CONSTRUCTION/PERMANENT LOAN AGREEMENT THIS AGREEMENT dated June 7, 2001, by and between New Millennium Bank, its successors and assigns located at 57 Livingston Avenue, New Brunswick, New Jersey 08903 (hereinafter referred to as the "Bank"), and HYDROMER, INC., A NJ Corporation, having an address at 35 Industrial Parkway, Branchburg, New Jersey 08876 hereinafter referred to as the "Borrower"). This Agreement specifies the terms of the construction loan from the Bank to the Borrower in an amount not to exceed the sum of ONE MILLION AND 00/100 DOLLARS ($1,000,000.00) which sum is to be used for the sole purpose of constructing an addition to the existing building on property located at 35 Industrial Parkway, Branchburg, Somerset County, New Jersey, (the "Project") , as defined herein, to be erected by the Borrower on said real property located in the Township of Branchburg, County of Somerset, and State of New Jersey, as more fully described in Schedule "All attached hereto (hereinafter referred to as the "Premises") . After the construction phase as defined herein, the loan shall be converted to a permanent loan in the amount of $1,000,000.00 to be repaid over a period of fifteen (15) years as more particularly set forth in a commitment letter issued by the Bank dated July 11, 2000 (the "Commitment"), as amended March 21, 2001, the terms and conditions of which are made a part hereof. NOW, THEREFORE, in consideration of these premises and the mutual agreements hereinafter set forth, the parties hereto agree as follows: DEFINITIONS 1. "Advance" or "Advances" shall include all payments of money to the Borrower at any time and in any amount and regardless of whether in accordance with the terms of this Agreement. 2. "Bank" shall mean New Millennium Bank, its successors or assigns. 3. "Borrower", in addition to the named Borrower, shall also include any and all persons, firms, associations or corporations which may be directly or indirectly, primarily or secondarily, liable for any debt contemplated hereunder of Borrower to the Bank. 4. "Completion Date" shall mean that date, up to eighteen (18) months from the date hereof on which if all conditions set forth herein are met, the final advance shall be made.
5. "Construction/Permanent Loan Mortgage" or "Mortgage" shall mean the mortgage given by the Borrower to the Bank to secure the Loan, and may be singular or plural as the text requires. 6. "Construction/ Permanent Loan Note" or "Note" shall mean the Note executed by the Borrower and delivered to the Bank as evidence of the Loan. 7. "Financing Statements" shall mean the Uniform Commercial Code financing statements required to be filed with (i) the Of f ice of the Secretary of State of New Jersey, and (ii) the Office of the Clerk of Somerset County in order to perfect the security interest granted to the Bank by the Construction/Permanent Loan Mortgage. 8. "Guarantor" shall mean Biosearch Medical Products Inc. 9. "Loan" shall mean the construction loan described herein which shall be in the aggregate principal amount not to exceed ONE MILLION AND 00/100 DOLLARS ($1,000,000.00) or such lesser amount as may be advanced to the Borrower by the Bank in accordance with the terms hereof, made by the Bank for the purpose of providing sufficient monies to enable the Borrower to complete the Project, which loan shall be converted to a permanent mortgage loan upon completion of construction as provided herein in the amount of $1,000,000.00. 10. "Loan Documents" shall mean this Agreement, the Construction/ Permanent Loan Note, the Construction/ Permanent Loan Mortgage, the Financing Statements, the Assignment of Leases covering 35 Industrial Parkway, Branchburg, New Jersey; the commitment of the Bank dated July 11, 2000 as amended March 21, 2001, as amended, and any other instrument or document executed in connection with the Loan, . together with all amendments or supplements to any or all of them. 11. "Permanent Loan" shall mean the loan made hereunder in the amount of $1,000,000.00 for long-term financing of the costs of completion of the Project, to be repaid over a period of 15 years. 12. "Project" shall mean the construction of an addition to the existing building located on the Premises and constructed in accordance with certain plans prepared for construction of the addition. LOANS AND AIWANCES 1. The Bank agrees to lend to the Borrower (subject to this Agreement) funds to aid in the construction of the Project in an amount not to exceed the sum of the Loan, with interest from the date of each advance at the rate set forth in the Construction/ Permanent Loan Note, payable monthly in accordance with the terms and provisions of the Construction/ Permanent Loan Note. 2. To secure payment of the Loan, the Borrower shall simultaneously herewith execute a Construction/Permanent Loan Mortgage and deliver same to the Bank with respect to the Premises, in such form and with such terms and conditions as are required by the Bank. The Construction/ Permanent Loan Mortgage shall be considered a part of this Agreement as though fully set forth herein, and the terms of this Agreement shall be considered part of the Construction/ Permanent Loan Mortgage as though fully set
forth therein. in addition t Q the aforementioned Construction/ Permanent Loan Mortgage, the Borrower hereby give and grants to the Bank an exclusive security interest in and to all buildings, structures and improvements of every kind and description erected and placed on the Premises as defined in the Mortgage and Security Agreement; all rents, issues and profits and all proceeds of conversion, which are more particularly described as follows: (a) All the buildings, structures and improvements of every kind and description now or hereafter erected or placed on the Premises (as defined in the Mortgage and Security Agreement), and all facilities, fixtures, machinery, apparatus, appliances, installations, machinery and equipment, including, without limitation, all building materials to be incorporated into such buildings, all electrical equipment necessary for the operation of such buildings and heating, air conditioning and plumbing equipment now or hereafter attached to, located in or used in connection with those buildings, structures or other improvements (the "Improvements") ; (b) All rents, issues and profits arising or issuing from the Premises and the Improvements (the "Rents") including, but not limited to, the Rents arising or issuing from all leases and subleases now or hereafter entered into covering all or any part of the Premises and Improvements (the "Leases") including, without limitation, all fees, charges, accounts or other payments for the use or occupancy of rooms and other public facilities in hotels, motels, or other lodging properties, and all cash or securities deposited under Leases to secure performance of lessees of their obligations thereunder, whether; such cash or securities are to be held until the expiration of the terms of such leases or applied to one or more installments of rent coming due prior to the expiration of such terms; (c) All proceeds of the conversion, voluntary or involuntary, of any of the foregoing into cash or liquidated claims; (d) And without limiting any of the other provisions of the Mortgage, all those portions of the Property (as defined in the Mortgage and Security Agreement), which may be subject to the Uniform Commercial Code provisions applicable to secured transactions under the laws of any state. The Borrower agrees to execute any and all documents including Financing Statements which may be required by the Bank to perfect or protect the security interest granted hereby. 3. Applications for Advances under this Agreement are to be made by the Borrower to the Bank on or about the first day of each month after the commencement of construction of the Project for work done during the preceding month or part thereof, at least five (5) days prior to actual Settlement, except that the Bank, at its option, upon request therefor by the Borrower, may make Advances at more frequent intervals. Advances shall be made by crediting the Borrower's account with the Bank. The funds in such account shall not be connected with funds from other property of the Borrower. Application for Advances shall be requisitioned on AIA Forms G702 and G703, a certain form attached as Exhibit B to that certain Design and Construction
Contract between Redco Engineering & Construction Corp. and Borrower dated April 19, 2001, or any other requisition forms designated by the Bank to be signed by the general contractor, the Bank inspector, and the Borrower. 4. Advances during construction period shall be limited to an initial advance of $30,000, as reimbursement for the deposit advanced by the Borrower for plans, plus the percentage of completion of "hard costs" of construction acceptably completed as determined by the Bank's construction inspector retained by the Bank, multiplied by ninety percent (90%) of the amount for which a requisition of monies has been received by the Bank, but at no time shall the undisbursed portion of the Loan herein be, in the judgment of the Bank, less than an amount sufficient to complete the Project. The Borrower shall furnish, as requested, a projection of work progress in such form and at such times as may be required by the Bank. Parts or the whole of any Advance provided for herein may in the discretion of the Bank be advanced before due, but all such Advances, if made, shall be deemed to have been made pursuant to this Agreement and not in modification thereof. 5. Advances for construction up to $1,000,000.00 shall be made in accordance with a schedule to be agreed upon by the Borrower and the Bank. 6. The Borrower agrees as a condition precedent to any Advance, to furnish the Bank with: (a) A mortgage title insurance policy in form and substance, and issued by companies and in amounts, satisfactory to the Bank. Said policy shall be extended by endorsement to cover each and every Advance of the Loan at the time of payment thereof insuring that the Bank's Construction/ Permanent Loan Mortgage is, without exception, a valid second lien on the Project. Within forty-five (45) days after the initial Advance, the Borrower shall furnish the Bank or its nominee with the mortgage title insurance policy as aforesaid; (b) The Borrower's certificate of in-place value of the completed construction portion of the Project certified by the general contractor and the Borrower drawn in accordance with cost estimate furnished, indicating the amount of work completed by trade and the percentage thereof, and also indicating (i) that the Project is being completed substantially in accordance with the Drawings and Specifications as approved by the Bank, (ii) that the aggregate of all disbursements for "hard costs" of construction does not exceed ninety percent (90%) of the amounts which the Bank has agreed to fund, as more fully set forth in the Project development budget previously delivered by the Borrower to the Bank, and (iii) that the amount of moneys remaining to be disbursed in accordance with this Agreement is sufficient to complete the construction of the Project substantially in accordance with the Drawings and Specifications. The Bank will disburse only that amount as is acceptable to the Bank; (c) Such affidavits and surveys, including initial plot plan, survey showing foundation-in-place and final survey, and such stipulations, subordinations, releases and discharges of mechanics' and materialmen's notices, claims, liens,
lien rights and stop notices as the Bank or the title insurance company may require. The Bank will made Advances to the Borrower of up to $300,000 prior to a foundation survey being provided by Borrower to the Bank; (d) Affidavits from the Borrower and the general contractor that all money previously disbursed on the Loan has been paid to subcontractors and that there are presently no amounts owing to subcontractors, materialmen or laborers other than the holdbacks or retainages provided for under existing contractual arrangements between or among the various parties; and (e) Satisfactory proof that all of the prerequisites required by this Agreement have been satisfactorily fulfilled. 7. No Advance shall be due or payable while there is any lien or encumbrance upon the Project other than the lien of the Construction/Permanent Loan Mortgage and security interest to the Bank above mentioned and the existing first mortgage to PNC Bank in the original amount of $850,000.00, or while there is any change, question or claim of any kind whatsoever, whether of record or not, which, in the opinion of the counsel for the Bank, may constitute a cloud on the title to the Premises, render the title of the Premises unmarketable, or otherwise invalidate or have priority over the Bank's Construction Loan Mortgage and security interest, or any portion thereof, or in any way render the Bank's position insecure. 8. Nothing contained herein or in any other document or agreement contemplated hereby or executed approximately simultaneously therewith shall impose upon the Bank any obligation to see to the proper application of Advances by the Borrower, general contractor of subcontractors, and nothing shall prevent the Bank, in its opinion, from deducting from any Advance any sums due to the Bank from the Borrower for unpaid interest or for sums paid and expended by the Bank for taxes or assessments, for insurance, and like payment, pursuant to the Bank's rights under the terms of this Agreement, the Construction/ Permanent Loan Note or the Construction/Permanent Loan Mortgage. III REPRESENTATIONS,WARRANTIES AND COVENANTS To induce the Bank to enter into this Agreement and to make the Loan hereunder, the Borrower represents, warrants and covenants to the Bank that: 1. The Borrower agrees to complete the Project within eighteen (18) months of the date hereof in accordance with Plans and Specifications. 2. The Borrower is a Corporation duly organized, validly existing and in good standing under the laws of New Jersey and has the power to execute, deliver and carry out the terms of this Agreement, the Construction/Permanent Loan Note, the Construction/Permanent Loan Mortgage and the Financing Statements, and its Board of Directors have duly authorized and approved the terms of the Loan and the taking of any and all action contemplated hereunder by the Borrower. At all times throughout the term of the Loan, the Borrower (i) shall maintain its existence and all rights, privileges, franchises, licenses and other authority necessary to conduct its business,
(ii) shall not liquidate or dissolve without the prior express written consent of the Bank, which consent shall not be unreasonably withheld. 3. The execution of this Agreement, the Cons t ruction /Permanent Loan Note, the Construction /Permanent Loan Mortgage, the Financing Statements, and every other instrument or document required to be executed in accordance herewith or which the Bank may deem advisable in connection herewith, does not violate any provision of the Certificate of Incorporation or By-Laws of the Borrower is a party or in which the Borrower is bound in any fashion. 4 . The Borrower has taken all action required by law to validate and make this Agreement, the Construction/ Permanent Loan Note, the Construction/Permanent Loan Mortgage, the Financing Statements, and any other document required in connection herewith, enforceable, and will deliver approximately simultaneously herewith certification of such action. 5. The Borrower has, and at all times will have, good and marketable title in fee simple to the Premises, and the Construction/Permanent Loan Mortgage, when executed, delivered and recorded, will be a valid second lien on the Premises. 6. There are no actions, Suits or proceedings pending, or to the knowledge of the Borrower threatened, against the Borrower or any of its property and it is nor- in default with respect to any order, writ, injunction, decree or demand of any court or any governmental authority. 7. The Borrower has filed, or has caused to be filed, all tax returns required to be filed, and has paid all taxes shown to be due and payable on said return or on any assessment made against it. 8. The Borrower agrees that it will execute and deliver any further mortgages or any other documents or instruments necessary to achieve and maintain at all times the balance due to the Bank as a second and valid lien on the Premises and the personal property described in the Financing Statements. 9. There has been no substantial and material adverse change in the condition of the Borrower, financial or otherwise, since the last financial statements and reports furnished by the Borrower to the Bank, and the information contained in said statements and reports is true and correctly reflects the financial condition of the Borrower as of the respective dates of the statements and reports. 10. The Borrower agrees that it shall maintain business records in a commonly-accepted manner, which said records shall be available at all times and at all reasonable hours for inspection by the Bank. 11. The Borrower agrees not to create, assume, or suffer to exist any mortgage, pledge, encumbrance, lien or security interest upon the Premises, real or personal, except those mortgages, pledges, encumbrances, liens or security interests permitted or provided for hereunder, including the existing first mortgage to PNC Bank in the original amount of $850,000.00.
12. The Borrower agrees to pay all charges incident to the procuring and making of the Loan and the charges for the examination of the titie of the Premises, surveys and drawing of papers, mortgage tax and recording fees, and for all searches which may be required by the Bank to assure the Bank that the Construction/ Permanent Loan Mortgage is a valid second lien as herein provided. If not so paid, the Bank may deduct such charges from the amount due under this Agreement. 13. In the event of a default by Borrower or in the event the first mortgage holder on the premises is no longer paying taxes, the Bank shall have the right to require the Borrower to maintain a tax escrow so that tax payments shall be made through the Bank for real estate taxes from proceeds paid to the Bank by Borrower. This provision shall only be applicable during the permanent loan phase. During the construction phase, Borrower shall pay taxes directly to the municipality. 14. The Borrower agrees that it will receive all Advances hereunder as a trust fund to be applied first for the purpose of paying for the cost of the improvements before using any part of the total of the same for any other purpose, but nothing herein shall impose upon the Bank any obligation to see to the proper application of such Advances by the Borrower. 15. The Borrower agrees (a) that the Project shall be constructed with first-class workmanship and materials strictly in accordance with all applicable ordinances and statutes and in accordance with the requirements of all regulatory authorities having jurisdiction and in conformity with the requirements of the Board of Fire Underwriters or similar body; (b) the Project shall be constructed entirely on the Premises and will not encroach upon or overhang any easement or right-of-way or upon the land of others; (c) that the building(s) when erected shall be wholly within the building restriction lines however established and will not violate applicable use or other restrictions contained in prior conveyances, zoning ordinances or regulations; and (d) that it will furnish from time to time satisfactory evidence with respect to (a), (b) and (c) hereof, together with surveys identified by a licensed surveyor or engineer showing the Project to be entirely on the Premises and free from such violations as aforesaid. All applicable approvals for the construction and completion of the Project have been obtained from all governmental agencies or public utility companies having jurisdiction including, but not limited to, all environmental approvals, all approvals for sewer, water and other utilities, all building or construction permits, zoning, site plan or subdivision approvals. All of such approvals and permits shall be legally valid and shall remain in full force and effect until the completion of the Project, as set forth in paragraph 1. of this Section III. 16. The Bank and its agents shall, at all times during construction, and on the occasion of each Advance for construction, have the right of entry and free access to the Project and the right to inspect all work done, labor performed and materials furnished in and about the Project, and to inspect subcontracts and records of the Borrower. The Borrower agrees to pay for all costs of such inspections at the rate of $250 per inspection.
17. The Borrower agrees that it will not assign this Agreement or any Advance to be made hereunder or any part thereof, nor convey, nor encumber, the Premises, fixtures and equipment, or any of them, without the Bank's prior express written consent. 18. The Borrower hereby assigns as further security for the Loan all construction permits, licenses and contracts relating to the Premises, including, but not limited to, all environmental approvals, all approvals for sewer, water and other utilities, all building or construction permits, zoning site plan or subdivision approvals, each as may be permitted by the entity issuing such construction permits, licenses and contracts. 19. The Borrower shall furnish the Bank with: (a) fiscal year end financial statement prepared by a CPA acceptable to the Bank within 90 days of fiscal year end; (b) quarterly internal financial statements within 60 days of quarter end; (c) all updated leases on an annual basis, as applicable; (d) completed signed copies on an annual basis of federal tax returns within 30 days of filing during the term of the Loan. IV EVENTS OF DEFAULT The occurrence of any of the following events shall constitute an Event of Default (hereinafter referred to as an "Event of Default"). 1. Any representation or warranty made by the Borrower in this Agreement, the Construction/Permanent Loan Note, the Construction/ Permanent Loan Mortgage, or any certificate or other writing, including the loan application, given in connection herewith shall prove to have been false, incorrect or misleading in any substantial and material respect on the date as of which made. 2. The Borrower shall have failed to make any payment of any installment of interest and/or principal on the Construction/Permanent Loan Note within ten (10) days of their due date. 3. The Borrower shall have failed to duly observe or perform any covenant, condition or agreement with respect to the payment of moneys on the part of the Borrower to be observed or performed pursuant to the terms of the Loan Documents other than the payment of principal and interest which shall be governed by Paragraph 2 above, and such default shall have remained uncured for a period of thirty (30) days after notice thereof to the Borrower by the Bank. 4. The Borrower shall have entered into any junior financing or shall have consented to the placing of any lien on the Premises or the Project, whether such financing or lien is prior to or subordinate to the lien of the Construction/Permanent Loan Mortgage. 5. The Borrower shall have failed to comply with any law, ordinance, order, rule or regulation of any governmental authority having jurisdiction over work similar in type as that herein contemplated to be erected, or shall have refused to remove any work condemned by any of the said governmental authorities or prohibited by law, and such default shall have remained uncured for a period of thirty (30) days after notice thereof to the Borrower by the Bank.
6. The Borrower shall have failed to present to the Bank any evidence from materialmen or contractors who have furnished material or labor upon the Premises, or failed to furnish evidence that all such persons, firms or corporations who or which have performed labor or furnished material have been paid in full, and such default shall have remained uncured for a period of thirty (30) days after notice thereof to the Borrower by the Bank. 7. A construction lien, or notice of any unpaid balance or any other lien or encumbrance shall have been filed against the Premises, and the Borrower shall have failed to procure within thirty (30) days after the same is filed a cancellation of the said lien or a discharge thereof, in the manner and form provided by law, and such default shall have remained uncured for a period of thirty (30) days after notice thereof to the Borrower by the Bank. 8. The Borrower shall have, at any time prior to the completion of the construction of the Project, abandoned the same or ceased to work thereon for a period of more than ten (10) days, or shall have failed to complete the construction of the Project in accordance with the Drawings and Specifications, or shall have made changes in the Drawings and Specifications without securing the prior express written consent of the Bank, and such default shall have remained uncured for a period of thirty (30) days after notice thereof to the Borrower by the Bank. 9. If the Construction/Permanent Loan Mortgage made by the Borrower shall not give to the Bank a valid second lien for the indebtedness to be secured thereby on the Premises. 10. If the Loan is to be advanced in more than one payment, and any payment be called for, and, because of some act an encumbrance or question of title or priority of lien arising after making of the preceding payment which may, or tend to, invalidate the lien of the Mortgage as a second lien on the Premises, and such encumbrance or question is not cured within ten (10) days after the giving of notice by the Bank of the defect. 11. If the improvements which may be erected on the Premises shall encroach upon the street or upon adjoining property or violate restrictive covenants of record or local zoning ordinances, and such default shall have remained uncured for a period of thirty (30) days after notice thereof to the Borrower by the Bank. 12. If any materials, fixtures, or articles used in the construction of the building or any improvement appurtenant thereto shall not be purchased so that the ownership thereof will vest in the owner thereof free from all encumbrances on delivery to the Premises. 13. If the Borrower does not permit a representative of the Bank to enter upon the Premises to inspect the building thereon at reasonable times. 14. The Borrower or any guarantor shall have applied for or consented to the appointment of a custodian, receiver, trustee or liquidator of all or a substantial part of its respective assets; shall generally be unable to pay its respective debts when due; or shall have admitted in writing its inability to pay its respective debts as they mature; or shall have made a general assignment for the benefit of creditors; or shall have filed
a petition or an answer seeking reorganization or an arrangement with creditors or shall have taken advantage of any insolvency law or shall have submitted an answer admitting the material allegations of a petition in any bankruptcy, reorganization or insolvency proceeding; or an order, judgment or decree shall have been entered without the application, approval or consent of the Borrower or any guarantor or endorser by any court of competent jurisdiction (approving a petition seeking reorganization of the Borrower or any guarantor or endorser, or appointing a receiver, trustee or liquidator of the Borrower or any guarantor or endorser or a substantial part of its respective assets, and such order, judgment or decree shall have continued un3tayed and in effect for a period of forty-five (45) consecutive days; or an involuntary petition in bankruptcy shall have been filed against the Borrower or any guarantor or endorser, and shall not have been dismissed for a period of thirty (30) consecutive days; or if any Order for Relief shall have been entered under the Federal Bankruptcy Code of 1978. 15. The Borrower shall have caused or permitted a security interest, perfected or otherwise, other than the security interest specifically provided for or permitted hereunder, to be created in any collateral provided for hereby, or shall have failed to take any action reasonably requested by the Bank to perfect or protect the security interest provided for herein, and such default shall have remained uncured for a period of thirty (30) days after notice thereof to the Borrower by the Bank. 16. Occurrence of any event which, in the reasonable opinion of any officer of the Bank, impairs the financial responsibility of Borrower, and such default shall have remained uncured for a period of thirty (30) days after notice thereof to the Borrower by the Bank. 17. The determination of any Bank officer that a material adverse change has occurred in the financial condition of' the Borrower, and such default shall have remained uncured for a period of thirty (30) days after notice thereof to the Borrower by the Bank. 18. The Borrower shall have transferred, or caused to have been transferred, title to the Premises or any part thereof, to any person without the prior express written consent of the Bank, whether voluntarily, involuntarily or by operation of law. 19. A writ of execution or attachment or any similar process shall be issued or levied against all or any part of or interest in any of the properties or assets of the Borrower or any judgment involving monetary damage shall be entered against the Borrower which shall become a lien on the Borrower's properties or assets or any portion thereof or interest therein and such execution, attachment or similar process is not released, bonded, satisfied, vacated or stayed within thirty (30) days after its entry or levy, and said writ of execution, attachment, levy or judgment shall involve monetary damages aggregating more than $25,000.00. 20. Seizure or foreclosure of any of the properties or assets of the Borrower pursuant to process of law or by respect of legal self-help, involving monetary damages
aggregating more than $25,000.00, unless said seizure of foreclosure is stayed or bonded within thirty (30) days after the occurrence of same. V CONSEQUENCES OF DEFAULT In case any Event of Default shall have occurred and be continuing, then and in every such Event of Default, the Bank may take any or all of the following actions in addition to those actions allowed in the Construction/ Permanent Loan Note and the Construction/Permanent Loan Mortgage, at the same time or at different times: 1. Declare all loans and sums owing to the Bank from the Borrower under this Agreement to be forthwith due and payable, whereupon all such sums shall forthwith become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower. 2. Enter into possession of the Project and perform any and all work and labor necessary to complete improvements substantially according to Drawings and Specifications, and employ watchmen to protect the Premises from injury; all sums so expended by the Bank to be deemed paid to the Borrower and secured by the Construction/Permanent Loan Mortgage. For this purpose, the Borrower hereby constitutes and appoints the Bank its true and lawful attorney-in-fact with full power of substitution in the Premises to complete the Project in the name of the Borrower, and hereby empowers said attorney or attorneys as follows: (a) To use any funds of the Borrower, including any balance which may be held in escrow and any funds which may remain unadvanced under this Construction Loan Agreement, for the purpose of completing the Project in the manner called for by the Drawings and Specifications hereinabove mentioned; to make such additions and changes and corrections in the Drawings and Specifications which shall be necessary or desirable to complete the Project in substantially the manner contemplated by the Drawings and Specifications; (b) To employ such contractors, subcontractors, and agents, architects and inspectors as shall be required for said purposes; to pay, settle or compromise all existing bills and claims which may be liens against the Project, or as may be necessary or desirable for the completion of the job, or for the clearance of title; (c) To execute all applications and certificates in the name of the Borrower which may be required by any of the contract documents and to do any and every act which the borrower might do in its own behalf. It is further understood and agreed that this power of attorney shall be deemed to be a power coupled with an interest and cannot be revoked. The above-mentioned attorney shall also have power to prosecute and defend all actions or proceedings in connection with the construction of the Project or Premises and to take such action and require scheduled performances as such attorney deems necessary under the accepted guaranty of completion. The Borrower hereby assigns and quitclaims to the Bank all sums unadvanced under this Agreement and all sums due in escrow conditioned upon the use of said sums in escrow for the
completion of the Project, such assignment to become effective only in the case of the Borrower's default. 3. To institute and maintain foreclosure proceedings in accordance with the laws of the State of New Jersey. In the event of the foreclosure of the Construction/Permanent Loan Mortgage for any default in the provisions thereof prior to the time when the building(s) shall be fully completed, it is hereby expressly agreed between the parties hereto that all work remaining to be done and materials still to be furnished shall be considered as work necessary for the conservation and preservation of the subject matter secured by the Construction/Loan Mortgage, to wit: the Project contemplated to be erected under this Agreement. 4. To institute proceedings to collect any balance due without instituting foreclosure proceedings. 5. Take any of the remedies otherwise available to it as a matter of law or equity. 6. The Bank shall have the right immediately, and without notice or other action to set-off against any of the Borrower's liability to the Bank (i) any money owed by the Bank or any of its affiliates in any capacity to the Borrower whether due or not, and/or (ii) any property of the Borrower in the possession of the Bank or any of its affiliates, and the Bank shall be deemed to have exercised such right of set-off and to have made a charge against any such money immediately upon the occurrence of such event of default, even though the actual book entries may be made at some time subsequent thereto; and 7. The Bank shall not be required to make any Advances during the existence of an Event of Default; provided, however, the Bank mayr in its sole discretion, make Advances notwithstanding the existence of such an Event of Default and any Advance so made shall be deemed to have been made pursuant to this Construction Loan Agreement. VII MISCELLANEOUS 1. The Bank shall be entitled to its reasonable expenses incurred in the enforcement on payment of the Loan, and those expenses shall, without limitation, including reasonable attorneys' fees plus other legal expenses incurred. 2. The Borrower agrees that no delay on the part of the Bank in exercising any power or right hereunder shall operate as a waiver of any such power or right, preclude other or further exercise thereof, or the exercise of any other power or right. No waiver whatsoever shall be valid unless in writing signed by the Bank, and then only to the extent set forth therein. 3. The Borrower waives presentment, dishonor and notice of dishonor, protest and notice of protest of all commercial papers at any time held by the Bank on which the Borrower is in any way liable. 4. The provisions of this Agreement shall be in addition to those set forth in the Construction/ Permanent Loan Mortgage, the Construction/ Permanent Loan Note or
other writings held by the Bank relating to this Loan, all of which shall be construed as one instrument. 5. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their respective successors and assigns. 6. The rights and remedies herein expressed to be vested in or conferred upon the Bank shall be cumulative and shall be in addition to and not in substitution for or in derogation of the rights and remedies conferred by any applicable law. 7. All notices to be given to any party hereunder shall be given to such party by certified mail, postage prepaid, at the address shown at the head of this Agreement. 8. Nothing herein contained shall impose upon the Bank any obligation to enforce any terms, covenants or conditions contained herein. Failure of the Bank, in any one or more instances, to insist upon strict performance by the Borrower of any terms, covenants or conditions of this Agreement shall not be deemed to be a waiver relinquishment of any such terms, covenants and conditions. 9. Ali conditions of the obligation of the Bank to make Advances hereunder are imposed solely and exclusively for the benefit of the Bank and its assigns, and no other person or persons shall have standing to require satisfaction of such conditions in accordance with their terms or be entitled to assume that the Bank will refuse to make Advances in the absence of strict compliance with any or all thereof, and no other person or persons shall, under any circumstances, be deemed to be a beneficiary or beneficiaries of such condition, any and all of which may be waived in whole or in part by the Bank if it, in its sole discretion, deems it advisable to do so. 10. This Agreement and all rights hereunder may be assigned or otherwise transferred by the Bank to anyone of its choosing. 11. This Agreement, the Loan and the rights of the parties hereto shall be governed by and construed under the laws of the State of New Jersey. 12. At ail times throughout the term of the Loan, the Borrower hereby agrees to pay all fees, expenses and charges with respect to the Loan, or in any way connected therewith, including but not limited to, title insurance and survey costs, recording and filing fees, the fees and expenses of the Bank's attorneys, and any other taxes, fees and expenses payable in connection with the Loan. The Bank shall not be required to pay any premium or other charge, or any brokerage fee or commission or similar compensation in connection with the Loan, and the Borrower agrees to defend, indemnify and hold the Bank harmless against and from any and all claims for any of the above mentioned matters. 13. During the term of the Loan evidenced by this Agreement, Borrower shall provide to the Bank: (a) Prior to conversion to Permanent status, copies of all lease agreements for the mortgaged premises shall be provided to the Bank and shall be supplied on an annual basis thereafter.
(b) Prior to conversion to Permanent status, a certificate of occupancy for the Project shall be provided to the Bank. (c) The Borrower's maximum debt/worth ratio shall not exceed 1.0. (d) Borrower shall provide the Bank within ten (10) days of its receipt, any state or municipal inspection reports concerning the mortgaged premises. (e) Prior to conversion to Permanent status, Borrower shall furnish a policy for fire and hazard insurance (including extended coverage) for the full insurable value of the Premises in amounts sufficient to avoid coinsurance liability, with standard form mortgagee endorsement naming the Bank as mortgagee. 14. Borrower shall maintain the Bank as its principal depository for all deposit accounts for this Project throughout the term of the Loan. Removal of the depository banking relationship will cause the interest rate of the Loan to increase by 1/2% per annum until corrected, as set forth in the Construction/Permanent Loan Note. All monthly payments shall be deducted from the Borrower's account at the Bank. IN WITNESS WHEREOF, the Borrower has caused these presents to be signed by the day and year first above written. Signed :
/s/ Manfred F. Dyck ------------------------------Manfred F. Dyck, President
Hydromer, Inc. Witness:
/s/ Robert J. Moravsik ----------------------------Robert J. Moravsik, Secretary
SCHEDULEA-LEGAL DESCRIPTION All that certain Lot, piece or parcel of land, with the buildings and improvements thereon erected, situate, lying a~d being in the Township of Branchburg: BEGINNING at a point in the northeasterly line of Industrial Parkway (60'wide) distant 675.98 feet measured in a westerly direction from the projected intersection of the northeasterly line of Industrial Parkway with the northwesterly line of Readington Road (60' wide) and running; thence 1) along said line of Industrial Parkway, North 65 degrees 45 minutes 00 seconds West, a distance of 650.41 feet to a point; thence 2) North 38 degrees 41 minutes 12 seconds East a distance of 475.38 feet to a point in the southwesterly line of the Central Railroad of New Jersey; thence 3) along said line of the Central Railroad of New Jersey, South 66 degrees 06 minutes 44 seconds East, a distance of 5 3 1.87 feet to a point; t hence 4) South 24 degrees 15 minutes 00 seconds West, a distance of 463.73 feet to a point in the northeasterly line of Industrial Parkway, the point and place of BEGINNING. NOTE: Being Lot(s) 3.04, Block 17, Tax Map of the Township of Branchburcr, County of Somerset. NOTE: Lot and Block shown for informational purposes only. Schedule A - Legal Description Loan Rates: During Construction-Prime +1/2% daily floating Permanent Phase-Prime+1.00% set 45 days before each three year period. Loan payable in 15 years after conversion to Permanent staus.
COATING SERVICES AGREEMENT THIS AGREEMENT, entered into as of the ___ day of April, 2001, by and between Hydromer, Inc., having its principal place of business at 35 Industrial Parkway, Branchburg, New Jersey 08876 (hereinafter referred to as "Supplier"), and Tyco Healthcare Group LP, a Delaware limited partnership having a place of business at 15 Hampshire Street, Mansfield, Massachusetts 02048 (hereinafter referred to as "Purchaser"). WHEREAS, Supplier manufactures certain proprietary primer and coating solutions; WHEREAS, Purchaser manufacturers, markets and sells certain silicone Foley catheters; WHEREAS, Supplier and Purchaser are parties to a License Agreement, dated as of November 30, 1983 (as amended, the "Coating License Agreement"), pursuant to which Supplier has licensed to Purchaser the right to make, use and sell certain products coated with Supplier's proprietary hydrophilic coating, including Purchaser's silicone Foley catheters; WHEREAS, Supplier and Purchaser are parties to a Know-How License Agreement, dated as of April ___, 2001 (the "Primer License Agreement"), pursuant to which Supplier has licensed to Purchaser the right to use certain know-how of Supplier related to its proprietary primer in connection with certain of Purchaser's products, including its silicone Foley catheters; WHEREAS, Purchaser desires to have Supplier perform certain services related to the application of Supplier's proprietary primer and coating to Purchaser's silicone Foley catheters, and Supplier desires to perform such services, in accordance with the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties mutually agree as follows: 1. DEFINITION OF TERMS 1.1 "Coatings" shall mean (i) Supplier's proprietary hydrophilic coating solution (the "Hydrophilic Coating"), and (ii) Supplier's proprietary primer solution used to allow the Hydrophilic Coating to be attached to silicone polymer surfaces (the "Primer"), in each case manufactured in accordance with the relevant Coating Specifications with the addition of Purchaser's silver compound. 1.2 "Coating Specifications" shall mean (i) with respect to the Hydrophilic Coating, the manufacturing and quality assurance specifications attached hereto as EXHIBIT A, and (ii) with respect to the Primer, the Supplier's manufacturing and quality assurance specifications therefor, as set forth ______________________
1.3 "Products" shall mean silicone Foley catheters manufactured or distributed by Purchaser used for urinary drainage. 1.4 "Services" shall mean Supplier's addition of Purchaser's proprietary anti-microbial compound into the Coatings, the application of such Coatings onto the Products, and the packaging of such coated Products, all in accordance with the Service Specifications. 1.5 "Service Specifications" shall mean the processing, quality assurance and packaging specifications for the Services, as mutually agreed upon by the parties pursuant to Section 3.2 below. 1.6 "Term" shall mean the duration of this Agreement as set forth in Section 2 below. 2. TERM OF AGREEMENT 2.1 Unless earlier terminated pursuant to the terms herein, the initial term of this Agreement shall commence upon the date hereof and shall continue in effect for a period of two (2) years from such date. Upon the expiration of the initial term, this Agreement shall automatically renew from year-to-year for additional terms of one year each, unless and until terminated by either party at the expiration of the initial term or any renewal term by giving notice of such termination to the other party in writing at least nine (9) months prior to the expiration of the then current term. 3. SALE AND PURCHASE OF THE SERVICES 3.1 Supplier agrees to provide the Services to Purchaser, and Purchaser agrees to purchase all priming and coating Services from Supplier for the Products, during the Term in accordance with the provisions herein. 3.2 Attached hereto as EXHIBIT B is an outline of the processing, packaging and quality assurance criteria which will constitute the Service Specifications. The parties acknowledge that the specific values and parameters of the Service Specifications cannot be finalized until completion of the Validation (as defined in the Primer License Agreement). Upon completion of the Validation, Supplier and Purchaser shall negotiate in good faith to promptly finalize the Service Specifications. If Supplier and Purchaser are unable to agree upon the final Service Specifications within four (4) weeks after completion of the Validation, this Agreement shall automatically terminate and be of no further force and effect. If during the course of the Validation Purchaser requires that the Service Specifications be modified to require Supplier to perform additional quality inspections than currently set forth in EXHIBIT B, Supplier and Purchaser shall negotiate an appropriate increase to the price of Services hereunder to compensate Supplier for its cost of such additional quality inspections. If Supplier and Purchaser are unable to agree upon the final revised pricing, if any, within four (4) weeks after completion of the Validation, this Agreement shall automatically terminate and be of no further force and effect. 3.3 Once the final Service Specifications are determined in accordance with Section 3.2, product or process changes which would cause the Coatings to deviate from the Coating 2
Specifications (including, without limitation, any change in any raw materials used to manufacture the Coatings or the source of such raw materials) or the Services to deviate from the Service Specifications shall not be made without the prior written agreement of both parties. If either party desires a modification to the Coating Specifications or the Service Specifications, such party shall give written notice of such proposed modification to the other party at least ninety (90) days prior to the desired effective date of such modification. The parties shall negotiate any such requested modification in good faith, including any adjustments to prices hereunder to reflect any increased or decreased costs of manufacturing the Coatings or performing the Services as a result of such modification. If the parties are unable to agree upon such requested modification and related amendments to this Agreement within such ninety (90) day period, this Agreement (and the Coating Specifications and Service Specifications) shall continue in effect without change. 3.4 On a semi-annual basis, Purchaser shall deliver to Supplier a non-binding forecast of Purchaser's anticipated requirements of Services hereunder for the following six (6) month period. 3.5 Purchaser shall submit its orders for the Services on non-cancelable purchase order forms ("Purchase Orders") specifying (i) the number of units, and relevant French sizes, of the Products to be coated, (ii) the destination to which the coated Products are to be shipped, and (iii) the designated shipping dates. Supplier shall ship the coated Products on the dates specified in each Purchase Order, provided that Purchaser has submitted such Purchase Order, and delivered all components that Purchaser is required to supply pursuant to Section 7 below to fill such order, at least six (6) weeks prior to the designated shipping date, and provided, further, that the quantity of Products designated for shipment within a single month does not exceed _______ units. 3.6 The terms printed on any invoice or confirmation submitted by Supplier to Purchaser, or any Purchase Order, shall be of no force and effect. The terms of all purchases of Products hereunder shall be governed solely by the terms of this Agreement. 4. PRICE AND PAYMENT/SHIPMENT TERMS 4.1 The price of Services hereunder shall be determined based upon the aggregate volume of units of Products per shipment designated by each Purchase Order submitted by Purchaser pursuant to Section 3.5 above. For each shipment of Products hereunder, the price of Services per unit of Product shall equal the amount set forth opposite the applicable aggregate volume of Products in such designated shipment, as set forth in a Purchase Order, provided they do not exceed the monthly maximum of __________ units:
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4.2 If the volume of a single French size of Product for a shipment designated in a Purchase Order is less than 1,000 units, Purchaser shall pay Supplier an additional charge of ______ for such order, in addition to the price set forth in Section 4.1 above. 4.3 The prices set forth in Section 4.1 shall be firm for the first Contract Year. Supplier shall have the right to increase prices hereunder, effective as of the first day of the second Contract Year and each subsequent Contract Year, by the greater of (i) three percent (3%), or (ii) the actual amount of any increase in Supplier's aggregate cost of raw materials ("Raw Materials") used to manufacture the Coatings (on a per-unit of Product basis) since the commencement of the preceding Contract Year; PROVIDED, HOWEVER, that in no event may any such price increase exceed five percent (5%). Supplier shall give written notice of any such price increase to Purchaser at least ninety (90) days prior to the effective date of such price increase. If Supplier seeks to increase prices by more than three percent (3%) in any Contract Year, Supplier shall provide written evidence of Supplier's increased costs, including invoices and such other evidence as may be reasonably requested by Purchaser. Purchaser shall have the right, on reasonable prior notice, to audit the relevant books and records of Supplier to confirm any reported cost increases. 4.4 Unless otherwise agreed by the parties in writing, payment shall be made by Purchaser separately for each purchase order issued to Supplier. Purchaser shall pay all invoice amounts within forty-five (45) days of the date of invoice in U.S. dollars. 4.5 The Products coated by Supplier pursuant to this Agreement shall be shipped F.O.B. Supplier's facility in Branchburg, New Jersey to the destination designated by the Purchaser in an order. 5. INSURANCE Throughout the Term of this Agreement and for a period of at least three (3) years thereafter, Supplier and Purchaser shall each carry Commercial General Liability Insurance in a minimum amount of $5,000,000 Combined Single Limit, Bodily Injury and Property Damage, naming the other party as an additional insured. Insurance to be maintained by each party pursuant to the provisions of this Section 5 shall provide for written notice to the other party at least fifteen (15) days in advance of any termination or cancellation of such insurance. Upon the request of either party from time to time during the Term, the other party shall provide a certificate evidencing such insurance coverage. 6. DUTIES OF SUPPLIER (a) Supplier shall manufacture the Coatings in accordance with the Coating Specifications, perform the Services in accordance with the Service Specifications, and maintain reasonable production levels to supply 100% of Purchaser's requirements for the Services, provided, that in no event shall Supplier be required to perform Services for more than 21,000 units of Product in any month, equivalent to an annual volume of ________ units of Product in any Contract Year. Notwithstanding the foregoing, in the event that Purchaser requires Services for more than ________ units of Product in any month or the equivalent to ________ units of Product 4
in any Contract Year, (i) Supplier shall perform such Services for up to an additional _______ units of Product in any month, provided that Purchaser agrees to reimburse Supplier for its reasonable incremental labor and variable overhead costs to perform such additional Services, and (ii) Supplier may, in its reasonable discretion, perform such Services for more than an additional 2,100 units of Product in any month, provided that Purchaser agrees to reimburse Supplier for all reasonable incremental costs (including capital, fixed overhead and environmental compliance costs) to perform such additional Services. If Purchaser requests that Supplier perform Services for more than __________units of Product in any month or _______ units of Product in any Contract Year, Supplier shall provide Purchaser with a written breakdown of any incremental costs, and such supporting evidence thereof as may be reasonably requested by Purchaser, within ten (10) business days of such request. (b) Supplier shall allow Purchaser to inspect Supplier's facilities during normal business hours and upon ten days' written notice to determine Supplier's adherence to the terms of this Agreement. (c) Each party shall notify the other party promptly in writing should either party become aware of any defect or condition which may render any of the Coatings or Services in violation of any applicable laws or regulations. (d) Supplier shall include with each shipment of coated Products released to Purchaser a written certification that such Products have been coated and packaged in conformance with the Service Specifications. (e) Supplier shall keep space available for storage of the Products and other components that Purchaser is required to provide pursuant to Section 7 below in an amount sufficient to provide Services for _______ units of Product, provided it is no more than _ pallets of a standard size (40"w x 48"l x 48" h). 7. COMPONENTS SUPPLIED BY PURCHASER 7.1 Purchaser shall be responsible for providing to Supplier, at Purchaser's sole cost and expense, all Products and other components listed in the Service Specifications as being provided by Purchaser (the "Purchaser Components"). Purchaser shall be responsible for ensuring that the silicone Foley catheters included in the Purchaser Components arrive at Supplier's facility pre-cleaned and ready for coating. Supplier shall store the Purchaser Components in a separate designated area, which shall be kept clean and dry. 7.2 Purchaser shall at all times retain title to all Purchaser Components, and Supplier shall have no ownership or security interest of any kind in such Purchaser Components. Supplier shall, at its expense, protect and defend Purchaser's title to the Purchaser Components against all person claiming against or through Supplier, keeping the Purchaser Components free from any legal process or encumbrance attributable to Supplier whatsoever, and shall give Purchaser immediate written notice of any such legal process or encumbrance and shall indemnify Purchaser from any loss caused thereby. 5
7.3 Purchaser shall assume all risk of loss of all Purchaser Components arising from fire or other casualty, except to the extent such fire or casualty is due to the negligence or willful misconduct of Supplier or its employees. Supplier shall reimburse Purchaser for its cost of any Purchaser Components that are lost, stolen, damaged or destroyed as a result of the negligence or willful misconduct of Supplier or its employees. 7.4 Purchaser agrees that after completion of the Validation (as defined in the Primer License Agreement), it will not make any change to the silver compound or silicone Foley catheters included in the Purchaser Components, or the manufacturing processes of such Purchaser Components, without giving Supplier at least ninety (90) days prior notice of any such change. To the extent that any such change requires a modification of the Service Specifications, the parties shall negotiate any such modification and related amendments to this Agreement in good faith, including any adjustments to prices hereunder to reflect any increased or decreased costs of performing the Services as a result of such modification. If Supplier and Purchaser are unable to agree upon the revised Service Specifications and pricing within ninety (90) days after notification, this Agreement shall automatically terminate and be of no further force and effect. 8. INTELLECTUAL PROPERTY 8.1 Purchaser and Supplier shall each hold in confidence Proprietary Information supplied to it by the other party (or observed) and shall not divulge the same to any other person or entity without the prior permission of the other party, except as reasonably required for purposes of normal customer sales and service or as may be required by law. The confidentiality obligations in this Section 8.1 shall not apply to Proprietary Information which (i) becomes public other than through the receiving party, (ii) is already known to the receiving party as evidenced by its written records, (iii) becomes known by the receiving party in the future from another source which is under no obligation of confidentiality to the disclosing party, or (iv) is subsequently developed by the receiving party in a manner which it can establish was independent of the disclosure hereunder. The obligations of Supplier and Purchaser pursuant to the provisions of this Section 8.1 shall survive termination of this Agreement for a period of five (5) years. For purposes of this Agreement, "Proprietary Information" shall mean all data, forecasts and other information revealed to either party by the other in writing and marked confidential or information revealed orally or visually and the substance of which is reduced to written form, marked confidential and transmitted to the other party within thirty (30) days of the oral or visual disclosure. 8.2 No press release, advertising, promotional statements (either oral or written) in connection with the existence, substance or details of this Agreement or the contractual arrangements relating to the subject matter of this Agreement, shall be made by either party unless required by applicable law without the prior written approval of the other party, which approval shall not be unreasonably withheld. 8.3 Supplier hereby grants Purchaser a non-exclusive, royalty-free license to use the tradename "Hydromer" and any related trademarks (the "Licensed Marks"), provided that they are used solely in connection with the marketing and sale of Products that are coated by Supplier 6
pursuant to this Agreement. Such license shall continue during the Term and for such period thereafter as Purchaser may have in its inventory any Products coated by Supplier hereunder. Supplier shall indemnify and hold harmless Purchaser from and against any damage or expense, including reasonable attorney's fees and disbursements, arising out of any third party claim that Purchaser's use of the Licensed Marks in accordance with this Section 8.3 infringes upon any trademarks, trade names, copyright or other intellectual property right of such third party; provided, that Purchaser shall have notified Supplier promptly of such claim and shall assist and cooperate with Supplier in the defense of such claim. This indemnification obligation shall survive the expiration or termination of this Agreement. 9. WARRANTIES 9.1 Supplier warrants that the Coatings shall: (a) conform to the Coating Specifications; (b) be free from defects in material and workmanship; and (c) be manufactured in compliance with all applicable laws. 9.2 Supplier warrants that the Services shall: (a) conform to the Service Specifications; (b) be performed in a good and workmanlike manner; and (c) be performed in compliance with all applicable laws 9.3 No representation or other affirmation of fact not set forth herein, including but not limited to statements regarding capacity, suitability for use, or performance of the Coatings or Services, shall be or be deemed to be a warranty by Supplier for any purpose, nor give rise to any liability or obligation of Supplier whatsoever. EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT, THERE ARE NO OTHER WARRANTIES, EXPRESSED OR IMPLIED, IN RESPECT OF THE COATINGS OR SERVICES, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 9.4 Written notice and an explanation of the circumstances of any claim of any breach of the warranties set forth in Section 9.1 or 9.2 shall be given promptly by Purchaser to Supplier. In the event of such a breach, Supplier shall promptly re-perform the defective Services or, at Supplier's discretion, refund to Purchaser that portion of the purchase price allocable to such defective Services. In the event that any Products shipped to Purchaser hereunder fail to conform to the warranties set forth in Section 9.1 or 9.2, Supplier shall also reimburse Purchaser for ninety-five percent (95%) of Purchaser's standard cost of the silicone Foley catheters and packaging sleeves that are rendered unusable as a result of such breach, provided that Purchaser shall have complied 7
with its obligations under Sections 7.1 and 7.4 with respect to the Purchaser Components for such shipment. In the event that Supplier and Purchaser are unable to agree as to whether a breach of warranty has occurred, the parties shall submit the matter to an independent laboratory mutually acceptable to the parties. The conclusions of such independent laboratory shall be conclusive and binding on the parties. Supplier and Purchaser shall each bear one-half (1/2) of the costs of any such independent laboratory testing. 9.5 In no event shall either party be liable to the other party for loss of profits or incidental, indirect, special, consequential or other similar damages arising out of any breach of this Agreement or obligations hereunder; provided, however, that the indemnification obligations of each party under Section 10 shall not be limited by this Section 9.5. 10. INDEMNIFICATION Purchaser shall defend, indemnify and hold harmless Supplier from and against any damage or expense, including reasonable attorney's fees and disbursements ("Losses"), arising out of any third party claim for death, injury or damage to property resulting from the use of any Products manufactured and/or sold by Purchaser which are coated by Supplier pursuant to this Agreement, unless such claim is a result of Supplier's breach of any warranty under Section 9.1 or 9.2 above. Supplier shall defend, indemnify and hold harmless Purchaser from and against any Losses arising out of any third party claim for death, injury or damage to property resulting from Supplier's breach of any warranty under Section 9.1 or 9.2 above. These indemnification obligations shall survive the expiration or termination of this Agreement. 11. TERMINATION 11.1 Either party may terminate this Agreement as follows: (a) if the other party commits a material breach of any of the provisions of this Agreement, the Coating License Agreement or the Primer License Agreement and does not cure such breach within sixty (60) days after receipt of written notice thereof, or such additional time, not to exceed an additional thirty (30) days, as may be reasonably necessary to cure such breach, provided that throughout such period the breaching party is using its best efforts and proceeding with due diligence to cure such breach; (b) immediately upon written notice to the other party in the event that proceedings in bankruptcy or insolvency are instituted by or against the other party, or a receiver is appointed, or if any substantial part of the assets of the other party is the object of attachment, sequestration or other type of comparable proceeding, and such proceeding is not vacated or terminated within thirty (30) days after its commencement or institution. 11.2 This Agreement shall automatically terminate and be of no further force or effect upon the expiration or termination of the Primer License Agreement. 8
11.3 Following the expiration or termination of this Agreement, all further rights and obligations of the parties shall cease, except that the parties shall not be relieved of (a) their respective obligations to pay monies due or which become due as of or subsequent to the date of expiration or termination, and (b) any other respective obligations under this Agreement which specifically survive or are to be performed after the date of expiration or termination. 11.4 In the event that Purchaser terminates this Agreement pursuant to Section 11.1, Supplier shall provide to Purchaser, at no charge, copies of all specifications, schematics and technical files related to all equipment, machinery and tooling used by Supplier to perform the Services. 12. MISCELLANEOUS 12.1 ASSIGNMENT. Neither party shall assign, transfer or otherwise dispose of this Agreement in whole or in part, or any of its obligations hereunder, to a third party without the prior written consent of the other party; PROVIDED, HOWEVER, that no such consent shall be required in connection with the assignment of this Agreement to an affiliate of the assigning party or to the purchaser of all or substantially all of the assets of the assigning party to which this Agreement pertains. In the event that Supplier sells all or substantially all of its assets that pertain to its performance of this Agreement, Supplier shall require that the purchaser of such assets assume all obligations of Supplier hereunder. 12.2 FORCE MAJEURE. If the performance of any obligation under this Agreement is prevented, restricted or interfered with by reason of war, civil commotion, embargo, strike or any other act which is beyond the reasonable control of the party affected, then the party so affected shall, upon giving prior written notice to the other party, be excused from such performance to the extent of such prevention, restriction or interference; provided, that the party so affected shall use commercially reasonable efforts to avoid and remove such causes of nonperformance, and shall continue performance hereunder with reasonable dispatch whenever such causes are removed. 12.3 ENTIRE AGREEMENT; MODIFICATION. This Agreement, the Coating License Agreement and the Primer License Agreement constitutes the entire agreement between the parties hereto and supersedes all previous negotiations, agreements and commitments with respect thereto, and shall not be released, discharged, changed or modified in any manner except by instruments signed by duly authorized representatives of each of the parties hereto. If any provision of this Agreement or the application thereof to any party or circumstance shall be declared void, illegal or unenforceable, the remainder of this Agreement shall be valid and enforceable to the extent permitted by applicable law. In such event, the parties shall use commercially reasonable efforts to replace the invalid or unenforceable provision by a provision that, to the extent permitted by applicable law, achieves the purposes intended under the invalid or unenforceable provision. 12.4 APPLICABLE LAW; JURISDICTION. This Agreement, and any claim or controversy relating hereto, shall be governed by and interpreted exclusively in accordance with the laws of the State of New Jersey. 9
12.5 WAIVERS. No claim or right arising out of or relating to a breach of any provision of this Agreement can be discharged in whole or in part by a waiver or renunciation of the claim or right unless the waiver or renunciation is supported by consideration and is in writing signed by the aggrieved party. Any failure by any party hereto to enforce at any time any provision under this Agreement shall not be considered a waiver of that party's right thereafter to enforce each and every provision of this Agreement. 12.6 INDEPENDENT CONTRACTORS. Nothing contained in this Agreement shall be construed to constitute Purchaser as a partner, employee or agent of Supplier, nor shall Purchaser hold itself out as such. Purchaser has no right or authority to incur, assume or create, in writing or otherwise, any warranty, liability or other obligation of any kind, express or implied, in the name or on behalf of Supplier, it being intended by Purchaser and Supplier that each shall remain an independent contractor responsible for its own actions. Except as otherwise provided herein, each party shall be responsible for its own expenses incidental to the performance of its obligations hereunder. 12.7 NOTICES. All notices and other communications in connection with this Agreement shall be in writing and shall be sent to the respective parties at the following addresses, or to such other addresses as may be designated by the parties in writing from time to time in accordance with this Section 12.7, by registered or certified air mail, postage prepaid, or by overnight courier service, service fee prepaid, or by telefax with a hard copy to follow via air mail or overnight courier service in accordance with this Section 12.7.
If to Supplier: Hydromer, Inc. 35 Industrial Parkway Branchburg, NJ 08876 Attn: President Hydromer, Inc. 35 Industrial Parkway Branchburg, NJ 08876 Attn: General Counsel Tyco Healthcare Group LP 15 Hampshire Street Mansfield, MA 02048 Attn: Director of Research and Development Tyco Healthcare Group LP 15 Hampshire Street Mansfield, MA 02048 Attn: General Counsel
With a copy to:
If to Purchaser:
With a copy to:
12.8 COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. 10
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective duly authorized representatives as of the date first written above. HYDROMER, INC. By: Its: TYCO HEALTHCARE GROUP LP By: Its: 11
EXHIBIT A HYDROPHILIC COATING SPECIFICATIONS EXHIBIT B SERVICE SPECIFICATIONS