" shall be made by the Corporation's Board of Directors in its sole and absolute discretion and its decision shall be final and binding on Employee unless found to be arbitrary or capricious by a court of competent jurisdiction.
(d) Performance of Duties During Notice Period. In the event that either party terminates Employee's employment with the Corporation in accordance with the terms of Subparagraph 10(a), Employee, if requested by the Corporation, shall continue to render services hereunder on behalf of the Corporation for the thirty (30) day period until the effective date of termination, and shall, in such event, be paid the compensation due him hereunder for the remainder of such period.
11. Confidential Information. Employee acknowledges and recognizes that, in connection with the performance of his duties and obligations for the Corporation, Employee has and will have access to certain confidential information of the Corporation, including, but not limited to, any intellectual property of the Corporation, the identity of the Corporation's clients,
the identity of prospective clients, the existence of negotiations with prospective clients of the Corporation, all drawings, records, sketches, models, financial information, customer information, trade secrets, and trade secrets relating to services of the Corporation, and products being developed by the Corporation (the "Confidential Information"). Employee hereby acknowledges that the maintenance of the confidentiality of the Confidential Information and restrictions on the use of the Confidential Information is essential to the Corporation. Employee shall not, at any time, whether during the term of this Agreement or after the termination of Employee's employment with the Corporation for any reason whatsoever, divulge or reveal any of the Confidential Information to any person, party or entity, directly or indirectly. In addition, Employee shall not utilize any of the Confidential Information for his own benefit, for the benefit of any subsequent employer or competitor of the Corporation. Employee shall maintain the Confidential Information in strict confidence and shall not copy, duplicate or otherwise reproduce, in whole or in part, such Confidential Information, except as necessary for Employee to perform services for the Corporation. Upon the termination of Employee's employment by the Corporation, or at the earlier request of the Corporation, Employee shall immediately surrender to the Corporation any and all memoranda, records, files or other documents and any other materials (including photocopies or other reproductions) containing or relating to the Confidential Information. Employee shall indemnify and hold the Corporation harmless from any loss, damage, expense, cost or liability arising out of any unauthorized use or disclosure of the Confidential Information by Employee. The provisions of this Paragraph 11 shall survive the termination of Employee's employment with the Corporation and the termination of this Agreement.
12. Employee Developments. Employee is aware and understands that, during the term of Employee's employment with the Corporation or with the financial and other assistance that may be provided by the Corporation, Employee may invent, create, develop and improve certain valuable property such as, but not limited to, patents, trademarks, inventions, other patentable inventions and other trade secrets and formula, where such valuable property is (1) created during Employee's normal work hours; (2) created using the equipment or facilities of the Corporation; (3) created by Employee under the supervision or guidance of the Corporation; or (4) within the field of use which includes human or animal allograft tissue ("Employee Developments"). Employee agrees that all Employee Developments that may be developed or produced by Employee during Employee's employment by the Corporation are and will be the property of the Corporation, and that Employee further agrees that he will, at the request of the Corporation, execute such documents as the Corporation may reasonably request from time to time, to assign and transfer all of the right, title and interest in Employee Developments that are the property of the Corporation to the Corporation and he will cooperate with the Corporation in connection with any patent applications. In this regard, Employee will, at all times, fully advise and inform the Corporation of all matters that Employee may be developing or working on while employed by the Corporation. Employee further agrees that upon the termination of his employment with the Corporation for any reason whatsoever, he shall immediately deliver and surrender to the Corporation any and all plans, documents and other materials of any nature relating to Employee Developments. The Corporation may provide additional compensation to Employee as consideration for Employee Developments in
accordance with any patent policy of the Corporation. The provisions of this Paragraph 12 shall survive the termination of this Agreement.
13. Limitation of Employment.
(a) In the event of the termination of Employee's employment with the Corporation by the Corporation for cause (as defined in Subparagraph 10(b) above), Employee agrees that for a period of one (1) year following the effective date of such termination, he will not engage in any business which receives, processes, or distributes human tissue within the United States. In the event of the termination of Employee's employment with the Corporation by the Corporation without cause, Employee agrees that for a period of one (1) year following the effective date of such termination, Employee will not engage in any business which receives, processes, or distributes human tissue (or in any business that competes with the Corporation) within the United States; provided, however, that Employee shall then be entitled to a severance payment in the amount of one (1) times his then-current salary (computed without reference to shares of stock in the Corporation, fringe benefits, or any other form of compensation). The Corporation may require Employee to execute a release of claims against the Corporation as a condition precedent to its obligation to make the severance payment described herein.
(b) Employee acknowledges that this restrictive covenant is reasonably necessary to protect the Corporation's legitimate business interests, which are represented by, among other things, the substantial relationships between the Corporation and its licensees and tissue sources, as well as the goodwill established by the Corporation with licensees and tissue sources in the United States and other countries where the Corporation's products are manufactured or distributed over a protracted period.
(c) Employee recognizes the fact that the Corporation would not sign this Agreement without the inclusion of this covenant, and Employee confirms the sufficiency of the consideration received by him, in the form of employment by the Corporation, in accepting this covenant as a material term of the Agreement.
(d) The period set forth in subparagraph (a) above will be tolled during any time in which Employee is in violation of the restrictive covenant contained in this Paragraph 13, and that period will begin to run again from the date Employee ceases such violation.
(e) This Paragraph 13 will survive the termination of this Agreement and the termination of Employee's employment with the Corporation.
14. Remedies For Breach. The parties understand and agree that no amount of money would adequately compensate the Corporation for damages which the parties acknowledge would be suffered as a result of a violation by Employee of the covenants contained in Paragraphs 11, 12 or 13 above, and that, therefore, the Corporation shall be entitled, upon application to a court of competent jurisdiction, to obtain injunctive relief to enforce the provisions of Paragraphs 11, 12 and/or 13, which injunctive relief shall be in addition to any other rights or remedies available to the Corporation. If such a violation occurs, Employee shall be responsible for the payment of reasonable attorney's fees and other costs and expenses incurred by the Corporation in enforcing the covenants contained in Paragraphs 11, 12 and/or 13 above, whether incurred at the trial level or in any appellate proceeding. The provisions of this Paragraph 14 shall survive the termination of this Agreement.
15. Limitations on Authority. Without the express written consent of the Corporation's Board of Directors, Employee shall have no authority to do any of the following:
(a) Pledge the credit of the Corporation or any of its other employees;
(b) Bind the Corporation under any contract, agreement, note, mortgage or other obligation, except as provided in the Corporation's Standard Operating Procedures;
(c) Release or discharge any debt due the Corporation unless the Corporation has received the full amount thereof; or
(d) Sell, mortgage, transfer or otherwise dispose of any assets of the Corporation.
Notwithstanding the foregoing, Employee may bind the Corporation under contracts, agreements, notes, mortgages or other obligations up to a value of $100,000, provided the approval and signature of either the Corporation's Chief Operating Officer or Chief Financial Officer is also obtained with respect to same.
16. Severability. If any provision of this Agreement shall be declared invalid or unenforceable by a court of competent jurisdiction, the invalidity or unenforceability of such provision shall not affect the other provisions hereof, and this Agreement shall be construed and enforced in all respects as if such invalid or unenforceable provision was omitted.
17. Attorney's Fees and Costs. Except as provided in Paragraph 14 above, in the event a dispute arises between the parties hereto and suit is instituted, the prevailing party in such litigation shall be entitled to recover reasonable attorney's fees and other costs and expenses from the nonprevailing party, whether incurred at the trial level or in any appellate proceeding.
18. Governing Law; Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, and venue for any legal proceeding or action at law arising out of or construing this Agreement shall lie in the state courts of Alachua County, Florida, or the United States District Court for the Northern District of Florida, Gainesville Division.
19. Completeness of Agreement. All understandings and agreements heretofore made between the parties hereto with respect to the subject matter of this Agreement are merged into this document which alone fully and completely expresses their agreement. No change or modification may be made to this Agreement except by instrument in writing duly executed by the parties hereto with the same formalities as this document.
20. Notices. Any and all notices or other communications provided for herein shall be given in writing and shall be hand delivered or sent by United States mail, postage prepaid, registered or certified, return receipt requested, addressed as follows:
If to the Corporation:
Regeneration Technologies, Inc.
One Innovation Drive
Alachua, Florida 32615
Attn: Board of Directors - Compensation Committee
If to Employee:
James M. Grooms
5131 NW 76th Lane
Gainesville, Florida 32653
provided, however, that any party may, from time to time, give notice to the other party of some other address to which notices or other communications to such party shall be sent, in which
event, notices or other communications to such party shall be sent to such address. Any notice or other communication shall be deemed to have been given and received hereunder as of the date the same is actually hand delivered or, if mailed, when deposited in the United States mail, postage prepaid, registered or certified, return receipt requested.
21. Assignment. Neither party to this Agreement may assign its rights or obligations hereunder without the prior written consent of the other party.
22. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the respective parties hereto, their heirs, legal representatives, successors and permitted assigns.
23. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument.
24. Captions. The captions appearing in this Agreement are inserted only as a matter of convenience and in no way define, limit, construe or describe the scope or intent of any provisions of this Agreement or in any way affect this Agreement.
25. Employee Handbook. Employee agrees to follow and be bound by the guidelines contained in the Corporation's Employee Handbook, as same may be modified from time to time.
(Signatures on following page)
IN WITNESS WHEREOF, the undersigned have executed this Agreement on this 12th day of February, 1998.
WITNESSES: "CORPORATION"
Regeneration Technologies, Inc.
/s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
------------------------------ ------------------------------------
------------------------------
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"EMPLOYEE"
/s/ [ILLEGIBLE] /s/ James M. Grooms
------------------------------ ------------------------------------
James M. Grooms
-------------------------------
|
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into this 13 day of February, 1998, by and between REGENERATION TECHNOLOGIES, INC., a Florida corporation (the "Corporation") and RICHARD R. ALLEN ("Employee").
WHEREAS, the Corporation is engaged in the business of manufacturing products from bone tissue in Alachua, Florida; and
WHEREAS, the Corporation desires to employ Employee and Employee desires to accept such employment during the term of this Agreement and upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and the benefits accruing to the parties hereto, the parties agree as follows:
1. Employment. The Corporation hereby agrees to employ Employee, and Employee hereby agrees to accept such employment, to render services on behalf of the Corporation as Chief Financial Officer. The duties of Employee shall be those established by the Corporation's Board of Directors, or its officers, from time to time.
2. Devotion to Employment. During the term of this Agreement, Employee shall devote his full time on behalf of the Corporation, and Employee shall not engage in any other gainful employment without the written consent of the Corporation. Provided, however, that nothing contained herein shall prohibit Employee from investing or trading in stocks, bonds, commodities or other forms of investment, including real property.
3. Term of Agreement. This Agreement shall be effective as of the date first written above, and it shall continue in full force and effect for a period of five (5) years unless sooner terminated as hereinafter provided.
4. Compensation.
(a) Annual Salary. The Corporation shall pay to Employee as compensation for his services a salary of One Hundred Twenty-Five Thousand Dollars ($125,000.00) per year, payable in equal monthly installments. Employee's salary shall be reviewed annually by the Corporation's Board of Directors, at which time Employee's salary may be adjusted as mutually agreed upon by Employee and the Corporation's Board of Directors.
(b) Performance Bonus. To provide greater incentive for Employee by rewarding him with additional compensation, a cash bonus may be paid to Employee at any time during the year, or after the close of the year, based upon the performance of the Corporation and the performance of Employee during such year; provided, however, that the payment of any such bonus and the amount thereof shall be within the sole discretion of the Corporation's Board of Directors. In making such determination, the Directors will consider the following:
(i) The net profits of the Corporation for the year;
(ii) The base salary of Employee;
(iii) Employee's overall performance as an employee of the Corporation;
(iv) A comparison of Employee's performance with the performance of the other employees of the Corporation; and
(v) Such other matters as may be considered appropriate by the Directors.
(c) Stock of the Corporation. The Corporation shall issue to Employee One Hundred Twenty Thousand (120,000) shares of common stock of the Corporation (the "Shares"). The Shares shall be issued as described herein only upon Employee's execution of a Stock Restriction Agreement for Regeneration Technologies, Inc. (the "Stock Restriction Agreement"), which, inter alia, restricts the transfer of the Shares and contains certain buy-back provisions regarding the Shares upon the termination of Employee's employment with the Corporation.
(d) Withholding, FICA, FUTA. Employee's salary and performance bonus, if any, shall be subject to, and reduced by, applicable federal income tax withholding and FICA tax, and any other taxes imposed by law.
5. Fringe Benefits. During the term of this Agreement, Employee shall be entitled to all fringe benefits offered generally to the Corporation's managerial employees as established or modified from time to time by the Corporation, subject always to the rules in effect regarding participation in such plans. Employee shall not be entitled to any other fringe benefits as a result of his employment with the Corporation.
6. Business Expenses. Except as otherwise provided herein, the Corporation shall pay, either directly or by reimbursement to Employee, such reasonable and necessary business expenses incurred by Employee in the course of his employment by the Corporation as are consistent with the Corporation's policies in existence from time to time, subject to such dollar limitations and verification and record keeping requirements as may be established from time to time by the Corporation.
7. Vacation. Employee shall be entitled to four (4) weeks paid vacation time each calendar year, prorated in accordance with Corporation policy. All vacations shall be taken by Employee at such time or times as may be approved by the Corporation. There will be no carryover of unused vacation time or sick leave from one year to another, and no compensation for such unused vacation or sick leave, if any.
8. Time Off. Employee shall be entitled to such time off with pay for attendance at seminars, courses, meetings and conventions as is authorized by the Corporation from time to time. The specific seminars, courses, meetings and conventions to be attended by Employee shall be subject to the Corporation's prior approval.
9. Termination of Employment.
(a) Voluntary Termination. Employee or the Corporation may voluntarily terminate Employee's employment with the Corporation (and, except as otherwise specifically provided hereunder, this Agreement) at any time, by delivering to the other party written notice of such intention not less than thirty (30) days prior to the effective date of termination. Notwithstanding the foregoing, if notice of termination is given by Employee to the Corporation, then the Corporation shall have the option of advancing the effective date of such termination to any date after receipt of such notice from Employee, which option shall be exercised by the Corporation within three (3) business days of receipt of such notice.
(b) Termination for Cause. The Corporation may immediately terminate Employee's employment with the Corporation (and, except as otherwise specifically provided hereunder, this Agreement) for "cause" by giving written notice (without regard to the
thirty (30) day period provided above) of such termination to Employee specifying the grounds therefor. A termination for "cause" shall only be for any one or more of the following reasons:
(i) Willfully or negligently damaging the Corporation's property, business, reputation or goodwill.
(ii) Willfully injuring any employee of the Corporation.
(iii) Willfully injuring any person in the course of the performance of services for the Corporation.
(iv) Lawfully charged with commission of a felony.
(v) Stealing, dishonesty, fraud or embezzlement.
(vi) Deliberate and continuous neglect of duty.
(vii) Use of alcohol or narcotics to the extent it prevents, in the sole judgment of the Corporation's Board of Directors, Employee from effectively performing the duties set forth in Paragraph 1 above.
(viii) Violating the covenants set forth in Paragraphs 10 or 11 of this Agreement.
The decision to terminate Employee's employment for "cause" shall be made by the Corporation's Board of Directors in its sole discretion.
(c) Termination Upon Death, Incompetency or Disability. Notwithstanding Subparagraph 9(a) above, the Corporation shall have the right to terminate Employee's employment with the Corporation (and, except as otherwise specifically provided hereunder, this Agreement) immediately and without prior written notice to Employee in the event that Employee dies, or is adjudicated incompetent, or is "permanently disabled", as
hereinafter defined. As used herein, the term "permanently disabled" shall mean that Employee is unable to adequately perform his regular duties hereunder as a result of sickness or accident and such condition appears to be permanent. The determination of "permanent disability" shall be made by the Corporation's Board of Directors in its sole and absolute discretion and its decision shall be final and binding on Employee unless found to be arbitrary or capricious by a court of competent jurisdiction.
(d) Performance of Duties During Notice Period. In the event that Employee terminates Employee's employment with the Corporation in accordance with the terms of Subparagraph 9(a), Employee, if requested by the Corporation, shall continue to render services hereunder on behalf of the Corporation for the thirty (30) day period until the effective date of termination, and shall, in such event, be paid the compensation due Employee hereunder for the remainder of such period.
10. Confidential Information. Employee acknowledges and recognizes that, in connection with the performance of Employee's duties and obligations for the Corporation, Employee has and will have access to certain confidential information of the Corporation, including, but not limited to, any intellectual property of the Corporation, the identity of the Corporation's clients, the identity of prospective clients, the existence of negotiations with prospective clients of the Corporation, all drawings, records, sketches, models, financial information, customer information, trade secrets, and trade secrets relating to services of the Corporation, and products being developed by the Corporation (the "Confidential Information"). Employee hereby acknowledges that the maintenance of the confidentiality of the Confidential Information and restrictions on the use of the Confidential Information is essential to the
Corporation. Employee shall not, at any time, whether during the term of this Agreement or after the termination of Employee's employment with the Corporation for any reason whatsoever, divulge or reveal any of the Confidential Information to any person, party or entity, directly or indirectly. In addition, Employee shall not utilize any of the Confidential Information for Employee's own benefit, or for the benefit of any subsequent employer or competitor of the Corporation. Employee shall maintain the Confidential Information in strict confidence and shall not copy, duplicate or otherwise reproduce, in whole or in part, such Confidential Information, except as necessary for Employee to perform services for the Corporation. Upon the termination of Employee's employment by the Corporation, or at the earlier request of the Corporation, Employee shall immediately surrender to the Corporation any and all memoranda, records, files or other documents and any other materials (including photocopies or other reproductions) containing or relating to the Confidential Information. Employee shall indemnify and hold the Corporation harmless from any loss, damage, expense, cost or liability arising out of any unauthorized use or disclosure of the Confidential Information by Employee. The provisions of this Paragraph 10 shall survive the termination of Employee's employment with the Corporation and the termination of this Agreement.
11. Employee Developments. Employee is aware and understands that, during the term of Employee's employment with the Corporation or with the financial and other assistance that may be provided by the Corporation, Employee may invent, create, develop and improve certain valuable property such as, but not limited to, patents, trademarks, inventions, other patentable inventions and other trade secrets and formula, where such valuable property is (1) created during Employee's normal work hours; (2) created using the equipment or facilities
of the Corporation; (3) created by Employee under the supervision or guidance of the Corporation; or (4) within the field of use which includes human or animal allograft tissue ("Employee Developments"). Employee agrees that all Employee Developments that may be developed or produced by Employee during Employee's employment by the Corporation are and will be the property of the Corporation and that Employee further agrees that he will, at the request of the Corporation, execute such documents as the Corporation may reasonably request from time to time, to assign and transfer all of the right, title and interest in Employee Developments to the Corporation and he will cooperate with the Corporation in connection with any patent applications. In this regard, Employee will, at all times, fully advise and inform the Corporation of all matters that Employee may be developing or working on while employed by the Corporation. Employee further agrees that upon the termination of his employment with the Corporation for any reason whatsoever, Employee shall immediately deliver and surrender to the Corporation any and all plans, documents and other materials of any nature relating to the Employee Developments. The Corporation may provide additional compensation to Employee as consideration for Employee Developments in accordance with any patent policy of the Corporation. The provisions of this Paragraph 11 shall survive the termination of this Agreement.
12. Limitation of Employment.
(a) In the event of the termination of Employee's employment with the Corporation either by the Corporation for cause (as defined in Subparagraph 9(b) above) or voluntarily by Employee, Employee agrees that for a period of two (2) years following the
effective date of such termination, Employee will not engage in the tissue banking business (or in any business that competes with Corporation) within the Southeastern United States. In the event of the termination of Employee's employment with the Corporation by the Corporation without cause, Employee agrees that for a period of one (1) year following the effective date of such termination, Employee will not engage in the tissue banking business (or in any business that competes with such business) within the Southeastern United States. For purposes of this Agreement, the "Southeastern United States" shall include the following states: Florida, Georgia, Alabama, Mississippi, South Carolina, North Carolina, Tennessee, Kentucky and Virginia.
(b) Employee acknowledges that this restrictive covenant is reasonably necessary to protect the Corporation's legitimate business interests, which are represented by, among other things, the substantial relationships between the Corporation and its licensees and tissue sources, as well as the goodwill established by the Corporation with licensees and tissue sources in the United States and other countries where the Corporation's tissues are distributed over a protracted period.
(c) Employee recognizes the fact that the Corporation would not sign this Agreement without the inclusion of this covenant, and Employee confirms the sufficiency of the consideration received by Employee, in the form of employment by the Corporation, in accepting this covenant as a material term of the Agreement.
(d) The parties acknowledge and agree that no amount of money would adequately compensate the Corporation for damages which the parties acknowledge would be suffered as a result of the violation of the terms of this provision by Employee, and they confirm that any such violation would result in irreparable injury to the Corporation because
of the reduction in its income caused by the loss of or damage to the aforesaid relationships. It is agreed that the Corporation will be entitled to specific performance of this provision, and to injunctive relief, in view of the fact that the actual harm is not readily ascertainable or compensable by money damages.
(e) The period set forth in subparagraph (a) above will be tolled during any time in which Employee is in violation of the restrictive covenant contained in this Paragraph 12, and that period will begin to run again from the date Employee ceases such violation.
(f) This Paragraph 12 will survive the termination of this Agreement and the termination of Employee's employment with the Corporation.
13. Remedies For Breach. It is understood and agreed by the parties that no amount of money would adequately compensate the Corporation for damages which the parties acknowledge would be suffered as a result of a violation by the Employee of the covenants contained in Paragraphs 10, 11 and 12 above, and that, therefore, the Corporation shall be entitled, upon application to a court of competent jurisdiction, to obtain injunctive relief to enforce the provisions of Paragraphs 10, 11 and 12, which injunctive relief shall be in addition to any other rights or remedies available to the Corporation. If such a violation occurs, Employee shall be responsible for the payment of reasonable attorney's fees and other costs and expenses incurred by the Corporation in enforcing the covenants contained in Paragraphs 10, 11 and 12 above, whether incurred at the trial level or in any appellate proceeding. The provisions of this Paragraph 13 shall survive the termination of this Agreement.
14. Limitations on Authority. Without the express written consent of the Corporation's Board of Directors, Employee shall have no authority to do any of the following:
(a) Pledge the credit of the Corporation or any of its other employees;
(b) Bind the Corporation under any contract, agreement, note, mortgage or other obligation, except as provided in the Corporation's Standard Operating Procedures;
(c) Release or discharge any debt due the Corporation unless the Corporation has received the full amount thereof; or
(d) Sell, mortgage, transfer or otherwise dispose of any assets of the Corporation.
Notwithstanding the foregoing, Employee may bind the Corporation under contracts, agreements, notes, mortgages or other obligations up to a value of $500,000, provided the approval and signature of either the Corporation's President or Chief Operating Officer is also obtained with respect to same.
15. Severability. If any provision of this Agreement shall be declared invalid or unenforceable by a court of competent jurisdiction, the invalidity or unenforceability of such provision shall not affect the other provisions hereof, and this Agreement shall be construed and enforced in all respects as if such invalid or unenforceable provision was omitted.
16. Attorney's Fees and Costs. Except as provided in Paragraph 13 above, in the event a dispute arises between the parties hereto and suit is instituted, the prevailing party in such litigation shall be entitled to recover reasonable attorney's fees and other costs and expenses from the nonprevailing party, whether incurred at the trial level or in any appellate proceeding.
17. Governing Law; Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, and venue for any legal proceeding
or action at law arising out of or construing this Agreement shall lie in the state courts of Alachua County, Florida, or the United States District Court for the Northern District of Florida, Gainesville Division.
18. Completeness of Agreement. All understandings and agreements heretofore made between the parties hereto with respect to the subject matter of this Agreement are merged into this document which alone fully and completely expresses their agreement. No change or modification may be made to this Agreement except by instrument in writing duly executed by the parties hereto with the same formalities as this document.
19. Notices. Any and all notices or other communications provided for herein shall be given in writing and shall be hand delivered or sent by United States mail, postage prepaid, registered or certified, return receipt requested, addressed as follows:
If to the Corporation:
University of Florida Tissue Bank, Inc.
One Innovation Drive
Alachua, Florida 32615
Attn: President
If to Employee:
Richard R. Allen
1110 NE Third Street
Gainesville, Florida 32601
provided, however, that any party may, from time to time, give notice to the other party of some other address to which notices or other communications to such party shall be sent, in which event, notices or other communications to such party shall be sent to such address. Any notice or other communication shall be deemed to have been given and received hereunder as of the date
the same is actually hand delivered or, if mailed, when deposited in the United States mail, postage prepaid, registered or certified, return receipt requested.
20. Assignment. Neither party to this Agreement may assign its rights or obligations hereunder without the prior written consent of the other party.
21. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the respective parties hereto, their heirs, legal representatives, successors and permitted assigns.
22. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument.
23. Captions. The captions appearing in this Agreement are inserted only as a matter of convenience and in no way define, limit, construe or describe the scope or intent of any provisions of this Agreement or in any way affect this Agreement.
24. Employee Handbook. Employee agrees to follow and be bound by the guidelines contained in the Corporation's Employee Handbook, as same may be modified from time to time.
(Signatures on following page)
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the date and year set forth above.
WITNESSES: "CORPORATION"
Regeneration Technologies, Inc.
/s/ [ILLEGIBLE] By: /s/ Jamie M. Grooms
----------------------- ---------------------------------
James M. Grooms, President
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|
"EMPLOYEE"
/s/ [ILLEGIBLE] /s/ Richard R. Allen
----------------------- ------------------------------------
Richard R. Allen
/s/ [ILLEGIBLE]
-----------------------
|
Exhibit 10.15
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered in this 25th day of November, 1998, by and between REGENERATION TECHNOLOGIES, INC., a Florida corporation (the "Corporation") having its principal address at 2 Innovation Drive, Alachua, Florida 32615 and Frederick Preiss ("Employee").
WHEREAS, the Corporation operates a tissue processing / manufacturing facility in Alachua, Florida; and
WHEREAS, the Corporation desires to employ Employee and Employee desires to accept such employment during the term of this Agreement and upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and the benefits accruing to the parties hereto, the parties agree as follows:
1. Employment. The Corporation hereby agrees to employ Employee, and Employee hereby agrees to accept such employment, to render services on behalf of the Corporation as General Manager. The duties of Employee shall be those established by the Corporation's Board of Directors, or its officers, from time to time.
2. Devotion to Employment. During the term of this Agreement, Employee shall devote his full time on behalf of the Corporation, and Employee shall not engage in any other gainful employment without written consent of the Corporation; provided, however, that nothing contained herein shall prohibit Employee from investing or trading in stocks, bonds, commodities or other forms of investment, including real property.
3. Term of Agreement. The effective date of this Agreement shall be the
Subj: Employment Agreement ICO Frederick Preiss
date of this Agreement, and it shall continue in full force and effect for a period of five (5) years unless sooner terminated as hereinafter provided.
4. Compensation.
(a) Annual Salary. The Corporation shall pay to Employee as compensation for Employee's services a salary of $125,000 per year, payable in installments in accordance with the payroll policies of the Corporation in effect from time to time during the Employment Term. Employee's salary shall be reviewed annually by the Corporation's Board of Directors, at which time Employee's salary may be adjusted as mutually agreed upon by Employee and the Corporation's Board of Directors.
(b) Performance Bonus. To provide greater incentive for Employee by rewarding him with additional compensation, a cash bonus may be paid to Employee at any time during the year, or after the close of the year, based upon the performance of the Corporation and the performance of Employee during such year; provided, however, that the payment of any such bonus and the amount thereof shall be within the sole discretion of the Corporation's Board of Directors. Bonus agreements made as indicated by the initial employment offer shall be honored provided all conditions and responsibilities remain the same. In making bonus determinations, the Directors will consider the following:
(i) The net profit of the Corporation for the year;
(ii) The base salary of Employee;
(iii) Employee's overall performance as an employee of the Corporation;
Subj: Employment Agreement ICO Frederick Preiss
(iv) A comparison of Employee's performance with the performance of the other employees of the Corporation; and
(v) Such other matters as may be considered appropriate by the Directors.
(c) Stock Options. Employee shall be granted an option to purchase seventeen thousand five hundred (17,500) shares of common stock of Regeneration Technologies, Inc. ("RTI") at the exercise price of Six and 25/100 Dollars ($6.25) per share, subject to approval of the Board of Directors and subject to such vesting and other requirements as are set forth in the Omnibus Stock Plan, the Employee Restricted Stock Agreement and the Incentive Stock Option Grant Agreement between RTI and Employee as additional consideration for services rendered to RTI.
(d) Withholding, FICA, FUTA. Employee's salary and performance bonus, if any, shall be subject to, and reduced by, applicable federal income tax withholding and FICA tax, and any other taxes imposed by law.
5. Other Benefits. The Employee shall be entitled to such vacation days, sick days, insurance and other benefit programs as are established for all other employees of the Corporation, on the same basis as such other employees are entitled thereto, it being understood that the establishment, termination, or change of any such program shall be at the instance of the Company, in exercise of its sole discretion, from time to time, and any such termination or change in any such program shall not affect this Agreement.
6. Fringe Benefits. During the term of this Agreement, Employee shall be
Subj: Employment Agreement ICO Frederick Preiss
entitled to all fringe benefits offered generally to the Corporation's managerial employees as established or modified from time to time by the Corporation, pro-rated based on the percentage of time Employee devotes to the Corporation, subject always to the rules in effect regarding participation in such plans. Employee shall not by entitled to any fringe benefits as a result of his employment with the Corporation.
7. Business Expenses. Except as otherwise provided herein, the Corporation shall pay, either directly or by reimbursement to Employee, such reasonable and necessary business expenses incurred by Employee in the course of his employment by the Corporation as are consistent with the Corporation's policies in existence from time to time, subject to such dollar limitations and verification and record keeping requirements as may be established from time to time by the Corporation.
8. Vacation and Sick Leave. Employee shall be entitled to such paid vacation time and paid sick leave each year, as shall be authorized by the Corporation from time to time. All vacations shall be taken by Employee at such time or times as may be approved by the Corporation. There will be no carryover of unused vacation time or sick leave from one year to another, and Employee shall not be entitled to any pay for unused vacation or sick leave.
9. Time Off. Employee shall be entitled to such time off with pay for attendance at seminars, courses, meetings and conventions as is authorized by the Corporation from time to time. The specific seminars, courses, meetings and conventions to be attended by Employee shall be subject to the Corporation's prior approval.
Subj: Employment Agreement ICO Frederick Preiss
10. Termination of Employment.
(a) Voluntary Termination. Employee or the Corporation may voluntarily terminate Employee's employment with the Corporation (and, expect as otherwise specifically provided hereunder, this Agreement) at any time, by delivering to the other party written notice of such intention not less than thirty (30) days prior to the effective date of termination. Notwithstanding the foregoing, if notice of termination is given by Employee to the Corporation, then the Corporation shall have the option of advancing the effective date of such termination to any date after receipt of such notice from Employee, which option shall be exercised by the Corporation within three (3) business days of receipt of such notice.
(b) Termination for Cause. The Corporation may immediately terminate Employee's employment with the Corporation (and, except as otherwise specifically provided hereunder, this Agreement) for "cause" by giving written notice (without regard to the thirty (30) day period provided above) of such termination to Employee specifying the grounds therefor. A termination for "cause" shall only be for any one or more of the following reasons:
(i) Willfully or negligently damaging the Corporation's property, business, reputation or goodwill;
(ii) Willfully injuring any employee of the Corporation;
(iii) Willfully injuring any person in the course of the performance of services for the Corporation;
(iv) Lawfully charged with commission of a felony;
(v) Stealing, dishonesty, fraud or embezzlement;
(vi) Deliberate and continuous neglect of duty;
Subj: Employment Agreement ICO Frederick Preiss
(vii) Failure to properly perform Employee's duties;
(viii) Use of alcohol or narcotics to the extent it prevents, in the sole judgement of the Corporation's Board of Directors, Employee from effectively performing the duties set forth in Paragraph I above;
(ix) Violating the covenants set forth in Paragraph 11 or 12 of this Agreement.
The decision to terminate Employee's employment for "cause" shall be made by the Corporation's Board of Directors in its sole discretion.
(c) Termination Upon Death, Incompentency or Disability. Notwithstanding Subparagraph 9(a) above, the Corporation shall have the right to terminate Employee's employment with the Corporation (and, expect as otherwise specifically provided hereunder, this Agreement) immediately and without prior written notice to Employee in the event that the Employee dies, or is adjudicated incompetent, or is "permanently disabled", as hereinafter denied. As used herein, the term "permanently disabled" shall mean that Employee is unable to adequately perform his regular duties hereunder as a result of sickness or accident and such condition appears to be permanent. The determination of "permanent disability" shall be made by the Corporation's Board of Directors in its sole and absolute discretion and its decision shall be final and binding on Employee unless found to be arbitrary or capricious by a court of competent jurisdiction.
(d) Performance of Duties During Notice Period. In the event that Employee terminates Employee's employment with the Corporation in accordance with the terms of Subparagraph 9(a), Employee, if requested by the Corporation, shall continue to render services
Subj: Employment Agreement ICO Frederick Preiss
hereunder on behalf of the Corporation for the thirty (30) day period until the effective date of termination, and shall, in such event, be paid the compensation due Employee hereunder for the remainder of such period.
11. Confidential Information. Employee acknowledges and recognizes that, in connection with the performance of Employee's duties and obligations for the Corporation, Employee has and will have access to certain confidential information of the Corporation, including, but not limited to, any intellectual property of the Corporation, the identity of the Corporation's clients, the identity of prospective clients, the existence of negotiations with prospective clients of the Corporation, all drawings, records, sketches, models, financial information, customer information, trade secrets, and trade secrets relating to services of the Corporation, and products being developed by the Corporation (the "Confidential Information"). Employee hereby acknowledges that the maintenance of the confidentiality of the Confidential Information and restrictions on the use of the Confidential Information is essential to the Corporation. Employee shall not, at any time, whether during the term of this Agreement or after the termination of Employee's employment with the Corporation for any reason whatsoever, divulge or reveal any of the Confidential Information to any person, party or entity, directly or indirectly. In addition, Employee shall not utilize any of the Confidential Information for Employee's own benefit, or for the benefit of any subsequent employer or competitor of the Corporation. Employee shall maintain the Confidential Information in strict confidence and shall not copy, duplicate or otherwise reproduce, in whole or in part, such Confidential Information, except as necessary for Employee to perform services for the Corporation. Upon the termination of Employee's employment by the Corporation, or at the earlier request of the
Subj: Employment Agreement ICO Frederick Preiss
Corporation, Employee shall immediately surrender to the Corporation any and all memoranda, records, files or other documents and any other materials (including photocopies or other reproductions) relating to the Confidential Information. Employee shall indemnify and hold the Corporation harmless from any loss, damage, expense, cost or liability arising out of any unauthorized use or disclosure of the Confidential Information by Employee. The provisions of this Paragraph 11 shall survive the termination of Employee's employment with the Corporation and the termination of this Agreement.
12. Employee Developments. Employee is aware and understands that during the term of Employee's employment with the Corporation or with the financial and other assistance that may be provided by the Corporation, Employee may invent, create, develop and improve certain valuable property such as, but not limited to, patents, trademarks, inventions, other patentable inventions and other trade secrets and formula ("Employee Developments"). Employee agrees that all Employee Developments that may be developed or produced by Employee during Employee's employment by the Corporation are and will be the property of the Corporation and that Employee further agrees that she will, at the request of the Corporation, execute such documents as the Corporation may reasonably request from time to time, to assign and transfer all of the right, title and interest in Employee Developments that are the property of the Corporation to the Corporation and she will cooperate with the Corporation in connection with any patent applications. In this regard, Employee will, at all times, fully advise and inform the Corporation of all matters that Employee may be developing or working on while employed by the Corporation. Employee further agrees that upon the termination of her employment with the Corporation for any reason whatsoever, Employee shall immediately deliver and surrender to
Subj: Employment Agreement ICO Frederick Preiss
the Corporation any and all plans, documents and other materials of any nature relating to the Employee Developments. The Corporation may provide additional compensation to Employee as consideration for Employee Developments in accordance with any patent policy of the Corporation. The provisions of this Paragraph 12 shall survive the termination of this Agreement.
13. Limitation of Employment.
(a) In the event of the termination of Employee's employment with the Corporation either by the Corporation for cause (as defined in Subparagraph 10(b) above) or voluntarily by Employee, Employee agrees that for a period of three (3) years following the effective date of such termination, Employee will not engage in or be employed by any business which engages in the business of manufacturing or distributing products from bone tissue in the United States.
(b) In the event of the termination of Employee's employment with the Corporation by the Corporation without cause, Employee agrees that for a period of one (1) year following the effective date of such termination, Employee will not engage in or be employed by any business which engages in the business of manufacturing or distributing products from bone tissue within the United States. In the event Employee is terminated by the Corporation without cause, the Corporation will provide severance compensation to Employee as follows:
(1) The Corporation provides no severance compensation in the event of termination prior to the end of four (04) months of full time employment;
(2) The Corporation provides one month of basic annual salary if Employee has served five months of full time employment upon termination.
Subj: Employment Agreement ICO Frederick Preiss
(3) The Corporation provides Employee two (2) months of basic annual salary upon termination, if the Employee has served six (06) full months of employment, to be paid monthly;
(4) the Corporation provides Employee three (3) months of basic annual salary if Employee has served at least (08) full months of employment upon termination, to be paid out monthly;
(5) The Corporation provides Employee four (4) months of basic annual salary if Employee has served at least (09) months of employment upon termination, to be paid out monthly;
(6) The Corporation provides Employee five (5) months of basic annual salary if Employee has served at least (10) months of employment upon termination, to be paid out monthly;
(7) The Corporation provides Employee six (6) months of basic annual salary if Employee has served at least (12) months of employment upon termination, to be paid out monthly.
(b) Employee acknowledges that this restrictive covenant is reasonably necessary to protect the Corporation's legitimate business interests, which are represented by, among other things, the substantial relationships between the Corporation and its licensees and tissue sources, as well as the goodwill established by the Corporation with licensees and tissue sources in the United States and other countries where the Corporation's tissues are distributed over a protracted period.
Subj: Employment Agreement ICO Frederick Preiss
(c) Employee recognizes the fact that the Corporation would not sign this Agreement without the inclusion of this covenant, and Employee confirms the sufficiency of the consideration received by Employee, in the form of employment by the Corporation, in accepting this covenant as a material term of the Agreement.
(d) It is agreed that the Corporation will be entitled to specific performance of this provision, and to injunctive relief, in view of the fact that the actual harm is not readily ascertainable or compensable by money damages.
(e) The period set forth in subparagraph (a) above will be tolled during any time in which Employee is in violation of the restrictive covenant contained in this Paragraph 13, and that period will begin to run again from the date Employee ceases such violation.
(f) This Paragraph 13 will survive the termination of this Agreement and the termination of Employee's employment with the Corporation.
14. Remedies For Breach. It is understood and agreed by the parties that no amount of money would adequately compensate the Corporation for damages which the parties acknowledge would be suffered as a result of a violation by the Employee of the covenants contained in Paragraphs 12 and 13 above, and that, therefore, the Corporation shall be entitled, upon application to a court of competent jurisdiction, to obtain injunctive relief to enforce the provisions of Paragraphs 12 and 13, which injunctive relief shall be in addition to any other rights or remedies available to the Corporation. If such a violation occurs, Employee shall be responsible for the payment of reasonable attorney's fees and other costs and expenses incurred by the Corporation in enforcing the covenants contained in Paragraphs 12 and 13 above, whether
Subj: Employment Agreement ICO Frederick Preiss
incurred at the trial level or in any appellate proceeding. The provisions of this Paragraph 14 shall survive the termination of this Agreement.
15. Limitations on Authority. Without the express written consent of the Corporation's Board of Directors, Chief Executive Officer, or the Vice President of Business Development, Employee shall have no apparent or implied authority to do any of the following:
(a) Pledge the credit of the Corporation or any of its other employees;
(b) Bind the Corporation under any contract, agreement, note, mortgage or other obligation, except in the performance of his/her functional duties relating to Director, Sales and in conjunction with signature of CEO or VP of Business Development;
(c) Release or discharge any debt due the Corporation unless the Corporation has received the full amount thereof; or
(d) Sell, mortgage, transfer or otherwise dispose of any assets of the Corporation.
16. Severability. If any provision of this Agreement shall be declared invalid or unenforceable by a court of competent jurisdiction the invalidity or unenforceability of such provision shall not affect the other provisions hereof, and this Agreement shall be construed and enforced in all respects as if such invalid or unenforceable provision was omitted.
17. Attorney's Fees and Costs. Except as provided in Paragraph 14 above, in the event a dispute arises between the parties hereto and suit is instituted, the prevailing party in such litigation shall be entitled to recover reasonable attorney's fees and other costs and expenses from the nonprevailing party, whether incurred at the trial level or in any appellate proceeding.
Subj: Employment Agreement ICO Frederick Preiss
18. Governing Law; Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, and venue for any legal proceeding or action at law arising out of or construing this Agreement shall lie in the state courts of Alachua County, Florida, or the United States District Court for the Northern District of Florida, Gainesville Division.
19. Completeness of Agreement. All understandings and agreements heretofore made between the parties hereto with respect to the subject matter of this Agreement are merged into this document which alone fully and completely expresses their agreement. No change or modification may be made to this Agreement except by instrument in writing duly executed by the parties hereto with the same formalities as this document.
20. Notices. Any and all notices or other communications provided for herein shall be given in writing and shall be hand delivered or sent by United States mail, postage prepaid, registered or certified, return receipt requested, addressed as follows:
If to the Corporation:
Regeneration Technologies, Inc.
Two Innovation Drive
Alachua, Florida 32615
Attn: President
If to Employee:
Frederick Preiss
/s/ Frederick Preiss ------------------------------ ------------------------------ |
Subj: Employment Agreement ICO Frederick Preiss
provided, however, that any party may, from time to time, give notice to the other party of some other address to which notices or other communications to such party shall be sent, in which event, notices or other communications to such party shall be sent to such address. Any notice or other communication shall be deemed to have been given and received hereunder as of the date the same is actually hand delivered or, if mailed, when deposited in the United States mail, postage prepaid, registered or certified, return receipt requested.
21. Assignment. Neither party to this Agreement may assign its rights or obligations hereunder without the prior written consent of the other party.
22. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the respective parties hereto, their heirs, legal representatives, successors and permitted assigns.
23. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument.
Subj: Employment Agreement ICO Frederick Preiss
24. Captions. The captions appearing in this Agreement are inserted only as a matter of convenience and in no way define, limit, construe or describe the scope or intent of any provisions of this Agreement or in any way affect this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the date and year set forth above.
WITNESSES: "CORPORATION"
Regeneration Technologies, Inc.
By: /s/ Nancy R. Holland
----------------------------------- -------------------------------------
Witness Nancy R. Holland Date
Title: VP Business Development
----------------------------------
"EMPLOYEE"
Frederick Preiss
/S/ ILLEGIBLE By: /s/ Frederick Preiss
----------------------------------- -------------------------------------
Witness Frederick Preiss (Signature / Date)
|
[DRIVERS LICENSE OF FREDERICK PREISS]
[BIRTH CERTIFICATE OF FREDERICK PREISS]
[LETTERHEAD OF REGENERATION TECHNOLOGIES]
December 8, 1998
Mr. Frederick Preiss
55 Llynwood Drive
Bolton, CT 06043
Dear Fred:
I am pleased to learn that you have verbally accepted our November 25 1998 letter of offer with two modifications. Jamie Grooms has directed me to outline these modifications as follows:
1. Employee Benefit Program -- RTI will reimburse Mr. Preiss for current health insurance policies (providing they are not Cobra) during the initial ninety (90) days of employment.
2. Severance Compensation/Protection - (In addition to standard compensation package and to be included in employment contract drafted by counsel.) If during Mr. Preiss' employment the controlling interest(s) of the corporation should change and, if Mr. Preiss is terminated for any reason other than cause during the six month period from the date of change of said control, then Mr. Preiss will be entitled to six (6) months salary compensation as severance.
We look forward to seeing you on Monday, December l4th. Hotel accommodations (directions attached) and car rental has been arranged as follows:
LaQuinta Inn. 920 NW 69th Terrace, Gainesville (I-75 & Newberry Road) Phone # 352-332-6466 / Confirmation # 66912446 / December 13 & 14
Avis Rental Car: Jacksonville Airport; approximately noon Confirmation #: 3305134US1 - 1 Week at rate of $159-00
Yours truly,
/s/ Kathleen Kathleen M. Davis Executive Administator |
Enc.
kmd
Exhibit 10.16
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into this 15th day of June, 1998, by and between REGENERATION TECHNOLOGIES, INC., a Florida corporation (the "Corporation") and THOMAS BREWER ("Employee").
WHEREAS, the Corporation is engaged in the business of manufacturing products from bone tissue in Alachua, Florida; and
WHEREAS, the Corporation desires to employ Employee and Employee desires to accept such employment during the term of this Agreement and upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and the benefits accruing to the parties hereto, the parties agree as follows:
1. Employment. The Corporation hereby agrees to employ Employee, and Employee hereby agrees to accept such employment, to render services on behalf of the Corporation as Director of Marketing. The duties of Employee shall be those established by the Corporation's Board of Directors, or its officers, from time to time.
2. Devotion to Employment. During the term of this Agreement, Employee shall devote his full time on behalf of the Corporation, and Employee shall not engage in any other gainful employment without the written consent of the Corporation. Provided, however, that nothing contained herein shall prohibit Employee from investing or trading in stocks, bonds, commodities or other forms of investment, including real property.
3. Term of Agreement. This Agreement shall be effective as of the date first written above, and it shall continue in full force and effect for a period of five (5) years unless sooner terminated as hereinafter provided.
4. Compensation.
(a) Annual Salary. The Corporation shall pay to Employee as compensation for his services a salary of One Hundred Forty-Eight Thousand Dollars ($148,000.00) per year, payable in equal biweekly installments. Employee's salary shall be reviewed annually by the Corporation's Board of Directors, at which time Employee's salary may be adjusted as mutually agreed upon by Employee and the Corporation's Board of Directors.
(b) Performance Bonus. To provide greater incentive for Employee by rewarding him with additional compensation, a cash bonus may be paid to Employee at any time during the year, or after the close of the year, based upon the performance of the Corporation and the performance of Employee during such year; provided, however, that the payment of any such bonus and the amount thereof shall be within the sole discretion of the Corporation's Board of Directors. In making such determination, the Directors will consider the following:
(i) The net profits of the Corporation for the year;
(ii) The base salary of Employee;
(iii) Employee's overall performance as an employee of the Corporation;
(iv) A comparison of Employee's performance with the performance of the other employees of the Corporation; and
(v) Such other matters as may be considered appropriate by the Directors.
The performance bonus described herein, if any, shall not exceed twenty percent (20%) of Employee's base annual salary.
(c) Stock of the Corporation. The Corporation shall issue to Employee the option to purchase Forty-Five Thousand (45,000) shares of common stock of the Corporation (the "Shares") at a price and on the terms set forth in the "Regeneration Technologies, Inc. Omnibus Stock Plan." The Shares shall be issued as described therein only upon Employee's execution of a Stock Restriction Agreement for Regeneration Technologies, Inc. (the "Stock Restriction Agreement"), which, inter alia restricts the transfer of the Shares and contains certain buy-back provisions regarding the Shares upon the termination of Employee's employment with the Corporation.
(d) Withholding, FICA, FUTA. Employee's salary and performance bonus, if any, shall be subject to, and reduced by, applicable federal income tax withholding and FICA tax, and any other taxes imposed by law.
5. Fringe Benefits. During the term of this Agreement, Employee shall be entitled to all fringe benefits offered generally to the Corporation's managerial employees as established or modified from time to time by the Corporation, subject always to the rules in effect regarding participation in such plans. Notwithstanding the foregoing, Employee shall not be entitled to receive health insurance, life insurance, or long term disability insurance
until the three month waiting period, commencing on Employee's first day of performance hereunder, has expired. During such three month waiting period, the Corporation shall reimburse Employee for his actual out-of-pocket expenses incurred in maintaining his pre-existing health, life, and long term disability coverages, if any. Employee shall not be entitled to any other fringe benefits as a result of his employment with the Corporation.
6. Business Expenses. Except as otherwise provided herein, the Corporation shall pay, either directly or by reimbursement to Employee, such reasonable and necessary business expenses incurred by Employee in the course of his employment by the Corporation as are consistent with the Corporation's policies in existence from time to time, subject to such dollar limitations and verification and record keeping requirements as may be established from time to time by the Corporation.
7. Vacation. Employee shall be entitled to four (4) weeks paid vacation time each calendar year, prorated in accordance with Corporation policy. All vacations shall be taken by Employee at such time or times as may be approved by the Corporation. There will be no carryover of unused vacation time or sick leave from one year to another, and no compensation for such unused vacation or sick leave, if any.
8. Time Off. Employee shall be entitled to such time off with pay for attendance at seminars, courses, meetings and conventions as is authorized by the Corporation from time to time. The specific seminars, courses, meetings and conventions to be attended by Employee shall be subject to the Corporation's prior approval.
9. Termination of Employment.
(a) Voluntary Termination. Employee or the Corporation may voluntarily terminate Employee's employment with the Corporation (and, except as otherwise specifically provided hereunder, this Agreement) at any time, by delivering to the other party written notice of such intention not less than thirty (30) days prior to the effective date of termination. Notwithstanding the foregoing, if notice of termination is given by Employee to the Corporation, then the Corporation shall have the option of advancing the effective date of such termination to any date after receipt of such notice from Employee, which option shall be exercised by the Corporation within three (3) business days of receipt of such notice.
(b) Termination for Cause. The Corporation may immediately terminate Employee's employment with the Corporation (and, except as otherwise specifically provided hereunder, this Agreement) for "cause" by giving written notice (without regard to the thirty (30) day period provided above) of such termination to Employee specifying the grounds therefor. A termination for "cause" shall only be for any one or more of the following reasons:
(i) Willfully or negligently damaging the Corporation's property, business, reputation or goodwill.
(ii) Willfully injuring any employee of the Corporation.
(iii) Willfully injuring any person in the course of the performance of services for the Corporation.
(iv) Lawfully charged with commission of a felony.
(v) Stealing, dishonesty, fraud or embezzlement.
(vi) Deliberate and continuous neglect of duty.
(vii) Use of alcohol or narcotics to the extent it prevents, in the sole judgment of the Corporations Board of Directors, Employee from effectively performing the duties set forth in Paragraph 1 above.
(viii) Violating the covenants set forth in Paragraphs 10 or 11 of this Agreement.
The decision to terminate Employee's employment for "cause" shall be made by the Corporation's Board of Directors in its sole discretion.
(c) Termination Upon Death, Incompetency or Disability. Notwithstanding Subparagraph 9(a) above, the Corporation shall have the right to terminate Employee's employment with the Corporation (and, except as otherwise specifically provided hereunder, this Agreement) immediately and without prior written notice to Employee in the event that Employee dies, or is adjudicated incompetent, or is "permanently disabled", as hereinafter defined. As used herein, the term "permanently disabled" shall mean that Employee is unable to adequately perform his regular duties hereunder as a result of sickness or accident and such condition appears to be permanent. The determination of "permanent disability" shall be made by the Corporation's Board of Directors in its sole and absolute discretion and its decision shall be final and binding on Employee unless found to be arbitrary or capricious by a court of competent jurisdiction.
(d) Performance of Duties During Notice Period. In the event that Employee terminates Employee's employment with the Corporation in accordance with the terms of Subparagraph 9(a), Employee, if requested by the Corporation, shall continue to render services hereunder on behalf of the Corporation for the thirty (30) day period until the
effective date of termination, and shall, in such event, be paid the compensation due Employee hereunder for the remainder of such period.
10. Confidential Information. Employee acknowledges and recognizes that, in connection with the performance of Employee's duties and obligations for the Corporation, Employee has and will have access to certain confidential information of the Corporation, including, but not limited to any intellectual property of the Corporation, the identity of the Corporation's clients, the identity of prospective clients, the existence of negotiations with prospective clients of the Corporation, all drawings, records, sketches, models, financial information, customer information, trade secrets, and trade secrets relating to services of the Corporation, and products being developed by the Corporation (the "Confidential Information"). Employee hereby acknowledges that the maintenance of the confidentiality of the Confidential Information and restrictions on the use of the Confidential Information is essential to the Corporation. Employee shall not, at any time, whether during the term of this Agreement or after the termination of Employee's employment with the Corporation for any reason whatsoever, divulge or reveal any of the Confidential Information to any person, party or entity, directly or indirectly. In addition, Employee shall not utilize any of the Confidential Information for Employee's own benefit, or for the benefit of any subsequent employer or competitor of the Corporation. Employee shall maintain the Confidential Information in strict confidence and shall not copy, duplicate or otherwise reproduce, in whole or in part, such Confidential Information, except as necessary for Employee to perform services for the Corporation. Upon the termination of Employee's employment by the Corporation, or at the
earlier request of the Corporation, Employee shall immediately surrender to the Corporation any and all memoranda, records, files or other documents and any other materials (including photocopies or other reproductions) containing or relating to the Confidential Information. Employee shall indemnify and hold the Corporation harmless from any loss, damage, expense, cost or liability arising out of any unauthorized use or disclosure of the Confidential Information by Employee. The provisions of this Paragraph 10 shall survive the termination of Employee's employment with the Corporation and the termination of this Agreement.
11. Employee Developments. Employee is aware and understands that, during the term of Employee's employment with the Corporation or with the financial and other assistance that may be provided by the Corporation, Employee may invent, create, develop and improve certain valuable property such as, but not limited to, patents, trademarks, inventions, other patentable inventions and other trade secrets and formula, where such valuable property is (1) created during Employee's normal work hours; (2) created using the equipment or facilities of the Corporation; (3) created by Employee under the supervision or guidance of the Corporation; or (4) within the field of use which includes human or animal allograft tissue ("Employee Developments"). Employee agrees that all Employee Developments that may be developed or produced by Employee during Employee's employment by the Corporation are and will be the property of the Corporation and that Employee further agrees that he will, at the request of the Corporation, execute such documents as the Corporation may reasonably request from time to time, to assign and transfer all of the right, title and interest in Employee Developments to the Corporation and he will cooperate with the Corporation in connection with any patent applications. In this regard,
Employee will, at all times, fully advise and inform the Corporation of all matters that Employee may be developing or working on while employed by the Corporation. Employee further agrees that upon the termination of his employment with the Corporation for any reason whatsoever, Employee shall immediately deliver and surrender to the Corporation any and all plans, documents and other materials of any nature relating to the Employee Developments. The Corporation may provide additional compensation to Employee as consideration for Employee Developments in accordance with any patent policy of the Corporation. The provisions of this Paragraph 11 shall survive the termination of this Agreement.
12. Limitation of Employment.
(a) After nine months of performance hereunder, in the event of the termination of Employee's employment with the Corporation either by the Corporation for cause (as defined in Subparagraph 9(b) above) or voluntarily by Employee, Employee agrees that for a period of two (2) years following the effective date of such termination, Employee will not engage in any business which receives, processes, or distributes human tissue (or in any business that competes with the Corporation) within the United States. In the event of the termination of Employee's employment with the Corporation by the Corporation without cause, Employee agrees that for a period of two (2) years following the effective date of such termination, Employee will not engage in any business which receives, processes, or distributes human tissue (or in any business that competes with the Corporation) within the United States; provided, however, that Employee shall then be entitled to a severance payment in the amount of one-half (1/2) his then current annual salary (computed without reference to shares of stock in the Corporation, fringe benefits, or any other form of compensation). The
Corporation may require Employee to execute a release of claims against the Corporation as a condition precedent to its obligation to make the severance payment described herein.
(b) During the first nine months of performance hereunder, in the event of the termination of Employee's employment with the Corporation either by the Corporation for cause (as defined in Subparagraph 9(b) above) or voluntarily by Employee, Employee will not engage in the tissue banking business (or in any business that competes with the Corporation) within the United States, subject to the following terms:
Length of Service Length of Noncompetition Period Severance Amount
----------------- ------------------------------- ----------------
0-3 months none none
4-9 months one month for each month of none
service after the third month
|
In the event of the termination of Employee's employment with the Corporation by the Corporation without cause, Employee will not engage in the tissue banking business (or in any business that competes with the Corporation) within the United States, subject to the following terms:
Length of Service Length of Noncompetition Period Severance Amount
----------------- ------------------------------- ----------------
0-3 months none none
4-9 months one month for each month of none
service after the third month
|
The base salary described in this subparagraph shall be computed without reference to shares of stock in the Corporation, fringe benefits, or any other form of compensation. The Corporation may require Employee to execute a release of claims against the Corporation as a condition precedent to its obligation to make the severance payment described herein.
(c) Employee acknowledges that this restrictive covenant is reasonably necessary to protect the Corporation's legitimate business interests, which are represented by, among other things, the substantial relationships between the Corporation and its licensees and tissue sources, as well as the goodwill established by the Corporation with licensees and tissue sources in the United States and other countries where the Corporation's tissues are distributed over a protracted period.
(d) Employee recognizes the fact that the Corporation would not sign this Agreement without the inclusion of this covenant, and Employee confirms the sufficiency of the consideration received by Employee, in the form of employment by the Corporation, in accepting this covenant as a material term of the Agreement.
(e) The parties acknowledge and agree that no amount of money would adequately compensate the Corporation for damages which the parties acknowledge would be suffered as a result of the violation of the terms of this provision by Employee, and they confirm that any such violation would result in irreparable injury to the Corporation because of the reduction in its income caused by the loss of or damage to the aforesaid relationships. It is agreed that the Corporation will be entitled to specific performance of this provision, and to injunctive relief, in view of the fact that the actual harm is not readily ascertainable or compensable by money damages.
(f) The period set forth in subparagraph (a) above will be tolled during any time in which Employee is in violation of the restrictive covenant contained in this Paragraph 12, and that period will begin to run again from the date Employee ceases such violation.
(g) This Paragraph 12 will survive the termination of this Agreement and the termination of Employee's employment with the Corporation.
13. Remedies For Breach. It is understood and agreed by the parties that no amount of money would adequately compensate the Corporation for damages which the parties acknowledge would be suffered as a result of a violation by the Employee of the covenants contained in Paragraphs 10, 11 and 12 above, and that, therefore, the Corporation shall be entitled, upon application to a court of competent jurisdiction, to obtain injunctive relief to enforce the provisions of Paragraphs 10, 1] and 12. which injunctive relief shall be in addition to any other rights or remedies available to the Corporation. If such a violation occurs, Employee shall be responsible for the payment of reasonable attorney's fees and other costs and expenses incurred by the Corporation in enforcing the covenants contained in Paragraphs 10, 11 and 12 above, whether incurred at the trial level or in any appellate proceeding. The provisions of this Paragraph 13 shall survive the termination of this Agreement.
14. Limitations on Authority. Without the express written consent of the Corporation's Board of Directors, Employee shall have no authority to do any of the following:
(a) Pledge the credit of the Corporation or any of its other employees;
(b) Bind the Corporation under any contract, agreement, note, mortgage or other obligation, except as provided in the Corporation's Standard Operating Procedures;
(c) Release or discharge any debt due the Corporation unless the Corporation has received the full amount thereof; or
(d) Sell, mortgage, transfer or otherwise dispose of any assets of the Corporation.
15. Severability. If any provision of this Agreement shall be declared invalid or unenforceable by a court of competent jurisdiction, the invalidity or unenforceability of such provision shall not affect the other provisions hereof. and this Agreement shall be construed and enforced in all respects as if such invalid or unenforceable provision was omitted.
16. Attorneys Fees and Costs. Except as provided in Paragraph 13 above, in the event a dispute arises between the parties hereto and suit is instituted, the prevailing party in such litigation shall be entitled to recover reasonable attorney's fees and other costs and expenses from the nonprevailing party, whether included at the trial level or in any appellate proceeding.
17. Governing Law: Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, and venue for any legal proceeding or action at law arising out of or construing this Agreement shall lie in the state courts of Alachua County, Florida, or the United States District Court For the Northern District of Florida, Gainesville Division.
18. Completeness of Agreement. All understandings and agreements heretofore made between the parties hereto with respect to the subject matter of this Agreement
are merged into this document which alone fully and completely expresses their agreement. No change or modification may be made to this Agreement except by instrument in writing duly executed by the parties hereto with the same formalities as this document.
19. Notices. Any and all notices or other communications provided for herein shall be given in writing and shall be hand delivered or sent by United States mail, postage prepaid, registered or certified, return receipt requested, addressed as follows:
If to the Corporation:
Regeneration Technologies. Inc.
One Innovation Drive
Alachua, Florida 32615
Attn: President
If to Employee:
provided, however, that any party may, from time to time, give notice to the other party of some other address to which notices or other communications to such party shall be sent, in which event, notices or other communications to such party shall be sent to such address. Any notice or other communication shall be deemed to have been given and received hereunder as of the date the same is actually hand delivered or, if mailed, when deposited in the United States mail, postage prepaid, registered or certified, return receipt requested.
20. Assignment. Neither party to this Agreement may assign its rights or obligations hereunder without the prior written consent of the other party.
21. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the respective parties hereto, their heirs, legal representatives, successors and permitted assigns.
22. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument.
23. Captions. The captions appearing in this Agreement are inserted only as a matter of convenience and in no way define, limit, construe or describe the scope or intent of any provisions of this Agreement or in any way affect this Agreement.
24. Employee Handbook. Employee agrees to follow and be bound by the guidelines contained in the Corporation's Employee Handbook, as same may be modified from time to time.
(Signatures on following page)
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the date and year set forth above.
WITNESSES: "CORPORATION"
Regeneration Technologies, Inc.
[ILLEGIBLE] /s/ James M. Grooms
----------------------- --------------------------------
James M. Grooms, President
-----------------------
|
"EMPLOYEE"
[ILLEGIBLE] /s/ Thomas Brewer
----------------------- --------------------------------
Thomas Brewer
-----------------------
|
Exhibit 10.17
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered in this day of November, 1998, by and between REGENERATION TECHNOLOGIES, INC., a Florida corporation (the "Corporation") having its principal address at 2 Innovation Drive, Alachua, Florida 32615 and James P. Abraham ("Employee").
WHEREAS, the Corporation operates a tissue processing / manufacturing facility in Alachua, Florida; and
WHEREAS, the Corporation desires to employ Employee and Employee desires to accept such employment during the term of this Agreement and upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and the benefits accruing to the parties hereto, the parties agree as follows:
1. Employment. The Corporation hereby agrees to employ Employee, and Employee hereby agrees to accept such employment, to render services on behalf of the Corporation as Director of Sales. The duties of Employee shall be those established by the Corporation's Board of Directors, or its officers, from time to time.
2. Devotion to Employment. During the term of this Agreement, Employee shall devote his full time on behalf of the Corporation, and Employee shall not engage in any other gainful employment without written consent of the Corporation; provided, however, that nothing contained herein shall prohibit Employee from investing or trading in stocks, bonds, commodities or other forms of investment, including real property.
3. Term of Agreement. The effective date of this Agreement shall be the
Subj: Employment Agreement ICO James P. Abraham
date of this Agreement, and it shall continue in full force and effect for a period of five (5) years unless sooner terminated as hereinafter provided.
4. Compensation.
(a) Annual Salary. The Corporation shall pay to Employee as compensation for Employee's services a salary of $150,000 per year, payable in installments in accordance with the payroll policies of the Corporation in effect from time to time during the Employment Term. Employee's salary shall be reviewed annually by the Corporation's Board of Directors, at which time Employee's salary may be adjusted as mutually agreed upon by Employee and the Corporation's Board of Directors.
(b) Performance Bonus. To provide greater incentive for Employee by rewarding him with additional compensation, a cash bonus may be paid to Employee at any time during the year, or after the close of the year, based upon the performance of the Corporation and the performance of Employee during such year; provided, however, that the payment of any such bonus and the amount thereof shall be within the sole discretion of the Corporation's Board of Directors. The Corporation may offer a quarterly incentive consideration as a percentage of the sales of the Corporation. Bonus agreements made as indicated by the initial employment offer shall be honored provided all conditions and responsibilities remain the same. In making bonus determinations, the Directors will consider the following:
(i) The net profit of the Corporation for the year;
(ii) The base salary of Employee;
(iii) Employee's overall performance as an employee of the Corporation;
Subj: Employment Agreement ICO James P. Abraham
(iv) A comparison of Employee's performance with the performance of the other employees of the Corporation; and
(v) Such other matters as may be considered appropriate by the Directors.
(c) Stock Options. Employee shall be granted an option to purchase seventeen thousand (17,000) shares of common stock of Regeneration Technologies, Inc. ("RTI") at the exercise price of Six and 25/100 Dollars ($6.25) per share, subject to approval of the Board of Directors and subject to such vesting and other requirements as are set forth in the Omnibus Stock Plan, the Employee Restricted Stock Agreement and the Incentive Stock Option Grant Agreement between RTI and Employee as additional consideration for services rendered to RTI.
(d) Withholding, FICA, FUTA. Employee's salary and performance bonus, if any, shall be subject to, and reduced by, applicable federal income tax withholding and FICA tax, and any other taxes imposed by law.
5. Other Benefits. The Employee shall be entitled to such vacation days, sick days, insurance and other benefit programs as are established for all other employees of the Corporation, on the same basis as such other employees are entitled thereto, it being understood that the establishment, termination, or change of any such program shall be at the instance of the Company, in exercise of its sole discretion, from time to time, and any such termination or change in any such program shall not affect this Agreement.
6. Fringe Benefits. During the term of this Agreement, Employee shall be
Subj: Employment Agreement ICO James P. Abraham
entitled to all fringe benefits offered generally to the Corporation's managerial employees as established or modified from time to time by the Corporation, pro-rated based on the percentage of time Employee devotes to the Corporation, subject always to the rules in effect regarding participation in such plans. Employee shall not by entitled to any fringe benefits as a result of his employment with the Corporation.
7. Business Expenses. Except as otherwise provided herein, the Corporation shall pay, either directly or by reimbursement to Employee, such reasonable and necessary business expenses incurred by Employee in the course of his employment by the Corporation as are consistent with the Corporation's policies in existence from time to time, subject to such dollar limitations and verification and record keeping requirements as may be established from time to time by the Corporation.
8. Vacation and Sick Leave. Employee shall be entitled to such paid vacation time and paid sick leave each year, as shall be authorized by the Corporation from time to time. All vacations shall be taken by Employee at such time or times as may be approved by the Corporation. There will be no carryover of unused vacation time or sick leave from one year to another, and Employee shall not be entitled to any pay for unused vacation or sick leave.
9. Time Off. Employee shall be entitled to such time off with pay for attendance at seminars, courses, meetings and conventions as is authorized by the Corporation from time to time. The specific seminars, courses, meetings and conventions to be attended by Employee shall be subject to the Corporation's prior approval.
Subj: Employment Agreement ICO James P. Abraham
10. Termination of Employment.
(a) Voluntary Termination. Employee or the Corporation may voluntarily terminate Employee's employment with the Corporation (and, expect as otherwise specifically provided hereunder, this Agreement) at any time, by delivering to the other party written notice of such intention not less than thirty (30) days prior to the effective date of termination. Notwithstanding the foregoing, if notice of termination is given by Employee to the Corporation, then the Corporation shall have the option of advancing the effective date of such termination to any date after receipt of such notice from Employee, which option shall be exercised by the Corporation within three (3) business days of receipt of such notice.
(b) Termination for Cause. The Corporation may immediately terminate Employee's employment with the Corporation (and, except as otherwise specifically provided hereunder, this Agreement) for "cause" by giving written notice (without regard to the thirty (30) day period provided above) of such termination to Employee specifying the grounds therefor. A termination for "cause" shall only be for any one or more of the following reasons:
(i) Willfully or negligently damaging the Corporation's property, business, reputation or goodwill;
(ii) Willfully injuring any employee of the Corporation;
(iii) Willfully injuring any person in the course of the performance of services for the Corporation;
(iv) Lawfully charged with commission of a felony;
(v) Stealing, dishonesty, fraud or embezzlement;
(vi) Deliberate and continuous neglect of duty;
Subj: Employment Agreement ICO James P. Abraham
(vii) Failure to properly perform Employee's duties;
(viii) Use of alcohol or narcotics to the extent it prevents, in the sole judgement of the Corporation's Board of Directors, Employee from effectively performing the duties set forth in Paragraph 1 above;
(ix) Violating the covenants set forth in Paragraph 11 or 12 of this Agreement.
The decision to terminate Employee's employment for "cause" shall be made by the Corporation's Board of Directors in its sole discretion.
(c) Termination Upon Death, Incompentency or Disability. Notwithstanding Subparagraph 9(a) above, the Corporation shall have the right to terminate Employee's employment with the Corporation (and, expect as otherwise specifically provided hereunder, this Agreement) immediately and without prior written notice to Employee in the event that the Employee dies, or is adjudicated incompetent, or is "permanently disabled", as hereinafter denied. As used herein, the term "permanently disabled" shall mean that Employee is unable to adequately perform his regular duties hereunder as a result of sickness or accident and such condition appears to be permanent. The determination of "permanent disability" shall be made by the Corporation's Board of Directors in its sole and absolute discretion and its decision shall be final and binding on Employee unless found to be arbitrary or capricious by a court of competent jurisdiction.
(d) Performance of Duties During Notice Period. In the event that Employee terminates Employee's employment with the Corporation in accordance with the terms of Subparagraph 9(a), Employee, if requested by the Corporation, shall continue to render services
Subj: Employment Agreement ICO James P. Abraham
hereunder on behalf of the Corporation for the thirty (30) day period until the effective date of termination, and shall, in such event, be paid the compensation due Employee hereunder for the remainder of such period.
11. Confidential Information. Employee acknowledges and recognizes that, in connection with the performance of Employee's duties and obligations for the Corporation, Employee has and will have access to certain confidential information of the Corporation, including, but not limited to, any intellectual property of the Corporation, the identity of the Corporation's clients, the identity of prospective clients, the existence of negotiations with prospective clients of the Corporation, all drawings, records, sketches, models, financial information, customer information, trade secrets, and trade secrets relating to services of the Corporation, and products being developed by the Corporation (the "Confidential Information"). Employee hereby acknowledges that the maintenance of the confidentiality of the Confidential Information and restrictions on the use of the Confidential Information is essential to the Corporation. Employee shall not, at any time, whether during the term of this Agreement or after the termination of Employee's employment with the Corporation for any reason whatsoever, divulge or reveal any of the Confidential Information to any person, party or entity, directly or indirectly. In addition, Employee shall not utilize any of the Confidential Information for Employee's own benefit, or for the benefit of any subsequent employer or competitor of the Corporation. Employee shall maintain the Confidential Information in strict confidence and shall not copy, duplicate or otherwise reproduce, in whole or in part, such Confidential Information, except as necessary for Employee to perform services for the Corporation. Upon the termination of Employee's employment by the Corporation, or at the earlier request of the
Subj: Employment Agreement ICO James P. Abraham
Corporation, Employee shall immediately surrender to the Corporation any and all memoranda, records, files or other documents and any other materials (including photocopies or other reproductions) relating to the Confidential Information. Employee shall indemnify and hold the Corporation harmless from any loss, damage, expense, cost or liability arising out of any unauthorized use or disclosure of the Confidential Information by Employee. The provisions of this Paragraph 11 shall survive the termination of Employee's employment with the Corporation and the termination of this Agreement.
12. Employee Developments. Employee is aware and understands that during the term of Employee's employment with the Corporation or with the financial and other assistance that may be provided by the Corporation, Employee may invent, create, develop and improve certain valuable property such as, but not limited to, patents, trademarks, inventions, other patentable inventions and other trade secrets and formula ("Employee Developments"). Employee agrees that all Employee Developments that may be developed or produced by Employee during Employee's employment by the Corporation are and will be the property of the Corporation and that Employee further agrees that she will, at the request of the Corporation, execute such documents as the Corporation may reasonably request from time to time, to assign and transfer all of the right, title and interest in Employee Developments that are the property of the Corporation to the Corporation and she will cooperate with the Corporation in connection with any patent applications. In this regard, Employee will, at all times, fully advise and inform the Corporation of all matters that Employee may be developing or working on while employed by the Corporation. Employee further agrees that upon the termination of her employment with the Corporation for any reason whatsoever, Employee shall immediately deliver and surrender to
Subj: Employment Agreement ICO James P. Abraham
the Corporation any and all plans, documents and other materials of any nature relating to the Employee Developments. The Corporation may provide additional compensation to Employee as consideration for Employee Developments in accordance with any patent policy of the Corporation. The provisions of this Paragraph 12 shall survive the termination of this Agreement.
13. Limitation of Employment.
(a) In the event of the termination of Employee's employment with the Corporation either by the Corporation for cause (as defined in Subparagraph 10(b) above) or voluntarily by Employee, Employee agrees that for a period of three (3) years following the effective date of such termination, Employee will not engage in or be employed by any business which engages in the business of manufacturing or distributing products from bone tissue in the United States.
(b) In the event of the termination of Employee's employment with the Corporation by the Corporation without cause, Employee agrees that for a period of one (1) year following the effective date of such termination, Employee will not engage in or be employed by any business which engages in the business of manufacturing or distributing products from bone tissue within the United States. In the event Employee is terminated by the Corporation without cause, the Corporation will provide severance compensation to Employee as follows:
(1) The Corporation provides no severance compensation in the event of termination prior to the end of four (04) months of full time employment;
(2) The Corporation provides one month of basic annual salary if Employee has served four months of full time employment upon termination.
Subj: Employment Agreement ICO James P. Abraham
(3) The Corporation provides Employee two (2) months of basic annual salary upon termination, if the Employee has served six (06) full months of employment, to be paid monthly;
(4) the Corporation provides Employee three (3) months of basic annual salary if Employee has served at least (08) full months of employment upon termination, to be paid out monthly;
(5) The Corporation provides Employee four (4) months of basic annual salary if Employee has served at least (09) months of employment upon termination, to be paid out monthly;
(6) The Corporation provides Employee five (5) months of basic annual salary if Employee has served at least (10) months of employment upon termination, to be paid out monthly;
(7) The Corporation provides Employee six (6) months of basic annual salary if Employee has served at least (12) months of employment upon termination, to be paid out monthly.
(b) Employee acknowledges that this restrictive covenant is reasonably necessary to protect the Corporation's legitimate business interests, which are represented by, among other things, the substantial relationships between the Corporation and its licensees and tissue sources, as well as the goodwill established by the Corporation with licensees and tissue sources in the United States and other countries where the Corporation's tissues are distributed over a protracted period.
Subj: Employment Agreement ICO James P. Abraham
(c) Employee recognizes the fact that the Corporation would not sign this Agreement without the inclusion of this covenant, and Employee confirms the sufficiency of the consideration received by Employee, in the form of employment by the Corporation, in accepting this covenant as a material term of the Agreement.
(d) It is agreed that the Corporation will be entitled to specific performance of this provision, and to injunctive relief in view of the fact that the actual harm is not readily ascertainable or compensable by money damages.
(e) The period set forth in subparagraph (a) above will be tolled during any time in which Employee is in violation of the restrictive covenant contained in this Paragraph 13, and that period will begin to run again from the date Employee ceases such violation.
(f) This Paragraph 13 will survive the termination of this Agreement and the termination of Employee's employment with the Corporation.
14. Remedies For Breach. It is understood and agreed by the parties that no amount of money would adequately compensate the Corporation for damages which the parties acknowledge would be suffered as a result of a violation by the Employee of the covenants contained in Paragraphs 12 and 13 above, and that, therefore, the Corporation shall be entitled, upon application to a court of competent jurisdiction, to obtain injunctive relief to enforce the provisions of Paragraphs 12 and 13, which injunctive relief shall be in addition to any other rights or remedies available to the Corporation. If such a violation occurs, Employee shall be responsible for the payment of reasonable attorney's fees and other costs and expenses incurred by the Corporation in enforcing the covenants contained in Paragraphs 12 and 13 above, whether
Subj: Employment Agreement ICO James P. Abraham
incurred at the trial level or in any appellate proceeding. The provisions of this Paragraph 14 shall survive the termination of this Agreement.
15. Limitations on Authority. Without the express written consent of the Corporation's Board of Directors, Chief Executive Officer, or the Vice President of Business Development, Employee shall have no apparent or implied authority to do any of the following:
(a) Pledge the credit of the Corporation or any of its other employees;
(b) Bind the Corporation under any contract, agreement, note, mortgage or other obligation, except in the performance of his/her functional duties relating to Director, Sales and in conjunction with signature of CEO or VP of Business Development;
(c) Release or discharge any debt due the Corporation unless the Corporation has received the full amount thereof; or
(d) Sell, mortgage, transfer or otherwise dispose of any assets of the Corporation.
16. Subject to the terms and conditions set forth herein, RTI indemnifies Employee if Employee is made a party to any lawsuit initiated by Encore Orthopedics, Inc. ("Encore") which is based primarily on Employee taking employment with Regeneration Technologies, Inc. (RTI). This indemnification covers expenses (including attorneys' fees) actually and reasonably incurred by Employee in connection with the defense or settlement of such action. In the event that RTI has the obligation to indemnify Employee under this agreement, then RTI shall have the right to designate the counsel that will handle the litigation. RTI will not have a duty to provide indemnification if Employee has not fully disclosed to RTI his contractual obligations to RTI, or if Employee breaches any confidentiality arrangements
Subj: Employment Agreement ICO James P. Abraham
(contractual or otherwise) that he has with RTI. It is RTI's understanding that the only contractual obligation Employee has with Encore regarding employment with Encore or concerning obligations owed to Encore after his termination of employment with Encore is the Indemnification Agreement dated August 16, 1995, the Employment Agreement dated August 17, 1995, and the Severance Agreement dated September 19, 1995, between Employee and Encore. Employee must disclose to RTI and, prior to his commencement of employment with RTI, provide RTI with a copy of those agreements and any other agreements that he has with Encore.
As a condition of RTI's promise to indemnify Employee, Employee agrees not to take any actions that may be deemed by a reasonable person to breach any confidentiality agreements you have with Encore. These prohibited actions include, but are not limited to, making copies of internal, confidential lists of customers, sales agents or distributors of Encore, removing from Encore any property of Encore, or disclosing to any current or future employee of RTI any information that Employee knows to be a trade secret or protected confidential information of Encore. Employee's failure to fully comply with this condition will nullify RTI's obligation to indemnify Employee.
17. Severability. If any provision of this Agreement shall be declared invalid or unenforceable by a court of competent jurisdiction, the invalidity or unenforceability of such provision shall not affect the other provisions hereof, and this Agreement shall be construed and enforced in all respects as if such invalid or unenforceable provision was omitted.
18. Attorney's Fees and Costs. Except as provided in Paragraph 14 above, in
Subj: Employment Agreement ICO James P. Abraham
the event a dispute arises between the parties hereto and suit is instituted, the prevailing party in such litigation shall be entitled to recover reasonable attorney's fees and other costs and expenses from the nonprevailing party, whether incurred at the trial level or in any appellate proceeding.
19. Governing Law; Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, and venue for any legal proceeding or action at law arising out of or construing this Agreement shall lie in the state courts of Alachua County, Florida, or the United States District Court for the Northern District of Florida, Gainesville Division.
20. Completeness of Agreement. All understandings and agreements heretofore made between the parties hereto with respect to the subject matter of this Agreement are merged into this document which alone fully and completely expresses their agreement. No change or modification may be made to this Agreement except by instrument in writing duly executed by the parties hereto with the same formalities as this document.
Subj: Employment Agreement ICO James P. Abraham
21. Notices. Any and all notices or other communications provided for herein shall be given in writing and shall be hand delivered or sent by United States mail, postage prepaid, registered or certified, return receipt requested, addressed as follows:
If to the Corporation:
Regeneration Technologies, Inc.
Two Innovation Drive
Alachua, Florida 32615
Attn: President
If to Employee:
James P. Abraham
404 SW 117th St
GAINSEVILLE, FL
provided, however, that any party may, from time to time, give notice to the other party of some other address to which notices or other communications to such party shall be sent, in which event, notices or other communications to such party shall be sent to such address. Any notice or other communication shall be deemed to have been given and received hereunder as of the date the same is actually hand delivered or, if mailed, when deposited in the United States mail, postage prepaid, registered or certified, return receipt requested.
22. Assignment. Neither party to this Agreement may assign its rights or obligations hereunder without the prior written consent of the other party.
23. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the respective parties hereto, their heirs, legal representatives, successors and permitted assigns.
Subj: Employment Agreement ICO James P. Abraham
24. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument.
25. Captions. The captions appearing in this Agreement are inserted only as a matter of convenience and in no way define, limit, construe or describe the scope or intent of any provisions of this Agreement or in any way affect this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the date and year set forth above.
WITNESSES: "CORPORATION"
Regeneration Technologies, Inc.
[ILLEGIBLE] By: /s/ Nancy R. Holland 11/28/98
------------------------------- ----------------------------------
Witness Nancy R. Holland Date
Title: VP Bus. Development
-------------------------------
[ILLEGIBLE]
|
"EMPLOYEE"
James P. Abraham
[ILLEGIBLE] By: /s/ James P. Abraham
------------------------------- ----------------------------------
Witness James P. Abraham (Signature/Date)
|
Proposal for compensation for the position of V.P. Sales:
Salary: $175,000 per year
Car Allowance: $550 per month
Club Dues: Local golf course
Stock Options: 50,000 shares total
Year-End Bonus Program: 15% of salary based on Top Line Revenue achievement
10% of salary based on Profitability Performance
5% of salary based on Expense Budget Performance
Quarterly Override: .2% of sales from dollar one on all sports medicine and oral maxilliofacial products.
.02% of sales from dollar one on conventional tissue sales.
Presidents discretion: Bonus based on increase in all RTI direct products as a percentage of overall sales as Compared to SDG sales.
1) Salary is based on current salary as Director of sales of $150k per year
and promotion to V.P. level. This figure is very consistent with salary
ranges of vice presidents in the health care profession. This would be the
current bottom of a range that caps around 5225K.
2) Car allowance is a perk of most sales executives that are entertaining
clients. 3l cents per mile is much less cost effective. I currently have
only utilized this mileage charge if I have traveled over 200 miles.
3) Club dues follow the same path as perks for sales executives. I have been
informed tat we have been paying dues for certain executives at the
Heritage club. It is more effective for us to have a membership at a golf
club for entertaining surgeons and distributors.
4) Stock options bring me in line with other vice presidents and several
directors. My original negotiations were based on outstanding stock of 2
million shares. The current outstanding stock is 4 million, this gives me
just at 1% of current outstanding shares.
5) Bonus Program should reflect every Vice Presidents efforts to achieve
revenue profitability and budget control. I would suggest that we make
this a standard program for all of us and recognize this with stock
options or profit sharing of some type.
6) The president should retain the ability to compensate sales and marketing
executives with a discretionary bonus based on achievements. This is a
personal goal to succeed at a faster rate than Danek.
I have the greatest ability of anyone in the company to affect sales and top line performance. My compensation is currently heavily weighted towards sales of all partner products. This seems to have been conceived in an attempt to justify getting me to an overall compensation dollar amount that we agreed upon for my hire of 100k in bonus. This is good for me, but may not be in the companies best interest.
My 1998 total W-2 was over $312,000. W-2 is available for your review. The current compensation structure is attached for your review. This new compensation structure enclosed should be very similar to the current compensation program with the addition of a salary raise.
Coming to work with RTI has been a great career move for me and my family. We are enjoying Gainesville and appreciate the confidence you have shown in promoting me to Vice President. We will be successful in developing the company into the market leader in Allograft\Xenograft tissue.
Net Sales Net Sales
Product Line Budget Over Base Old Rate New Rate New Incentive Old Incentive
------------ ---------- ---------- -------- -------- ------------- -------------
MDDowel - SDG 10,910.540 0.100% 10,910.54 13,638 18
SR - SDG 2,313,525 0.100% 2,313.53 2891.91
PLIF - SDG 3,942,720 0.100% 3,942.72 4,928.40
Opteform - Exactech 4,461,275 0.100% 4,461.28 5,576.59
Osteofil - SDG 8,923,599 0.100% 8,923.60 11,154.50
FasLata - Bard 2,049,260 0.100% 2,049.26 2,561.58
Osteofil - RTI 873,738 2.000% 17,474.76 17,474.76
Conventional* 13,000,000 7,000,000 0.212% 14,840.00
Interference Screw 807,040 2% 1.750% 14,123.20 16,141
Maxillofacial 110,400 2% 1.750% 1,932.00 2,208
Cortical Bone Pins 93,000 2% 1.750% 1,627.50 1,860
Suture Anchors 571,200 2% 1.750% 9,996.00 11,424
Fib Shafts & Wedges 965,050 2% 1.750% 16,888.38 19.301
--------------------------------------------------------------------------------------------
49,021,347 109,482.75 109,159.72
============================================================================================
|
Incentive based on net sales over base of 500,000/month * 12 months = $6,000,000
UFTB will support the conventional tissue incentive monthly until this tissue transfers to RTI
/s/ James Abraham ------------------ James Abraham /s/ Nancy Holland ------------------ Nancy Holland /s/ Richard Allen ------------------ Richard Allen /s/ Richard Zahn ------------------ Richard Zahn 25-Mar-99 |
Regeneration Technologies, Inc. Incentive Analysis
2nd Half Gross 2nd Half (B) Suggested Adjusted
Product Line Forecast Net Forecast Rate Incentive
------------ -------------- ------------ --------- ---------
MD Dowel - SDG -- 0.00% --
SR - SDG -- 0.00% --
PLIF - SDG -- 0.00% --
Opteform - Exactech 900,180 900,180 0.50% 4,500.90
Osteofil - SOG 6,581,494 2,632,598 0.50% 13,162.99
FasLata - Bard 0.00% --
Conventional - (A) 4,712.975 1,327,556 2.50% 33,188.89
Osteofil - RTI - Italy 304,218 304.218 2.50% 7,605.45
Osteofil - RTI 525,116 406,965 2.50% 10,174.12
Regenaform 160,550 124,426 2.50% 3,110.66
Regenafil 258,060 199,997 2.50% 4,999.91
Interference Screw 514,800 398,970 2.50% 9,974.25
Maxillofacial Screw 65,000 50,375 2.50% 1,259.38
Cortical Bone Pins 101,280 78,492 2.50% 1,962.30
Suture Anchors & Spears 278,000 215,450 2.50% 5,386.25
Fib Shafts & Wedges -- -- 2.50% --
----------
Total Q3 & Q4 95,325.10
Q1 & Q2 Incentive 20,000.00
Total Potential Incentive for Year 115,325.10
==========
|
(A) - Incremental over base of 500,000 per month (B) - 2nd Half forecast is after Mgmt Fees or Distributor Commissions, where applicable.
/s/ James Abraham July 7, 1999 ------------------- James Abraham /s/ Richard Allen July 7, 1999 ------------------- Richard Allen /s/ Jamie Grooms July 7, 1999 ------------------- Jamie Grooms |
Terms of Employment for Jim Abraham, Director of Sales November 3, 1998
Salary: $150,000
Bonus: $15,230
Initially, 1% of estimated fourth quarter 98 RTI sales to be available for down
payment on house
Year 1 - 1% sales, net distribution and management service fees for 1999
Years 2-5 to be determined in concert with salary cap
RTI options
Initially, 17,000 @ $6.25, subject to approval of the board of directors
Additional options will be available at a later date
Employment Agreement
5 years
Indemnification from Encore non-compete
Salary for years 2-5 to include cap to leave combined total of salary and sales
bonus consistent with other executive salaries at RTI.
Transition Incidentals: $5,000
Includes transportation, lodging, meals in relation to finding living quarters
and preparation for house sale
Moving:
AUSTIN - Estimates to be supplied for approval
No more than the actual cost will be reimbursed
Packing, unpacking, insurance, storage, if necessary, vehicle transfer Realtor's
fees @ 6% of sale of home
GAINESVILLE-- Temporary housing up to 90 days for Mr. Abraham. If family is included in the 90 days temporary housing, Mr. Abraham will pay the difference. Closing costs and one (1) point towards loan on new home
Please remit receipts for reimbursement of all moving expenses, except the $5,000 for Transition Incidentals.
In addition to the compensation cited above, Mr. Abraham will be eligible for the RTI 401 (k) retirement plan, life and health insurance benefits, annual and
sick leave.
EXHIBIT 10.18
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into by and between REGENERATION TECHNOLOGIES, INC. a Florida for-profit corporation (the "Corporation") and NANCY R. HOLLAND ("Employee").
WHEREAS, the Corporation is engaged in the business of manufacturing products from human and animal tissue in Alachua, Florida; and
WHEREAS, the Corporation desires to employ Employee and Employee desires to accept such employment during the term of this Agreement and upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and the benefits accruing to the parties hereto, the parties agree as follows:
1. Employment. The Corporation hereby agrees to employ Employee, and Employee hereby agrees to accept such employment, to render services on behalf of the Corporation as Vice President of Business Development. The duties of Employee shall be those established by the Corporation's Board of Directors, or its officers, from time to time.
2. Devotion to Employment. During the term of this Agreement, Employee shall devote approximately fifty percent (50%) of her time on behalf of the Corporation, it being understood and agreed between the Corporation and Employee that Employee shall devote the remaining fifty percent (50%) of her time on behalf of University of Florida Tissue Bank, Inc. ("Tissue Bank") and Employee shall not engage in any other gainful employment without the written consent of the Corporation. Provided, however, that nothing contained herein shall prohibit Employee from investing or trading in stocks, bonds, commodi-
ties or other forms of investment, including real property. Employee and Corporation agree to review, on a semi-annual basis, the actual division of Employee's time between Corporation and Tissue Bank.
3. Term of Agreement. This Agreement shall be effective as of February 13, 1998, and it shall continue in full force and effect for a period of five (5) years unless sooner terminated as hereinafter provided.
4. Compensation.
(a) Annual Salary. The Corporation shall pay to Employee as compensation for her services a salary of Seventy-Five Thousand Dollars ($75,000.00) per year, payable in equal monthly installments. Employee's salary shall be reviewed annually by the Corporation's Board of Directors, at which time Employee's salary may be adjusted as agreed upon by the Corporation's Board of Directors.
(b) Performance Bonus. To provide greater incentive for Employee by rewarding her with additional compensation, a cash bonus may be paid to Employee at any time during the year, or after the close of the year, based upon the performance of the Corporation and the performance of Employee during such year; provided, however, that the payment of any such bonus and the amount thereof shall be within the sole discretion of the Corporation's Board of Directors. In making such determination, the Directors will consider the following:
(i) The net profits of the Corporation for the year;
(ii) The base salary of Employee;
(iii) Employee's overall performance as an employee of the Corporation;
(iv) A comparison of Employee's performance with the performance of the other employees of the Corporation; and
(v) Such other matters as may be considered appropriate by the Directors.
(c) Stock of the Corporation. The Corporation shall issue to Employee Two Hundred Twenty Thousand (220,000) shares of common stock of the Corporation (the "Shares"). The Shares shall be issued as described herein only upon Employee's execution of a Stock Restriction Agreement for Regeneration Technologies, Inc. (the "Stock Restriction Agreement"), which, inter alia, restricts the transfer of the Shares and contains certain buy-back provisions regarding the Shares upon the termination of Employee's employment with the Corporation.
(d) Withholding, FICA, FUTA. Employee's salary and performance bonus, if any, shall be subject to, and reduced by, applicable federal income tax withholding and FICA tax, and any other taxes imposed by law.
5. Fringe Benefits. During the term of this Agreement, Employee shall be entitled to all fringe benefits offered generally to the Corporation's managerial employees as established or modified from time to time by the Corporation, pro rated based on the percentage of time Employee devotes to the Corporation, subject always to the rules in effect regarding participation in such plans. In addition, the Corporation shall obtain and maintain in force during the term of this Agreement a life insurance policy covering Employee's life in a
face value of not less than one million dollars ($1,000,000.00). The death benefit of such policy shall be made payable to the beneficiary or beneficiaries Employee may from time to time designate in writing.
6. Business Expenses. Except as otherwise provided herein, the Corporation shall pay, either directly or by reimbursement to Employee, such reasonable and necessary business expenses incurred by Employee in the course of her employment by the Corporation as are consistent with the Corporation's policies in existence from time to time, subject to such dollar limitations and verification and record keeping requirements as may be established from time to time by the Corporation.
7. Vacation. Employee shall be entitled to two (2) weeks paid vacation time each year. All vacations shall be taken by Employee at such time or times as may be approved by the Corporation. There will be no carryover of unused vacation time or sick leave from one year to another, and no compensation for such unused vacation or sick leave, if any.
8. Time Off. Employee shall be entitled to such time off with pay for attendance at seminars, courses, meetings and conventions as is authorized by the Corporation from time to time. The specific seminars, courses, meetings and conventions to be attended by Employee shall be subject to the Corporation's prior approval.
9. Termination of Employment.
(a) Voluntary Termination. Employee or the Corporation may voluntarily terminate Employee's employment with the Corporation (and, except as otherwise specifically provided hereunder, this Agreement) at any time, by delivering to the other party
written notice of such intention not less than thirty (30) days prior to the effective date of termination. Notwithstanding the foregoing, if notice of termination is given by Employee to the Corporation, then the Corporation shall have the option of advancing the effective date of such termination to any date after receipt of such notice from Employee, which option shall be exercised by the Corporation within three (3) business days of receipt of such notice.
(b) Termination for Cause. The Corporation may immediately terminate Employee's employment with the Corporation (and, except as otherwise specifically provided hereunder, this Agreement) for "cause" by giving written notice (without regard to the thirty (30) day period provided above) of such termination to Employee specifying the grounds therefor. A termination for "cause" shall only be for any one or more of the following reasons:
(i) Willfully or negligently damaging the Corporation's property, business, reputation or goodwill.
(ii) Willfully injuring any employee of the Corporation.
(iii) Willfully injuring any person in the course of the performance of services for the Corporation.
(iv) Lawfully charged with commission of a felony.
(v) Stealing, dishonesty, fraud or embezzlement.
(vi) Deliberate and continuous neglect of duty.
(vii) Use of alcohol or narcotics to the extent it prevents, in the sole judgment of the Corporation's Board of Directors, Employee from effectively performing the duties set forth in Paragraph 1 above.
(viii) Violating the covenants set forth in Paragraphs 10 or 11 of this Agreement.
The decision to terminate Employee's employment for "cause" shall be made by the Corporation's Board of Directors in its sole discretion.
(c) Termination Upon Death, Incompetency or Disability. Notwithstanding Subparagraph 9(a) above, the Corporation shall have the right to terminate Employee's employment with the Corporation (and, except as otherwise specifically provided hereunder, this Agreement) immediately and without prior written notice to Employee in the event that Employee dies, or is adjudicated incompetent, or is "permanently disabled", as hereinafter defined. As used herein, the term "permanently disabled" shall mean that Employee is unable to adequately perform her regular duties hereunder as a result of sickness or accident and such condition appears to be permanent. The determination of "permanent disability" shall be made by the Corporation's Board of Directors in its sole and absolute discretion and its decision shall be final and binding on Employee unless found to be arbitrary or capricious by a court of competent jurisdiction.
(d) Performance of Duties During Notice Period. In the event that Employee terminates Employee's employment with the Corporation in accordance with the terms of Subparagraph 9(a), Employee, if requested by the Corporation, shall continue to render services hereunder on behalf of the Corporation for the thirty (30) day period until the effective date of termination, and shall, in such event, be paid the compensation due Employee hereunder for the remainder of such period.
10. Confidential Information. Employee acknowledges and recognizes that, in connection with the performance of Employee's duties and obligations for the Corporation, Employee has and will have access to certain confidential information of the Corporation, including, but not limited to, any intellectual property of the Corporation, the identity of the Corporation's clients, the identity of prospective clients, the existence of negotiations with prospective clients of the Corporation, all drawings, records, sketches, models, financial information, customer information, trade secrets, and trade secrets relating to services of the Corporation, and products being developed by the Corporation (the "Confidential Information"). Employee hereby acknowledges that the maintenance of the confidentiality of the Confidential Information and restrictions on the use of the Confidential Information is essential to the Corporation. Employee shall not, at any time, whether during the term of this Agreement or after the termination of Employee's employment with the Corporation for any reason whatsoever, divulge or reveal any of the Confidential Information to any person, party or entity, directly or indirectly. In addition, Employee shall not utilize any of the Confidential Information for Employee's own benefit, or for the benefit of any subsequent employer or competitor of the Corporation. Employee shall maintain the Confidential Information in strict confidence and shall not copy, duplicate or otherwise reproduce, in whole or in part, such Confidential Information, except as necessary for Employee to perform services for the Corporation. Upon the termination of Employee's employment by the Corporation, or at the earlier request of the Corporation, Employee shall immediately surrender to the Corporation any and all memoranda, records, files or other documents and any other materials (including photocopies or other reproductions) containing or relating to the Confidential Information.
Employee shall indemnify and hold the Corporation harmless from any loss, damage, expense, cost or liability arising out of any unauthorized use or disclosure of the Confidential Information by Employee. The provisions of this Paragraph 10 shall survive the termination of Employee's employment with the Corporation and the termination of this Agreement.
11. Employee Developments. Employee is aware and understands that, during the term of Employee's employment with the Corporation or with the financial and other assistance that may be provided by the Corporation, Employee may invent, create, develop and improve certain valuable property such as, but not limited to, patents, trademarks, inventions, other patentable inventions and other trade secrets and formula, where such valuable property is (1) created during Employee's normal work hours; (2) created using the equipment or facilities of the Corporation; (3) created by Employee under the supervision or guidance of the Corporation; or (4) within the field of use which includes human or animal allograft tissue ("Employee Developments"). Employee agrees that all Employee Developments that may be developed or produced by Employee during Employee's employment by the Corporation are and will be the property of the Corporation and that Employee further agrees that she will, at the request of the Corporation, execute such documents as the Corporation may reasonably request from time to time, to assign and transfer all of the right, title and interest in Employee Developments to the Corporation and she will cooperate with the Corporation in connection with any patent applications. In this regard, Employee will, at all times, fully advise and inform the Corporation of all matters that Employee may be developing or working on while employed by the Corporation. Employee
further agrees that upon the termination of her employment with the Corporation for any reason whatsoever, Employee shall immediately deliver and surrender to the Corporation any and all plans, documents and other materials of any nature relating to the Employee Developments. The Corporation may provide additional compensation to Employee as consideration for Employee Developments in accordance with any patent policy of the Corporation. The provisions of this Paragraph 11 shall survive the termination of this Agreement.
12. Limitation of Employment.
(a) In the event of the termination of Employee's employment with the Corporation by the Corporation for cause (as defined in Subparagraph 9(b) above), Employee agrees that for a period of one (1) year following the effective date of such termination, Employee will not engage any business which receives, processes, or distributes human tissue within the United States. In the event of the termination of Employee's employment with the Corporation by the Corporation without cause, Employee agrees that for a period of one (1) year following the effective date of such termination, Employee will not engage in any business which receives, processes, or distributes human tissue within the United States; provided, however, that Employee shall then be entitled to a severance payment in the amount of one (1) times Employee's annual salary (computed without reference to shares of stock in the Corporation, fringe benefits, or any other form of compensation). The Corporation may require Employee to execute a release of claims against the Corporation as a condition precedent to its obligation to make the severance payment described herein.
(b) Employee acknowledges that this restrictive covenant is reasonably necessary to protect the Corporation's legitimate business interests, which are represented by, among other things, the substantial relationships between the Corporation and its licensees and tissue sources, as well as the goodwill established by the Corporation with licensees and tissue sources in the United States and other countries where the Corporation's tissues are distributed over a protracted period.
(c) Employee recognizes the fact that the Corporation would not sign this Agreement without the inclusion of this covenant, and Employee confirms the sufficiency of the consideration received by Employee, in the form of employment by the Corporation, in accepting this covenant as a material term of the Agreement.
(d) The parties acknowledge and agree that no amount of money would adequately compensate the Corporation for damages which the parties acknowledge would be suffered as a result of the violation of the terms of this provision by Employee, and they confirm that any such violation would result in irreparable injury to the Corporation because of the reduction in its income caused by the loss of or damage to the aforesaid relationships. It is agreed that the Corporation will be entitled to specific performance of this provision, and to injunctive relief, in view of the fact that the actual harm is not readily ascertainable or compensable by money damages.
(e) The period set forth in subparagraph (a) above will be tolled during any time in which Employee is in violation of the restrictive covenant contained in this Paragraph 12, and that period will begin to run again from the date Employee ceases such violation.
(f) This Paragraph 12 will survive the termination of this Agreement and the termination of Employee's employment with the Corporation.
13. Remedies For Breach. It is understood and agreed by the parties that no amount of money would adequately compensate the Corporation for damages which the parties acknowledge would be suffered as a result of a violation by the Employee of the covenants contained in Paragraphs 10, 11 and 12 above, and that, therefore, the Corporation shall be entitled, upon application to a court of competent jurisdiction, to obtain injunctive relief to enforce the provisions of Paragraphs 10, 11 and 12, which injunctive relief shall be in addition to any other rights or remedies available to the Corporation. If such a violation occurs, Employee shall be responsible for the payment of reasonable attorney's fees and other costs and expenses incurred by the Corporation in enforcing the covenants contained in Paragraphs 10, 11 and 12 above, whether incurred at the trial level or in any appellate proceeding. The provisions of this Paragraph 13 shall survive the termination of this Agreement.
14. Limitations on Authority. Without the express written consent of the Corporation's Board of Directors, Employee shall have no authority to do any of the following:
(a) Pledge the credit of the Corporation or any of its other employees;
(b) Bind the Corporation under any contract, agreement, note, mortgage or other obligation, except as provided in the Corporation's Standard Operating Procedures;
(c) Release or discharge any debt due the Corporation unless the Corporation has received the full amount thereof; or
(d) Sell, mortgage, transfer or otherwise dispose of any assets of the Corporation.
Notwithstanding the foregoing, Employee may bind the Corporation under contracts, agreements, notes, mortgages or other obligations up to a value of $100,000, provided the approval and signature of either the Corporation's President or Chief Financial Officer is also obtained with respect to same.
15. Severability. If any provision of this Agreement shall be declared invalid or unenforceable by a court of competent jurisdiction, the invalidity or unenforceability of such provision shall not affect the other provisions hereof, and this Agreement shall be construed and enforced in all respects as if such invalid or unenforceable provision was omitted.
16. Attorney's Fees and Costs. Except as provided in Paragraph 13 above, in the event a dispute arises between the parties hereto and suit is instituted, the prevailing party in such litigation shall be entitled to recover reasonable attorney's fees and other costs and expenses from the nonprevailing party, whether incurred at the trial level or in any appellate proceeding.
17. Governing Law; Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, and venue for any legal proceeding or action at law arising out of or construing this Agreement shall lie in the state courts of Alachua County, Florida, or the United States District Court for the Northern District of Florida, Gainesville Division.
18. Completeness of Agreement. All understandings and agreements heretofore made between the parties hereto with respect to the subject matter of this Agreement are merged into this document which alone fully and completely expresses their agreement. No
change or modification may be made to this Agreement except by instrument in writing duly executed by the parties hereto with the same formalities as this document.
19. Notices. Any and all notices or other communications provided for herein shall be given in writing and shall be hand delivered or sent by United States mail, postage prepaid, registered or certified, return receipt requested, addressed as follows:
If to the Corporation:
Regeneration Technologies, Inc.
One Innovation Drive
Alachua, Florida 32615
Attn: President
If to Employee:
Nancy R. Holland
11530 NW 67th
Alachua, Florida 32615
provided, however, that any party may, from time to time, give notice to the other party of some other address to which notices or other communications to such party shall be sent, in which event, notices or other communications to such party shall be sent to such address. Any notice or other communication shall be deemed to have been given and received hereunder as of the date the same is actually hand delivered or, if mailed, when deposited in the United States mail, postage prepaid, registered or certified, return receipt requested.
20. Assignment. Neither party to this Agreement may assign its rights or obligations hereunder without the prior written consent of the other party.
21. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the respective parties hereto, their heirs, legal representatives, successors and permitted assigns.
22. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument.
23. Captions. The captions appearing in this Agreement are inserted only as a matter of convenience and in no way define, limit, construe or describe the scope or intent of any provisions of this Agreement or in any way affect this Agreement.
24. Employee Handbook. Employee agrees to follow and be bound by the guidelines contained in the Corporation's Employee Handbook, as same may be modified from time to time.
(Signatures on following page)
IN WITNESS WHEREOF, the undersigned have executed this Agreement on this 14th day of December, 1998.
WITNESSES: "CORPORATION"
Regeneration Technologies, Inc.
/s/ [ILLEGIBLE] By: /s/ James M. Grooms
--------------------------------- ---------------------------------------
James M. Grooms, President
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"EMPLOYEE"
/s/ [ILLGIBLE] /s/ Nancy R. Holland
--------------------------------- ---------------------------------------
Nancy R. Holland
/s/ [ILLEGIBLE]
---------------------------------
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Exhibit 10.19
REGENERATION TECHNOLOGIES, INC.
OMNIBUS STOCK PLAN
1. Establishment, Purpose and Types of Awards
REGENERATION TECHNOLOGIES, INC. (the "Corporation') hereby establishes the REGENERATION TECHNOLOGIES INC. OMNIBUS STOCK PLAN (the "Plan"). The purpose of the Plan is to promote the long-term growth and profitability of the Corporation by (i) providing key people with incentives to improve stockholder value and to contribute to the growth and financial success of the Corporation, and (ii) enabling the Corporation to attract, retain and reward the best-available persons for positions of substantial responsibility.
The Plan permits the granting of stock options (including incentive stock options qualifying under Code section 422 and nonqualified stock options), stock appreciation rights, restricted or unrestricted stock awards, phantom stock, performance awards, or any combination of the foregoing.
2. Definitions
Under this Plan, except where the context otherwise indicates, the following definitions apply:
(a) "Affiliate shall mean any entity, whether now or hereafter existing, which controls, is controlled by, or is under common control with, the Corporation (including, but not limited to, joint ventures, limited liability companies, and partnerships). For this purpose, "control" shall mean ownership of 50% or more of the total combined voting power or value of all classes of stock or interests of the entity.
(b) "Award" shall mean any stock option, stock appreciation right, stock award, phantom stock award, or performance award.
(c) "Board" shall mean the Board of Directors of the Corporation.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended, regulations promulgated thereunder.
(e) "Common Stock" shall mean shares of the Corporation's Common Stock, par value of $.001 per share.
(f) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
(g) "Fair Market Value" of a share of the Corporation's Common Stock for any purpose on a particular date shall be determined in a manner such as the Administrator shall in good faith determine to be appropriate; provided that in the event the Common Stock shall become registered under Section 12 of the Exchange Act, then thereafter the Fair Market Value of the Corporation's Common Stock for any purpose on a particular date shall mean the last reported sale price per share of Common Stock, regular way, on such date or, in case no such sale takes place on such date, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on a national securities exchange or included for quotation on the Nasdaq-National Market, or if the Common Stock
is not so listed or admitted to trading or included for quotation, the last quoted price, or if the Common Stock is not so quoted, the average of the high bid and low asked prices, regular way, in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal other automated quotations system that may then be in use or, if the Common Stock is not quoted by any such organization, the average of the closing bid and asked prices, regular way, as furnished by a professional market maker making a market in the Common Stock as selected in good faith by the Administrator or by such other source or sources as shall be selected in good faith by the Administrator. If, as the case may be, the relevant date is not a trading day, the determination shall be made as of the next preceding trading day. As used herein, the term "trading day" shall mean a day on which public trading of securities occurs and is reported in the principal consolidated reporting system referred to above, or if the Common Stock is not listed or admitted to trading on a national securities exchange or included for quotation on the Nasdaq-National Market, any business day.
(h) "Grant Agreement" shall mean a written document memorializing the terms and conditions of an Award granted pursuant to the Plan and shall incorporate the terms of the Plan.
(i) "Rule 16b-3" shall mean Rule 16b-3 as in effect under the Exchange Act on the effective date of the Plan, or any successor provision prescribing conditions necessary to exempt the issuance of securities under the Plan (and further transactions in such securities) from Section 16(b) of the Exchange Act.
(j) "Stockholders' Agreement" shall mean the Corporation's Stockholders' Agreement dated February 12, 1998, as it may be amended and/or restated from time to time.
3. Administration
(a) Administration of the Plan. The Plan shall be administered by the Board or by such committee or committees as may be appointed by the Board from time to time (the Board, committee or committees hereinafter referred to as the "Administrator").
(b) Powers of the Administrator. The Administrator shall have all the powers vested in it by the terms of the Plan, such powers to include authority, in its sole and absolute discretion, to grant Awards under the Plan, prescribe Grant Agreements evidencing such Awards and establish programs for granting Awards.
The Administrator shall have full power and authority to take all other actions necessary to carry out the purpose and intent of the Plan, including, but not limited to, the authority to: (i) determine the eligible persons to whom, and the time or times at which Awards shall be granted; (ii) determine the types of Awards to be granted; (iii) determine the number of shares to be covered by or used for reference purposes for each Award; (iv) impose such terms, limitations, restrictions and conditions upon any such Award as the Administrator shall deem appropriate; (v) modify, amend, extend or renew outstanding Awards, or accept the surrender of outstanding Awards and substitute new Awards (provided however, that, except as provided in Section 7(d) of the Plan, any modification that would materially adversely affect any outstanding Award shall not be made without the consent of the holder); (vi) accelerate or otherwise change the time in which an Award may be exercised or becomes payable and to waive or accelerate the lapse, in whole or in part, of any restriction or condition with
respect to such Award, including, but not limited to, any restriction or condition with respect to the vesting or exercisability of an Award following termination of any grantee's employment; and (vii) establish objectives and conditions, if any, for earning Awards and determining whether Awards will be paid after the end of a performance period.
The Administrator shall have full power and authority, in its sole and absolute discretion, to administer and interpret the Plan and to adopt and interpret such rules, regulations, agreements, guidelines and instruments for the administration of the Plan and for the conduct of its business as the Administrator deems necessary or advisable.
(c) Non-Uniform Determinations. The Administrator's determinations under the Plan (including without limitation, determinations of the persons to receive Awards, the form, amount and timing of such Awards, the terms and provisions of such Awards and the Grant Agreements evidencing such Awards) need not be uniform and may be made by the Administrator selectively among persons who receive, or are eligible to receive, Awards under the Plan, whether or not such persons are similarly situated.
(d) Limited Liability. To the maximum extent permitted by law, no member of the Administrator shall be liable for any action taken or decision made in good faith relating to the Plan or any Award thereunder.
(e) Indemnification. To the maximum extent permitted by law and by the Corporation's charter and by-laws, the members of the Administrator shall be indemnified by the Corporation in respect of all their activities under the Plan.
(f) Effect of Administrator's Decision. All actions taken and decisions and determinations made by the Administrator on all matters relating to the Plan pursuant to the powers vested in it hereunder shall be in the Administrator's sole and absolute discretion and shall be conclusive and binding on all parties concerned, including the Corporation, its stockholders, any participants in the Plan and any other employee of the Corporation, and their respective successors in interest.
4. Shares Available for the Plan; Maximum Awards
Subject to adjustments as provided in Section 7(d) of the Plan, the shares of Common Stock that may be issued with respect to Awards granted under the Plan shall not exceed an aggregate of two hundred thousand (200,000) shares of Common Stock. The Corporation shall reserve such number of shares for Awards under the Plan, subject to adjustments as provided in Section 7(d) of the Plan. If any Award, or portion of an Award, under the Plan expires or terminates unexercised, becomes unexercisable or is forfeited or otherwise terminated, surrendered or canceled as to any shares, or if any shares of Common Stock are surrendered to the Corporation in connection with any Award (whether or not such surrendered shares were acquired pursuant to any Award), the shares subject to such Award and the surrendered shares shall thereafter be available for further Awards under the Plan; provided, however, that any such shares that are surrendered to the Corporation in connection with any Award or that are otherwise forfeited after issuance shall not be available for purchase pursuant to incentive stock options intended to qualify under Code section 422.
5. Participation
Participation in the Plan shall be open to all employees, officers, and directors of the Corporation, or of any Affiliate of the Corporation and to third parties which provide services to the Corporation, their employees and officers, as may be selected by the Administrator from time to time.
6. Awards
The Administrator, in its sole discretion, establishes the terms of all Awards granted under the Plan. Awards may be granted individually or in tandem with other types of Awards. All Awards are subject to the terms and conditions provided in the Grant Agreement.
(a) Stock Options. The Administrator may from time to time grant to eligible participants Awards of incentive stock options as that term is defined in Code section 422 or nonqualified stock options; provided, however, that Awards of incentive stock options shall be limited to employees of the Corporation or of any Parent or Subsidiary of the Corporation. Options intended to qualify as incentive stock options under Code section 422 must have an exercise price at least equal to Fair Market Value on the date of grant, but nonqualified stock options may be granted with an exercise price less than Fair Market Value. No stock option shall be an incentive stock option unless so designated by the Administrator at the time of grant or in the Grant Agreement evidencing such stock option.
(b) Stock Appreciation Rights. The Administrator may from time to time
grant to eligible participants Awards of Stock Appreciation Rights ("SAR"). An
SAR entitles the grantee to receive, subject to the provisions of the Plan and
the Grant Agreement, a payment having an aggregate value equal to the product of
(i) the excess of (A) the Fair Market Value on the exercise date of one share of
Common Stock over (B) the base price per share specified in the Grant Agreement,
times (ii) the number of shares specified by the SAR, or portion thereof, which
is exercised. Payment by the Corporation of the amount receivable upon any
exercise of an SAR may be made by the delivery of Common Stock or cash, or any
combination of Common Stock and cash, as determined in the sole discretion of
the Administrator. If upon settlement of the exercise of an SAR a grantee is to
receive a portion of such payment in shares of Common Stock, the number of
shares shall be determined by dividing such portion by the Fair Market Value of
a share of Common Stock on the exercise date. No fractional shares shall be used
for such payment and the Administrator shall determine whether cash shall be
given in lieu of such fractional shares or whether such fractional shares shall
be eliminated.
(c) Stock Awards. The Administrator may from time to time grant restricted or unrestricted stock Awards to eligible participants in such amounts, on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as may be required by law, as it shall determine. A stock Award may be paid in Common Stock, in cash, or in a combination of Common Stock and cash, as determined in the sole discretion of the Administrator.
(d) Phantom Stock. The Administrator may from time to time grant Awards to eligible participants denominated in stock-equivalent units ("phantom stock") in such amounts and on such terms and conditions as it shall determine. Phantom stock units granted to a participant shall be credited to a bookkeeping reserve account solely for accounting purposes and shall not require a segregation of any of the Corporation's assets. An Award of phantom stock may be settled in Common Stock, in cash, or in a combination of Common Stock and cash, as determined in the sole
discretion of the Administrator. Except as otherwise provided in the applicable Grant Agreement, the grantee shall not have the rights of a stockholder with respect to any shares of Common Stock represented by a phantom stock unit solely as a result of the grant of a phantom stock unit to the grantee.
(e) Performance Awards. The Administrator may, in its discretion, grant performance awards which become payable on account of attainment of one or more performance goals established by the Administrator. Performance awards may be paid by the delivery of Common Stock or cash, or any combination of Common Stock and cash, as determined in the sole discretion of the Administrator. Performance goals established by the Administrator may be based on the Corporation's or an Affiliate's operating income or one or more other business criteria selected by the Administrator that apply to an individual or group of individuals, a business unit, or the Corporation or an Affiliate as a whole, over such performance period as the Administrator may designate.
7. Miscellaneous
(a) Withholding of Taxes. Grantees and holders of Awards shall pay to the Corporation, or make provision satisfactory to the Administrator for payment of, any taxes required to be withheld in respect of Awards under the Plan no later than the date of the event creating the tax liability. The Corporation may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to the grantee or holder of an Award. In the event that payment to the Corporation of such tax obligations is made in shares of Common Stock, such shares shall be valued at Fair Market Value on the applicable date for such purposes.
(b) Loans. The Corporation may make or guarantee loans to grantees to assist grantees in exercising Awards and satisfying any withholding tax obligations.
(c) Transferability. Except as otherwise determined by the Administrator, and in any event in the case of an incentive stock option or a stock appreciation right granted with respect to an incentive stock option, no Award granted under the Plan shall be transferable by a grantee otherwise than by will or the laws of descent and distribution. Unless otherwise determined by the Administrator in accord with the provisions of the immediately preceding sentence, an Award may be exercised during the lifetime of the grantee, only by the grantee or, during the period the grantee is under a legal disability, by the grantee's guardian or legal representative.
(d) Adjustments; Business Combinations. In the event of changes in the Common Stock of the Corporation by reason of any stock dividend, split-up, recapitalization, merger, consolidation. business combination or exchange of shares and the like, the Administrator shall, in its discretion, make appropriate adjustments to the maximum number and kind of shares reserved for issuance or with respect to which Awards may be granted under the Plan as provided in Section 4 of the Plan and to the number, kind and price of shares covered by Awards granted, and shall, in its discretion and without the consent of holders of Awards, make any other adjustments in Awards, including but not limited to reducing the number of shares subject to Awards or providing or mandating alternative settlement methods such as settlement of the Awards in cash or in shares of Common Stock or other securities of the Corporation or of any other entity, or in any other matters which relate to Awards as the Administrator shall, in its sole discretion, determine to be necessary or appropriate.
Notwithstanding anything in the Plan to the contrary and without the consent of holders of Awards, the Administrator, in its sole discretion, may make any modifications to any Awards, including but not limited to cancellation, forfeiture, surrender or other termination of the Awards in whole or in part regardless of the vested status of the Award, in order to facilitate any business combination that is authorized by the Board to comply with requirements for treatment as a pooling of interests transaction for accounting purposes under generally accepted accounting principles.
The Administrator is authorized to make, in its discretion and without the consent of holders of Awards, adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events affecting the Corporation, or the financial statements of the Corporation or any Subsidiary, or of changes in applicable laws, regulations, or accounting principles, whenever the Administrator determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan.
(e) Stockholders' Agreement. As a condition precedent to the grant of any Award under the Plan or the exercise pursuant to such an Award or to the delivery of certificates for shares issued pursuant to any Award, the Administrator may require the grantee or the grantee's successor or permitted transferee, as the case may be, to become a party to the Stockholders' Agreement of the Corporation and/or to a stock restriction agreement substantially in the form attached hereto as Attachment A.
(f) Termination, Amendment and Modification of the Plan. The Board may terminate, amend or modify the Plan or any portion thereof at any time.
(g) Non-Guarantee of Employment or Service. Nothing in the Plan or in any Grant Agreement thereunder shall confer any right on an individual to continue in the service of the Corporation or shall interfere in any way with the right of the Corporation to terminate such service at any time.
(h) Compliance with Securities Laws; Listing and Registration. Common Stock shall not be issued with respect to an Award granted under the Plan unless the exercise of such Award and the issuance and delivery of stock certificates for such Common Stock pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933 and the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any national securities exchange or any listing or quotation system established by the National Association of Securities Dealers, Inc. ("Nasdaq System") upon which the Common Stock may then be listed or quoted, and shall be further subject to the approval of counsel for the Corporation with respect to such compliance to the extent such approval is sought by the Administrator. The Corporation may require that a grantee, as a condition to exercise of an Award, and as a condition to the delivery of any share certificate, provide to the Corporation, at the time of each such exercise and each such delivery, a written representation that the shares of Common Stock being acquired shall be acquired by the grantee solely for investment and will not be sold or transferred without registration or the availability of an exemption from registration under the Securities Act and applicable state securities laws. The Corporation may also require that a grantee submit other written representations which will permit the Corporation to comply with federal and applicable state securities laws in connection with the issuance of the Common Stock, including representations as to the knowledge and experience in financial and business matters of the grantee and the grantee's ability to bear the economic risk of the grantee's
investment. The Corporation may require that the grantee obtain a "purchaser representative" as that term is defined in applicable federal and state securities laws. The stock certificates for any shares of Common Stock issued pursuant to this Plan may bear a legend restricting transferability of the shares of Common Stock unless such shares are registered or an exemption from registration is available under the Securities Act and applicable state securities laws. The Corporation may notify its transfer agent to stop any transfer of shares of Common Stock not made in compliance with these restrictions. If the Corporation determines that the listing, registration or qualification upon any securities exchange or upon the Nasdaq System or under any law, of shares subject to any Award is necessary or desirable as a condition of, or in connection with, the granting of the Award or the issuance or purchase of shares thereunder, no such Award may be exercised in whole or in part and no restrictions on such Award shall lapse, unless such listing, registration or qualification is effected free of any conditions not acceptable to the Corporation.
(i) No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Corporation and a grantee or any other person. To the extent that any grantee or other person acquires a right to receive payments from the Corporation pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Corporation.
(j) Governing Law. The validity, construction and effect of the Plan, of Grant Agreements entered into pursuant to the Plan, and of any rules, regulations, determinations or decisions made by the Administrator relating to the Plan or such Grant Agreements, and the rights of any and all persons having or claiming to have any interest therein or thereunder, shall be determined exclusively in accordance with applicable federal laws and the laws of Florida without regard to its conflict of laws principles.
(k) Effective Date; Termination Date. The Plan is effective as of the date on which the Plan was adopted by the Board, subject to approval of the stockholders within twelve months before or after such date. No Award shall be granted under the Plan after the close of business on the day immediately preceding the tenth anniversary of the effective date of the Plan. Subject to other applicable provisions of the Plan, all Awards made under the Plan prior to such termination of the Plan shall remain in effect until such Awards have been satisfied or terminated in accordance with the Plan and the terms of such Awards.
Date Approved by the Board: ___________________________
Date Approved by the Stockholders: ____________________
Exhibit 10.20
Regeneration Technologies, Inc.
- Incentive Compensation Plan -
- Year 2000 -
The RTI annual Incentive Compensation Plan incorporates the following three separate plans:
o RTI Corporate Plan
o Sales & Marketing Plan
o National Accounts/Recovery Plan
Employees only participate in one of the Plans. Plan participants from the Sales & Marketing Plan and the National Accounts/Recovery Plan are not eligible as participants in the RTI Corporate Plan.
Index:
Page
----
Sales & Marketing Plan 2
National Accounts/Donor Recovery Plan 3
RTI Corporate Plan 4-7
Administrative & Operating Provisions 8
Revenue, Profit & Plan Income for 2000 9
Summary of Plan Pay-Outs 10
Spreadsheet: Sales & Marketing Plan 11
Spreadsheet: National Accounts/Donor Recovery Plan 12
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Regeneration Technologies, Inc. - Incentive Compensation Plan - - Year 2000 -
Sales & Marketing Plan:
The following employees are participants in the Sales & Marketing Plan.
Participants -
VP Sales
National Sales Director
Regional Sales Managers
Distribution Manager
Oral-Maxillofacial Group
How Sales & Marketing Plan awards are computed:
The Sales & Marketing Plan establishes, for each product group under the employee's control:
o Baseline sales volumes
o "Budget" sales volumes (external goals)
o "Internal Target" sales volumes (optimistic goals)
For each product group, the potential award is calculated as a pre-determined percentage of the sales over baseline and over Budget.
VP and Director-level participants in the Sales & Marketing Plan, like Officer & Director-level participants in the RTI Corporate Plan, do not achieve any awards unless sales equal to the "Budget" levels are achieved.
Full Plan Computation:
The attached spreadsheet titled "Year 2000 Sales & Marketing Incentive Plans" on page 11 reflects the specific baselines, percentages and proposed bonuses at Budget, Target and 110% of Target for all participants in the Sales & Marketing Plan.
Regeneration Technologies, Inc. - Incentive Compensation Plan - - Year 2000 -
National Accounts/Donor Recovery Plan:
The following employees are participants in the National Accounts/Donor Recovery Plan.
Participants -
Dan Towers, National Recovery Manager
Stacey Barron, National Recovery Manager
Kathy Croft, National Recovery Manager
How National Accounts/Donor Recovery awards are computed:
The National Accounts/Donor Recovery Plan establishes bonuses for adding new recovery groups or increasing donor recovery in the territory's or programs under the employee's control. Bonus programs include:
o Adding new recovery groups (% based on # of donors)
o Adding contracts that decrease average per-donor recovery cost
o Overachieving donor recovery in existing territories
o Adding funeral homes to the recovery network
o Adding medical examiner recovery of heart valves
o Converting or signing "Management Services Agreements"
Full Plan Computation:
The attached spreadsheet titled "Year 2000 National Accounts / Donor Recovery Incentive Plan" on page 12 reflects the specific bonuses and targets for each aspect of this Plan, for all participants in the National Accounts / Donor Recovery Plan
Regeneration Technologies, Inc. - Incentive Compensation Plan - - Year 2000 -
RTI Corporate Plan:
All employees who are not participants in the Sales & Marketing Plan or the National Accounts/Donor Recovery Plan will be eligible to participate in the RTI Corporate Plan.
The RTI Corporate Plan has the following participant levels:
Participant
Job Levels Group
CEO/CFO/COO I
Vice Presidents II
Directors III
Managers IV
Exempt V
Non-Exempt VI
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Calculating the Incentive Pool under the RTI Corporate Plan:
The pool of funds that is available for incentives under the RTI Corporate Plan is computed as a percentage of the company's performance over budgetary targets. For 2000, that overall corporate target is:
o Overall corporate Pre-Tax Operating Income above the Budget level
Each department within the company has other targets which must be achieved in order to achieve full participation in the pool of funds that is available. These departmental targets include such items as corporate revenue above baselines, product-line revenue above baselines, new product introductions, etc.
How Individual awards are computed in the RTI Corporate Plan:
Incentive award opportunities in the RTI Corporate Plan are computed based on the following factors:
o Overall Corporate Performance (above)
o Achievement of Departmental Goals & Metrics
o Individual Performance
Participants in the RTI Corporate Plan do not achieve any awards unless profits are above to the company's "Budget" level for profits.
Regeneration Technologies, Inc. - Incentive Compensation Plan - - Year 2000 -
RTI Corporate Plan, cont.:
Computing the Pool Available for the RTI Corporate Plan:
The pool of funds potentially available for pay-out under the RTI Corporate Plan is computed as follows:
If Plan Income* is at or below RTI's "Budget" for Plan Income:
-0-Funding of Pool
If Plan Income is above "Budget" for Plan Income:
+ 30.0% of Plan Income above "Budgeted" Plan Income
"Budgeted Net Income" for Year 2000 does not include any incentive compensation expense, as no incentive compensation is earned until earnings exceed Budgeted Net Income.
Examples of Pool Available at "Budget" & "Internal Target":
At At At 110%
Budget Target Target
Computed "Plan Income" $9.7m $14.4m $17.3m
RTI Corporate Incentive Pool Available $ -0- $1.4m $2.3m
RTI Corporate After-Tax Net income $5.8m $7.8m $9.Om
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"Plan Income" = Net Operating Income before Tax or RTI Corporate Incentive Plan expense
Regeneration Technologies, Inc. - Incentive Compensation Plan - - Year 2000 -
RTI Corporate Plan, cont.:
Division of the Pool Among Participant Groups:
Assuming an incentive pool is earned as described above, the pool will be divided initially among the six categories of employees as reflected below, creating six sub-pools. The percentage for each sub-pool has been calculated to result in a potential pay-out, if the company achieves it's Internal Profit Target (above "Budget"), of the following multiple of "base compensation":
% of Base Pay % of Pool
Job Levels Group at Internal Target Required
CEO/CFO/COO I 35% of base earnings 14.2% of Pool
Vice Presidents II 30% of base earnings 8.3% of Pool
Directors III 25% of base earnings 20.4% of Pool
Managers IV 15% of base earnings 18.8% of Pool
Exempt V 10% of base earnings 17.6% of Pool
Non-Exempt VI 5% of earned(1) 20.7% of Pool
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1. Expressed as a percentage of earnings, including overtime payments, for non-exempt participants, in order to prevent overtime from being used to increase the "base wages" qualifying for incentives.
All individual pay-outs from the sub-pools will be dependent upon achievement of Department goals and individual performance, and subject to executive review.
No pay-out exists if the company only achieves the "Budget" level of Net Income. At 110% of "Internal Target" Net Profit, the pay-outs are estimated to be roughly 60% higher for each bracket than the percentages shown above. Page 9, "Revenue, Profit & Plan Income for 2000 Budget Year," reflects the pay-outs projected, by category, at Budget, Internal Target, and 110% of Internal Target.
Regeneration Technologies, Inc. - Incentive Compensation Plan - -Year 2000-
RTI Corporate Plan, cont.:
Recap:
1. The "Incentive Pool" will only exist if the company achieves its Budgeted
Net Profit level
2. After Budgeted Net Profit level is achieved, the Pool is increased only as
a percentage of earnings above the Budget
3. Employees will still be required to achieve Departmental goals to
participate in the potential Pool
4. Individual performance will be used to determine the final pay-out (if
any) from the pool
5. A review of all proposed pay-outs under the Plan will be conducted by the
company's CEO, COO and CEO prior to any pay-outs
Specific goals of each Department (or Business Unit) will be weighted based on importance
Regeneration Technologies, Inc. - Incentive Compensation Plan - -Year 2000-
RTI Corporate Plan, cont.:
Operational Provisions of Plan:
-- Participant award ranges reviewed and approved annually -- Organizational performance measures reviewed and approved annually -- Review of extraordinary items affecting financial results will be conducted annually, with appropriate adjustments made in determining the bonus pool funding level -- Individual contribution to RTI success reviewed annually -- The plan may be amended or discontinued by RTI at anytime -- RTI maintains the right to change or terminate any individual's participation in the Plan at any time -- Nothing in the plan shall confer on any participant the right to continued employment or affect RTI's right to terminate a participant's employment for any reason
Administrative Guidelines:
-- Full participation if employed throughout the fiscal year;
-- Partial participation if a participant enters the plan in the first
nine months of the year;
-- Employees joining in 4Q are excluded;
-- Pro-rata participation at regular distribution date if termination
occurs due to death, total disability, retirement or layoff;
-- No award for other types of termination prior to end of fiscal year;
-- No award for participants evaluated unsatisfactory on
performance/appraisal;
-- If promotion results in a change in target bonus prior to the fourth
quarter, final award is pro-rated based on the number of months at
each level.
End-of-Year Administrative Steps:
-- Compute amount (if any) of Incentive Pool
-- Approve plan participants
-- Review status of Departmental goals
-- Approve final incentive awards
-- CEO/CFO/COO review individual performance
Regeneration Technologies, Inc. - Incentive Compensation Plan -
Revenue, Profit and "Plan Income" for 2000 Budget Year
----------------- -------------------- ------------------
Year 2000 Year 2000 Year 2000
Per Budget & internal Targets: Budget Internal Target 110% of Int Targ
----------------- -------------------- ------------------
Gross Revenue 124,259,764 137,701,701 151,471,871
Net Revenue 62,422,314 68,782,367 75,660,604
Net income from Operations * 9,675,730 12,961,900 15,008,176
Net Pre-Tax Income 9,713,730 12,999,900 15,046,176
Net Income 5,828,238 7,799,940 9,027,706
----------------- -------------------- ------------------
----------------- -------------------- ------------------
Year 2000 Year 2000 Year 2000
Computed for Plan Purposes: Budget Internal Target 110% of Int Targ
----------------- -------------------- ------------------
Pre-Tax Operating income (from above) * 9,675,730 12,961,900 15,008,176
RTI Corporate incentive Compensation -- 1,405,000 2,281,975
"PLAN INCOME" (computed) 9,675,730 14,366,900 17,290,151
----------------- -------------------- ------------------
----------------- -------------------- ------------------
Year 2000 Year 2000 Year 2000
Incentive Comp as % of Pre-Tax Income: Budget Internal Target 110% of Int Targ
----------------- -------------------- ------------------
Incentive Compensation (above) -- 1,405,000 2,281,975
% of "Plan income over Budget" 0% 30% 30%
% of Pre-Tax Operating Income 0% 11% 15%
----------------- -------------------- ------------------
|
IncentiveCompPlan-2000-Full Plan Income
Regeneration Technologies, Inc. - Incentive Compensation Plan -
Summary of Plan Pay-Outs
Note: Award computation below is at "Budget" Net Profit; "Internal Target" & 10% above Internal Target
------------------------ -------------------------- -------------------------
At "Budget" Net Profit At "internal Tar et" 110% over Internal
------------------------ -------------------------- -------------------------
------------ $ Pay-Out $ Pay-Out
Base Computed $ Pay-Out Computed at profit Computed at profit
Compensation Pay-Out as at profit Pay-Out as = to Internal Pay-Out as = 110% of
by Category % of Base = to Budget % of Base Target % of Base Int. Target
------------ ------------------------ -------------------------- -------------------------
RTI Corporate Incentive Plan:
Executives CEO/CFO/COO $570,638 0% $0 35% $199,723 57% $324,040
Executives VP's $388,170 0% $0 30% $116,451 49% $189,404
Directors 1,147,175 0% $0 25% $286,794 41% $465,523
Managers 1,757,128 0% 50 15% $263,569 24% $429,011
Exempt 2,472,026 0% $0 10% $247,203 16% $401,628
Non-Exempt 5,825,200 0% $0 5% $291,260 8% $472,369
----------- ---------- ----------
Total $12,160,337 $0 $1,405,000 $2,281,975
% of Eligible Payroll -
Corporate Plan 0.0% 11.6% 18.8%
Sales & Marketing Plan 1,003,000 21% $209,061 44% $438,734 66% $657,421
Donor Recovery Plan 192,000 18% $34,434 21% $40,510 24% $46,587
|
Regeneration Technologies, Inc. Year 2000 Sales and Marketing Incentive Plans
Year 2000 Numbers:
NOTE: All sales numbers are NET of ACTUAL Returns
Each plan participant must achieve at least their Baseline on ALL product lines in their control, or their total bonus is reduced by 50%
All awards subject to final review & approval by CEO/CFO
Budget Internal Target Established
Revenue Revenue Baseline
------------------ ---------------- ----------------------------------
Sales Dept:
Jim Abraham Incentive Lines:
Domestic Non-Spinal Osteofil $ 3,536,160 $ 4,018,768 99% of budget $ 3,500,798
Italy Osteofil $ 86,736 $ 100,080 99% of budget $ 85,869
Regenafil/form $ 5,016,221 $ 5,700,069 99% of budget $ 4,966,059
Sports Medicine $ 5,154,125 $ 7,395,125 99% of budget $ 5,102,584
Conventional (w/ Pericardium) $ 14,454,155 $ 16,290,035 99% of budget $ 14,309,613
SDG Spinal Non-Paste $ 75,028,060 $ 83,355,940 99% of budget $ 74,277,779
SDG Spinal Paste $ 14,063,231 $ 15,981,480 99% of budget $ 13,922,599
Exactech Opteform $ 1,319,968 $ 1,500,096 99% of budget $ 1,306,768
------------------ ---------------- ----------------
$ 118,658,656 $ 134,341,593 $ 117,472,069
National Director Incentive Lines:
Sports Medicine $ 5,154,125 $ 7,395,125 80% of budget $ 4,123,300
Domestic Non-Spinal Osteofil $ 3,536,160 $ 4,018,768 80% of budget $ 2,828,928
Conventional(w/o O/M Pericard) $ 14,190,000 $ 15,990,000 80% of budget $ 11,352,000
------------------ ---------------- ----------------
$ 22,880,285 $ 27,403,893 $ 18,304,228
Regional Managers Incentive Lines:
Sports Medicine $ 5,154,125 $ 7,395,125 80% of budget $ 4,123,300
Domestic Non-Spinal Osteofil $ 3,536,160 $ 4,018,768 80% of budget $ 2,828,928
Conventional(w/o O/M Pericard) $ 14,190,000 $ 15,990,000 80% of budget $ 11,352,000
NOTE: Each region's Internal Target
& Budget will need to be estabtished
individually (& the 3 regions must
= the totals above), and then separate
tiered % can be developed for each
region, which in total must =
commission totals above.
Distribution Manager Incentive Lines:
Sports Medicine $ 5,154,125 $ 7,395,125 80% of budgot $ 4,123,300
Conventional $ 14,454,155 $ 16,290,035 80% of budget $ 11,563,324
(Brian & Phil are assumed to be part
of the corporate incentive
compensation plan)
Marketing Dept:
Oral-Maxillofacial Incentive Lines:
Regenafil $ 2,904,096 $ 3,300,024 70% of budget $ 2,032,867
Regenaform $ 2,112,125 $ 2,400,045 70% of budget $ 1,478,488
Pericardium $ 264,155 $ 300,035 70% of budget $ 184,909
------------------ ---------------- ----------------
$ 5,280,376 $ 6,000,104 $ 3,696,263
Breakdown of O/M Sales:
Internal $ 880,047 $ 1,000,000 70% of budget $ 616,033
Regional 1 $ 1,100,082 $ 1,250,026 70% of budget $ 770,057
Regional 2 $ 1,100,082 $ 1,250,026 70% of budget $ 770,057
Regional 3 $ 1,100,082 $ 1,250,026 70% of budget $ 770,057
Regional 4 $ 1,100,082 $ 1,250,026 70% of budget $ 770,057
------------------ ---------------- ----------------
$ 5,280,375 $ 6,000,104 $ 3,696,263
------------------ ---------------- ----------------
Tim: National Manager $ 5,280,375 $ 6,000,104 70% of budget $ 3,696,263
Total Total
Bonus Bonus Bonus
at Budget at Int Target at 110% Target Bonus at Budget
------------ ------------- -------------- -------------------------------
Sales Dept:
Jim Abraham Incentive Lines:
Domestic Non-Spinal Osteofil $ - $ 12,065 $ 24,122 0.00% from baseline to "budget"
Italy Osteofil $ - $ 334 $ 634 0.00% from baseline to "budget"
Regenafil/form $ - $ 5,129 $ 10,829 0.00% from baseline to "budget"
Sports Medicine $ - $ 56,025 $ 78,210 0.00% from baseline to "budget"
Conventional (w/ Pericardium) $ - $ 36,718 $ 85,588 0.00% from baseline to "budget"
SDG Spinal Non-Paste $ - $ 3,331 $ 6,665 0.00% from baseline to "budget"
SDG Spinal Paste $ - $ 9,591 $ 17,582 0.00% from baseline to "budget"
Exactech Opteform $ - $ 901 $ 1,651 0.00% from baseline to "budget"
------------ ------------- --------------
$ - $ 124,093 $ 225,280
National Director Incentive Lines:
Sports Medicine $ 3,866 $ 26,276 $ 37,368 0.375% from baseline to "budget"
Domestic Non-Spinal Osteofil $ 2,652 $ 7,478 $ 13,506 0.375% from baseline to "budget"
Conventional(w/o O/M Pericard) $ 10,643 $ 28,643 $ 52,628 0.375% from baseline to "budget"
------------ ------------- --------------
$ 17,180 $ 62,396 $ 103,502
Regional Managers Incentive Lines:
Sports Medicine $ 7,731 $ 52,551 $ 74,731 0.75% from baseline to "budget" i
Domestic Non-Spinal Osteofil $ 5,304 $ 14,956 $ 21,013 0.75% from baseline to "budget"
Conventional(w/o O/M Pericard) $ 21,285 $ 51,285 $ 105,255 0.75% from baseline to "budget"
------------ ------------- --------------
Note: The total bonuses
computed on this line
are split among all
three Regional Managers >> $ 34,320 $ 124,793 $ 207,004
Distribution Manager Incentive Lines:
Sports Medicine $ 1,546 $ 8,269 $ 11,597 0.15% from baseline to "budget"
Conventional $ 14,454 $ 28,223 $ 44,513 0.50% from baseline to "budget"
------------ ------------- --------------
$ 16,000 $ 36,492 $ 56,110
Marketing Dept:
Oral-Maxillofacial Incentive Lines:
Regenafil
Regenaform
Pericardium
Breakdown of O/M Sales:
Internal $ 2,640 $ 5,039 $ 8,039 1.00% from baseline to "budget"
Regional 1 $ 33,002 $ 37,501 $ 41,251 3.00% on all sales
Regional 2 $ 24,752 $ 39,140 $ 54,747 7.50% from baseline to "budget"
Regional 3 $ 24,752 $ 39,746 $ 54,747 7.50% from baseline to "budget"
Regional 4 $ 24,752 $ 39,746 $ 54,747 7.50% from baseline to "budget"
------------ ------------- --------------
$ 109,898 $ 161,779 $ 213,530
Tim: National Manager $ 31,682 $ 53,274 $ 77,275 2.00% from baseline to "budget"
------------ ------------- --------------
$ 141,580 $ 215,053 $ 290,804
Additional Bonus at Target Addtl Bonus over Target
--------------------------------- -----------------------
Sales Dept:
Jim Abraham Incentive Lines:
Domestic Non-Spinal Osteofil + 2.50% from "budget" to Int Target + 3.00% over Int Target
Italy Osteofil + 2.50% from "budget" to Int Target + 3.00% over Int Target
Regenafil/form + 0.75% from "budget" to Int Target + 1.00% over Int Target
Sports Medicine + 2.50% from "budget" to Int Target + 3.00% over Int Target
Conventional (w/ Pericardium) + 2.00% from "budget" to Int Target + 3.00% over Int Target
SDG Spinal Non-Paste + 0.04% from "budget" to Int Target + 0.04% over Int Target
SDG Spinal Paste + 0.50% from "budget" to Int Target + 0.50% over Int Target
Exactech Opteform + 0.50% from "budget" to Int Target + 0.50% over Int Target
National Director Incentive Lines:
Sports Medicine + 1.00% from "budget" to Int Target + 1.50% over Int Target
Domestic Non-Spinal Osteofil + 1.00% from "budget" to Int Target + 1.50% over Int Target
Conventional(w/o O/M Pericard) + 1.00% from "budget" to Int Target + 1.50% over Int Target
Regional Managers Incentive Lines:
Sports Medicine + 2.00% from "budget" to Int Target + 3.00% over Int Target
Domestic Non-Spinal Osteofil + 2.00% from "budget" to Int Target + 3.00% over Int Target
Conventional(w/o O/M Pericard) + 2.00% from "budget" to Int Target + 3.00% over Int Target
Distribution Manager Incentive Lines:
Sports Medicine + 0.30% from "budget" to Int Target + 0.45% over Int Target
Conventional + 0.75% from "budget" to Int Target + 1.00% over Int Target
Marketing Dept:
Oral-Maxillofacial Incentive Lines:
Regenafil
Regenaform
Pericardium
Breakdown of O/M Sales:
Internal + 2.00% from "budget" to Int Target + 3.00% over Int Target
Regional 1
Regional 2 + 10.00% from "budget" to Int Target + 12.00% over Int Target
Regional 3 + 10.00% from "budget" to Int Target + 12.00% over Int Target
Regional 4 + 10.00% from "budget" to Int Target + 12.00% over Int Target
Tim: National Manager + 3.00% from "budget" to Int Target + 4.00% over Int Target
|
Discounts:
In all lines where previous sales history exists, the average discount must be maintained in order to achieve the above bonuses.
If the average sales in any quarterly period are at a discount greater than the average, 2.5% of the bonus will be lost for each 1% discount off average.
If the average sales in any quarterly period are 5% or more ABOVE the average, the bonus will be increased by 10% (new bonus will = 110% x normal bonus).
The term "average discount" means the average discount off of catalog pricing within the region for the preceding 6-month period.
Regeneration Technologies, Inc.
Year 2000 National Accounts / Donor Recovery Incentive Plan
Field Staff Incentives:
1. For signing a new account, or conversion of competitor account -
Payout of a bonus based on the size & avg recovery cost of the program, as per the following table:
------------------------------------------------------------------------------------------------------------------
Program with Program with Program with
Greater than or equal to 7 Less than 7 but Greater than 15 Less than 15
donors/month donors/month donors/month
------------------------------------------------------------------------------------------------------------------
More than 10% under the
current avg per-donor cost $500/donor $750/donor $1,250/donor
------------------------------------------------------------------------------------------------------------------
At avg per-donor cost, or up
to 9% under current avg $350/donor $500/donor $750/donor
------------------------------------------------------------------------------------------------------------------
Over the current avg per-
donor cost $125/donor $175/donor $200/donor
------------------------------------------------------------------------------------------------------------------
|
Rules:
a. For a new program, payout is initially based on
agreed-upon estimates (& paid upon closing), with
adjustment at end of year one for actual performance of
the program, using actual months 7-12 multiplied by two
(annualized).
b. For a conversion program, payout is initially based on
agreed-upon estimates (& paid upon closing), with
adjustment at end of six months for actual performance,
using actual months 1-6 multiplied by two (annualized).
c. Finance will provide quarterly updates to National
Accounts of the "average per-donor cost" of RTI recovery
programs.
d. "Donors" are whole donors as defined in recovery
contracts, plus "equivalent whole" for partial donors
a. Targets for all accounts under management to be
reviewed, & modified if needed, quarterly with Director
b. All targets to be revised annually
c. Targets will exclude certain accounts, at discretion of
Director, such as UFTB, Tutogen. etc.
Support Staff Incentives:
a. Targets will be set by Director, subject to Director
discretion
b. All targets to be revised annually, or more often at
Director discretion
c. Target will exclude certain accounts (ie., Tutogen)
Other Awards:
Chairman's Award of Excellence (Quarterly) -
Excellence in Orthopedic Donor Recovery Excellence in Soft Tissue Donor Recovery Excellence in Cardiovascular Donor Recovery
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Regeneration Technologies, Inc. and subsidiary on Form S-1 of our report dated March 22, 2000 (April 27, 2000 as to Note 18) appearing in the Prospectus, which is part of this Registration Statement, and of our report relating to the consolidated financial statement schedule dated March 22, 2000 (April 27, 2000 as to Note 18), appearing elsewhere in this Registration Statement. We also consent to the reference to us under the headings "Selected Financial Data" and "Experts" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP Tampa, Florida April 27, 2000 |
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Regeneration Technologies, Inc. and subsidiary on Form S-1 of our report relating to the statements of revenues and direct costs of the predecessor business of Regeneration Technologies, Inc. dated April 17, 2000, appearing in the Prospectus, which is part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP Tampa, Florida April 27, 2000 |
| ARTICLE 5 |
| THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF REGENERATION TECHNOLOGIES, INC. AND SUBSIDIARY AS OF DECEMBER 31, 1998 AND 1999 AND FOR THE PERIOD FROM FEBRUARY 12, 1998 (DATE OPERATIONS BEGAN) TO DECEMBER 31, 1998 AND THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS. |
| PERIOD TYPE | OTHER | YEAR |
| FISCAL YEAR END | DEC 31 1998 | DEC 31 1999 |
| PERIOD START | FEB 12 1998 | JAN 01 1999 |
| PERIOD END | DEC 31 1998 | DEC 31 1999 |
| CASH | 3,925,880 | 7,536,287 |
| SECURITIES | 0 | 0 |
| RECEIVABLES | 5,940,370 | 15,841,837 |
| ALLOWANCES | 38,500 | 335,087 |
| INVENTORY | 4,356,849 | 16,232,109 |
| CURRENT ASSETS | 15,010,574 | 41,197,787 |
| PP&E | 4,473,824 | 6,951,713 |
| DEPRECIATION | 347,836 | 1,138,930 |
| TOTAL ASSETS | 19,267,530 | 48,538,314 |
| CURRENT LIABILITIES | 15,023,080 | 27,146,209 |
| BONDS | 1,522,249 | 2,026,796 |
| PREFERRED MANDATORY | 0 | 0 |
| PREFERRED | 6,581,777 | 16,581,777 |
| COMMON | 770 | 770 |
| OTHER SE | (8,013,346) | (1,145,238) |
| TOTAL LIABILITY AND EQUITY | 19,267,530 | 48,538,314 |
| SALES | 11,128,079 | 33,025,987 |
| TOTAL REVENUES | 11,128,079 | 33,025,987 |
| CGS | (9,844,771) | (19,172,398) |
| TOTAL COSTS | (3,986,946) | (9,739,790) |
| OTHER EXPENSES | (1,472,410) | (1,675,019) |
| LOSS PROVISION | (38,500) | (171,587) |
| INTEREST EXPENSE | (152,631) | (285,166) |
| INCOME PRETAX | (4,141,947) | 2,340,631 |
| INCOME TAX | 0 | 618,862 |
| INCOME CONTINUING | (4,141,947) | 2,959,493 |
| DISCONTINUED | 0 | 0 |
| EXTRAORDINARY | 0 | 0 |
| CHANGES | 0 | 0 |
| NET INCOME | (4,141,947) | 2,959,493 |
| EPS BASIC | (5.37) | 3.84 |
| EPS DILUTED | (5.37) | 0.84 |