U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
X Quarterly report under Section 13 or 15 (d) of the Securities Exchange Act of 1934
________ Transition report under Section 13 or 15 (d) of the Exchange Act
For the transition period from______________________ to ______________________
Commission file number 000-21326
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Anika Therapeutics, Inc.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
Massachusetts 04-3145961
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
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Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:
On August 10, 1998, 9,959,090 shares of common stock, par value $0.01 per share, were outstanding.
This Form 10-QSB contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The Company's actual results could differ materially
from those set forth in the forward-looking statements. Certain factors that
might cause such a difference are discussed throughout this Form 10-QSB and
are discussed in the section entitled "Certain Factors Affecting Future
Operating Results" of this Form 10-QSB.
PART 1: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
ANIKA THERAPEUTICS, INC.
Balance Sheets as of, June 30, 1998 December 31, 1997
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ASSETS
Current assets:
Cash and cash equivalents $ 23,507,849 $ 22,679,820
Accounts receivable 2,742,191 1,918,293
Inventories 2,781,688 2,541,552
Prepaid expenses 621,599 610,364
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Total current assets 29,653,327 27,750,029
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Property and equipment 5,768,572 4,138,365
Less accumulated depreciation 3,563,822 3,325,321
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Net property and equipment 2,204,750 813,044
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Loan receivable due from officer 75,000 75,000
Long term deposits 196,160 111,265
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Total Assets $ 32,129,237 $ 28,749,338
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 906,381 $ 967,986
Accrued expenses 960,894 1,253,154
Deferred revenue 200,000 200,000
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Total current liabilities 2,067,275 2,421,140
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Advance rent payment 77,192 103,912
Stockholders' equity:
Undesignated preferred stock, $.01 par value: authorized
1,250,000 shares; no shares issued and outstanding -- --
Common stock, $.01 par value: authorized 15,000,000
shares; issued and outstanding 9,916,458 shares and
9,691,091 shares, respectively 99,554 96,911
Additional paid-in capital 34,506,105 32,156,504
Unearned stock option compensation (1,430,221) --
Accumulated deficit (3,190,668) (6,029,129)
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Total stockholders' equity 29,984,770 26,224,286
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Total Liabilities and Stockholders' Equity $ 32,129,237 $ 28,749,338
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See accompanying notes to financial statements.
ANIKA THERAPEUTICS, INC.
STATEMENTS OF OPERATIONS
Three months ended Six months ended
June 30, June 30,
1998 1997 1998 1997
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Product revenue $ 3,095,966 $ 2,350,073 $ 5,850,385 $ 4,277,423
Licensing payments 1,500,000 100,000 1,500,000 100,000
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Total revenue 4,595,966 2,450,073 7,350,385 4,377,423
Cost of sales 1,564,569 1,187,798 2,908,041 2,207,211
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Gross profit 3,031,397 1,262,275 4,442,344 2,170,212
Operating expenses:
Research and development 388,531 509,142 891,510 832,257
Selling, general and administrative 704,228 435,999 1,240,214 830,420
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Total operating expenses 1,092,759 945,141 2,131,724 1,662,677
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Income from operations 1,938,638 317,134 2,310,620 507,535
Interest income, net 318,468 29,418 610,568 59,802
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Income before income taxes 2,257,106 346,552 2,921,188 567,337
Income taxes 55,651 9,508 82,727 13,924
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Net income $ 2,201,455 $ 337,044 $ 2,838,461 $ 553,413
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Basic earnings per share $ 0.22 $ 0.06 $ 0.29 $ 0.09
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---- ---- ---- ----
Shares used for computing basic EPS 9,948,095 5,052,426 9,895,082 5,020,989
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Diluted earnings per share $ 0.20 $ 0.04 $ 0.26 $ 0.06
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---- ---- ---- ----
Shares used for computing diluted EPS 11,197,949 7,336,833 11,039,747 7,224,872
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See accompanying notes to financial statements.
ANIKA THERAPEUTICS, INC.
Statements of Cash Flows
Six months ended,
June 30,
1998 1997
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Cash flows from operating activities:
Net income $ 2,838,461 $ 553,413
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization 238,501 158,464
Amortization of unearned stock compensation 59,840 --
Common stock issued to 401(k) plan and Board of Directors -- 134,327
Changes in operating assets and liabilities:
Accounts receivable (823,898) (647,683)
Loan receivable due from officer -- (75,000)
Long term deposits (84,895) --
Inventories (240,136) 74,421
Prepaid expenses (11,235) (224,050)
Accounts payable and accrued expenses (353,867) 30
Other long-term liabilities (26,720) (18,888)
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Net cash provided by (used for) operating activities 1,596,051 (44,966)
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Cash flows used for investing activities:
Additions to property and equipment (1,630,207) (16,410)
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Net cash used for investing activities (1,630,207) (16,410)
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Cash flows provided by financing activities:
Proceeds from issuance of common stock (64,919) --
Proceeds from exercise of stock options and warrants 927,104 302,563
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Net cash provided by financing activities 862,185 302,563
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Increase in cash and cash equivalents 828,029 241,187
Cash and cash equivalents at beginning of period 22,679,820 2,704,665
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Cash and cash equivalents at end of period $ 23,507,849 $ 2,945,852
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Supplemental disclosure of cash flow information:
Cash paid for interest -- $ 2,771
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Supplemental disclosure of non cash items:
Dividend on redeemable preferred stock -- $ 103,036
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See accompanying notes to financial statements.
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements (Continued)
Anika Therapeutics, Inc.
Notes to Financial Statements
Anika Therapeutics, Inc. (the "Company") develops, manufactures and commercializes therapeutic products and devices intended to promote the protection and healing of bone, cartilage and soft tissue. These products are based on hyaluronic acid ("HA"), a naturally-occurring, biocompatible polymer found throughout the body. Due to its unique biophysical and biochemical properties, HA plays an important role in a number of physiological functions such as the protection and lubrication of soft tissues and joints, the maintenance of the structural integrity of tissues, and the transport of molecules to and within cells. The Company has been developing HA and HA based products since 1983. The Company's currently marketed products consist of ORTHOVISC(R), which is an HA product used in the treatment of some forms of osteoarthritis ("OA") in humans and HYVISC(R), which is an HA product used in the treatment of equine osteoarthritis. ORTHOVISC is currently approved for marketing in Canada and Europe; in the U.S., ORTHOVISC is limited to investigational use only. The Company manufactures AMVISC(R)(1) and AMVISC Plus(R), which are HA products used as viscoelastic supplements in ophthalmic surgery, for Bausch & Lomb Surgical, a subsidiary of Bausch & Lomb, Inc. The Company is currently developing INCERT(R), which is an HA based product designed for use in the prevention of post-surgical adhesions. In addition, the Company is collaborating with Orquest, Inc. to develop OSSIGEL(TM), an injectable formulation of basic fibroblast growth factor combined with HA designed to accelerate the healing of bone fractures.
The accompanying financial statements have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of the Company, these financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position of the Company as of June 30, 1998, the results of operations for the three and six months ended June 30, 1998 and 1997 and the cash flows for the six months ended June 30, 1998 and 1997.
1) AMVISC and AMVISC Plus are registered trademarks of Bausch & Lomb Surgical. ORTHOVISC and HYVISC are registered trademarks of the Company. Ossigel is a trademark of Orquest.
The accompanying financial statements and related notes should be read in conjunction with the Company's annual financial statements filed with the Annual Report on Form 10-KSB for the year ended December 31, 1997. The results of operations for the six months ended June 30, 1998 are not necessarily indicative of the results to be expected for the full year.
The Company follows the provisions of Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings per Share, which establishes standards for computing and presenting earnings per share, simplifying previous standards and making them comparable to international earnings per share standards. Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares and dilutive potential common shares outstanding during the period. Under the treasury stock method, weighted average options outstanding are assumed to be exercised during the period. The assumed proceeds are then used to purchase common shares at the average market price during the period.
The following illustrates a reconciliation of the numerator and denominator for the three and six months ended June 30, 1998 and 1997 for basic and diluted earnings per share computations.
For the three months For the six months
ended June 30, 1998 ended June 30, 1998
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Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
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Net income $2,201,455 $2,838,461
Basic EPS
Income
available
to common
stock-
holders $2,201,455 9,948,095 $.22 2,838,461 9,895,082 $.29
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Effect of
Dilutive
Securities
Warrants
and
options 1,249,854 1,144,665
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Diluted EPS
Income
available
to common
stock-
holders $2,201,455 11,197,949 $.20 2,838,461 11,039,747 $.26
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For the three months For the six months
ended June 30, 1997 ended June 30, 1997
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Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- ------ --------- ------------ ------
Net income $337,044 $553,413
Dividend on
Preferred
Stock (44,075) (103,035)
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Basic EPS
Income
available
to common
stock-
holders $292,969 5,052,426 $.06 450,378 5,020,989 $.09
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Effect of
Dilutive
Securities
Warrants
and
options 2,284,407 2,203,883
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Diluted EPS
Income
available
to common
stock-
holders $292,969 7,336,833 $.04 450.378 7,224,872 $.06
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Sales of AMVISC products to Bausch & Lomb Surgical, accounted for 76% and 88% of total product revenue for the six months ended June 30, 1998 and 1997, respectively. Sales of AMVISC products to Bausch & Lomb Surgical accounted for 71% and 82% of total revenue for the three months ended June 30, 1998 and 1997, respectively.
The Company adopted SFAS No. 130, Reporting Comprehensive Income, effective January 1, 1998. SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components in financial statements. Comprehensive income is the total of net income and all other nonowner changes in equity including items such as unrealized holding gains/losses on securities classified as available for sale, foreign currency translation adjustments and minimum pension liability adjustments. The Company had no such items for the six months ended June 30, 1998 and 1997 and therefore comprehensive income and net income are the same.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 establishes accounting and reporting standards for derivative instruments and for hedging instruments. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. This statement applies to all entities and is effective for all fiscal quarters beginning after June 15, 1999. Initial application of this Statement should be as of the beginning of an entity's fiscal quarter. As of June 30, 1998 and during the quarter then ended, the Company did not hold any derivative instruments or have any hedging activities. The Company does not expect adoption of this Statement to have a significant impact on its financial position or results of operations.
PART I: FINANCIAL INFORMATION
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations
This Form 10-QSB contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The Company's actual results could differ materially from those set forth in the forward-looking statements. Certain factors that might cause such a difference are discussed throughout this Form 10-QSB and are discussed in the section entitled "Certain Factors Affecting Future Operating Results" of this Form 10-QSB.
The Company develops, manufactures and commercializes therapeutic products and devices intended to promote the protection and healing of bone, cartilage and soft tissue. These products are based on hyaluronic acid, a naturally-occurring, biocompatible polymer found throughout the body. Due to its unique biophysical and biochemical properties, HA plays an important role in a number of physiological functions such as the protection and lubrication of soft tissues and joints, the maintenance of the structural integrity of tissues, and the transport of molecules to and within cells. The Company has been developing HA and HA based products since 1983. The Company's currently marketed products consist of ORTHOVISC, which is an HA product used in the treatment of some forms of osteoarthritis in humans, and HYVISC, which is an HA product used in the treatment of equine osteoarthritis. ORTHOVISC is currently approved for marketing in Canada and Europe; in the U.S. ORTHOVISC is currently limited to investigational use only. The Company manufactures AMVISC and AMVISC Plus, which are HA products used as viscoelastic supplements in ophthalmic surgery, for Bausch & Lomb Surgical. The Company is currently developing INCERT, which is an HA based product designed for use in the prevention of post-surgical adhesions. In addition, the Company is collaborating with Orquest, Inc. to develop OSSIGEL, an injectable formulation of basic fibroblast growth factor combined with HA designed to accelerate the healing of bone fractures.
Product Revenue. Product revenue for the three months ended June 30, 1998 totalled $3,096,000, an increase of $746,000, or 32% over the $2,350,000 in product revenue recorded for the comparable period last year. The increase in product revenue for the three months ended June 30, 1998 was attributable to increased sales of AMVISC products and ORTHOVISC. Unit sales of AMVISC products and ORTHOVISC for the three months ended June 30, 1998 increased by 13% and 214%, respectively, over the comparable period of last year. Product revenue for the six months ended June 30, 1998 totalled $5,850,000, an increase of $1,573,000, or 37% over
the $4,277,000 in product revenue recorded for the six months ended June 30, 1997. The increase in product revenue for the six months ended June 30, 1998 was attributable to increased sales of AMVISC products and ORTHOVISC. Unit sales of AMVISC products and ORTHOVISC for the six months ended June 30, 1998 increased by 13% and 236%, respectively, over the comparable period of last year.
Licensing Payments. Revenue from licensing payments increased to $1,500,000 for the three and six months ended June 30, 1998 from $100,000 for the comparable periods in the prior year. In June 1998, the Company received a $1,500,000 licensing payment from Zimmer for the granting of ORTHOVISC European and Latin American distribution rights.
Gross Profit. The Company's gross profit from Product Revenue as a percentage of Product Revenue was 49.5% and 50.2%, respectively, for the three and six months ended June 30, 1998, versus 49.5% and 48% for the same periods last year. The improvement in gross margin for the six months ended June 30, 1998 was attributable to increased sales of ORTHOVISC which has a higher gross margin than AMVISC.
Research and Development Expenses. Research and development expenses for the three months ended June 30, 1998 decreased by $121,000, or 24%, to $389,000 from $509,000 for the same period last year. For the six months ended June 30, 1998 research and development expenses increased by $59,000 or 7% to $892,000 from $832,000 for the same period last year. The increase in research and development expenses for the six months ended June 30, 1998 was primarily attributable to development expenses for INCERT and regulatory expenses for the ORTHOVISC Pre-Market Approval application. The Company expects research and development expenses for the second half of 1998 will be greater than the first half of 1998 due to INCERT development expenses.
Selling, General and Administrative Expenses. Selling, general and administrative expenses for the three months ended June 30, 1998 increased by $268,000, or 61%, to $704,000 from $436,000 for the same period last year. Selling, general and administrative expenses for the six months ended June 30, 1998 increased by 49% to $1,240,000 from $830,000 in the prior year. The increase in selling, general and administrative expenses for the three and six months ended June 30, 1998 was due to additional staffing and salary increases. The Company expects that selling, general and administrative expenses for the second half of 1998 will be greater than the first half of 1998 due to additional staffing and ORTHOVISC marketing expenses.
Interest Income. Interest income, net for the six months ended June 30, 1998 increased by $551,000 to $611,000 due to interest income earned from an increase in the cash balance on hand as a result of the Company's public offering of Common Stock completed in December 1997. The Company had an average cash balance on hand for the first six months of
1998 and 1997 of $22,948,000 and $2,532,000, respectively.
In December 1997, the Company completed a public offering of 2,725,000 shares of its Common Stock that resulted in net proceeds of approximately $17 million.
At June 30, 1998, the Company had cash and cash equivalents of $23,508,000 and working capital of $27,586,000. The Company believes that cash from operations and its cash on hand will be sufficient to meet its operating requirements for at least the next 24 months. Thereafter, the Company may require additional financing to fund its operations and for the construction of a new manufacturing facility. The Company's future capital requirements and the adequacy of available funds will depend, however, on numerous factors, including market acceptance of its existing and future products, the successful commercialization of products in development, progress in its product development efforts, the magnitude and scope of such efforts, progress with preclinical studies, clinical trials and product clearances by the FDA and other agencies, the cost and timing of its efforts to expand its manufacturing capabilities, the cost of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights, competing technological and market developments, and the development of strategic alliances for the marketing of certain of its products.
To the extent that funds generated from the Company's operations, together with the Company's existing capital resources and the net proceeds of this offering are insufficient to meet future requirements, the Company will be required to obtain additional funds through equity or debt financings, strategic alliances with corporate partners and others, or through other sources. The terms of any future equity financings may be dilutive to the Company's stockholders and the terms of any debt financings may contain restrictive covenants which limit the Company's ability to pursue certain courses of action. The ability of the Company to obtain financing is dependent on the status of the Company's future business prospects as well as conditions prevailing in the relevant capital markets. No assurance can be given that any additional financing will be made available to the Company or will be available on acceptable terms should such a need arise. The Company's estimate of the time period for which cash from operations and its cash on hand will be adequate to fund the Company's operating requirements is a forward looking statement within the meaning of the Private Securities Litigation Reform Act of 1995 and is subject to risks and uncertainties. Actual results may differ materially from those contemplated in such forward looking statements. In addition to those described above, factors which may cause such a difference are set forth under the caption "Risk Factors" as well as in this 10-QSB generally.
In March 1996, the Company completed a financing involving the private placement of 1,455,000 shares of newly issued Common Stock to institutional and private accredited investors. In connection with the private placement, the Company issued to the private placement agent warrants to purchase 57,036 shares of Common Stock at $4.00 per share and warrants to purchase 146,664 shares of Common Stock at $3.00 per share. In January 1998, the Company sent a notice for mandatory exercise of the warrants in accordance with the warrant provisions, all warrants were converted into common stock and the Company received $668,136.
Year 2000. The Company is in the process of upgrading its computer hardware and software. The Company's present computer system runs only financial applications. Management believes that the software upgrade will resolve the Year 2000 issue for the Company. Installation of the hardware and software is expected to occur in 1999 and all of the software packages under review by the Company are Year 2000 compliant.
CERTAIN FACTORS AFFECTING FUTURE OPERATING RESULTS
This Form 10-QSB contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1934. The Company's actual results could differ materially from those set forth in the forward-looking statements. Certain factors that might cause such a difference include, among other factors noted herein, the following:
History of Losses; Uncertainty of Future Profitability.
The Company incurred through the year ended December 31, 1996 annual
operating losses since its inception in May 1993 and had an accumulated
deficit of approximately $3.2 million as of June 30, 1998. The
continued development of the Company's products will require the
commitment of substantial resources to conduct research and preclinical
and clinical development programs, and to establish sales and marketing
capabilities. The Company incurred substantial and increasing operating
losses through December 31, 1996 and although the Company achieved
profitability for the six months ended June 30, 1998 and the year ended
December 31, 1997, the ability of the Company to reach sustained
profitability is highly uncertain. To achieve sustained profitability
the Company must, among other things, successfully complete development
of certain of its products, obtain regulatory approvals and establish
sales and marketing capabilities for certain of its products. There can
be no assurance that the Company will be able to achieve sustained
profitability.
Competition. The Company competes with many companies, including large pharmaceutical companies and specialized medical products companies. Many of these companies have substantially greater financial and other resources, larger research and development staffs, more extensive marketing and manufacturing organizations and more experience in the regulatory process than the Company. The Company also competes with academic institutions, governmental agencies and other research organizations which may be involved in research, development and commercialization of products. Because a number of companies are developing HA products for similar applications, the successful commercialization of a particular product will depend in part upon the ability of the Company to complete clinical studies and obtain FDA marketing and foreign
regulatory approvals prior to its competitors. There can be no assurance that the Company will be able to compete against current or future competitors or that competition will not have a material adverse effect on the Company's business, financial condition and results of operations.
Comprehensive Government Regulation; No Assurance of FDA Approval. The Company's products, product development activities, manufacturing processes, and current and future sales and marketing are subject to extensive and rigorous regulation by the FDA and comparable agencies in foreign countries. In the United States, the FDA regulates the marketing, advertising, promotion, and distribution of medical devices, drugs, and biologics, as well as testing, manufacturing, labeling, recordkeeping, and reporting activities for such products.
Medical products regulated by the FDA are generally classified as devices and/or drugs and/or biologics. Product development and approval within the FDA framework takes a number of years and involves the expenditure of substantial resources. There can be no assurance that the FDA will grant approval for the Company's new products on a timely basis if at all, or that FDA review will not involve delays that will adversely affect the Company's ability to commercialize additional products or expand permitted uses of existing products, or that the regulatory framework will not change, or that additional regulation will not arise at any stage of the Company's product development process which may adversely affect approval of or delay an application or require additional expenditures by the Company. In the event the Company's future products are regulated as human drugs or biologics, the FDA's review process typically would be substantially longer and more expensive than the review process for devices.
The Company's ORTHOVISC product is currently regulated as a Class III device by the FDA. Class III devices are those that generally must receive pre-market approval by the FDA to ensure their safety and effectiveness (e.g. life-sustaining, life-supporting and implantable or new devices which have not been found to be substantially equivalent to legally marketed devices) and require clinical testing to ensure safety and effectiveness and FDA approval prior to marketing and distribution. In order for the Company to commercially distribute ORTHOVISC in the U.S., it must obtain FDA approval of a PMA. The Company has submitted a PMA for ORTHOVISC and it was accepted for filing by the FDA in February 1998. The Company announced in July 1998 that it filed an amendment to the PMA which could extend the review time for an additional 180 days. The PMA approval process can be expensive, uncertain and lengthy. A number of devices for which pre-market approval has been sought have never been approved for marketing. The review of an application often occurs over a protracted time period and may take two years or more from the filing date to complete. There can be no assurance that the
FDA will approve a PMA application for ORTHOVISC on a timely basis, if at all, or that the FDA review will not involve delays (including a requirement that the Company conduct additional clinical trials) that will affect the Company's ability to commercialize additional products or expand permitted uses of existing products. Furthermore, even if granted, the approval may include significant limitations on the indications for use for which the product may be marketed.
The Company's developmental HA products, including INCERT and HA oligosaccharides, have not obtained regulatory approval in the U.S. for investigational use and/or commercial marketing and sale. The Company believes that INCERT will be regulated as a Class III medical device and HA oligosaccharides will be regulated as a drug, although there can be no assurance that such products will not be otherwise classified. Before undertaking clinical trials in the U.S. to support a PMA, the Company must apply for and obtain FDA and/or institutional review board ("IRB") approval of an investigation device exemption ("IDE"). There can be no assurance that the Company will be permitted to undertake clinical trials of these or other future products in the U.S. or that clinical trials will demonstrate that the products are safe and effective or otherwise satisfy the FDA's pre-market approval requirements. Orquest has not received regulatory approval in the U.S. for the investigational use and/or commercial marketing and sale of OSSIGEL. OSSIGEL may be regulated as a Class III medical device, a biologic, a drug or a combination thereof. There can be no assurance that Orquest will be permitted to undertake clinical trials of OSSIGEL or, if clinical trials are permitted, that such clinical trials will demonstrate that OSSIGEL is safe and effective or otherwise satisfy FDA requirements.
Once obtained, marketing clearance can be withdrawn by the FDA due to failure to comply with regulatory standards or the occurrence of unforeseen problems following initial clearance. The Company may be required to make further filings with the FDA under certain circumstances. The FDA's regulations require agency approval of a PMA supplement for certain changes if they affect the safety and effectiveness of an approved device, including, but not limited to, new indications for use, labeling changes, the use of a different facility to manufacture, process or package the device, changes in manufacturing methods or quality control systems and changes in performance or design specifications. Failure by the Company to receive approval of a PMA supplement regarding the use of a different manufacturing facility or any other change affecting the safety or effectiveness of an approved device on a timely basis, or at all, would have a material adverse effect on the Company's business, financial condition and results of operations. The FDA could also limit or prevent the manufacture or distribution of the Company's products and has the power to require the recall of such products. Significant delay or cost in obtaining, or failure to obtain FDA clearance to market products, any FDA limitations on the use of the
Company's products, or any withdrawal or suspension of clearance by the FDA could have a material adverse effect on the Company's business, financial condition and results of operations.
In addition, all FDA-approved products manufactured by the Company must be manufactured in compliance with FDA's Good Manufacturing Practices ("GMP") regulations or, for medical devices, FDA's Quality System Regulations ("QSR"). Ongoing compliance with GMP, QSR and other applicable regulatory requirements is monitored through periodic inspection by state and federal agencies, including the FDA. The FDA may inspect the Company and its facilities from time to time to determine whether the Company is in compliance with regulations relating to medical device and manufacturing companies, including regulations concerning manufacturing, testing, quality control and product labeling practices. There can be no assurance that the Company will be able to comply with current or future FDA requirements applicable to the manufacture of products.
FDA regulations depend heavily on administrative interpretation and there can be no assurance that the future interpretations made by the FDA or other regulatory bodies, with possible retroactive effect, will not adversely affect the Company. In addition, changes in the existing regulations or adoption of new governmental regulations or policies could prevent or delay regulatory approval of the Company's products.
Failure to comply with applicable regulatory requirements could result in, among other things, warning letters, fines, injunctions, civil penalties, recall or seizure of products, total or partial suspension of production, refusal of the FDA to grant pre-market clearance or pre-market approval for devices, withdrawal of approvals and criminal prosecution.
In addition to regulations enforced by the FDA, the Company is subject to other existing and potential future federal, state, local and foreign regulations. International regulatory bodies often establish regulations governing product standards, packing requirements, labeling requirements, import restrictions, tariff regulations, duties and tax requirements. To enable the Company to market its products in Europe, the Company was required to receive a "CE" marking certification, an international symbol of quality and compliance with the applicable European medical device directive. In October 1996, the Company received an EC Design Examination and an EC Quality System Certificate from a European Notified Body, which entitles the Company to affix a CE marking on ORTHOVISC for the treatment of osteoarthritis in synovial joints. There can be no assurance that the Company will be able to achieve and/or maintain compliance required for CE marking or other foreign regulatory approvals for any or all of its products or that it will be able to produce its products in a timely and profitable manner while complying with applicable
requirements. Federal, state, local and foreign regulations regarding the manufacture and sale of medical products are subject to change. The Company cannot predict what impact, if any, such changes might have on its business. The requirements relating to the conduct of clinical trials, product licensing, pricing and reimbursement also vary widely from country to country.
The process of obtaining approvals from the FDA and other regulatory authorities can be costly, time consuming, and subject to unanticipated delays. There can be no assurance that approvals of the Company's products will be granted or that the Company will have the necessary funds to develop certain of such products. Any failure to obtain, or delay in obtaining, such approvals could adversely affect the ability of the Company to market its products.
Dependence Upon Marketing Partners. The Company does not plan to directly market and sell its current products to customers. Therefore, the Company's success will be dependent upon the efforts of its marketing partners and the terms and conditions of the Company's relationships with such marketing partners. The Company currently manufactures AMVISC and AMVISC Plus for Bausch & Lomb Surgical under a non-exclusive fixed price, five-year supply agreement which contains stated minimum annual purchase obligations and terminates on December 31, 2001. Since January 1, 1997, Bausch & Lomb Surgical has purchased AMVISC and AMVISC Plus in amounts substantially in excess of the minimum purchase obligations set forth in the AMVISC supply contract. There can be no assurance that Bausch & Lomb Surgical will continue to purchase AMVISC and AMVISC Plus at levels beyond the stated minimum annual purchase obligations. Any such decrease in orders under the AMVISC supply contract could have a material adverse effect on the Company's business, financial condition and results of operations.
On November 7, 1997, the Company entered into a distribution agreement with Zimmer for the exclusive marketing and distribution of ORTHOVISC in the United States, Canada and selected countries in the Asia-Pacific region. This agreement was subsequently amended in June 1998 to expand the territories to also include Europe and Latin America. While the agreement provides for future payments to the Company of up to $22.5 million (which includes the right upon attaining certain milestones, at Zimmer's election, to make an equity investment in the Company equal to the greater of $2.5 million or 9.9% of the then outstanding Common Stock (but not to exceed 19.9% of the then outstanding Common Stock) at a premium to the then current market price), such payments are contingent upon the achievement of certain enumerated regulatory approval and sales milestones. There can be no assurance that such milestones will be met on a timely basis or at all and, accordingly, that any such payments will be received by the Company.
The Company will need to obtain the assistance of additional marketing partners for new products which are brought to market and existing products brought to new markets. There can be no assurance that such additional partners will be available or that such partners will agree to market the Company's products on acceptable terms. The failure to establish strategic partnerships for the marketing and distribution of the Company's products on acceptable terms would have a material adverse effect on the Company's business, financial condition and results of operations.
Uncertainty Regarding Success of Clinical Trials. Several of the Company's products, including INCERT and HA oligosaccharides, as well as the products of the Company's collaborative partners, including OSSIGEL, will require clinical trials to determine their safety and efficacy in humans for various conditions. There can be no assurance that the Company or its collaborative partners will not encounter problems that will cause it to delay or suspend clinical trials of any of these products. In addition, there can be no assurance that such clinical trials, if completed, will ultimately demonstrate these products to be safe and efficacious.
Uncertainty of Market Acceptance of New Products. The Company's success will depend in part upon the acceptance of the Company's new products by the medical community, hospitals and physicians and other health care providers, and third-party payors. Such acceptance may depend upon the extent to which the medical community perceives the Company's products as safer, more effective or cost-competitive than other similar products. Ultimately, for the Company's new products to gain general market acceptance, it will also be necessary for the Company to develop marketing partners for the distribution of its products. There can be no assurance that the Company's new products will achieve significant market acceptance on a timely basis, or at all. Failure of some or all of the Company's new products to achieve significant market acceptance could have a material adverse effect on the Company's business, financial condition and results of operations.
Dependence on Patents and Proprietary Technology. The Company's success will depend, in part, on its ability to obtain and enforce patents, protect trade secrets, obtain licenses to technology owned by third parties when necessary, and conduct its business without infringing the proprietary rights of others. The patent positions of pharmaceutical, medical products and biotechnology firms, including the Company, can be uncertain and involve complex legal and factual questions. There can be no assurance that any patent applications will result in the issuance of patents or, if any patents are issued, whether they will provide significant proprietary protection or commercial advantage, or will not be circumvented by others. In the event a third party has also
filed one or more patent applications for any of its inventions, the Company may have to participate in interference proceedings declared by the U.S. Patent and Trademark Office ("PTO") to determine priority of invention (see below), which could result in failure to obtain or the loss of patent protection for the inventions and the loss of any right to use the inventions. Even if the eventual outcome is favorable to the Company, such interference proceedings could result in substantial cost to the Company. Filing and prosecution of patent applications, litigation to establish the validity and scope of patents, assertion of patent infringement claims against others and the defense of patent infringement claims by others can be expensive and time consuming. There can be no assurance that in the event that any claims with respect to any of the Company's patents, if issued, are challenged by one or more third parties, that any court or patent authority ruling on such challenge will determine that such patent claims are valid and enforceable. An adverse outcome in such litigation could cause the Company to lose exclusivity covered by the disputed rights. If a third party is found to have rights covering products or processes used by the Company, the Company could be forced to cease using the technologies or marketing the products covered by such rights, could be subject to significant liabilities to such third party, and could be required to license technologies from such third party. Furthermore, even if the Company's patents are determined to be valid, enforceable, and broad in scope, there can be no assurance that competitors will not be able to design around such patents and compete with the Company using the resulting alternative technology.
The Company has a policy of seeking patent protection for patentable aspects of its proprietary technology. The Company co-owns certain United States patents and a patent application which claim certain adhesion prevention uses and certain drug delivery uses of HA, and solely owns patents directed to certain manufacturing processes. The Company also holds an exclusive license from Tufts University to use technologies claimed in a United States patent application which has been granted a Notice of Allowance from the U.S. Patent Office for the anti-metastasis applications of HA oligosaccharides. The Company's issued patents expire between 2007 and 2015 and the license expires upon expiration of all related patents. The Company intends to seek patent protection with respect to products and processes developed in the course of its activities when it believes such protection is in its best interest and when the cost of seeking such protection is not inordinate. However, no assurance can be given that any patent application will be filed, that any filed applications will result in issued patents or that any issued patents will provide the Company with a competitive advantage or will not be successfully challenged by third parties. The protections afforded by patents will depend upon their scope and validity, and others may be able to design around the Company's patents. The Company's issued patents and any patents which arise from
the Company's licensed application would provide competitive protection, if at all, only in the United States. The Company has not, to date, pursued foreign patents equivalent to those issued or applied for in the United States.
Other entities have filed patent applications for or have been issued patents concerning various aspects of HA-related products or processes. There can be no assurance that the products or processes developed by the Company will not infringe the patent rights of others in the future. Any such infringement may have a material adverse effect on the Company's business, financial condition and results of operations. In particular, the Company has received notice from the PTO that a third party is attempting to provoke a patent interference with respect to one of the Company's co-owned patents covering the use of INCERT for post-surgical adhesion prevention. Although the Company believes that an interference will be declared by the PTO, it is too early to determine the merits of the interference or the effect, if any, the interference will have on the Company's marketing of INCERT for this use. The existence of the interference proceeding may have a negative impact on the marketing of the INCERT product, and no assurance can be given that the Company would be successful in any such interference proceeding. If the third-party interference were to be decided adversely to the Company, involved claims of the Company's patent would be cancelled, the Company's marketing of the INCERT product may be materially and adversely affected and the third party may enforce patent rights against the Company which could prohibit the sale and use of the INCERT products, which could have a material adverse effect on the Company's future operating results.
The Company also relies upon trade secrets and proprietary know-how for certain unpatented aspects of its technology. To protect such information, the Company requires all employees, consultants and licensees to enter into confidentiality agreements limiting the disclosure and use of such information. There can be no assurance that these agreements provide meaningful protection or that they will not be breached, that the Company would have adequate remedies for any such breach, or that the Company's trade secrets, proprietary know-how, and technological advances will not otherwise become known to others. In addition, there can be no assurance that, despite precautions taken by the Company, others have not and will not obtain access to the Company's proprietary technology. Further, there can be no assurance that third parties will not independently develop substantially equivalent or better technology.
Pursuant to the AMVISC supply contract the Company has granted Bausch & Lomb Surgical a royalty-free, worldwide, exclusive license to the Company's manufacturing and product inventions which relate to AMVISC products, effective on December 31, 2001, the termination date of the AMVISC supply contract which
became effective on January 1, 1997. Upon expiration of the AMVISC supply contract, there can be no assurance that Bausch & Lomb Surgical will continue to use the Company to manufacture AMVISC and AMVISC Plus. If Bausch & Lomb Surgical discontinues the use of the Company as a manufacturer after such time, the Company's business, financial condition and results of operations could be materially and adversely affected.
Risks Associated with Manufacturing. The Company's results of operations are dependent upon the continued operation of its manufacturing facility in Woburn, Massachusetts. The operation of biomedical manufacturing plants involves many risks, including the breakdown, failure or substandard performance of equipment, natural and other disasters, and the need to comply with the requirements of directives of government agencies, including the FDA. In addition, the Company relies on a single supplier for syringes and a small number of suppliers for a number of other materials required for the manufacturing and delivery of its HA products. Furthermore, manufacturing processes and research and development efforts of the Company involve animals and products derived from animals. The utilization of animals in research and development and product commercialization is subject to increasing focus by animal rights activists. The activities of animal rights groups and other organizations that have protested animal based research and development programs or boycotted the products resulting from such programs could cause an interruption in the Company's manufacturing processes and research and development efforts. The occurrence of material operational problems, including but not limited to the events described above, could have a material adverse effect on the Company's business, financial condition and results of operations during the period of such operational difficulties.
No Assurance of Ability to Manage Growth. The Company's future success depends on substantial growth in product sales. There can be no assurance that such growth can be achieved or, if achieved, can be sustained. There can be no assurance that if substantial growth in product sales and the demand for the Company's products is achieved, the Company will be able to (i) develop the necessary manufacturing capabilities, (ii) obtain the assistance of additional marketing partners, (iii) attract, retain and integrate the required key personnel, or (iv) implement the financial, accounting and management systems needed to manage growing demand for its products, should it occur. Failure of the Company to successfully manage future growth could have a material adverse effect on the Company's business, financial condition and results of operations.
Third Party Reimbursement and Health Care Cost Containment Initiatives. In the U.S. and other markets, health care providers, such as hospitals and physicians, that purchase health care products, such as the Company's products,
generally rely on third party payors, including Medicare, Medicaid and other health insurance and managed care plans, to reimburse all or part of the cost of the health care product. Reimbursement by a third party payor may depend on a number of factors, including the payor's determination that the use of the Company's products are clinically useful and cost-effective, medically necessary and not experimental or investigational. Since reimbursement approval is required from each payor individually, seeking such approvals can be a time consuming and costly process which, in the future, could require the Company or its marketing partners to provide supporting scientific, clinical and cost-effectiveness data for the use of the Company's products to each payor separately. Significant uncertainty exists as to the reimbursement status of newly approved health care products, and third party payors are increasingly attempting to contain the costs of health care products and services by limiting both coverage and the level of reimbursement for new therapeutic products and by refusing in some cases to provide coverage for uses of approved products for disease indications for which the FDA has not granted marketing approval. In addition, Congress and certain state legislatures have considered reforms that may affect current reimbursement practices, including controls on health care spending through limitations on the growth of Medicare and Medicaid spending. There can be no assurance that third party reimbursement coverage will be available or adequate for any products or services developed by the Company. Outside the U.S., the success of the Company's products is also dependent in part upon the availability of reimbursement and health care payment systems. Lack of adequate coverage and reimbursement provided by government and other third party payors for the Company's products and services could have a material adverse effect on the Company's business, financial condition and results of operations.
Need for Additional Funds; Liquidity. The Company anticipates that its cash and cash equivalents of approximately $23.5 million on June 30, 1998 will be adequate to fund its operations for an additional 24 months. The Company's future capital requirements and the adequacy of available funds will depend, however, on numerous factors, including market acceptance of its existing and future products, the successful commercialization of products in development, progress in its product development efforts, the magnitude and scope of such efforts, progress with preclinical studies, clinical trials and product clearances by the FDA and other agencies, the cost and timing of its efforts to expand its manufacturing capabilities, the cost of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights, competing technological and market developments, and the development of strategic alliances for the marketing of certain of its products. To the extent that funds generated from the Company's operations, together with the Company's existing capital resources and the net proceeds of this
offering are insufficient to meet future requirements, the Company will be required to obtain additional funds through equity or debt financings, strategic alliances with corporate partners and others, or through other sources. The terms of any future equity financings may be dilutive to the Company's stockholders and the terms of any debt financings may contain restrictive covenants which limit the Company's ability to pursue certain courses of action. The ability of the Company to obtain financing is dependent on the status of the Company's future business prospects as well as conditions prevailing in the relevant capital markets. No assurance can be given that any additional financing will be made available to the Company or will be available on acceptable terms should such a need arise.
Exposure to Product Liability Claims. The testing, marketing and sale of human health care products entail an inherent risk of allegations of product liability, and there can be no assurance that substantial product liability claims will not be asserted against the Company. Although the Company has not received any material product liability claims to date and has a $1 million insurance policy to cover such claims should they arise, there can be no assurance that material claims will not arise in the future or that the Company's insurance will be adequate to cover all situations. Moreover, there can be no assurance that such insurance, or additional insurance, if required, will be available in the future or, if available, will be available on commercially reasonable terms. Any product liability claim, if successful, could have a material adverse effect on the Company's business, financial condition and results of operations.
Dependence Upon Key Personnel. The Company is highly dependent on the members of its management and scientific staff, the loss of one or more of whom could have a material adverse effect on the Company. In addition, the Company believes that its future success will depend in large part upon its ability to attract and retain highly skilled, scientific, managerial and manufacturing personnel. The Company faces significant competition for such personnel from other companies, research and academic institutions, government entities and other organizations. There can be no assurance that the Company will be successful in hiring or retaining the personnel it requires. The failure to hire and retain such personnel could have a material adverse effect on the Company's business, financial condition and results of operations.
Environmental Regulation. The Company is subject to a variety of local, state and federal government regulations relating to the storage, discharge, handling, emission, generation, manufacture and disposal of toxic, or other hazardous substances used in the manufacture of the Company's products. Any failure by the Company to control the use, disposal, removal or storage of hazardous chemicals or toxic substances
could subject the Company to significant liabilities, which could have a material adverse effect on the Company's business, financial condition and results of operations.
Risks' Relating to International Operations. Approximately 24% of the Company's net sales for the six months ended June 30, 1998 were generated in international markets through marketing partners. The Company's representatives, agents and distributors which sell products in international markets are subject to the laws and regulations of the foreign jurisdictions in which they operate and in which the Company's products are sold. A number of risks are inherent in international sales and operations. For example, the volume of international sales may be limited by the imposition of government controls, export license requirements, political instability, trade restrictions, changes in tariffs, difficulties in managing international operations, import restrictions and fluctuations in foreign currency exchange rates. Such changes in the volume of sales may have an adverse effect on the Company's business, financial condition and results of operations.
Potential Volatility of Stock Price; No Control Over Market Making. The market price of shares of the Company's Common Stock may be highly volatile. Factors such as announcements of new commercial products or technological innovations by the Company or its competitors, disclosure of results of clinical testing or regulatory proceedings, governmental regulation and approvals, developments in patent or other proprietary rights, public concern as to the safety of products developed by the Company and general market conditions may have a significant effect on the market price of the Company's Common Stock. The trading price of the Company's Common Stock could be subject to wide fluctuations in response to quarter-to-quarter variations in the Company's operating results, material announcements by the Company or its competitors, governmental regulatory action, conditions in the health care industry generally or in the medical products industry specifically, or other events or factors, many of which are beyond the Company's control. In addition, the stock market has experienced extreme price and volume fluctuations which have particularly affected the market prices of many medical products companies and which often have been unrelated to the operating performance of such companies. The Company's operating results in future quarters may be below the expectations of equity research analysts and investors. In such event, the price of the Common Stock would likely decline, perhaps substantially.
No person is under any obligation to make a market in the Common Stock or publish research reports on the Company, and any person making a market in the Common Stock or publishing research reports on the Company may discontinue market making or publishing such reports at any time without notice. There can be no assurance that an active public market in the Common
Stock will develop or, if developed, will be sustained.
Possible Adverse Effect of Certain Anti-Takeover Provisions. Certain provisions of the Company's Restated Articles of Organization and Amended and Restated By-laws could have the effect of discouraging a third party from pursuing a non-negotiated takeover of the Company and preventing certain changes in control. These provisions include a classified Board of Directors, advance notice to the Board of Directors of stockholder proposals, limitations on the ability of stockholders to remove directors and to call stockholder meetings, the provision that vacancies on the Board of Directors be filled by a majority of the remaining directors, the ability of the Board of Directors to issue, without further stockholder approval, preferred stock with rights and privileges which could be senior to the Common Stock and the ability of the Board of Directors to adopt a shareholder rights plan without seeking stockholder approval. The Company also is subject to Chapter 110F of the Massachusetts General Laws which, subject to certain exceptions, prohibits a Massachusetts corporation from engaging in any of a broad range of business combinations with any "interested stockholder" for a period of three years following the date that such stockholder became an interested stockholder. These provisions could discourage a third party from pursuing a takeover of the Company at a price considered attractive by many stockholders, since such provisions could have the effect of preventing or delaying a potential acquiror from acquiring control of the Company and its Board of Directors.
Part II: OTHER INFORMATION
The Company's by-laws establish an advance notice procedure with respect to the introduction of business by stockholders at annual meetings. In order to be properly brought before an annual meeting by a stockholder, such business must have been specified in a written notice given by or on behalf of a stockholder of record on the record date for such meeting entitled to vote thereat or a duly authorized proxy for such stockholder in accordance with all of the requirements described below. Such notice must be delivered personally to or mailed to and received at the principal executive office of the Company, addressed to the attention of the Clerk, no later than April 1, 1999, provided, however, that such notice shall not be required to be given more than sixty days prior to an annual meeting of stockholders. Such notice given by or on behalf of the stockholder shall set forth (i) a full description of each such item of business proposed to be brought before the meeting, (ii) the name and address of the person proposing to bring such business before the meeting, (iii) the class and number of shares held of record, held beneficially and represented by proxy by such person as of the record date for the meeting (if such date has been made publicly available) and as of the date of such notice, (iv) if any item of such business involves a nomination for director, all information regarding each such nominee that would be required to be set forth in a definitive proxy statement filed with the SEC pursuant to Section 14 of the Securities Exchange Act of 1934, as amended, or any successor thereto, and the written consent of each such nominee to serve if elected, and (v) all other information that would be required to be filed with the SEC if, with respect to the business proposed to be brought before the meeting, the person proposing such business was a participant in a solicitation subject to Section 14 of the Securities Exchange Act of 1934, as amended, or any successor thereto.
(a) Exhibit No. Description
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3.1 Articles of Amendment
10.1 First Amendment to Exclusive Distribution
Agreement Dated as of June 1, 1998 between
Anika and Zimmer, Inc.
10.2 1993 Stock Option Plan, as amended
27.1 Financial Data Schedule
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(b) Reports on Form 8-K:
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ANIKA THERAPEUTICS, INC.
DATE: August 14, 1998 BY: /s/ J. Melville Engle
---------------------
J. Melville Engle
Chief Executive Officer
DATE: August 14, 1998 BY: /s/ Sean F. Moran
-----------------
Sean F. Moran
Chief Financial Officer
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Exhibit 3.1
C --
P --
M --
R.A. --
P.C.
FEDERAL IDENTIFICATION
NO. 04-3145961
The Commonwealth of Massachusetts
William Francis Galvin
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
We, J. Melville Engle, *President
----------------------------------------
and Sean F. Moran, *Clerk
----------------------------------------
of Anika Therapeutics, Inc. ,
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(Exact name of corporation)
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certify that these Articles of Amendment affecting articles numbered:
of the Articles of Organization were duly adopted at a meeting held on June 3,
1998, by vote of: -------
----
6,057,862 shares of Common Stock of 9,937,731 shares outstanding,
--------- ----------------------- ---------
(type, class & series, if any)
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________ shares of _______________________ of __________ shares outstanding, and
(type, class & series, if any)
________ shares of _______________________ of ______________ shares outstanding,
(type, class & series, if any)
1**being at least a majority of each type, class or series outstanding and entitled to vote thereon:
*Delete the inapplicable words **Delete the inapplicable clause. 1 For amendments adopted pursuant to Chapter 156B, Section 70. 2 For amendments adopted pursuant to Chapter 156B, Section 71. Note: If the space provided under any article or item on this form is insufficient, additions shall be set forth on one side only of separate 8 1/2 x 11 sheets of paper with a Left margin of at least 1 inch. Additions to more than one article may be made on a single sheet so long as each article requiring each addition is clearly indicated.
ADDENDUM A
TO THE
RESTATED ARTICLES OF ORGANIZATION OF
ANIKA THERAPEUTICS, INC.
ARTICLE IV
CAPITAL STOCK
The authorized capital stock of the Corporation shall consist of (i) common stock, $.01 par value per share (the "Common Stock"), and (ii) preferred stock, $.01 par value per share (the "Preferred Stock").
The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation.
A. Common Stock
1. General. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights of the holders of the Preferred Stock of any series as may be designated by the Board of Directors of the Corporation (the "Board of Directors") upon any issuance of the Preferred Stock of any series.
2. Voting. The holders of the Common Stock are entitled to one vote for each share held at all meetings of stockholders (and written actions in lieu of meetings). There shall be no cumulative voting.
3. Dividends. Dividends may be declared and paid on the Common Stock from funds lawfully available therefor as and when determined by the Board of Directors and subject to any preferential dividend rights of any then outstanding Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the Corporation, whether voluntary or involuntary, holders of Common Stock will be entitled to receive all assets of the Corporation available for distribution to its stockholders, subject to any preferential rights of any then outstanding Preferred Stock.
B. Preferred Stock
Preferred Stock may be issued from time-to-time in one or more series, each of such series to have such terms as stated or expressed herein and in the resolution or resolutions providing for the issue of such series adopted by the Board of Directors as hereinafter provided. Any shares of Preferred Stock which may be redeemed, purchased or acquired by
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the Corporation may be reissued except as otherwise provided by law. Different series of Preferred Stock shall not be construed to constitute different classes of shares for the purposes of voting by classes unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from time-to-time to issue the Preferred Stock in one or more series, and in connection with the creation of any such series, by resolution or resolutions providing for the issue of the shares thereof, to determine and fix such voting powers, full or limited, or no voting powers, and such designations, preferences and relative participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including without limitation thereof, dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be stated and expressed in such resolutions, all to the full extent now or hereafter permitted by Chapter 156B of the Massachusetts General Laws. Without limiting the generality of the foregoing, the resolutions providing for issuance of any series of Preferred Stock may provide that such series shall be superior or rank equally or be junior to the Preferred Stock of any other series to the extent permitted by law. No vote of the holders of the Preferred Stock or Common Stock shall be a prerequisite to the issuance of any shares of any series of the Preferred Stock authorized by and complying with the conditions of the Articles of Organization, the right to have such vote being expressly waived by all present and future holders of the capital stock of the Corporation.
At the time of acceptance for record of this Articles of Amendment, the Board of Directors has duly established and designated Series B Junior Participating Cumulative Preferred Stock of the Corporation, and fixed and determined the relative rights and preferences of the shares of such series set forth in the Certificate of Vote of Directors Establishing a Series of a Class of Stock (the "Series B Certificate") filed with the Secretary of the Commonwealth of Massachusetts on April 7, 1998 and included herein as follows:
C. Series B Junior Participating Cumulative Preferred Stock
1. Designation and Amount. The shares of such series shall be designated as "Series B Junior Participating Cumulative Preferred Stock" (the "Series B Preferred Stock"), and the number of shares constituting such series shall be 150,000.
2. Dividends and Distributions.
(A) (i) Subject to the rights of the holders of any shares of any series of preferred stock (or any similar stock) ranking prior and superior to the Series B Preferred Stock with respect to dividends, the holders of shares of Series B Preferred Stock, in preference to the holders of shares of common stock and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly
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Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series B Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provisions for adjustment hereinafter set forth, 1000 times the aggregate per share amount of all cash dividends, and 1000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of common stock or a subdivision of the outstanding shares of common stock (by reclassification or otherwise), declared on the common stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series B Preferred Stock. The multiple of cash and non-cash dividends declared on the common stock to which holders of the Series B Preferred Stock are entitled, which shall be 1000 initially but which shall be adjusted from time to time as hereinafter provided, is hereinafter referred to as the "Dividend Multiple." In the event the Corporation shall at any time after April 6, 1998 (the "Rights Declaration Date") (i) declare or pay any dividend on common stock payable in shares of common stock, or (ii) effect a subdivision or combination or consolidation of the outstanding shares of common stock (by reclassification or otherwise than by payment of a dividend in shares of common stock) into a greater or lesser number of shares of common stock, then in each such case the Dividend Multiple thereafter applicable to the determination of the amount of dividends which holders of shares of Series B Preferred Stock shall be entitled to receive shall be the Dividend Multiple applicable immediately prior to such event multiplied by a fraction, the numerator of which is the number of shares of common stock outstanding immediately after such event and the denominator of which is the number of shares of common stock that were outstanding immediately prior to such event.
(ii) Notwithstanding anything else contained in this paragraph (A), the Corporation shall, out of funds legally available for that purpose, declare a dividend or distribution on the Series B Preferred Stock as provided in this paragraph (A) immediately after it declares a dividend or distribution on the common stock (other than a dividend payable in shares of common stock); provided that, in the event no dividend or distribution shall have been declared on the common stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series B Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
(B) Dividends shall begin to accrue and be cumulative on outstanding shares of Series B Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series B Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series B Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such
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dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series B Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix in accordance with applicable law a record date for the determination of holders of shares of Series B Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than such number of days prior to the date fixed for the payment thereof as may be allowed by applicable law.
3. Voting Rights. In addition to any other voting rights required by law, the holders of shares of Series B Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each share of Series B Preferred Stock shall entitle the holder thereof to 1000 votes on all matters submitted to a vote of the stockholders of the Corporation. The number of votes which a holder of a share of Series B Preferred Stock is entitled to cast, which shall initially be 1000 but which may be adjusted from time to time as hereinafter provided, is hereinafter referred to as the "Vote Multiple." In the event the Corporation shall at any time after the Rights Declaration Date (i) declare or pay any dividend on common stock payable in shares of common stock, or (ii) effect a subdivision or combination or consolidation of the outstanding shares of common stock (by reclassification or otherwise than by payment of a dividend in shares of common stock) into a greater or lesser number of shares of common stock, then in each such case the Vote Multiple thereafter applicable to the determination of the number of votes per share to which holders of shares of Series B Preferred Stock shall be entitled shall be the Vote Multiple immediately prior to such event multiplied by a fraction, the numerator of which is the number of shares of common stock outstanding immediately after such event and the denominator of which is the number of shares of common stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of shares of Series B Preferred Stock and the holders of shares of common stock and the holders of shares of any other capital stock of this Corporation having general voting rights, shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.
(C) Except as otherwise required by applicable law or as set forth herein, holders of Series B Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of common stock as set forth herein) for taking any corporate action.
4. Certain Restrictions.
(A) Whenever dividends or distributions payable on the Series B Preferred
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Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series B Preferred Stock outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series B Preferred Stock, except dividends paid ratably on the Series B Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;
(iii) except as permitted in subsection 4(A)(iv) below, redeem, purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series B Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series B Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of Series B Preferred Stock, or any shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series B Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under subsection (A) of this Section 4, purchase or otherwise acquire
6A
such shares at such time and in such manner.
5. Reacquired Shares. Any shares of Series B Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of preferred stock and may be reissued as part of a new series of preferred stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein.
6. Liquidation, Dissolution or Winding Up. Upon any liquidation
(voluntary or otherwise), dissolution or winding up of the Corporation, no
distribution shall be made (x) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series B Preferred Stock unless, prior thereto, the holders of shares of Series
B Preferred Stock shall have received an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, plus an amount equal to the greater of (1) $1000.00 per share or
(2) an aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1000 times the aggregate amount to be
distributed per share to holders of common stock, or (y) to the holders of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series B Preferred Stock, except distributions made ratably
on the Series B Preferred Stock and all other such parity stock in proportion to
the total amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Corporation shall at
any time after the Rights Declaration Date (i) declare or pay any dividend on
common stock payable in shares of common stock, or (ii) effect a subdivision or
combination or consolidation of the outstanding shares of common stock (by
reclassification or otherwise than by payment of a dividend in shares of common
stock) into a greater or lesser number of shares of common stock, then in each
such case the aggregate amount per share to which holders of shares of Series B
Preferred Stock were entitled immediately prior to such event under clause (x)
of the preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of common stock
outstanding immediately after such event and the denominator of which is the
number of shares of common stock that were outstanding immediately prior to such
event.
Neither the consolidation of nor merging of the Corporation with or into any other corporation or corporations, nor the sale or other transfer of all or substantially all of the assets of the Corporation, shall be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of this Section 6.
7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of common stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series B Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment
7A
hereinafter set forth) equal to 1000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of common stock is changed or exchanged, plus accrued and unpaid dividends, if any, payable with respect to the Series B Preferred Stock. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare or pay any dividend on common stock payable in shares of common stock, or (ii) effect a subdivision or combination or consolidation of the outstanding shares of common stock (by reclassification or otherwise than by payment of a dividend in shares of common stock) into a greater or lesser number of shares of common stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series B Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of common stock outstanding immediately after such event and the denominator of which is the number of shares of common stock that were outstanding immediately prior to such event.
8. Redemption. The shares of Series B Preferred Stock shall not be redeemable.
9. Ranking. Unless otherwise expressly provided in the Articles or a Certificate of Vote of Directors Establishing a Class of Stock relating to any other series of preferred stock of the Corporation, the Series B Preferred Stock shall rank junior to every other series of the Corporation's preferred stock previously or hereafter authorized, as to the payment of dividends and the distribution of assets on liquidation, dissolution or winding up and shall rank senior to the common stock.
10. Amendment. The Articles and the Series B Certificate shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series B Preferred Stock so as to affect them adversely (within the meaning of Section 77 of Chapter 156B of the Massachusetts General Laws) without the affirmative vote of the holders of two-thirds or more of the outstanding shares of Series B Preferred Stock, voting separately as a class.
11. Fractional Shares. Series B Preferred Stock may be issued in whole shares or in any fraction of a share that is one one-thousandth (1/1000th) of a share or any integral multiple of such fraction, which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series B Preferred Stock. In lieu of fractional shares, the Corporation may elect to make a cash payment as provided in the Rights Agreement for fractions of a share other than one one-thousandth (1/1000th) of a share or any integral multiple thereof.
8A
To amend the Restated Articles of Organization (the "Articles"), as amended, of Anika Therapeutics, Inc. (the "Corporation") by adopting the following amendments: (1) to increase the aggregate number of authorized shares of Common Stock from 15,000,000 to 30,000,000; and (2) eliminate the Certificate of Vote of Directors Establishing Series A Preferred Stock and in conjunction (i) change the aggregate number of authorized shares of Preferred Stock from 2,000,000 to 1,250,000 and (ii) amend Article IV, Capital Stock, in its entirety by replacing the existing Article IV with a new Article IV, the full text of which is set forth on Addendum A attached as pages 2A-8A.
The foregoing amendment(s) will become effective when these Articles of Amendment are filed in accordance with General Laws, Chapter 156B, Section 6 unless these articles specify, in accordance with the vote adopting the amendment a later effective date not more than thirty days after such filing, in which event the amendment will become effective on such later date.
Later effective date: _________________________.
SIGNED UNDER THE PENALTIES OF PERJURY, this 3rd day of June, 1998
/s/ J. Melville Engle *President ------------------------------------------- /s/ Sean Moran *Clerk ------------------------------------------- "Delete the inapplicable words. |
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
I hereby approve the within Articles of Amendment and, the filing fee in the amount of $14,350.00 having been paid, said articles are deemed to have been filed with me this 3rd day of June 1998.
Effective date: ______________________________________
/s/ William Francis Galvin WILLIAM FRANCIS GALVIN Secretary of the Commonwealth |
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
Exhibit 10.1
* Portions of this exhibit have been omitted pursuant to a request for confidential treatment. The omitted portions have been filed separately with the Securities and Exchange Commission (the "Commission").
FIRST AMENDMENT TO
EXCLUSIVE DISTRIBUTION AGREEMENT
THIS FIRST AMENDMENT TO EXCLUSIVE DISTRIBUTION AGREEMENT (the "Amendment") is effective as of this June 1, 1998 (the "Amendment Effective Date") by and between ZIMMER, INC., a Delaware corporation ("Distributor"), and ANIKA THERAPEUTICS, INC., a Massachusetts corporation ("Company"). Reference is hereby made to that certain Exclusive Distribution Agreement effective as of November 7, 1997, together with all Annexes and Exhibits thereto (the "Agreement"), by and between Distributor and Company. All capitalized terms used herein and not defined shall have the meanings given to them in the Agreement.
WHEREAS, Distributor and Company have previously entered into the Agreement providing for the exclusive right of Distributor to distribute and sell the Product in accordance with the terms set forth therein; and
WHEREAS, Distributor and Company desire to amend the terms of the Agreement as provided herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements of the Partes contained herein and in the Agreement, the Parties hereby agree as follows:
SECTION 1. AMENDMENTS. The Agreement is hereby amended as follows:
1.1 Section 2(a) of the Agreement shall be amended by adding the following sentence to the end of such Section:
"As partial consideration to Company for the rights granted to Distributor under the Amendment, Distributor shall pay to Company the sum of $1,500,000 upon the execution and delivery of the Amendment by both Parties."
1.2 Section 2(d) of the Agreement shall be deleted in its entirety and replaced with the following:
"(d) Reimbursement Approvals. Distributor shall seek and use its commercially reasonable efforts to obtain Reimbursement Approvals for the Product in the Field of Use in all the Territory countries. If additional clinical data are required in connection with such Reimbursement Approvals, Company shall use all commercially reasonable efforts to obtain such data commensurate with requirements of the authority from whom reimbursement is sought. All costs associated with all such efforts to obtain Reimbursement Approvals will be borne ***.
(d.1) Upon receipt of the first Reimbursement Approval for use of the Product in the Field of Use by the appropriate governmental body and/or private insurers representing in aggregate more than *** of the population in any one of the following three major Asian markets
(Australia, Korea, or Taiwan), Distributor shall pay Company the sum of ***. Upon receipt of a Reimbursement Approval for use of the Product in the Field of Use by the appropriate governmental body (and/or private insurers representing in aggregate more than *** of the population in any other Asian market, if applicable), Distributor will pay Company the one-time nonrefundable sum of ***.
(d.2) Upon receipt of a Reimbursement Approval for use of the Product in the Field of Use by the appropriate governmental body and/or private insurers representing in aggregate more than *** of the population in Germany, Distributor shall pay Company the one-time nonrefundable sum of ***.
(d.3) Upon receipt of the first Reimbursement Approval for use of the Product in the Field of Use by the appropriate governmental body and/or private insurers representing in aggregate more than *** of the population in either of the United Kingdom or France, Distributor shall pay Company the one-time nonrefundable sum of *** and thereafter upon receipt of such Reimbursement Approval in such other country, Distributor shall pay Company the one-time nonrefundable sum of ***.
(d.4) Upon receipt of the first Reimbursement Approval for use of the Product in the Field of Use by the appropriate governmental body and/or private insurers representing in aggregate more than *** of the population in any one of the following countries (Italy, Sweden or the Netherlands), Distributor shall pay Company the one-time nonrefundable sum of ***.
(d.5) Upon receipt of Reimbursement Approval for the use of the Product for treatment of osteoarthritis by injection into the human knee joint in the United States by at least *** the Qualified Primary National Medical Insurance Organizations listed in the attached Annex H, Distributor shall pay Company the sum of ***.
The aggregate amount of payments made by Distributor to Company pursuant to this section 2(d) shall not exceed *** in any event. "Reimbursement Approval" shall mean the written agreement of the insurer or appropriate government authority to pay for the Product as a treatment in the Field of Use, to the extent of at least *** of the Average Selling Price. The payments specified in this Section 2(d) shall be made within forty-five (45) business days after receipt of the applicable "Reimbursement Approval."
* Portions of this exhibit have been omitted pursuant to a request for confidential treatment. The omitted portions have been filed separately with the Commission.
1.3 The table comprising part of Section 4(a) of the Agreement shall be amended by deleting such table in its entirety and replacing it with the following:
"Calendar Year Territory-wide Units Requirement
-------------- --------------------------------
(Exclusive of Samples and
Demonstration Units)
1998 (Year 1) *** Units
1999 (Year 2) *** Units
2000 (Year 3) *** Units
2001 (Year 4) *** Units
2002 (Year 5) *** Units
2003 (Year 6) and thereafter (annually) *** Units
|
1.4 Section 4(b) of the Agreement shall be deleted in its entirety and replaced with the following:
"(b) Notwithstanding the provisions of Section 4(a), Distributor shall not be obligated to purchase more than *** Units per year until the year in which the U.S. FDA approves the Product for marketing and sale for use in the treatment of osteoarthritis by injection in the human knee joint in the Field of Use in the United States. Upon receipt of such FDA approval, Distributor shall be obligated to purchase in that calendar year the prorated Year 2 annual Territory-wide Units Requirement which shall be determined by multiplying the Year 2 annual Territory-wide Units Requirement *** by a fraction, the numerator of which is the number of days remaining in the calendar year after the date on which FDA approval is received and the denominator of which is 365. The Year 3, Year 4 and Year 5 annual Territory-wide Units Requirements shall apply to the first, second and third calendar years, respectively, immediately succeeding the calendar year during which the FDA approval is received, and the Year 6 annual Territory-wide Units Requirement shall apply to each calendar year thereafter during the Term. All purchases of Product shall have a documented delivery date assigned to them. For purposes of determining whether or not Distributor has met the annual Territory-wide Units Requirement for any given year, the documented delivery date shall be determinative, not the date of actual delivery, if different."
1.5 Annex C-1 of the Agreement shall be deleted in its entirety and replaced by Annex C-1 attached hereto.
1.6 Annex C-2 of the Agreement shall be deleted in its entirety and replaced by Annex C-2 attached hereto.
1.7 The first paragraph of Section 17(b) of the Agreement shall be deleted in its entirety and replaced by the following:
* Portions of this exhibit have been omitted pursuant to a request for confidential treatment. The omitted portions have been filed separately with the Commission.
"(b) Upon the tenth anniversary of the Effective Date, Distributor may, at Distributor's sole option, choose to extend this Agreement for an additional period of ten (10) years, which such ten (10) years shall be added to the Term for each country in the following regions:
1. "Americas" Region = Canada, U.S. and Puerto Rico
2. "Latin America" Region = Argentina, Bolivia, Brazil, Chile,
Columbia, Costa Rica, Dominican Republic, Ecuador, El Salvador,
Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua,
Panama, Paraguay, Peru, Puerto Rico, Suriname, Trinidad and Tobago,
Uruguay, Venezuela
3. Japan
4. China
5. "Asia" Region = Australia, Hong Kong, Indonesia, South Korea,
Malaysia, New Zealand, Philippines, Singapore, Taiwan, Thailand
6. "Europe" Region = Austria, Belgium, Denmark, Finland, France,
Germany, Greece, Italy, Luxembourg, The Netherlands, Norway, Sweden,
United Kingdom"
1.8 Section 27 of the Agreement shall be amended such that, upon execution of this Amendment, Company may issue a press release in the form of Exhibit 1 attached hereto.
1.9 Table 3, (referred to therein as the "Proposed Marketing Activities Budget Summary"), comprising part of the Marketing Plan attached as Annex B to the Agreement, and Appendix A also comprising part of the Marketing Plan shall both be amended in the form of Exhibit 2 attached hereto.
SECTION 2. MISCELLANEOUS.
2.1 Except as specifically amended by this Amendment, including the Annexes and Exhibits hereto, the Agreement shall remain in full force and effect in accordance with its terms. Except as specifically provided herein, all references in the Agreement and in this Amendment to the "Agreement" shall mean the Agreement as amended hereby. All references in the Agreement to the Marketing Plan, including, without limitation, Table 3 thereof, shall mean the Marketing Plan as amended hereby.
2.2 This Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
2.3 This Amendment shall be governed by and construed in all respects in accordance with the laws of the State of New York, without giving effect to its choice of law principles.
* Portions of this exhibit have been omitted pursuant to a request for confidential treatment. The omitted portions have been filed separately with the Commission.
IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed by their duly authorized representatives.
ANIKA THERAPEUTICS, INC.
By: /s/ J. Melville Engle
----------------------------
Name: J. Melville Engle
Title: President, C.E.O.
|
ZIMMER, INC.
By: /s/ Ray Elliott
----------------------------
Name: Ray Elliott
Title: President
|
* Portions of this exhibit have been omitted pursuant to a request for confidential treatment. The omitted portions have been filed separately with the Commission.
ANNEX C-1
ASIA AMERICAS
---------------------------------------------------
Australia Canada
China* United States of America
Hong Kong Puerto Rico
Indonesia
Japan** LATIN AMERICA
Korea, South -------------
Malaysia
New Zealand Argentina
Philippines Bolivia
Singapore Brazil
Taiwan Chile
Thailand Columbia
Costa Rica
EUROPE Dominican Republic
------ Ecuador
Austria El Salvador
Belgium Guatemala
Denmark Guyana
Finland Haiti
France Honduras
Germany Jamaica
Greece Mexico
Italy Nicaragua
Luxembourg Panama
Netherlands, The Paraguay
Norway Peru
Sweden Suriname
United Kingdom Trinidad and Tobago
Uruguay
Venezuela
|
* Subject to the terms and conditions in Section 2(c)(ii) ** Subject to the terms and conditions in Section 2(c)(i)
* Portions of this exhibit have been omitted pursuant to a request for confidential treatment. The omitted portions have been filed separately with the Commission.
ANNEX C-2
None.
* Portions of this exhibit have been omitted pursuant to a request for confidential treatment. The omitted portions have been filed separately with the Commission.
EXHIBIT 1
Form of Press Release
FOR IMMEDIATE RELEASE
Contact:
Anika Therapeutics, Inc. Pondel Parsons & Wilkinson Zimmer, Inc. Sean Moran, C.F.O. Susan Klein (508) 358-4315 Brad Bishop (781) 932-6616 ext. 102 Rob Whetstone (310) 207-9300 (219) 372-4291 |
ZIMMER AND ANIKA THERAPEUTICS ANNOUNCE AGREEMENT TO EXPAND
DISTRIBUTION OF ORTHOVISC(R) INTO EUROPE AND LATIN AMERICA
Innovative, Natural Osteoarthritis Treatment Also Launched in Canada
WARSAW, INDIANA, June 3, 1998 Zimmer, Inc., a wholly owned subsidiary of Bristol Myers Squibb (NYSE: BMS) and Anika Therapeutics, Inc. (Nasdaq: ANIK) today announced that they have amended their agreement for sales, marketing and distribution of ORTHOVISC(R) sodium hyaluronate to include European countries, Scandinavia and Latin America.
Under terms of the exclusive, multi-year amended agreement, the potential licensing payments to Anika from Zimmer will total up to $5.0 million, contingent upon achievement of certain milestones, including an initial upfront payment of $1.5 million. As part of the amended agreement, Zimmer will commit significant additional sales and marketing resources to support ORTHOVISC(R) commercialization.
The world leader in knee and hip replacements, Zimmer signed a multi-year agreement with Anika in November 1997 to distribute ORTHOVISC(R) in the United States, Canada and a number of Asian markets.
"We are excited about bringing this therapeutic product to the European and Latin American markets and about the opportunity to further its commercialization around the world," said Ray Elliott, Zimmer president. "ORTHOVISC(R) is a natural extension of the products we currently provide to physicians to help them improve the quality of life for their patients. ORTHOVISC(R) offers physicians another treatment option for relieving pain and improving function"
Noted J. Melville Engle, Anika president and chief executive officer, "We have been extremely pleased with the results of our collaboration with Zimmer to date and see
* Portions of this exhibit have been omitted pursuant to a request for confidential treatment. The omitted portions have been filed separately with the Commission.
opportunities in expanding the relationship to cover these additional markets. Zimmer is the world leader in knee and hip replacement products, and has the world's largest dedicated sales force working with orthopaedic surgeons and related specialists. Extending our collaboration to cover Europe and Latin America means ORTHOVISC(R) will have a cohesive, global representation."
ORTHOVISC(R) is an ultra-pure, high molecular weight, naturally derived HA product, designed to restore the elasticity and viscosity of the synovial fluid in joints. The product is injected into the knee joint space three times over a two-week period intending to provide viscosupplementation and pain relief.
Osteoarthritis is a prevalent degenerative joint disease characterized by chronic, debilitating symptoms such as joint pain, stiffness and loss of mobility. In the U.S. and Canada nearly twenty million people reportedly suffer from this disease.
The companies also announced that Zimmer has launched the innovative treatment for osteoarthritis of the knee in Canada. where osteoarthritis affects over 12% of the population.
Two major Canadian medical centers are now conducting additional follow-up studies with ORTHOVISC(R). Dr. John Wade of the University of British Columbia is leading a multi-center study in Canada, and Dr. Sandy Kirkley is conducting a study at the Fowler Kennedy Sport Medicine Clinic at the University of Western Ontario in London, Ontario. A multi-center trial is also underway in the United States.
In addition to being for sale in Canada, ORTHOVISC(R) has received Communatee European (CE) marking, permitting sale of the product throughout the European Union. The product is currently approved as an investigational device in the United States and its pre-market approval application has been accepted for review by the U.S. Food and Drug Administration. In February 1998, the agency informed Anika that the application would not require panel review.
Zimmer is the world leader in the design, manufacture and distribution of orthopaedic implants and related equipment and supplies. The company provides a broad range of joint replacement, fracture management and patient care products.
* Portions of this exhibit have been omitted pursuant to a request for confidential treatment. The omitted portions have been filed separately with the Commission.
Founded in 1927, Zimmer became a member of the Bristol-Myers Squibb family of companies in 1972.
Anika Therapeutics, Inc. develops, manufactures and commercializes therapeutic products and devices intended to promote the protection and healing of bone, cartilage and soft tissue. These products are based on hyaluronic acid (HA), a naturally occurring, biocompatible polymer found throughout the body.
######
Visit Zimmer on the Worldwide Web at http//www.zimmer.com Visit Anika on the Worldwide Web at http://www.anikatherapeutics.com Visit Bristol-Myers Squibb on the Worldwide Web at http://www.bms.com
This press release includes forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The Company's actual results could differ materially from those set forth in the forward-looking statements. Certain factors that might create such a difference include the ability of the Company to obtain regulatory approval of ORTHOVISC, the inability of Zimmer to successfully market the product in the geographic areas covered by the Company's agreements with Zimmer and those factors set forth under the heading "Risk Factors" in the Company's 10-KSB filed with the Securities and Exchange Commission on March 31, 1998.
* Portions of this exhibit have been omitted pursuant to a request for confidential treatment. The omitted portions have been filed separately with the Commission.
EXHIBIT 2
*
* Portions of this exhibit have been omitted pursuant to a request for confidential treatment. The omitted portions have been filed separately with the Commission.
AMENDED APPENDIX A
*
* Portions of this exhibit have been omitted pursuant to a request for confidential treatment. The omitted portions have been filed separately with the Commission.
Exhibit 10.2
ANIKA THERAPEUTICS, INC.
1993 STOCK OPTION PLAN, as amended
March 3, 1993
1. Purpose.
The purpose of this plan (the "Plan") is to secure for Anika Therapeutics, Inc. (the "Company") and its shareholders the benefits arising from capital stock ownership by employees, officers and directors of, and consultants or advisors to, the Company and its parent and subsidiary corporations who are expected to contribute to the Company's future growth and success and to provide options to holders of options to purchase the capital stock of MedChem Products, Inc. ("MedChem") in connection with the distribution of shares of the Company's Common Stock ("Common Stock") by MedChem. Except where the context otherwise requires, the term "Company" shall include the parent and all present and future subsidiaries of the Company as defined in Sections 424(e) and 424(f) of the Internal Revenue Code of 1986, as amended or replaced from time to time (the "Code"). Those provisions of the Plan which make express reference to Section 422 shall apply only to Incentive Stock Options (as that term is defined in the Plan).
2. Type of Options and Administration.
(a) Types of Options. Options granted pursuant to the Plan shall be
authorized by action of the Board of Directors of the Company (or a Committee
designated by the Board of Directors) and may be either incentive stock options
("Incentive Stock Options") meeting the requirements of Section 422 of the Code
or non-statutory options which are not intended to meet the requirements of
Section 422 of the Code.
(b) Outright Grant of Shares. The Board of Directors is also authorized to make outright grants of shares of Common Stock of the Company in all circumstances in which the Board of Directors deems such grants appropriate, subject to such terms, conditions or vesting limitations as from time to time determined by the Board of Directors.
(c) Administration. The Plan will be administered by the Board of Directors of the Company, whose construction and interpretation of the terms and provisions of the Plan shall be final and conclusive. The Board of Directors may in its sole discretion grant options to purchase shares of the Company's Common Stock and issue shares upon exercise of such options as provided in the Plan. The Board shall have authority, subject to the express provisions of the Plan, to construe the respective option agreements and the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan, to determine the terms and provisions of the respective option agreements, which need not be identical, and to make all other determinations in the judgment of the Board of Directors necessary or desirable for the administration of the Plan. The Board of Directors may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any option agreement in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. No director or person acting pursuant to authority delegated by the Board of Directors shall be liable for any action or determination under the Plan made in good faith. The Board of Directors may, to the full extent permitted by or consistent with applicable laws or regulations (including, without limitation, applicable state law and Rule 16b-3 promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), or any successor rule ("Rule 16b-3")), delegate any or all of its powers under the Plan to a committee (the "Committee") which consists solely of two or more Non-Employee Directors (as defined in Rule 16b-3) appointed by the Board of Directors, and if the Committee is so appointed all references to the Board of Directors in the Plan shall mean and relate to such Committee.
(d) Applicability of Rule 16b-3. Those provisions of the Plan which make express reference to Rule 16b-3 shall apply only to such persons as are required to file reports under Section 16(a) of the Exchange Act (a "Reporting Person").
3. Eligibility.
(a) General. Options may be granted to persons who are, at the time of grant, employees, officers or directors of, or consultants or advisors to, the Company; provided, that the class of employees to whom Incentive Stock Options may be granted shall be limited to all employees of the Company. A person who has been granted an option may, if he or she is otherwise eligible, be granted additional options if the Board of Directors shall so determine.
(b) MedChem Products, Inc. Notwithstanding the foregoing paragraph, non-statutory options may also be granted under the Plan to persons who hold options to purchase shares of Common Stock of MedChem as of the date on which MedChem distributes the shares of Common Stock of the Company it holds to its stockholders pursuant to the terms of the Plan and Agreement of Distribution to be entered into between MedChem and the Company (the "MedChem Optionees").
(c) Grant of Options to Directors and Officers. From and after the registration of the Common Stock of the Company under the Exchange Act, the selection of a director or an officer (as the terms "director" and "officer" are defined for purposes of Rule 16b-3) as a recipient of an option, the timing of the option grant, the exercise price of the option and the number of shares subject to the option shall be determined either (i) by the Board of Directors or (ii) by two or more directors having full authority to act in the matter, each of whom shall be a Non-Employee Director. For the purposes of the Plan, a director shall be deemed to be a Non-Employee Director only if such person qualifies as a Non-Employee Director within the meaning of Rule 16b-3, as such term is interpreted from time to time.
4. Stock Subject to Plan.
Subject to adjustment as provided in Section 15 below, the maximum number of shares of Common Stock of the Company which may be issued and sold under the Plan is 3,000,000 shares. In no event shall stock options with respect to more than 250,000 shares of Common Stock be granted to any one individual during any one calendar year period. If an option granted under the Plan shall expire or terminate for any reason without having been exercised in full, the unpurchased shares subject to such option shall again be available for subsequent option grants under the Plan. If shares issued upon exercise of an option under the Plan are tendered to the Company in payment of the exercise price of an option granted under the Plan, such tendered shares shall again be available for subsequent option grants under the Plan; provided, that in no event shall (i) the total number of shares issued pursuant to the exercise of Incentive Stock Options under the Plan, on a cumulative basis, exceed the maximum number of shares authorized for issuance under the Plan exclusive of shares made available for issuance pursuant to this sentence or (ii) the total number of shares issued pursuant to the exercise of options by Reporting Persons, on a cumulative basis, exceed the maximum number of shares authorized for issuance under the Plan exclusive of shares made available for issuance pursuant to this sentence.
5. Forms of Option Agreements.
As a condition to the grant of an option under the Plan, each recipient of an option shall execute an option agreement in such form not inconsistent with the Plan as may be approved by the Board of Directors. Such option agreements may differ among recipients.
6. Purchase Price.
(a) General. The purchase price per share of stock deliverable upon the exercise of an option shall be determined by the Board of Directors, provided, however, that in the case of an Incentive Stock Option, the exercise price shall not be less than 100% of the fair market value of such stock, as determined by the Board of Directors, at the time of grant of such option, or less than 110% of such fair market value in the case of options described in Section 11(b).
(b) Payment of Purchase Price. Options granted under the Plan may provide for the payment of the exercise price by delivery of cash or a check to the order of the Company in an amount equal to the exercise price of such options, or, to the extent provided in the applicable option agreement, (i) by delivery to the Company of shares of Common Stock of the Company already owned by the optionee having a fair market value equal in amount to the exercise price of the options being exercised, (ii) by any other means (including, without limitations by delivery of a promissory note of the optionee payable on such terms as are specified by the Board of Directors) which the Board of Directors determines are consistent with the purpose of the Plan and with applicable laws and regulations (including, without limitation, the provisions of Rule 16b-3 and Regulation T promulgated by the Federal Reserve Board) or (iii) by any combination of such methods of payment. The fair market value of any shares of the Company's Common Stock or other non-cash consideration which may be delivered upon exercise of an option shall be determined by the Board of Directors.
7. Option Period.
Each option and all rights thereunder shall expire on such date as shall be set forth in the applicable option agreement, except that, in the case of an Incentive Stock Option, such date shall not be later than ten years after the date on which the option is granted and, in all cases, options shall be subject to earlier termination as provided in the Plan.
8. Exercise of Options.
Each option granted under the Plan shall be exercisable either in full or in installments at such time or times and during such period as shall be set forth in the agreement evidencing such option, subject to the provisions of the Plan.
9. Nontransferability of Options.
Incentive Stock Options, and all options granted to Reporting Persons, shall not be assignable or transferable by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the life of the optionee, shall be exercisable only by the optionee; provided, however, that non-statutory options may be transferred pursuant to a qualified domestic relations order (as defined in Rule 16b-3).
10. Effect of Termination of Employment or Other Relationship.
Except as provided in Section 11(d) with respect to Incentive Stock Options, and subject to the provisions of the Plan, the Board of Directors shall determine the period of time during which an optionee may exercise an option following (i) the termination of the optionee's employment or other relationship with the Company or, in the case of a MedChem Optionee, with MedChem or, (ii) the death or disability of the optionee. Such periods shall be set forth in the agreement evidencing such option.
11. Incentive Stock Options.
Options granted under the Plan which are intended to be Incentive Stock Options shall be subject to the following additional terms and conditions:
(a) Express Designation. All Incentive Stock Options granted under the Plan shall; at the time of grant, be specifically designated as such in the option agreement covering such Incentive Stock Options.
(b) 10% Shareholder. If any employee to whom an Incentive Stock Option is to be granted under the Plan is, at the time of the grant of such option, the owner of stock possessing more than 10% of the total combined voting power of all classes of stock of the Company (after taking into account the attribution of stock ownership rules of Section 424(d) of the Code), then the following special provisions shall be applicable to the Incentive Stock Option granted to such individual:
(i) The purchase price per share of the Common Stock subject to such Incentive Stock Option shall not be less than 110% of the fair market value of one share of Common Stock at the time of grant; and
(ii) the option exercise period shall not exceed five years from the date of grant.
(c) Dollar Limitation. For so long as the Code shall so provide, options granted to any employee under the Plan (and any other incentive stock option plans of the Company) which are intended to constitute Incentive Stock Options shall not constitute Incentive Stock Options to the extent that such options in the aggregate, become exercisable for the first time in any one calendar year for shares of Common Stock with an aggregate fair market value (determined as of the respective date or dates of grant) of more than $100,000.
(d) Termination of Employment, Death or Disability. No Incentive Stock Option may be exercised unless, at the time of such exercise the optionee is, and has been continuously since the date of grant of his or her option, employed by the Company, except that:
(i) an Incentive Stock Option may be exercised within the period of three months after the date the optionee ceases to be an employee of the Company (or within such lesser period as may be specified in the applicable option agreement), provided, that the agreement with respect to such option may designate a longer exercise period and that the exercise after such three-month period shall be treated as the exercise of a non-statutory option under the Plan;
(ii) if the optionee dies while in the employ of the Company, or within three months after the optionee ceases to be such an employee, the Incentive Stock Option may be exercised by the person to whom it is transferred by will or the laws of descent and distribution within the period of one year after the date of death (or within such lesser period as may be specified in the applicable option agreement); and
(iii) if the optionee becomes disabled (within the meaning of
Section 22(e)(3) of the Code or any successor provision thereto) while in the
employ of the Company, the Incentive Stock Option may be exercised within the
period of one year after the date the optionee ceases to be such an employee
because of such disability (or within such lesser period as may be specified in
the applicable option agreement).
For all purposes of the Plan and any option granted hereunder, "employment" shall be defined in accordance with the provisions of Section 1.421-7(h) of the Income Tax Regulations (or any successor regulations). Notwithstanding the foregoing provisions, no Incentive Stock Option may be exercised after its expiration date.
12. Additional Provisions.
(a) Additional Option Provisions. The Board of Directors may, in its sole discretion, include additional provisions in option agreements covering options granted under the Plan, including without limitation restrictions on transfer, repurchase rights, commitments to pay cash bonuses, to make, arrange for or guaranty loans or to transfer other property to optionees upon exercise of options, or such other provisions as shall be
determined by the Board of Directors; provided that such additional provisions
shall not be inconsistent with any other term or condition of the Plan and such
additional provisions shall not cause any Incentive Stock Option granted under
the Plan to fail to qualify as an Incentive Stock Option within the meaning of
Section 422 of the Code.
(b) Acceleration, Extension, Etc. The Board of Directors may, in its sole discretion, (i) accelerate the date or dates on which all or any particular option or options granted under the Plan may be exercised or (ii) extend the dates during which all, or any particular, option or options granted under the Plan may be exercised; provided, however, that no such extension shall be permitted if it would cause the Plan to fail to comply with Section 422 of the Code or with Rule 16b-3.
13. General Restrictions.
(a) Investment Representations. The Company may require any person to whom an option is granted, as a condition of exercising such option, to give written assurances in substance and form satisfactory to the Company to the effect that such person is acquiring the Common Stock subject to the option for his or her own account for investment and not with any present intention of selling or otherwise distributing the same and to such other effects as the Company deems necessary or appropriate in order to comply with federal and applicable state securities laws, or with covenants or representations made by the Company in connection with any public offering of its Common Stock.
(b) Compliance With Securities Laws. Each option shall be subject to the requirement that if, at any time, counsel to the Company shall determine that the listing, registration or qualification of the shares subject to such option upon any securities exchange or under any state or federal law, or the consent or approval of any governmental or regulatory body, or that the disclosure of non-public information or the satisfaction of any other condition is necessary as a condition of, or in connection with, the issuance or purchase of shares thereunder, such option may not be exercised, in whole or in part, unless such listing, registration, qualification, consent or approval, or satisfaction of such condition shall have been effected or obtained on conditions acceptable to the Board of Directors. Nothing herein shall be deemed to require the Company to apply for or to obtain such listing, registration or qualification, or to satisfy such condition.
14. Rights as a Shareholder.
The holder of an option shall have no rights as a shareholder with respect to any shares covered by the option (including, without limitation any rights to receive dividends or non-cash distributions with respect to such shares) until the date of issue of a stock certificate to him or her for such shares. No adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued.
15. Adjustment Provisions for Recapitalizations and Related Transactions.
(a) General. If, through or as a result of any merger, consolidation, sale of all or substantially all of the assets of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar transaction, (i) the outstanding shares of Common Stock are increased, decreased or exchanged for a different number or kind of shares or other securities of the Company, or (ii) additional shares or new or different shares or other securities of the Company or other non-cash assets are distributed with respect to such shares of Common Stock or other securities, an appropriate and proportionate adjustment may be made in (x) the maximum number and kind of shares reserved for issuance under the Plan, (y) the maximum number of shares subject to stock options that can be granted to any one individual in any one calendar year, (z) the number and kind of shares or other securities subject to any then outstanding options under the Plan, and (xx) the price for each share subject to any then outstanding options under the Plan, without changing the aggregate purchase price as to which such options remain exercisable. Notwithstanding the foregoing, no adjustment shall be made
pursuant to this Section 15 if such adjustment would cause the Plan to fail to comply with Section 422 of the Code.
(b) Board Authority to Make Adjustments. Any adjustments under this
Section 15 will be made by the Board of Directors, whose determination as to
what adjustments, if any, will be made and the extent thereof will be final,
binding and conclusive. No fractional shares will be issued under the Plan on
account of any such adjustments.
16. Merger, Consolidation, Asset Sale, Liquidation, etc.
(a) General. In the event of a consolidation or merger or sale of all or substantially all of the assets of the Company in which outstanding shares of Common Stock are exchanged for securities, cash or other property of any other corporation or business entity or in the event of a liquidation of the Company, the Board of Directors of the Company, or the board of directors of any corporation assuming the obligations of the Company, may in its discretion, take any one or more of the following actions, as to outstanding options: (i) provide that such options shall be assumed, or equivalent options shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof), provided that any such options substituted for Incentive Stock Options shall meet the requirements of Section 424(a) of the Code, (ii) upon written notice to the optionees, provide that all unexercised options will terminate immediately prior to the consummation of such transaction unless exercised by the optionee within a specified period following the date of such notice, (iii) in the event of a merger under the terms of which holders of the Common Stock of the Company will receive upon consummation thereof a cash payment for each share surrendered in the merger (the "Merger Price"), make or provide for a cash payment to the optionees equal to the difference between (A) the Merger Price times the number of shares of Common Stock subject to such outstanding options (to the extent then exercisable at prices not in excess of the Merger Price) and (B) the aggregate exercise price of all such outstanding options in exchange for the termination of such options, and (iv) provide that all or any outstanding options shall become exercisable in full immediately prior to such event.
(b) Substitute Options. The Company may grant options under the Plan in substitution for options held by employees of another corporation who become employees of the Company, or a subsidiary of the Company, as the result of a merger or consolidation of the employing corporation with the Company or a subsidiary of the Company, or as a result of the acquisition by the Company, or one of its subsidiaries, of property or stock of the employing corporation. The Company may direct that substitute options be granted on such terms and conditions as the Board of Directors considers appropriate in the circumstances.
17. No Special Employment Rights.
Nothing contained in the Plan or in any option shall confer upon any optionee any right with respect to the continuation of his or her employment by the Company or, in the case of a MedChem Optionee, by MedChem or interfere in any way with the right of the Company or, in the case of a MedChem Optionee, MedChem at any time to terminate such employment or to increase or decrease the compensation of the optionee.
18. Other Employee Benefits.
Except as to plans which by their terms include such amounts as compensation, the amount of any compensation deemed to be received by an employee as a result of the exercise of an option or the sale of shares received upon such exercise will not constitute compensation with respect to which any other employee benefits of such employee are determined, including, without limitation, benefits under any bonus, pension, profit-sharing, life insurance or salary continuation plan, except as otherwise specifically determined by the Board of Directors.
19. Amendment of the Plan.
(a) The Board of Directors may at any time, and from time to time, modify or amend the Plan in any respect, except that if at any time the approval of the shareholders of the Company is required under Section 422 of the Code or any successor provision with respect to Incentive Stock Options, the Board of Directors may not effect such modification or amendment without such approval.
(b) The termination or any modification or amendment of the Plan shall not, without the consent of an optionee, affect his or her rights under an option previously granted to him or her. With the consent of the optionee affected, the Board of Directors may amend outstanding option agreements in a manner not inconsistent with the Plan. The Board of Directors shall have the right to amend or modify (i) the terms and provisions of the Plan and of any outstanding Incentive Stock Options granted under the Plan to the extent necessary to qualify any or all such options for such favorable federal income tax treatment (including deferral of taxation upon exercise) as may be afforded incentive stock options under Section 422 of the Code and (ii) the terms and provisions of the Plan and of any outstanding option to the extent necessary to ensure the qualification of the Plan.
20. Withholding.
(a) The Company shall have the right to deduct from payments of any kind otherwise due to the optionee any federal, state or local taxes of any kind required by law to be withheld with respect to any shares issued upon exercise of options under the Plan. Subject to the prior approval of the Company, which may be withheld by the Company in its sole discretion, the optionee may elect to satisfy such obligations, in whole or in part, (i) by causing the Company to withhold shares of Common Stock otherwise issuable pursuant to the exercise of an option or (ii) by delivering to the Company shares of Common Stock already owned by the optionee. The shares so delivered or withheld shall have a fair market value equal to such withholding obligation. The fair market value of the shares used to satisfy such withholding obligation shall be determined by the Company as of the date that the amount of tax to be withheld is to be determined. An optionee who has made an election pursuant to this Section 20(a) may only satisfy his or her withholding obligation with shares of Common Stock which are not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements.
(b) Notwithstanding the foregoing, in the case of a Reporting Person, no election to use shares for the payment of withholding taxes shall be effective unless made in compliance with any applicable requirements of Rule 16b-3.
21. Cancellation and New Grant of Options, Etc.
The Board of Directors shall have the authority to effect, at any time and from time to time, with the consent of the affected optionees, (i) the cancellation of any or all outstanding options under the Plan and the grant in substitution therefor of new options under the Plan covering the same or different numbers of shares of Common Stock and having an option exercise price per share which may be lower or higher than the exercise price per share of the cancelled options or (ii) the amendment of the terms of any and all outstanding options under the Plan to provide an option exercise price per share which is higher or lower than the then current exercise price per share of such outstanding options.
22. Effective Date and Duration of the Plan.
(a) Effective Date. The Plan became effective when adopted by the Board of Directors, but no Incentive Stock Option granted under the Plan shall become exercisable unless and until the Plan shall have been approved by the Company's shareholders. If such shareholder approval is not obtained within twelve months after the date of the Board's adoption of the Plan, no options previously granted under the Plan shall be deemed to be Incentive Stock Options and no Incentive Stock Options shall be granted thereafter. Amendments to the Plan not
requiring shareholder approval shall become effective when adopted by the Board of Directors; amendments requiring shareholder approval (as provided in Section 19) shall become effective when adopted by the Board of Directors, but no incentive Stock Option granted after the date of such amendment shall become exercisable (to the extent that such amendment to the Plan was required to enable the Company to grant such Incentive Stock Option to a particular optionee) unless and until such amendment shall have been approved by the Company's shareholders. If such shareholder approval is not obtained within twelve months of the Board's adoption of such amendment, any Incentive Stock Options granted on or after the date of such amendment shall terminate to the extent that such amendment to the Plan was required to enable the Company to grant such option to a particular optionee. Subject to this limitation, options may be granted under the Plan at any time after the effective date and before the date fixed for termination of the Plan.
(b) Termination. Unless sooner terminated in accordance with Section 16, the Plan shall terminate, with respect to Incentive Stock Options, upon the earlier of (i) the close of business on the day next preceding the tenth anniversary of the date of its adoption by the Board of Directors, the tenth anniversary of any amendment increasing the number of shares of Common Stock of the Company which may be issued and sold under the Plan, or (ii) the date on which all shares available for issuance under the Plan shall have been issued pursuant to the exercise or cancellation of options granted under the Plan. Unless sooner terminated in accordance with Section 16, the Plan shall terminate with respect to options which are not Incentive Stock Options on the date specified in (ii) above. If the date of termination is determined under (i) above, then options outstanding on such date shall continue to have force and effect in accordance with the provisions of the instruments evidencing such options.
23. Provision for Foreign Participants.
The Board of Directors may, without amending the Plan, modify awards or options granted to participants who are foreign nationals or employed outside the United States to recognize differences in laws, rules, regulations or customs of such foreign jurisdictions with respect to tax, securities, currency, employee benefit or other matters.
24. Change in Control.
Notwithstanding any other provision of the Plan and except as otherwise
provided in the relevant option agreement, in the event of a "Change in Control
of the Company" (as defined below) the exercise dates of all options then
outstanding shall be accelerated in full and any restrictions on exercising
outstanding options issued pursuant to the Plan prior to any given date shall
terminate. For purposes of the Plan, a "Change in Control of the Company" shall
occur or be deemed to have occurred only if any of the following events occur:
(i) any "person," as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the
Company, any trustee or other fiduciary holding securities under an employee
benefit plan of the Company, or any corporation owned directly or indirectly by
the stockholders of the Company in substantially the same proportion as their
ownership of stock of the Company) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 20% or more of the combined voting power
of the Company's then outstanding securities; (ii) individuals who, as of the
date hereof, constitute the Board (as of the date hereof, the "Incumbent Board")
cease for any reason to constitute at least a majority of the Board, provided
that any person becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's stockholders, was approved
by a vote of at least a majority of the directors then comprising the Incumbent
Board (other than an election or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the directors of the Company, as such terms
are used in Rule 14a-11 of Regulation 14A under the Exchange Act) shall be, for
purposes of this Agreement, considered as though such person were a member of
the Incumbent Board; (iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation other than (A) a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities of the surviving entity) more than 80% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined) acquires more than 50% of the combined voting power of the Company's then outstanding securities; or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. Notwithstanding the foregoing, the Board of Directors of the Company may, in its sole discretion, by a resolution adopted by a majority of the Incumbent Board prior to the occurrence of any of the events otherwise constituting a Change in Control of the Company, declare that such event will not constitute a Change in Control of the Company for the purposes of the Plan. If such resolution is adopted, such event shall not constitute a Change in Control of the Company for any purpose of the Plan.
Adopted by the Board of Directors on March 3, 1993.
Amended by the Board of Directors on April 26, 1993.
Approved by the Stockholders on April 26, 1993.
Amended by the Board of Directors on March 21, 1995.
Approved by the Stockholders on January 10, 1996.
Amended by the Board of Directors on October 1, 1996.
Amended by the Board of Directors on October 28, 1997.
Amended by the Board of Directors on January 6, 1998.
Approved by the Stockholders on June 3, 1998.
| ARTICLE 5 |
| RESTATED: |
| PERIOD TYPE | 6 MOS | 6 MOS |
| FISCAL YEAR END | DEC 31 1998 | DEC 31 1997 |
| PERIOD START | JAN 01 1998 | JAN 01 1997 |
| PERIOD END | JUN 30 1998 | JUN 30 1997 |
| CASH | 23507849 | 2945852 |
| SECURITIES | 0 | 0 |
| RECEIVABLES | 2742191 | 1186687 |
| ALLOWANCES | 0 | 0 |
| INVENTORY | 2781688 | 2407225 |
| CURRENT ASSETS | 29653327 | 7139116 |
| PP&E | 5768572 | 3881740 |
| DEPRECIATION | 3563822 | 3204750 |
| TOTAL ASSETS | 32129237 | 7891106 |
| CURRENT LIABILITIES | 2067275 | 1805577 |
| BONDS | 0 | 0 |
| PREFERRED MANDATORY | 0 | 2723865 |
| PREFERRED | 0 | 0 |
| COMMON | 99554 | 50730 |
| OTHER SE | 29885216 | 3187047 |
| TOTAL LIABILITY AND EQUITY | 32129237 | 7891106 |
| SALES | 5850385 | 4377423 |
| TOTAL REVENUES | 7350385 | 4377423 |
| CGS | 2908041 | 2207211 |
| TOTAL COSTS | 2908041 | 2207211 |
| OTHER EXPENSES | 0 | 0 |
| LOSS PROVISION | 0 | 0 |
| INTEREST EXPENSE | 0 | 0 |
| INCOME PRETAX | 2921188 | 567337 |
| INCOME TAX | 82727 | 13924 |
| INCOME CONTINUING | 2838461 | 553413 |
| DISCONTINUED | 0 | 0 |
| EXTRAORDINARY | 0 | 0 |
| CHANGES | 0 | 0 |
| NET INCOME | 2838461 | 553413 |
| EPS PRIMARY | .29 | .09 |
| EPS DILUTED | .26 | .07 |