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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Fiscal Year Ended Commission File No. 0-23047
December 31, 1999
SIGA Technologies, Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-3864870
(State or other jurisdiction of (IRS Employer Id. No.)
incorporation or organization)
420 Lexington Avenue, Suite 620
New York, NY 10170
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (212) 672-9100
Securities registered pursuant to Section 12(b) of the Act:
None
(Title of Class)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.0001 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|.
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing sale price of the Common Stock on March 20,
2000 as reported on the Nasdaq SmallCap Market was approximately $35,358,069 As
of March 20, 2000 the registrant had outstanding 6,654,837 shares of Common
Stock.
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SIGA Technologies, Inc.
Form 10-KSB
Table of Contents
Part I Page No.
Item 1 Business................................................ 3
Item 2 Properties.............................................. 15
Item 3 Legal Proceedings....................................... 15
Item 4 Submission of Matters to a Vote of Security Holders..... 15
Part II
Item 5 Market for Registrant's Common Equity and Related
Stockholder Matters .................................... 16
Item 6 Management's Discussion and Analysis for Financial
Condition and Results of Operations..................... 17
Item 7 Consolidated Financial Statements....................... 23
Item 8 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................... 23
Part III
Item 9 Directors and Executive Officers of the Registrant...... 24
Item 10 Executive Compensation.................................. 26
Item 11 Security Ownership of Certain Beneficial Owners and
Management.............................................. 30
Item 12 Certain Relationships and Related Transactions.......... 32
Part IV
Item 13 Exhibits, Lists and Reports on Form 8-K................. 33
Signatures.......................................................... 37
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PART I
Item 1. Business
Certain statements in this Annual Report on Form 10-KSB, including certain
statements contained in "Business" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations," constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The
words or phrases "can be", "expects", "may affect", "may depend", "believes",
"estimate", "project", and similar words and phrases are intended to identify
such forward-looking statements. Such forward-looking statements are subject to
various known and unknown risks and uncertainties and Siga cautions you that any
forward-looking information provided by or on behalf of Siga is not a guarantee
of future performance. Siga's actual results could differ materially from those
anticipated by such forward-looking statements due to a number of factors, some
of which are beyond Siga's control, in addition to those risks discussed below
and in Siga's other public filings, press releases and statements by Siga's
management, including (i) the volatile and competitive nature of the
biotechnology and Internet industries, (ii) changes in domestic and foreign
economic and market conditions, and (iii) the effect of federal, state and
foreign regulation on Siga's businesses. All such forward-looking statements are
current only as of the date on which such statements were made. Siga does not
undertake any obligation to publicly update any forward-looking statement to
reflect events or circumstances after the date on which any such statement is
made or to reflect the occurrence of unanticipated events.
SIGA Technologies, Inc. is referred to throughout this report as "Siga,"
"we" or "us."
Introduction
SIGA Technologies, Inc. is a development stage company with interests in
biotechnology and the Internet. Siga Research Labs, (SRL), our biotechnology
division, is focused on the discovery, development and commercialization of
vaccines, antibiotics and novel anti-infectives for serious infectious diseases.
SRL's lead vaccine candidate is for the prevention of group A streptococcal
pharyngitis or "strep throat." SRL is developing a technology for the mucosal
delivery of its vaccines which may allow those vaccines to activate the immune
system at the mucus lined surfaces of the body -- the mouth, the nose, the lungs
and the gastrointestinal and urogenital tracts -- the sites of entry for most
infectious agents. SRL's anti-infectives programs, aimed at the increasingly
serious problem of drug resistance, are designed to block the ability of
bacteria to attach to human tissue, the first step in the infection process.
We are currently developing, PeerFinder(TM), a third generation instant
messenger, which we believe will make the Internet more interactive by enabling
meaningful conversation within peer groups or between like-minded individuals.
As a complement to users' normal surfing habits, PeerFinder(TM) will provide
instant messaging technology for peer-to-peer communication across Web sites,
servicing the Internet's rapidly growing collection of online communities. By
combining the search for content with real-time conversation, users will be able
to easily locate information, transact business, solicit product reviews or
simply converse with like-minded individuals on the topics of their interest.
The Company's Technologies
Vaccine Technologies: Mucosal Immunity and Vaccine Delivery
Using proprietary technology licensed from The Rockefeller University
("Rockefeller"), Siga is developing certain commensal bacteria ("commensals") as
a means to deliver mucosal vaccines. Commensals are harmless bacteria that
naturally inhabit the body's surfaces with different commensals inhabiting
different surfaces, particularly the mucosal surfaces. Our vaccine candidates
utilize genetically engineered commensals to deliver antigens from a variety of
pathogens to the mucosal immune system.
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When administered, the genetically engineered ("recombinant") commensals
colonize the mucosal surface and replicate. By activating a local mucosal immune
response, our vaccine candidates are designed to prevent infection and disease
at the earliest possible stage. By comparison, most conventional vaccines are
designed to act after infection has already occurred.
Our commensal vaccine candidates utilize gram-positive bacteria, one of
two major classes of bacteria. Rockefeller scientists have identified a protein
region that is used by gram-positive bacteria to anchor proteins to their
surfaces. We are using the proprietary technology licensed from Rockefeller to
combine antigens from a wide range of infectious organisms, both viral and
bacterial, with the surface protein anchor region of a variety of commensal
organisms. By combining a specific antigen with a specific commensal, vaccines
can be tailored to both the target pathogen and its mucosal point of entry.
To target an immune response to a particular mucosal surface, a vaccine
would employ a commensal organism that naturally inhabits that surface. For
example, vaccines targeting sexually transmitted diseases could employ
Lactobacillus acidophilus, a commensal colonizing the female urogenital tract.
Vaccines targeting gastrointestinal ("GI") diseases could employ Lactobacillus
casei, a commensal colonizing the GI tract. We have conducted initial
experiments using Streptococcus gordonii ("S. gordonii"), a commensal that
colonizes the oral cavity and that can potentially be used in vaccines targeting
pathogens that enter through the upper respiratory tract, such as the influenza
virus.
By using an antigen unique to a given pathogen, the technology can
potentially be applied to any infectious agent that enters the body through a
mucosal surface. Our founding scientists have expressed and anchored a variety
of viral and bacterial antigens on the outside of S. gordonii, including the M6
protein from group A streptococcus, a group of organisms that cause a range of
diseases, including strep throat, necrotizing fasciitis, impetigo and scarlet
fever. In addition, proteins from other infectious agents, such as HIV and human
papilloma virus have also been expressed using this system. We believe this
technology will enable the expression of most antigens regardless of size or
shape. In animal studies, we have shown that the administration of a recombinant
S. gordonii vaccine prototype induces both a local mucosal immune response and a
systemic immune response.
We believe that mucosal vaccines developed using our proprietary commensal
delivery technology could provide a number of advantages, including:
o More complete protection than conventional vaccines: Mucosal vaccines in
general may be more effective than conventional parenteral (injectable)
vaccines, due to their ability to produce both a systemic and local
(mucosal) immune response.
o Safety advantage over other live vectors: A number of bacterial pathogens
have been genetically rendered less infectious, or attenuated, for use as
live vaccine vectors. Commensals, by virtue of their harmless nature, may
offer a safer delivery vehicle without fear of genetic reversion to the
infectious state inherent in attenuated pathogens.
o Non-injection administration: Oral, nasal, rectal or vaginal
administration of the vaccine eliminates the need for painful injections
with their potential adverse reactions.
o Potential for combined vaccine delivery: The Children's Vaccine Initiative
has called for the development of combined vaccines, specifically to
reduce the number of needle sticks per child, by combining several
vaccines into one injection, thereby increasing compliance and decreasing
disease. We believe our commensal delivery technology can be an effective
method of delivery of multi-component vaccines within a single commensal
organism that address multiple diseases or diseases caused by multiple
strains of an infectious agent.
o Eliminating need for refrigeration: One of the problems confronting the
effective delivery of parenteral vaccines is the need for refrigeration at
all stages prior to injection. The stability of the commensal
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organisms in a freeze-dried state would, for the most part, eliminate the
need for special climate conditions, a critical consideration, especially
for the delivery of vaccines in developing countries.
o Low cost production: By using a live bacterial vector, extensive
downstream processing is eliminated, leading to considerable cost savings
in the production of the vaccine. The potential for eliminating the need
for refrigeration would add considerably to these savings by reducing the
costs inherent in refrigeration for vaccine delivery.
Anti-Infectives Technology: Prevention of Attachment and Infectivity
The bacterial infectious process generally includes three steps:
colonization, invasion and disease. The adherence of bacteria to a host's
surface is crucial to establishing colonization. Bacteria adhere through a
number of mechanisms, but generally by using highly specialized surface
structures which, in turn, bind to specific structures or molecules on the
host's cells or, as discussed below, to inanimate objects residing in the host.
Once adhered, many bacteria will invade the host's cells and either establish
residence or continue invasion into deeper tissues. During any of these stages,
the invading bacteria can cause the outward manifestations of disease, in some
cases through the production and release of toxin molecules. The severity of
disease, while dependent on a large combination of factors, is often the result
of the ability of the bacteria to persist in the host. These bacteria accomplish
this persistence by using surface molecules which can alter the host's
nonspecific mechanisms or its highly specific immune responses to clear or
destroy the organisms.
Unlike conventional antibiotics, as discussed above, our anti-infectives
approaches aim to block the ability of pathogenic bacteria to attach to and
colonize human tissue, thereby preventing infection at its earliest stage. Our
scientific strategy is to inhibit the expression of bacterial surface proteins
required for bacterial infectivity. We believe that this approach has promise in
the areas of hospital-acquired drug-resistant infections and a broad range of
other diseases caused by bacteria.
Many special surface proteins used by bacteria to infect the host are
anchored in the bacterial cell wall. Scientists at Rockefeller University have
identified an amino acid sequence and related enzyme, a selective protease, that
are essential for anchoring proteins to the surface of most gram-positive
bacteria. Published information indicates that this amino acid sequence is
shared by more than 50 different surface proteins found on a variety of
gram-positive bacteria. This commonality suggests that this protease represents
a promising target for the development of a new class of antibiotic products for
the treatment of a wide range of infectious diseases. Experiments by our
founding scientists at Rockefeller University have shown that without this
sequence, proteins cannot become anchored to the bacterial surface and thus the
bacteria are no longer capable of attachment, colonization or infection. Such
"disarmed" bacteria should be readily cleared by the body's immune system. Our
drug discovery strategy is to use a combination of structure-based drug design
and high throughput screening procedures to identify compounds that inhibit the
protease, thereby blocking the anchoring process. If successful, this strategy
should provide relief from many gram-positive bacterial infections, but may
prove particularly important in combating diseases caused by the emerging
antibiotic resistance of the gram-positive organisms S. aureus, Streptococcus
pneumoniae, and the enterococci.
In contrast to the above program, which focuses on gram-positive bacteria,
our pilicide program, based upon initial research performed at Washington
University, focuses on a number of new and novel targets all of which impact on
the ability of gram-negative bacteria to assemble adhesive pili on their
surfaces. This research program is based upon the well-characterized interaction
between a periplasmic protein -- a chaperone -- and the protein subunits
required to form pili. In addition to describing the process by which chaperones
and pili subunits interact, this program has developed the assay systems
necessary to screen for potential therapeutic compounds, and has provided an
initial basis for selecting novel antibiotics that work by interfering with the
pili adhesion mechansism.
Surface Protein Expression System ("SPEX")
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The ability to overproduce many bacterial and human proteins has been made
possible through the use of recombinant DNA technology. The introduction of DNA
molecules into E. coli has been the method of choice to express a variety of
gene products, because of this bacteria's rapid reproduction and well-understood
genetics. Yet despite the development of many efficient E. coli-based gene
expression systems, the most important concern continues to be associated with
subsequent purification of the product. Recombinant proteins produced in this
manner do not readily cross E. coli's outer membrane, and as a result, proteins
must be purified from the bacterial cytoplasm or periplasmic space. Purification
of proteins from these cellular compartments can be very difficult. Frequently
encountered problems include low product yields, contamination with potentially
toxic cellular material (i.e., endotoxin) and the formation of large amounts of
partially folded polypeptide chains in non-active aggregates termed inclusion
bodies.
To overcome these problems, we have taken advantage of our knowledge of
gram-positive bacterial protein expression and anchoring pathways. This pathway
has evolved to handle the transport of surface proteins that vary widely in
size, structure and function. Modifying the approach used to create commensal
mucosal vaccines, we have developed methods which, instead of anchoring the
foreign protein to the surface of the recombinant gram-positive bacteria, result
in it being secreted into the surrounding medium in a manner which is readily
amenable to simple batch purification. We believe the advantages of this
approach include the ease and lower cost of gram-positive bacterial growth, the
likelihood that secreted recombinant proteins will be folded properly, and the
ability to purify recombinant proteins from the culture medium without having to
disrupt the bacterial cells and liberating cellular contaminants. Gram-positive
bacteria may be grown simply in scales from those required for laboratory
research up to commercial mass production.
PeerFinder(TM)
PeerFinder(TM) is an Internet-based application that is being developed to
allow registered users viewing any given Web site to see and communicate with:
(i) all other members of the same peer group wherever they are on the Web, (ii)
all other registered users simultaneously viewing the same site and (iii) all of
the people in the registered users buddy list. The product will enable both
group and private communication in a small discussion box that overlays the Web
site being viewed. The product is being designed to facilitate a more natural
form of conversation that is both content driven and spontaneous. We believe
PeerFinder(TM) will make the Internet more interactive by enabling group or
private communication that is not restricted to any particular Web site or chat
room, but will complement the users' normal Web browsing habits. PeerFinder(TM)
is expected to have the following features:
Peer groups - Users will sign up with a particular peer or interest group
when they register. Users will be notified when other members of their peer
groups are online and can communicate with them even if they are at a different
Web site. Users will be able to converse with their peers simultaneously or in
one-on-one environments.
Siteseers - Users will be notified of other PeerFinder(TM) users who are
on the same Web site they are on and will be able to communicate with each other
in either group or one-to-one discussion.
Buddy list - Users will be notified when their self selected "buddies" are
online and will be able to communicate with them no matter where they are on the
Web.
Video, Audio, and Multimedia Streaming - Users will be able to select one
of several video, audio or multimedia feeds within the PeerFinder(TM) box to
watch and/or listen to.
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Our Product Candidates and Research and Discovery Programs
Mucosal Vaccines
Development of Our mucosal vaccine candidates involves: (i) identifying a
suitable immunizing antigen from a pathogen; (ii) selecting a commensal that
naturally colonizes the mucosal point of entry for that pathogen; and (iii)
genetically engineering the commensal to express the antigen on its surface for
subsequent delivery to the target population.
Strep Throat Vaccine Candidate. Until the age of 15, many children suffer
recurrent strep throat infections. Up to five percent of ineffectively treated
strep throat cases progress to rheumatic fever, a debilitating heart disease,
which worsens with each succeeding streptococcal infection. Since the advent of
penicillin therapy, rheumatic fever in the United States has experienced a
dramatic decline. However, in the last decade, rheumatic fever has experienced a
resurgence in the United States. Part of the reason for this is the latent
presence of this organism in children who do not display symptoms of a sore
throat, and, therefore, remain untreated and at risk for development of
rheumatic fever. Based on data from the Centers for Disease Control and
Prevention, there are five to 10 million cases of pharyngitis due to group A
streptococcus in the United States each year. There are over 32 million children
in the principal age group targeted by us for vaccination. Worldwide, it is
estimated that one percent of all school age children in the developing world
have rheumatic heart disease. Despite the relative ease of treating strep throat
with antibiotics, the specter of antibiotic resistance is always present. In
fact, resistance to erythromycin, the second line antibiotic in patients
allergic to penicillin, has appeared in a large number of cases.
No vaccine for strep throat has been developed because of the problems
associated with identifying an antigen that is common to the more than 100
different serotypes of group A streptococcus, the bacterium that causes the
disease. We have licensed from Rockefeller a proprietary antigen which is common
to most types of group A streptococcus, including types that have been
associated with rheumatic fever. When this antigen was orally administered to
animals, it was shown to provide protection against multiple types of group A
streptococcal infection. Utilizing this antigen, we are developing a mucosal
vaccine for strep throat.
Our technology expresses the strep throat antigen on the surface of the
commensal S. gordonii, which lives on the surface of the teeth and gums. We
believe that a single oral dose of the vaccine may be adequate to provide
protection. Indeed, investigators at other institutions have shown that
organisms of this type can safely colonize in the human oral cavity for up to
two years. We are currently completing pre-clinical development of its strep
throat vaccine candidate. Pre-clinical research in mice and rabbits has
established the ability of this vaccine candidate to colonize and induce both a
local and systemic immune response. We are collaborating with the National
Institutes of Health (the "NIH") and the University of Maryland Center for
Vaccine Development on the clinical development of this vaccine candidate. In
cooperation with the NIH we filed an Investigational New Drug Application
("IND") with the United States Food and Drug Administration (the "FDA") in
December 1997. The first stage of these clinical trials under this IND commenced
at the University of Maryland in early 1999. In September 1999 we were awarded a
Phase I Small Business Innovation Research Grant (SBIR) from the NIH to help
support the research cost of our strep program.
STD Vaccine Candidates. One of the great challenges in vaccine research
remains the development of effective vaccines to prevent sexually transmitted
diseases (STDs). Three of the principal pathogens which are transmitted via this
route are: chlamydia, the most common bacterial STD; Neisseria, the causative
agent of gonnorhia; and human papilloma virus (HPV), which is linked to both
genital warts and cervical carcinoma. To date, a great deal of effort has been
expended, without appreciable success, to develop effective injectable
prophylactic vaccines versus these pathogens. Given that each of these pathogens
enters the host through the mucosa, we believe that induction of a vigorous
mucosal response to bacterial or viral antigens may protect against acquisition
of the initial infection. To test this hypothesis, we have expressed newly
discovered antigens from these three pathogens in its proprietary mucosal
vaccine delivery system. These live recombinant vaccines will be delivered to
animals and tested for local
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and systemic immune response induction, and whether these responses can block
subsequent viral infections. We have licensed technology from Oregon State
University and Washington University in support of its chlamydia and Neisseria
programs. In February 2000 we entered into an option agreement with the Ross
Products Division of Abbott Laboratories (Ross) which will provide funding to
further development of an STD vaccine product.
Periodontal Vaccine Candidate. Periodontal disease is characterized by
acute soft tissue inflammation and subsequent alveolar bone loss. It is
estimated that this condition afflicts up to 50% of the adult population by the
time they reach age 65, and is a major cause of tooth loss in the older
population. In addition, animal studies conducted at the University of Minnesota
show that bacteria from the mouth which enter the blood stream via diseased gums
can induce clotting which is the pivotal event in most heart attacks and
strokes. Current treatments for periodontal disease include mechanical
debridement, tissue resection and/or antibiotic therapy. It is believed that
periodontal disease is the result of an interaction between the immune system or
the host and a number of oral bacterial pathogens, principally Porphyromonas
gingivalis ("P. gingivalis").
The vaccine, as currently constructed, features a surface antigen,
fimbrillin from P. gingivalis delivered to the oral cavity via our proprietary
mucosal vaccine delivery system. In pre-clinical trials, mucosal immunization
with, or direct delivery of, fimbrillin-derived peptides to the oral cavity of
germ-free rats blocked the ability of P. gingivalis to colonize in the rats upon
subsequent challenge, and dramatically reduced associated periodontal disease
and bone loss. Two vaccine candidates are currently being studied in
pre-clinical animal colonization and challenge experiments. If we are successful
in our efforts to develop a product using its vaccine delivery system, we will
need to acquire a license from the State University of New York at Buffalo to
use their antigen in such a product.
Mucosal Vaccine Delivery System
We are also developing a proprietary mucosal vaccine delivery system which
is a component of our vaccine candidates and which we intend to license to other
vaccine developers. Our commensal vaccine candidates utilize gram-positive
bacteria as vectors for the presentation of antigens. Scientists at Rockefeller
have identified a protein region used by gram-positive bacteria to anchor
proteins to their surfaces. We are using proprietary technology licensed from
Rockefeller to anchor antigens from a wide range of infectious organisms, both
viral and bacterial, to the surface protein anchor region of a variety of
commensal organisms. By combining a specific antigen with a specific commensal,
we believe that vaccines can be tailored to both the target pathogen and its
mucosal point of entry.
We have developed several genetic methods for recombining foreign
sequences into the genome of gram-positive bacteria at a number of non-essential
sites. Various parameters have been tested and optimized to improve the level of
foreign protein expression and its immunogenicity. In pre-clinical studies,
recombinant commensals have been implanted into the oral cavities of several
animal species with no deleterious effects. The introduced vaccine strains have
taken up residence for prolonged periods of time and induce both a local mucosal
(IgA) as well as a systemic immune response (IgG and T-cell).
We have completed an early stage clinical evaluation of our mucosal
vaccine delivery system based on the commensal bacteria S. gordonii. These
clinical studies were designed to test the safety of the formulation, to monitor
the extent and duration of colonization of the nasal and oral cavities, and to
determine if the delivery system could be eradicated at the end of the study
with a regimen of conventional antibiotics. A total of 47 volunteers between the
ages of 18 and 40 years completed the studies, in which S. gordonii was
delivered to the nasal passage and oral cavity. The results of the studies
indicated the delivery system was well-tolerated and that the delivery system
spontaneously eradicated or was easily eradicated by conventional antibiotics.
The current clinical studies at the University of Maryland are also designed to
evaluate S. gordonii as a commensal bacterial vector for our vaccine targeting
strep throat.
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Anti-Infectives
Our anti-infectives program is targeted principally toward drug-resistant
bacteria and hospital-acquired infections. According to estimates from the
Centers for Disease Control, approximately two million hospital-acquired
infections occur each year in the United States.
Our anti-infectives approaches aim to block the ability of bacteria to
attach to and colonize human tissue, thereby blocking infection at the first
stage in the infection process. By comparison, antibiotics available today act
by interfering with either the structure or the metabolism of a bacterial cell,
affecting its ability to survive and to reproduce. No currently available
antibiotics target the attachment of a bacterium to its target tissue. By
preventing attachment, the bacteria should be readily cleared by the body's
immune system.
Gram-Positive Antibiotic Technology. Our lead anti-infectives program is
based on a novel target for antibiotic therapy. Our founding scientists have
identified an enzyme, a selective protease, utilized by most gram-positive
bacteria to anchor certain proteins to the bacterial cell wall. These surface
proteins are the means by which certain bacteria recognize, adhere to and
colonize specific tissue. Our strategy is to develop protease inhibitors. We
believe protease inhibitors will have wide applicability to gram-positive
bacteria in general, including antibiotic resistant staphlyococcus and a broad
range of serious infectious diseases including meningitis and respiratory tract
infections. We have entered into a collaborative research and license agreement
with the Wyeth-Ayerst Laboratories Division of American Home Products
Corporation ("Wyeth-Ayerst") to identify and develop protease inhibitors as
novel antibiotics.
Gram-Negative Antibiotic Technology. We have entered into a set of
technology transfer and related agreements with MedImmune, Inc. ("MedImmune"),
Astra AB and The Washington University, St. Louis ("Washington University"),
pursuant to which we acquired rights to certain gram-negative antibiotic
targets, products, screens and services developed at Washington University. In
February 2000, we ended our collaborative research and development relationship
with Washington University on this technology. (See "Collaborative Research and
Licenses") We still maintain a non-exclusive license to technology acquired
through these related agreements. We are using this technology in the
development of antibiotics against gram-negative pathogens. These bacteria
utilize structures called pili to adhere to target tissue, and we plan to
exploit the assembly and export of these essential infective structures as novel
anti-infective targets.
Research carried out at Washington University has demonstrated that
assembly of type P pili on gram-negative bacteria requires the participation of
both a periplasmic molecular chaperone and an outer membrane usher. Since the
gram-negative pili are the primary mechanism by which these organisms adhere to
and colonize host tissue, inhibition of their assembly should effectively
inhibit disease caused by this class of organisms. Detailed structural data is
available on the molecular chaperone and the usher protein. This information has
been used in concert with molecular modeling techniques to identify potential
structures that will bind to the conserved residues of the chaperone and usher
proteins. With identification of these structures, natural and synthetic
molecules that inhibit chaperone/usher function can be screened using high
throughput assays developed by scientists at SRL. We believe that this approach
is a departure from conventional antibiotics and therefore may afford a method
to circumvent the resistance mechanisms already established in many
gram-negative bacteria.
Scientists at Washington University have elucidated the role of chaperones
- -- a family of periplasmic proteins -- in the formation of pili, which are
essential for the virulence of certain gram-negative bacteria, such as E. coli
or the Enterobacteriaceae (Salmonella, Shigella, Klebsiella, etc.). The
elucidation of this pathway provides several targets for the development of
novel anti-infectives: (i) blocking the interaction between chaperones and pilin
subunits; (ii) interfering with chaperone-dependent folding of pilin subunits;
or (iii) interfering with how pilin subunits exit from the bacteria's outer
membrane (through the "usher" component). The chaperone-pilin complex has been
examined using x-ray crystallography, and assays
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measuring the chaperone interactions have been established. We are reviewing
potential compounds which interfere with the chaperone-pilin interaction, as
well as seeking alternative intervention sites in the pilus formation pathway.
In July 1999 we were awarded a Phase I SBIR grant from the NIH to support our
development efforts in this area.
Surface Protein Expression System
Our proprietary SPEX protein expression uses the protein export and
anchoring pathway of gram-positive bacteria as a means to facilitate the
production and purification of biopharmaceutical proteins. We have developed
vectors which allow foreign genes to be inserted into the chromosome of
gram-positive bacteria in a manner such that the encoded protein is synthesized,
transported to the cell surface and secreted into the medium. This system has
been used to produce milligram quantities of soluble antigenically authentic
protein that can be easily purified from the culture medium by affinity
chromatography. We believe this technology can be extended to a variety of
different antigens and enzymes.
We have commenced yield optimization and process validation of this
system. This program is designed to transfer the method from a laboratory scale
environment to a commercial production facility. Our business strategy is to
license this technology on a non-exclusive basis for a broad range of
applications.
PeerFinder(TM)
A by-product of the Internet's growth has been the establishment of online
communities. Like their traditional counterparts, these virtual communities
consist of individuals with common backgrounds or interests. Online communities,
however, are unconstrained by geographic and physical boundaries, and provide a
continuous forum for the exchange of information and ideas. As traditional
communities continue to decline in a complex world, online communities have
grown, with each trend likely to continue and accelerate the other. Online
communities provide an opportunity to replace, and even enhance, many of the
functions of their physical counterparts, giving users the opportunity to meet
and converse, share and explore, ask and advise.
The business opportunities created by these online communities are
enormous. By definition, these communities have aggregated potential consumers
according to pre-selected demographics and the consumers continue to aggregate
themselves into affinity groups with each Web site they visit. The financial
opportunities lie in the technology that creates these communities--making
members instantly accessible to advertisers, and retailers, and immediately
capable of purchasing products and services.
The emergence of online communities notwithstanding, the ability to find
one's peers on the Web is still often a matter of chance, and this, we believe,
has limited the utility and growth of online communities. The Internet's
greatest feature, the ability to easily disseminate and retrieve information,
leads to one of its greatest limitations. Just as the explosive growth of the
Internet has made sorting through all of the available information on any given
topic infinitely easier but virtually impossible, it has also made the process
of locating one's peers difficult and time consuming. As a result, the number of
active chat rooms is vastly outnumbered by the number that are sluggish or
dormant.
We are developing PeerFinder(TM) as a third generation instant messenger
to enhance peer-to-peer communication and increase the growth of online
communities by making it easy to locate and communicate with like-minded
individuals in real-time.
The first generation of instant messengers were a breakthrough because
they enabled communication across the Internet. As long as one had buddies whose
identifying code nickname or user name was known one could converse with them.
This generation was based on familiarity. The second generation of instant
messengers advanced communication across the Web by adding proximity. Users
could now, in addition
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to speaking with their buddies, communicate with others at the same Web site at
the time they were there. PeerFinder(TM) is the first third generation instant
messenger. In addition to familiarity and proximity, PeerFinder(TM) identifies
and aggregates registered users by their interests, associations and
professions.
PeerFinder(TM) Revenue Opportunities
We are developing PeerFinder(TM) as a platform technology with a
continuous presence on the user's desktop. Although the basic version of
PeerFinder(TM) will be provided free to users, we believe that the product will
offer significant revenue opportunities including:
Advertising - In addition to allowing text advertising in its discussion
box, PeerFinder(TM) will include a window space for multimedia advertising. This
window could be sold as a radio or TV spot before every requested audio or video
feed. On a non-cash basis, any unsold spots could be used to promote the
benefits of the product or new features, or could be used as barter with
affiliated Web sites or other partners.
Branding - The PeerFinder(TM) product will have room, in addition to the
advertising window, to brand itself. This space could be used to brand or
co-brand the product as the XYZ PeerFinder(TM) depending on who we enter into
agreements with.
Opt-In Marketing - When registering for PeerFinder(TM), users will have
the opportunity to sign up to receive email messages from us or selected
merchants. They will also be given an opportunity to sign up to receive email
newsletters from various partners.
Licensing for Customer Service - A modified version of PeerFinder(TM)
could be used as a tool for customer service for any site or suite of sites. As
a non Web site resident communications platform, both the customer service
representative and the customer will be able to discuss the products or features
while looking at one or more Web pages together.
Licensing for Intranet or Business-to-Business Portal Use - PeerFinder(TM)
could be used as an intranet, extranet or business-to-business portal
application. For corporate intranet and extranet uses the product could be
renamed and the focus of the product would be on the benefits of "Instant
Collaboration."
Collaborative Research and Licenses
We sponsor research and development activities in laboratories at
Rockefeller, Oregon State, and Washington University. We have a research and
development facility in Corvallis, Oregon. We have entered into the following
license agreements and collaborative research arrangements:
Rockefeller University. Siga and Rockefeller have entered into an
exclusive worldwide license agreement whereby we have obtained the right and
license to make, use and sell mucosal vaccines based on gram-positive organisms
and products for the therapy, prevention and diagnosis of diseases caused by
streptococcus, staphylococcus and other organisms. The license covers two issued
United States patents and one issued European patent as well as 11 pending
United States patent applications and corresponding foreign patent applications.
The issued United States patents expire in 2005 and 2014, respectively. The
agreement generally requires us to pay royalties on sales of products developed
from the licensed technologies and fees on revenues from sublicensees, where
applicable, and we are responsible for certain milestone payments and for the
costs of filing and prosecuting patent applications.
Oregon State University. Oregon State is also a party to our license
agreement with Rockefeller whereby we have obtained the right and license to
make, use and sell products for the therapy, prevention and diagnosis of
diseases caused by streptococcus. Pursuant to a separate research support
agreement with Oregon State, we provided funding for sponsored research through
December 31, 1999, with exclusive license rights to all inventions and
discoveries resulting from this research. At this time, no additional funding is
contemplated under this agreement, however we retain the exclusive licensing
rights to the
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inventions and discoveries that may arise from this collaboration. During 1999,
we acquired an option to enter into a license with the University in which we
will acquire the rights to certain technology pertaining to the potential
development of a chlamydia vaccine. In February 2000 we exercised our option and
will make certain payments to the University as part of our obligation under the
option.
National Institutes of Health. We have entered into a clinical trials
agreement with the NIH pursuant to which the NIH, with our cooperation, will
conduct a clinical trial of our strep throat vaccine candidate. In addition,
during 1999, we received two Phase I SBIR grants from the NIH to support our
vaccine and anti infectives development programs.
Wyeth-Ayerst. We have entered into a collaborative research and license
agreement with Wyeth-Ayerst in connection with the discovery and development of
anti-infectives for the treatment of gram-positive bacterial infections.
Pursuant to the agreement, Wyeth-Ayerst provided funding for a joint research
and development program, subject to certain milestones, through September 30,
1999 and is responsible for additional milestone payments. We are currently
negotiating with Wyeth-Ayerst to expand their funding support of the development
program.
Washington University. We entered into a research collaboration and
worldwide license agreement with Washington University pursuant to which we
obtained the right and license to make, use and sell antibiotic products based
on gram-negative technology for all human and veterinary diagnostic and
therapeutic uses. The license covered five pending United States patent
applications and corresponding foreign patent applications. The agreement
generally required us to pay royalties on sales of products developed from the
licensed technologies and fees on revenues from sublicensees, where applicable,
and we were responsible for certain milestone payments and for the costs of
filing and prosecuting patent applications. Pursuant to the agreement, we agreed
to provided funding to Washington University for sponsored research through
February 6, 2001, with exclusive license rights to all inventions and
discoveries resulting from this research. During 1999 a dispute arose between
the parties regarding their respective performance under the agreement. In
February 2000, the parties reached a settlement agreement and mutual release of
their obligations under the research collaboration agreement. Under the terms of
the settlement, we are released from any further payments to the University and
have disclaimed any rights to the patents licensed under the original agreement.
As part of the settlement agreement, we entered into a non-exclusive license to
certain patents covered in the original agreement.
Chiron. We entered into a collaborative research agreement with Chiron
regarding research toward the development of mucosal vaccines against HIV. The
agreement expired on December 31, 1999 and has not been renewed.
Abbott Laboratories. In February 2000 we entered into an option agreement
with Ross. In the agreement, we granted Ross an exclusive option to negotiate an
exclusive license to certain of our technology and patents for use in the
treatment of sexually transmitted diseases. In exchange for the option, Ross
will make payments to us against certain product development milestones.
Open-i Media. We entered into an agreement with Open-i in October 1999 for
the development and acquisition of the source code for a client/server chat and
instant messaging Internet application. As development milestones are reached,
we will pay Open-i a combination of $200,000 cash and 125,000 shares of common
stock. In March 2000 we entered into a second agreement with Open-i for
additional Internet development service and consultation. Open-I will receive
$280,000 in cash and shares of common stock against certain development
milestones that they will achieve during the year 2000. The number of shares
Open-i will receive will depend on the closing sales price of the our common
shares at the time the milestone is achieve. In the aggregate, they will receive
a total of $125,000 in stock at a price equal to the fair market value of our
common stock at the time the milestone is achieved.
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Intellectual Property and Proprietary Rights
Protection of our proprietary compounds and technology is essential to our
business. Our policy is to seek, when appropriate, protection for our lead
compounds and certain other proprietary technology by filing patent applications
in the United States and other countries. We have licensed the rights to seven
issued United States patents and one issued European patent. We have also
licensed the rights to one allowed United States patent application, four
pending United States patent applications as well as corresponding foreign
patent applications. We are joint owner with Washington University of one
issued, one allowed application, and one pending application as well as foreign
counterparts. We are also exclusive owner of three pending U.S. applications
based on research out of our facility in Oregon.
The patents and patent applications licensed us relate to all of the core
technology used in the development of our leading product candidates, including
the mucosal vaccine delivery system, the SPEX protein expression system for
producing biopharmaceutical products, the protective streptococcal antigens and
the antibiotic development target, as well as a variety of early stage research
projects. Each of our products represented by each of the patents is in a very
early stage in its development process.
We also rely upon trade secret protection for our confidential and
proprietary information. No assurance can be given that other companies will not
independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to our trade secrets or that we can
meaningfully protect our trade secrets.
Government Regulation
Regulation by governmental authorities in the United States and other
countries will be a significant factor in the production and marketing of any
biopharmaceutical products that we may develop. The nature and the extent to
which such regulation may apply to us will vary depending on the nature of any
such products. Virtually all of our potential biopharmaceutical products will
require regulatory approval by governmental agencies prior to commercialization.
In particular, human therapeutic products are subject to rigorous pre-clinical
and clinical testing and other approval procedures by the FDA and similar health
authorities in foreign countries. Various federal statutes and regulations also
govern or influence the manufacturing, safety, labeling, storage, record keeping
and marketing of such products. The process of obtaining these approvals and the
subsequent compliance with appropriate federal and foreign statutes and
regulations requires the expenditure of substantial resources.
In order to test clinically, produce and market products for diagnostic or
therapeutic use, a company must comply with mandatory procedures and safety
standards established by the FDA and comparable agencies in foreign countries.
Before beginning human clinical testing of a potential new drug, a company must
file an IND and receive clearance from the FDA. This application is a summary of
the pre-clinical studies that were conducted to characterize the drug, including
toxicity and safety studies, as well as an in-depth discussion of the human
clinical studies that are being proposed.
The pre-marketing program required for approval of a new drug typically
involves a time-consuming and costly three-phase process. In Phase I, trials are
conducted with a small number of patients to determine the early safety profile,
the pattern of drug distribution and metabolism. In Phase II, trials are
conducted with small groups of patients afflicted with a target disease in order
to determine preliminary efficacy, optimal dosages and expanded evidence of
safety. In Phase III, large scale, multi-center comparative trials are conducted
with patients afflicted with a target disease in order to provide enough data
for statistical proof of efficacy and safety required by the FDA and others.
The FDA closely monitors the progress of each of the three phases of
clinical testing and may, in its discretion, reevaluate, alter, suspend or
terminate the testing based on the data that have been accumulated to that point
and its assessment of the risk/benefit ratio to the patient. Estimates of the
total time required
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for carrying out such clinical testing vary between two and ten years. Upon
completion of such clinical testing, a company typically submits a New Drug
Application ("NDA") or Product License Application ("PLA") to the FDA that
summarizes the results and observations of the drug during the clinical testing.
Based on its review of the NDA or PLA, the FDA will decide whether to approve
the drug. This review process can be quite lengthy, and approval for the
production and marketing of a new pharmaceutical product can require a number of
years and substantial funding; there can be no assurance that any approvals will
be granted on a timely basis, if at all.
Once the product is approved for sale, FDA regulations govern the
production process and marketing activities, and a post-marketing testing and
surveillance program may be required to monitor continuously a product's usage
and its effects. Product approvals may be withdrawn if compliance with
regulatory standards is not maintained. Other countries in which any products
developed by us may be marketed could impose a similar regulatory process.
Competition
The biotechnology and pharmaceutical industries are characterized by
rapidly evolving technology and intense competition. Our competitors include
most of the major pharmaceutical companies, which have financial, technical and
marketing resources significantly greater than ours. Biotechnology and other
pharmaceutical competitors include Cubist Pharmaceuticals, Inc., Corixa
Coproration, Microcide Pharmaceuticals, Inc., ID Vaccines Ltd., Actinova PLC,
and Antex Biologics, Inc. Academic institutions, governmental agencies and other
public and private research organizations are also conducting research
activities and seeking patent protection and may commercialize products on their
own or through joint venture. There can be no assurance that our competitors
will not succeed in developing products that are more effective or less costly
than any which are being developed by us or which would render our technology
and future products obsolete and noncompetitive.
The Internet is characterized by rapidly evolving technology and intense
competition. Our competitors include some of the largest and most successful
Internet companies formed to date which have financial, technical and marketing
resources significantly greater than those of Siga. These competitors include
America Online Inc., Microsoft Corporation, CMGI Inc, Hypernix Technologies Ltd,
MultiMate.net Inc. and Cahoots, Inc. There can be no assurance that our
competitors will not succeed in developing products that are more effective or
less costly than any which are being developed by us or which would render our
technology and future products obsolete and non-competitive.
Human Resources and Facilities
As of March 20, 2000 we had 17 full time employees. Our employees are not
covered by a collective bargaining agreement and we consider our employee
relations to be excellent.
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Item 2. Properties
Our headquarters and Internet operation are located in New York, New York
and our biopharmaceutical research and development facilities are located in
Corvallis, Oregon. In New York, we lease approximately 5,200 square feet under a
lease that expires in November 2002. In Corvallis, we lease approximately 10,000
square feet under a lease that expires in December 2004.
Item 3. Legal Proceedings
In February of 1998, we entered into a research collaboration and license
agreement with Washington University. Under the terms of the agreement, we were
granted an exclusive world-wide license to make, use and sell products derived
from the licensed technology, in exchange for royalty payments equal to a
certain percentage of net sales of products incorporating the licensed
technology, and certain milestone payments. In addition, we agreed to sponsor
further research by the University for the development of the licensed
technology. In July 1997, we entered into a separate consulting agreement with a
faculty member of the University. A dispute arose between Siga and the
University and the consultant regarding, among other things, the performance of
the parties under the agreements. In May 1999, the University sent us notice of
intent to terminate the agreement in 90 days claiming certain payments were not
made. It was our position that, among other things, such payments are not owed
due to the University's failure to perform. Under the arbitration clause of the
agreement, the University, in July 1999, commenced an arbitration seeking an
award in the amount of $230,000. We also commenced an arbitration seeking a
determination that such amount is not owed the University and seeking our own
award of $5 million. In February 2000 the parties reached a settlement agreement
and mutual release of their obligations under the research collaboration and
licensing agreement entered into in February of 1998. Further, all personal
consulting agreements between Siga and Washington University faculty members and
employees were also terminated. Under the terms of the settlement agreement any
payments owed by Siga under the research collaboration and licensing agreement
are cancelled. In addition, all payments owed faculty members under consulting
agreements are also cancelled. The University will reimburse Siga $37,037 for
certain patent expenses incurred under the research collaboration. We have
disclaimed any rights to patents licensed under the February 1998 agreement.
however, if the University successfully commercializes any of the patents, they
agree to pay Siga licensing revenue arising from products commercialized. As
part of the settlement agreement and mutual release Siga and the University
entered into a non-exclusive license of certain patents that were part of the
research collaboration
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the quarter
ended December 31, 1999.
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Part II
Item 5. Market For Registrant's Common Equity and Related Stockholder Matters
Price Range of Common Stock
Our common stock has been traded on the Nasdaq SmallCap Market since
September 9, 1997 and trades under the symbol "SIGA." Prior to that time there
was no public market for our common stock. The following table sets forth, for
the periods indicated, the high and low closing sales prices for the common
stock, as reported on the Nasdaq SmallCap Market.
Price Range
1998 High Low
First Quarter $4.88 $4.00
Second Quarter $4.53 $3.88
Third Quarter $3.63 $1.13
Fourth Quarter $2.88 $1.06
1999 High Low
First Quarter $1.88 $1.03
Second Quarter $1.44 $0.81
Third Quarter $1.41 $0.69
Fourth Quarter $2.09 $0.97
As of March 20, 2000, the closing sales price of our common stock was
$6.50 per share. There were 34 holders of record as of March 20, 2000. We
believe that the number of beneficial owners is substantially greater than the
number of record holders, because a large portion of common stock is held in
broker "street names."
We have paid no dividends on our common stock and we do not expect to pay
cash dividends in the foreseeable future. We are not under any contractual
restriction as to our present or future ability to pay dividends. We currently
intend to retain any future earnings to finance the growth and development of
our business.
Sales of Unregistered Securities
On January 31, 2000 we completed a private placement of an aggregate
principal amount of $1,500,000 6% convertible debentures and 1,043,478 warrants.
We received net proceeds of $1,499,674 from the total $1,552,174 gross proceeds.
The debentures are convertible into common stock at $1.44 per share. The
warrants have a term of five years and are exercisable at $3.41 per share. Under
certain circumstances, we can redeem the shares.
On March 28, 2000 we completed a private placement of an aggregate of
600,000 shares of common stock and 450,000 warrants. We received net proceeds of
$2,883,000 from the total gross proceeds of $3,000,000. The warrants have a term
of three years; 210,000 warrants are exercisable at $5.00 per share, 120,000 are
exercisable at $6.375 per share and 120,000 are exercisable at $6.90 per share.
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Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
OF OPERATIONS
The following discussion should be read in conjunction with our financial
statements and notes to those statements and other financial information
appearing elsewhere in this Annual Report. In addition to historical
information, the following discussion and other parts of this Annual Report
contain forward-looking information that involves risks and uncertainties.
Overview
We are a development stage, technology company, whose primary focus is in
biopharmaceutical product development. Since inception in December 1995 our
efforts have been principally devoted to research and development, securing
patent protection, obtaining corporate relationships and raising capital. In
October of 1999, we began the development of a strategic alternative outside the
biotechnology area with an agreement with Open-i Media, Inc. ("Open-i"), a New
York based software and web developer to develop an instant messenger product.
Since inception through December 31, 1999, we have sustained cumulative net
losses of $14,651,980, including non-cash charges in the amount of $1,457,458
for the write-off of research and development expenses associated with the
acquisition of certain technology rights acquired from a third party in exchange
for our common stock. In addition, a non-cash charge of $450,450 was incurred
for stock option and warrant compensation expense. Our losses have resulted
primarily from expenditures incurred in connection with research and
development, patent preparation and prosecution and general and administrative
expenses. From inception through December 31, 1999, research and development
expenses amounted to $7,666,981, patent preparation and prosecution expenses
totaled $1,130,844, general and administration expenses amounted to $7,413,056.
From inception through December 31, 1999 revenues from research and development
agreements and government grants totaled $1,644,561.
In October of 1999, we entered into an agreement with Open-i for the
development and acquisition of the source code for a client/server chat and
instant messaging application. Through December 31, 1999, we have paid Open-i
$100,000 of the total $200,000 cash development cost and 25,000 shares of the
total 125,000 shares due under the terms of the agreement. Through December 31,
1999 we have incurred expenses of approximately $316,547, including payments to
Open-i, for the development of our instant messenger product. We expect to
continue to incur substantial costs in the future associated with the
development and marketing of our Internet product. General and administrative
expenses needed to support the product development and marketing effort are also
expected to be substantial.
At the time we announced our decision to develop our instant messenger
product, we also announced that we would consolidate our biotechnology assets
and operations in our research facility in Corvallis Oregon. Our goal is to fund
our ongoing vaccine and antibiotic programs through a combination of government
grants, corporate partnerships and strategic alliances. No assurance can be
given that we will be successful in obtaining funds from these sources. Until
such relationships are established, we expect to continue to incur significant
research and development costs and cost associated with the manufacturing of
product for use in clinical trials and pre-clinical testing. It is expected that
general and administrative costs, including patent and regulatory costs,
necessary to support clinical trials, research and development will continue to
be significant in the future.
To date, we have not marketed, or generated revenues from the commercial
sale of any products. Our biopharmaceutical product candidates are not expected
to be commercially available for several years if at all. Accordingly, we expect
to incur operating losses for the foreseeable future. There can be no assurance
that we will ever achieve profitable operations.
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Results of Operations
Twelve Months ended December 31, 1999, December 31, 1998 and December 31, 1997
Revenues from grants and research and development contracts were $519,561
for the twelve months ended December 31, 1999 compared to $450,000 for the same
period of 1998, and $675,000 for the twelve months ended December 31, 1997. The
approximate 15.5% increase in revenue is due to the receipt of two Small
Business Innovation Research (SBIR) grants from the National Institutes of
Health (NIH) that generated $182,061 in revenue for 1999. The receipt of grant
income more than offset the $112,500 decline in revenues received under an
agreement entered into in July of 1997 with Wyeth-Ayerst, under which we
received certain payments for research and development activities sponsored by
Wyeth-Ayerst. The approximate 33.3% decline in revenue for the twelve months
ended December 31, 1998 compared to the same period of 1997 reflects a $300,000
one time up front payment made by Wyeth-Ayerst at the time the agreement was
entered into in July of 1997.
Research and development expenses decreased to $1,672,778 for the twelve
months ended December 31, 1999 from $4,385,213 for the same period in 1998.
Research and development spending in the twelve months ended December 31, 1997
were $946,785. The approximate 61.9% decrease in spending from 1998 compared to
1999, is primarily the result of a reduction in activity with higher cost third
party entities, including sponsored research at universities, in favor of
performing the work at our research facility in Corvallis, Oregon. We also
incurred a non-cash charge for the twelve months ended December 31, 1998 of
$1,457,458 for research and development costs associated with the acquisition of
certain technology from MedImmune, Inc. in exchange for 335,530 shares of our
common stock. In the year ended December 31, 1999, we spent approximately
$137,500 in development spending on Internet product development. The $3,438,428
increase in spending in 1998 compared to 1997 reflects the non-cash charge for
research and development costs associated with the acquisition of technology,
combined with the high level of activity of sponsored research programs with
universities, the start-up costs of our research facility, higher levels of
third party production of product for clinical trials and the clinical
management expenses associated with those trials.
General and administrative expenses decreased approximately 18% for the
twelve months ended December 31, 1999 to $2,284,790 from $2,784,763 for the
twelve months ended December 31, 1998. The reduction in spending is the result
of a reduction in general and administrative compensation combined with a
decline in the use of consultants and lower reduced travel expense. In 1999
approximately $179,047 of the expenses incurred were associated with our initial
efforts in developing our instant messenger product. General and administrative
expenses for the twelve months ended December 31, 1998 were 79% above the
$1,554,686 level for the twelve month period ending December 31, 1997. The
increase was due to an increase in staff, higher accounting and legal expenses
associated with being a public company, and higher spending levels needed to
support our expanded research and development effort.
Patent preparation expense of $193,567 for the twelve months ended
December 31, 1999 was 1.8% lower than the $197,071 incurred for the twelve
months ending December 31, 1998. The relatively flat spending is primarily the
result of maintenance of the existing technology patent portfolio rather than
the addition of new technology. Patent expenses for the year ended December 31,
1998 were approximately 31% below the spending levels for 1997. The decline from
1997 to 1998 reflects the redirection of our activity away from technology and
patent acquisition to the development of potential products from the patents and
technology acquired by us in prior years. Our patent efforts are directed at
supporting the existing technology and development of patents on technology
developed directly by us.
In the twelve months ended December 31, 1999 we incurred expenses of
$97,696 resulting from the settlement of litigation with a university where we
had been sponsoring research. The settlement expenses are for the transfer of
title to the university of certain fixed assets as part of the settlement
agreement. No such expenses were incurred in 1998 or 1997.
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Total operating loss for the twelve months ended December 31, 1999 was
$3,729,543, an approximate 46% decrease from the $6,931,453 loss incurred for
the twelve months ended December 31, 1998. The decrease in the operating loss is
the result of a modest increase in revenue combined with a material reduction in
research and development spending as well as lower general and administrative
expenses as described above. Excluding the $1,457,458 the one-time charge
associated with our purchase of certain technology from MedImmune, the decrease
in the 1999 operating loss was approximately 32% from 1998. The approximate $6.9
million operating loss incurred in the twelve months ended December 31, 1998 was
218% greater than the approximately $2.2 million loss for 1997. The increased
loss was primarily the result of higher research and development expenses along
with an increase in general and administration spending to support the increased
level of research and development activity.
Net interest income for the twelve months ended December 31, 1999 was
$26,383 an approximate 93% decrease from income of $379,788 in the twelve months
ended December 31, 1998. The lower level of net interest income is the result of
the decrease in the cash available for investment in the current year period as
the funds raised in our September 1997 initial public offering (IPO) were
expended in accordance with our development plan combined with higher levels of
interest expense associated with the equipment leases. For the twelve months
ended December 31, 1997 we incurred net interest expense of $12,378. The
improvement to interest income of $379,788 for the twelve months ended December
31, 1998 is the result of repayment of debt outstanding at the time of our IPO
and the investment of the proceeds of the offering. We recorded a net gain of
$66,660 for the twelve months ended December 31, 1999 from the sale of certain
securities held for investment purposes. No such income was received in the
years ending December 31, 1998 and 1997.
Net loss per common share of $.55 for the twelve months ended December 31,
1999 was 45% less than the $1.00 loss per share for the twelve months ended
December 31, 1998. The improvement in the loss per share is the result of
increased revenues, lower research and development and general and
administrative expenses. The $1.00 loss for 1998 was approximately 92% greater
than the net loss per share of $.52 incurred for 1997. The increase in the loss
per share in 1998 was the result of lower revenues, and higher levels of
spending as described above, partially offset by the 55% increase in the
weighted average number of shares outstanding due to the IPO and the issuance of
the 335,530 shares to MedImmune. Excluding the one-time write-off of in-process
research and development associated with the MedImmune transaction, the increase
in the net loss per share is reduced to 48%.
Liquidity and Capital Resources
As of December 31, 1999 we had $1,758,541 in cash and cash equivalents and
$1,163,214 of net working capital. In July, August and September of 1998 we sold
certain laboratory equipment, computer equipment and furniture to a third party,
for $493,329, $385,423 and $260,333, respectively, under sale/leaseback
arrangements. The leases have a term of 42 months and require minimum monthly
payments of $13,171, $10,290 and $6,950, respectively. We have an option to
purchase the equipment for Fair Market Value (defined in the agreement as 15% of
original cost) at the end of the lease. In July of 1997 we entered into a
collaborative research and license agreement with Wyeth-Ayerst. Under the terms
of the agreement, we have granted Wyeth-Ayerst an exclusive worldwide license to
develop, make, use and sell products derived from specified technologies. If
certain milestones are met, the agreement requires Wyeth-Ayerst to sponsor
further research by us for the development of the licensed technologies for a
period of two years from the effective date of the agreement, in return for
payments to Siga. Through December 31, 1999 we have received a total of
$1,462,500 from Wyeth-Ayerst. In July and October of 1999 we were awarded SBIR
grants from the NIH. The grant received in July was for a six month program for
a total of $109,072. As of December 31, 1999 we had received $86,243. The
October grant is a twelve month program for a total of $293,466, of which,
$48,248 was received at December 31, 1999. The remaining $268,047 due under the
grants is scheduled to be received during the twelve months ending December 31,
2000.
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In January of 2000 we sold an aggregate principal amount of $1,500,000 6%
convertible debentures due January 2002 with warrants to purchase 1,043,478
shares of common stock. We received net proceeds of $1,499,674 from the total
$1,552,174 gross proceeds. The interest on the debentures is payable in either
cash or stock at our discretion. The debentures are convertible into common
stock at $1.44 per share. The warrants have a term of five years and are
exercisable at $3.41 per share. Under certain circumstances, we can redeem the
warrants.
In February of 2000 we entered into an Option Agreement with the Ross
Products Division of Abbott Laboratories (Ross). The Agreement grants Ross an
exclusive option to negotiate an exclusive license to certain Siga technology
and patents. In exchange for the Option, Ross will make payments to us totaling
$120,000, $40,000 of which was paid upon signing. The remainder will be paid in
$40,000 installments against certain milestones.
On March 28, 2000 we completed a private placement of an aggregate of
600,000 shares of common stock and 450,000 warrants. We received net proceeds of
$2,883,000 from the total gross proceeds of $3,000,000. The warrants have a term
of three years; 210,000 warrants are exercisable at $5.00 per share, 120,000 are
exercisable at $6.375 per share and 120,000 are exercisable at $6.90 per share
We anticipate that our current resources will be sufficient to finance our
currently anticipated needs for operating and capital expenditures approximately
through the end of the second quarter of 2001. In addition, we will attempt to
generate additional working capital through a combination of collaborative
agreements, strategic alliances, research grants, equity and debt financings.
However, no assurance can be provided that additional capital will be obtained
through these sources or if obtained on commercially reasonable terms.
Our working capital and capital requirements will depend upon numerous
factors, including progress of the development of our instant messenger product
and the success of the product in the market, pharmaceutical research and
development programs; pre-clinical and clinical testing; timing and cost of
obtaining regulatory approvals; levels of resources that we devote to the
development of manufacturing and marketing capabilities; technological advances;
status of competitors; and our ability to establish collaborative arrangements
with other organizations.
The Year 2000
To date, we have not experienced any disruptions in our operations as a
result of the impact of the year 2000 on the ability of our computerized
information systems to accurately process information that may be date
sensitive. In addition, there has not been any impact on our operations from
disruptions that may have occurred at third parties due to the year 2000.
20
<PAGE>
Risk Factors That May Affect Results of Operations and Financial Condition
We have incurred operating losses since our inception and expect to incur
net losses and negative cash flow for the foreseeable future. We incurred net
losses of $2.2 million for the year ended December 31, 1997, $6.6 million for
the year ended December 31, 1998 and $3.6 million for the year ended December
31, 1999. As of December 31, 1999 and December 31, 1998, our accumulated deficit
was $14.7 million and $11.0 million, respectively. We expect to continue to
incur significant operating and capital expenditures and, as a result, we will
need to generate significant revenues to achieve and maintain profitability.
We cannot guarantee that we will achieve sufficient revenues for
profitability. Even if we do achieve profitability, we cannot guarantee that we
can sustain or increase profitability on a quarterly or annual basis in the
future. If revenues grow slower than we anticipate, or if operating expenses
exceed our expectations or cannot be adjusted accordingly, our business, results
of operations and financial condition will be materially and adversely affected.
Because our strategy includes acquisitions of other businesses, acquisition
expenses and any cash used to make these acquisitions will reduce our available
cash.
We are in various stages of product development and there can be no
assurance of successful commercialization. Our research and development programs
are at an early stage of development. The United States Food and Drug
Administration has not approved any of our biopharmaceutical product candidates.
Any drug candidates developed by us will require significant additional research
and development efforts, including extensive pre-clinical and clinical testing
and regulatory approval, prior to commercial sale. We cannot be sure our
approach to drug discovery will be effective or will result in the development
of any drug. We cannot expect that any drugs that do result from our research
and development efforts will be commercially available for many years.
We have limited experience in conducting pre-clinical testing and clinical
trials. Even if we receive initially positive pre-clinical results, such results
do not mean that similar results will be obtained in the later stages of drug
development, such as additional pre-clinical testing or human clinical trials.
All of our potential drug candidates are prone to the risks of failure inherent
in pharmaceutical product development, including the possibility that none of
our drug candidates will or can:
o be safe, non-toxic and effective;
o otherwise meet applicable regulatory standards;
o receive the necessary regulatory approvals;
o develop into commercially viable drugs;
o be manufactured or produced economically and on a large scale;
o be successfully marketed;
o be reimbursed by government or private consumers; and
o achieve customer acceptance.
In addition, third parties may preclude us from marketing our drugs
through enforcement of their proprietary rights. Or, third parties may succeed
in marketing equivalent or superior drug products. Our
21
<PAGE>
failure to develop safe, commercially viable drugs would have a material adverse
effect on our business, financial condition and results of operations.
We face difficulties typically encountered by development stage companies
in new and rapidly evolving markets because of our new Internet initiative. We
have recently begun developing PeerFinder(TM), a third generation instant
messenger. An investor purchasing our common stock must therefore consider the
risks and difficulties frequently encountered by early stage companies in new
and rapidly evolving markets, such as online commerce. These risks include our
ability to:
o develop our web site;
o acquire rights to content for our web site;
o create a customer base;
o respond to changes in a rapidly evolving and unpredictable business
environment;
o maintain current and develop new strategic relationships;
o manage growth;
o continue to develop and upgrade our technology; and
o attract, retain and motivate qualified personnel.
We cannot assure you that any services or products developed by us,
independently or with collaborative partners, will achieve market acceptance.
We may be subject to additional litigation and infringement claims. The
technology that we use to develop our products, and those that we incorporate in
our products, may be subject to claims that they infringe the patents or
proprietary rights of others. The risk of this occurring will tend to increase
as the biotechnology and software industries expand, more patents are issued and
other companies attempt to develop mucosal vaccines and anti-infectives
programs.
As is typical in the biotechnology and software industries, we have
received, and we will probably receive in the future, notices from third parties
alleging patent infringement. We believe that we are not infringing the patent
rights of any such third party.
We may, however, be involved in future lawsuits alleging patent
infringement or other intellectual property rights violations. In addition,
litigation may be necessary to:
o assert claims of infringement;
o enforce our patents;
o protect our trade secrets or know-how; or
o determine the enforceability, scope and validity of the proprietary
rights of others.
We may be unsuccessful in defending or pursuing these lawsuits. Regardless
of the outcome, litigation can be very costly and can divert management's
efforts. An adverse determination may subject us to significant liabilities or
require us to seek licenses to other parties' patents or proprietary rights. We
may also be restricted or prevented from manufacturing or selling our products.
Further, we may not be able to obtain the necessary licenses on acceptable
terms, if at all.
22
<PAGE>
We may have difficulty managing our growth. We expect to continue to
experience significant growth in the number of our employees and the scope of
our operations. This growth has placed, and may continue to place, a significant
strain on our management and operations. Our ability to manage this growth will
depend upon our ability to broaden our management team and our ability to
attract, hire and retain skilled employees. Our success will also depend on the
ability of our officers and key employees to continue to implement and improve
our operational and other systems and to hire, train and manage our employees.
We depend on key employees in a competitive market for skilled personnel.
We are highly dependent on the principal members of our management, operations
and scientific staff, including Joshua D. Schein, our Chief Executive Officer.
The loss of any of these persons' services would have a material adverse effect
on our business. We have entered into employment agreements with seven
individuals who we consider to be "Key Employees." We do not maintain a key
person life insurance policy on the life of any employee.
Our future success also will depend in part on the continued service of
our key scientific, software, bioinformatics and management personnel and our
ability to identify, hire and retain additional personnel, including customer
service, marketing and sales staff. We experience intense competition for
qualified personnel. We may not be able to continue to attract and retain
personnel necessary for the development of our business.
Our activities involve hazardous materials and may subject us to
environmental regulatory liabilities. Our biopharmaceutical research and
development involves the controlled use of hazardous and radioactive materials
and biological waste. We are subject to federal, state and local laws and
regulations governing the use, manufacture, storage, handling and disposal of
these materials and certain waste products. Although we believe that our safety
procedures for handling and disposing of these materials comply with legally
prescribed standards, the risk of accidental contamination or injury from these
materials cannot be completely eliminated. In the event of an accident, we could
be held liable for damages, and this liability could exceed our resources.
We believe that we are in compliance in all material respects with
applicable environmental laws and regulations and currently do not expect to
make material additional capital expenditures for environmental control
facilities in the near term. However, we may have to incur significant costs to
comply with current or future environmental laws and regulations.
We could still face problems related to the year 2000 issue. To date, we
have not experienced any impairment in our internal operations with the year
2000 issue. Nevertheless, computer experts have warned that there may still be
residual consequences stemming from the change in centuries and, if these
consequences become widespread, they could result in claims against us,
increased operating expenses and other business interruptions. We have not
developed any specific contingency plan for year 2000 issues.
Item 7. Financial Statements and Supplementary Data
The financial statements required by Item 7 are included in this
Annual Report beginning on Page F-1.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
23
<PAGE>
PART III
Item 9. Directors and Executive Officers of the Registrant
Name Age Position
- ---- --- --------
Joshua D. Schein, Ph.D. 39 Chief Executive Officer, Secretary and Director
Judson A. Cooper 41 Chairman of the Board, Executive Vice President
Thomas N. Konatich 54 Chief Financial Officer and Treasurer
Dennis E. Hruby, Ph.D. 48 Vice President of Research
Scott Eagle 40 Director
Thomas Lanier 40 Director
Jeffrey Rubin 32 Director
Joshua D. Schein, Ph.D. has served as our Chief Executive Officer since
August 1998 and as acting Chief Executive Officer from April 1998 to August
1998. Dr. Schein has also served as Secretary and a Director since December
1995. Dr. Schein served as Chief Financial Officer from December 1995 until
April 1998. From December 1995 to June 1998, Dr. Schein was a Director of
DepoMed, Inc. a publicly traded biotechnology company. From January 1996 to
August 1998, Dr. Schein was an executive officer and a director of Virologix
Corporation, a private biotechnology company. From June 1996 to September 1998,
Dr. Schein was an executive officer and a director of Callisto Pharmaceuticals,
Inc. From 1994 to 1995, Dr. Schein served as a Vice President of Investment
Banking at Josephthal, Lyon and Ross, Incorporated, an investment banking firm.
From 1991 to 1994, Dr. Schein was a Vice President at D. Blech & Company,
Incorporated, a merchant and investment banking firm focused on the
biopharmaceutical industry. Dr. Schein received a Ph.D. in neuroscience from the
Albert Einstein College of Medicine and an MBA form the Colombia Graduate School
of Business. Dr. Schein is a principal of Prism Ventures LLC ("Prism"), a
privately held limited liability company.
Judson A. Cooper has served as our Chairman of the Board of Directors
since August 1998 and as acting Chairman of the Board from April 1998 to August
1998. Mr. Cooper has also served as a Director since December 1995 and Executive
Vice President since November 1996. From December 1995 until November 1996 Mr.
Cooper served as President. From August 1995 to June 1998, Mr. Cooper was a
Director of DepoMed, Inc., a publicly traded biotechnology company. From January
1996 to August 1998, Mr. Cooper was an executive officer and a director of
Virologix Corporation, a private biotechnology company. From June 1996 to
September 1998, Mr. Cooper was an executive officer and a director of Callisto
Pharmaceuticals, Inc. Mr. Cooper was a private investor from September 1993 to
December 1995. From 1991 to 1993, Mr. Cooper served as a Vice President of D.
Blech & Company, Incorporated. Mr. Cooper is a graduate of the Kellog School of
Management. Mr. Cooper is a principal of Prism Ventures LLC ("Prism"), a
privately held limited liability company.
Thomas N. Konatich has served as Chief Financial Officer and Treasurer
since April 1, 1998. From November 1996 through March 1998, Mr. Konatich served
as Chief Financial Officer and a Director of Innapharma, Inc., a privately held
pharmaceutical development company. From 1993 through November 1996, Mr.
Konatich served as Vice President and Chief Financial Officer of Seragen, Inc.,
a publicly traded biopharmaceutical development company. From 1988 to 1993, he
was Treasurer of Ohmicron Corporation, a venture capital firm. Mr. Konatich has
an MBA from the Columbia Graduate School of Business.
24
<PAGE>
Dennis F. Hruby, Ph.D. has served as Vice-President of Research since
April 1,1997. From January 1996 through March 1997, Dr. Hruby served as a senior
scientific advisor to Siga. Dr. Hruby is a Professor of Microbiology at Oregon
State University, and from 1990 to 1993 was Director of the Molecular and
Cellular Biology Program and Associate Director of the Center for Gene Research
and Biotechnology. Dr. Hruby specializes in virology and cell biology research,
and the use of viral and bacterial vectors to produce recombinant vaccines. He
is a member of the American Society of Virology, the American Society for
Microbiology and a fellow of the American Academy of Microbiology. Dr. Hruby
received a Ph.D. in microbiology from the University of Colorado Medical Center
and a B.S. in microbiology from Oregon State University.
Scott Eagle has been a Director since January 2000. Mr. Eagle has been,
since November 1998, Vice President of Marketing at Gator.com, where he manages
the marketing team and oversees business development and partnership activities.
Prior to joining Gator.com, Mr. Eagle was the Vice President of Marketing at
Concentric Network Corporation from 1996 to 1998. Before Concentric, from 1993
to 1996, Mr. Eagle served as Vice President of Marketing at MFS Communications
where he launched regional marketing campaigns for the start-up MFS Intelnet
subsidiary. Mr. Eagle began his career at Proctor and Gamble in marketing and
new product development for the consumer package goods, managing brands such as
Formula 44 and Chloraseptic. Mr. Eagle holds a B.S. from the University of
Pennsylvania, Wharton School.
Thomas Lanier has been a Director since January 2000. Since 1996, Mr.
Lanier has been an International Advisor for the U.S. Department of the Treasury
during which time he co-wrote the U.S. Treasury's guide to external debt
issuance for emerging market borrowers. From 1988 until 1996 Mr. Lanier worked
for Chemical Bank as a U.S. Government Bond Trader (1988-1993), Emerging Markets
Salesperson (1993-1994) and Emerging Markets Debt Trader (1994-1996). In 1981
Mr. Lanier graduated form the United States Military Academy at West Point with
a Bachelor of Science Degree and prior to leaving the Army in 1986, also
graduated from the U.S. Army Airborne School and the U.S. Army Flight School as
well as planning, organizing and controlling logistical operations on an
international project for the Army Chief of Staff. In 1998, Mr. Lanier received
a Masters of Business Administration with an emphasis in finance and marketing
from the Fuqua School of Business, Duke University.
Jeffrey Rubin has been a director since November 1998. Mr. Rubin is
Principal and Managing Director of The Whitestone Group, an asset management and
investment banking firm he formed in January 1998. From 1994 to 1997, Mr. Rubin
was founder and a director of the Fastcast Corporation, a company specializing
in optical technologies. From 1989 to 1994, Mr. Rubin was a Vice President of
American European Corporation, an import/export company. Mr. Rubin received a
Bachelor of Arts degree in 1989 from the University of Michigan.
25
<PAGE>
Item 10. Executive Compensation
The following table sets forth the total compensation paid or accrued for
the years ended December 31, 1999, 1998 and 1997 for Siga's Chief Executive
Officer and its four most highly compensated executive officers, other than its
Chief Executive Officer, whose salary and bonus for the fiscal year ended
December 31, 1999 were in excess of $100,000.
Summary Compensation Table
Annual Compensation
<TABLE>
<CAPTION>
Long-Term
Compensation
Other Annual Securities
Compensation Underlying Options(#)
Name and Principal Position Year Salary ($) ($)
<S> <C> <C> <C> <C>
Joshua D. Shein, Ph.D., Chief 1999 225,000 -- 150,000
Executive Officer and Director
1998 170,940 -- 16,667
1997 154,616 -- 16,667
Judson A. Cooper, Executive Vice 1999 225,000 -- 150,000
President and Director
1998 170,939 -- 16,667
1997 154,616 -- 16,667
Dennis E. Hruby, Ph.D., Vice 1999 170,000 -- --
President of Research
1998 167,148 -- 40,000
1997 78,549 27,366 (1) 10,000
Thomas N. Konatich, Chief 1999 170,000 -- --
Financial Officer
1998 120,172 -- 95,000
</TABLE>
(1) Consisting of the value of common stock issued at fair market value.
26
<PAGE>
Option Grants for the Year Ended December 31, 1999
The following table sets forth grants of stock options to Siga's Chief
Executive Officer and its four most highly compensated executive officers, other
than its Chief Executive Officer, for the year ended December 31, 1999. The
exercise price per share of each option was equal to the fair market value at
the time of the grant. The potential realizable value is calculated based on the
term of the option at its time of grant ,10 years. It is calculated assuming
that the fair market value of common stock on the date of grant appreciates at
the indicated annual rate compounded annually for the entire term of the option
and that the option is exercised and sold on the last day of its term for the
appreciated stock price. These numbers are calculated based on the requirements
of the Securities and Exchange Commission and do not reflect Siga's estimate of
future stock price growth.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------
Percent
of Total Potential
Options Realizable Value
Granted at Assumed Annual
Number of to Rates of Stock
Securities Employees Exercise Price
Underlying in Price Appreciation for
Options Fiscal per -----------------
Granted Year Share Expiration Option Term
Name (#) (%)(1) ($/SH) Date 5%($) 10%($)
- ---- --- ------ ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Joshua D. Schein 150,000 25.0 1.125 11/11/09 274,876 437,694
Judson A. Cooper 150,000 25.0 1.125 11/11/09 274,876 437,694
</TABLE>
(1) Based on options to purchase an aggregate of 600,000 shares of common
stock granted under the Amended 1996 Incentive and Non-Qualified Stock
Option Plan.
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
The following table provides certain summary information concerning stock
options held as of December 31, 1999 by Siga's Chief Executive Officer and its
four most highly compensated executive officers, other than its Chief Executive
Officer. No options were exercised during fiscal 1999 by any of the officers.
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options
Options# at Fiscal Year-End($)(1)
------------------------------ ---------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
Joshua D. Schein 87,501 112,500 18,750 56,250
Judson A. Cooper 87,501 112,500 18,750 56,250
Dennis Hruby 15,000 35,000 0 0
Thomas N. Konatich 23,750 71,250 0 0
(1) Based upon the closing price on December 31, 1999 as reported on the
Nasdaq SmallCap Market and the exercise price per option.
27
<PAGE>
Stock Option Plan
As of January 1, 1996, we adopted our 1996 Incentive and Non-Qualified
Stock Option Plan (the "Plan"), pursuant to which stock options may be granted
to key employees, consultants and outside directors.
The Plan is administered by a committee (the "Committee") comprised of
disinterested directors. The Committee determines persons to be granted stock
options, the amount of stock options to be granted to each such person, and the
terms and conditions of any stock options as permitted under the Plan. The
members of the Committee are Scott Eagle and Jeffrey Rubin.
Both Incentive Options and Nonqualified Options may be granted under the
Plan. An Incentive Option is intended to qualify as an incentive stock option
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). Any Incentive Option granted under the Plan will have an
exercise price of not less than 100% of the fair market value of the shares on
the date on which such option is granted. With respect to an Incentive Option
granted to an employee who owns more than 10% of the total combined voting stock
of Siga or of any parent or subsidiary of Siga, the exercise price for such
option must be at least 110% of the fair market value of the shares subject to
the option on the date the option is granted. A Nonqualified Option (i.e., an
option to purchase common stock that does not meet the Code's requirements for
Incentive Options) must have an exercise price of at least the fair market value
of the stock at the date of grant.
The Plan, as amended, provides for the granting of options to purchase
1,500,000 shares of common stock, of which 1,130,561 options were outstanding as
of December 31, 1999.
Employment Contracts and Directors Compensation
Dr. Joshua Schein, our Chief Executive Officer, was employed under an
agreement through December 31, 1999 which had a base annual salary of $225,000
and granted him 16,667 options per year, exercisable at the fair market value on
the date of the grant. In January 2000 he entered into a new employment
agreement with Siga which expires January 2005 and is cancelable by Siga only
for cause, as defined in the agreement. The agreement is renewable for
additional one year terms unless cancelled by either party in writing 180 days
prior to cancellation. Dr. Schein receives an annual base salary of $250,000 and
he was granted 500,000 fully vested stock options upon signing the new
agreement. The options are exercisable at $2.00 per share, the fair market value
on the date of grant. He is eligible to receive additional stock options and
bonuses at the discretion of the Board of Directors. In addition, Dr. Schein
will receive a cash payment equal to 1.5% of the total consideration received by
Siga in a transaction resulting in a change of ownership of at least 50% of the
outstanding Siga common stock.
Judson Cooper, our Chairman of the Board of Directors, was employed under
an employment agreement through December 31, 1999 which had a base annual salary
of $225,000 and granted him 16,667 options per year, exercisable at the fair
market value on the date of the grant. In January 2000 he entered into a new
employment agreement which expires January 2005 and is cancelable by Siga only
for cause, as defined in the agreement. The agreement is renewable for
additional one year terms unless cancelled by either party in writing 180 days
prior to cancellation. Mr. Cooper receives an annual base salary of $250,000 and
he was granted 500,000 fully vested stock options upon signing the new
agreement. The options are exercisable at $2.00 per share, the fair market value
on the date of grant. He is eligible to receive additional stock options and
bonuses at the discretion of the Board of Directors. In addition, Mr. Cooper
will receive a cash payment equal to 1.5% of the total consideration received by
Siga in a transaction resulting in a change of ownership of at least 50% of the
outstanding Siga common stock.
28
<PAGE>
Thomas Konatich, Chief Financial Officer, is employed by Siga under an
employment agreement that was to expire April 1, 2000. On January 19, 2000 the
employment agreement was amended, the amended agreement expires on January 19,
2002 and is cancelable by Siga only for cause, as defined in the agreement. Mr.
Konatich receives an annual base salary of $170,000. He received options to
purchase 95,000 shares of common stock, at $4.44 on April 1, 1998. The options
vest on a pro rata basis on the first, second, third and fourth anniversaries of
the agreement. On January 19, 2000 he received an additional grant to purchase
100,000 shares at an exercise price of $2.00 per share. The options vest on a
pro rata basis each quarter through January 19, 2002. Mr. Konatich is also
eligible to receive additional stock options and bonuses at the discretion of
the Board of Directors.
Dr. Dennis Hruby, Vice President of Research, has an employment agreement
with Siga which expires on December 31, 2000 except that it may be terminated
upon 90 days notice. Dr. Hruby received options to purchase 40,000 shares of
common stock at an exercise price of $4.63 per share. The options become
exercisable on a pro rata basis on the first, second, third and fourth
anniversaries of the agreement. Dr. Hruby is eligible to receive additional
stock options and bonuses at the discretion of the Board of Directors.
29
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the
beneficial ownership of the common stock as of December 31, 1999 of (i) each
person known to Siga to beneficially own more than 5% of the common stock, (ii)
each director of Siga, (iii) each executive officer of Siga for whom information
is given in the Summary Compensation Table, and (iv) all directors and executive
officers of Siga as a group.
Name and Address of Amount of Beneficial
Beneficial Owner (1) Ownership (2) Percentage of Total
- -------------------- ------------- -------------------
Judson Cooper 569,117(3) 8.5%
Joshua D. Schein, Ph.D 566,017(3) 8.4%
Steven M. Oliveira 421,516 6.4%
129 Post Road East
Westport, CT 06880
Richard B. Stone 414,915 6.3%
135 East 57th Street
11th Floor
New York, NY 10022
MedImmune Inc. 335,530 5.1%
Jeffrey Rubin 0 *
Thomas Lanier 0 *
Scott Eagle 0 *
Dennis Hruby 65,000 *
Thomas N. Konatich 23,750 *
All Officers and Directors 1,223,884 17.9%
as a group (seven persons)(4)
30
<PAGE>
* Less than 1% of the outstanding shares of common stock.
(1) Unless otherwise indicated the address of each beneficial owner identified
is 420 Lexington Avenue, Suite 620, New York, NY 10170.
(2) Unless otherwise indicated, each person has sole investment and voting
power with respect to the shares indicated. For purposes of this table, a
person or group of persons is deemed to have "beneficial ownership" of any
shares as of a given dated which such person has the right to acquire
within 60 days after such date. For purposes of computing the percentage
of outstanding shares held by each person or group of persons named above
on a given date, any security which such person or persons has the right
to acquire within 60 days after such date is deemed to be outstanding for
the purpose of computing the percentage ownership of such person or
persons, but is not deemed to be outstanding for the purpose of computing
the percentage ownership of any other person.
(3) Includes currently exercisable options to purchase 87,501 shares of common
stock owned directly and 50% beneficial ownership of 12,500 additional
options held by Prism Ventures LLC, an entity jointly owned by Mr. Cooper
and Dr. Schein.
(4) Includes an aggregate of 226,252 currently exercisable options to purchase
shares of common stock.
31
<PAGE>
Item 12. Certain Relationships and Related Transactions
Effective January 15, 1998, we entered into a consulting agreement with
Prism Ventures LLC pursuant to which Prism has agreed to provide certain
business services to Siga, including business development, operations and other
advisory services, licensing, strategic alliances, merger and acquisition
activity, financings and other corporate transactions. Pursuant to the terms of
the agreement, Prism receives an annual fee of $150,000 and 16,667 stock options
per year. The agreement expires on January 15, 2001, and is cancelable by Siga
only for cause as defined in the agreement. Mr. Cooper and Dr. Schein are the
members of Prism. In October of 1998, Siga and Prism agreed to suspend the
agreement for as long as the two principals are employed by Siga under the
provisions of their amended employment agreements. During 1999, Prism received
no payments pursuant to the agreement.
Effective September 9, 1999 we entered into a consulting agreement with
Stefan Capital, LLC pursuant to which Stefen has agreed to provide certain
business services to Siga. Pursuant to the terms of the agreement, Stefen
received five year warrants to purchase 100,000 shares of our common stock at an
exercise price of $1.00. None of the warrants may be exercised before September
9, 2000, at which time 50,000 warrants can be exercised. Mr. Jeffrey Rubin, one
of our directors, is a principal of Stefen.
Effective January 19, 2000 we entered into a consulting agreement with Mr.
Scott Eagle, one of our directors. Mr. Eagle will provide consulting services
concerning our strategic review and development of alternate internet and
related technologies. The agreement will expire on January 19, 2001. Pursuant to
the terms of the agreement, Mr. Eagle has received five year warrants to
purchase 50,000 shares of our common stock at an exercise price of $1.00 per
share. None of the warrants may be exercised before January 19, 2001.
32
<PAGE>
PART IV
Item 13. Exhibits, Material Agreements and Reports on Form 8-K
3(a) Articles of Incorporation of the Company (Incorporated by reference
to Form SB-2 Registration Statement of the Company dated March 10,
1997 (No. 333-23037)).
3(b) Bylaws of the Company (Incorporated by reference to Form SB-2
Registration Statement of the Company dated March 10, 1997 (No.
333-23037)).
4(a) Form of Common Stock Certificate (Incorporated by reference to Form
SB-2 Registration Statement of the Company dated March 10, 1997 (No.
333-23037)).
4(b) 1996 Incentive and Non-Qualified Stock Option Plan (Incorporated by
reference to Form SB-2 Registration Statement of the Company dated
March 10, 1997 (No. 333-23037)).
4(c) Warrant Agreement dated as of September 15, 1996 between the Company
and Vincent A. Fischetti (1) (Incorporated by reference to Form SB-2
Registration Statement of the Company dated March 10, 1997 (No.
333-23037)).
4(d) Warrant Agreement dated as of November 18, 1996 between the Company
and David de Weese (1) (Incorporated by reference to Form SB-2
Registration Statement of the Company dated March 10, 1997 (No.
333-23037)).
4(e) Stock Purchase Agreement between the Company and MedImmune, Inc.,
dated as of February 10, 1998. (Incorporated by reference to the
Company's Annual Report on Form 10-KSB for the year ended December
31, 1997).
4(f) Registration Rights Agreement between the Company and MedImmune,
Inc., dated as of February 10, 1998. (Incorporated by reference to
the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997).
10(a) License and Research Support Agreement between the Company and The
Rockefeller University, dated as of January 31, 1996; and Amendment
to License and Research Support Agreement between the Company and
The Rockefeller University, dated as of October 1, 1996(2)
(Incorporated by reference to Form SB-2 Registration Statement of
the Company dated March 10, 1997 (No. 333-23037)).
10(b) Research Agreement between the Company and Emory University, dated
as of January 31, 1996(2) (Incorporated by reference to Form SB-2
Registration Statement of the Company dated March 10, 1997 (No.
333-23037)).
10(c) Research Support Agreement between the Company and Oregon State
University, dated as of January 31, 1996(2) (Incorporated by
reference to Form SB-2 Registration Statement of the Company dated
March 10, 1997 (No. 333-23037)). Letter Agreement dated as of March
5, 1999 to continue the Research Support Agreement.
10(d) Options Agreement between the Company and Oregon State University,
dated as of November 30, 1999 and related Amendments to the
Agreement.
33
<PAGE>
10(e) Employment Agreement between the Company and Dr. Joshua D. Schein,
dated as of January 19, 2000
10(f) Employment Agreement between the Company and Judson A. Cooper, dated
as of January19,2000.
10(g) Employment Agreement between the Company and Dr. Kevin F. Jones,
dated as of January 1, 1996 (Incorporated by reference to Form SB-2
Registration Statement of the Company dated March 10, 1997 (No.
333-23037)).
10(h) Employment Agreement between the Company and David de Weese, dated
as of November 18, 1996(1) (Incorporated by reference to Form SB-2
Registration Statement of the Company dated March 10, 1997 (No.
333-23037)).
10(i) Consulting Agreement between the Company and CSO Ventures LLC, dated
as of January 1, 1996 (Incorporated by reference to Form SB-2
Registration Statement of the Company dated March 10, 1997 (No.
333-23037)).
10(j) Consulting Agreement between the Company and Dr. Vincent A.
Fischetti, dated as of January 1, 1996 (Incorporated by reference to
Form SB-2 Registration Statement of the Company dated March 10, 1997
(No. 333-23037)).
10(k) Consulting Agreement between the Company and Dr. Dennis Hruby, dated
as of January 1, 1996 Incorporated by reference to Form SB-2
Registration Statement of the Company dated March 10, 1997 (No.
333-23037)).
10(l) Letter Agreement between the Company and Dr. Vincent A. Fischetti,
dated as of March 1, 1996 Incorporated by reference to Form SB-2
Registration Statement of the Company dated March 10, 1997 (No.
333-23037)).
10(m) Employment Agreement between the Company and Dr. Dennis Hruby, dated
as of April 1, 1997 (Incorporated by reference to Amendment No. 1 to
Form SB-2 Registration Statement of the Company dated July 11, 1997
(No. 333-23037)).
10(n) Clinical Trials Agreement between the Company and National Institute
of Allergy and Infectious Diseases, dated as of July 1, 1997
(Incorporated by reference to Amendment No. 1 to Form SB-2
Registration Statement of the Company dated July 11, 1997 (No.
333-23037)).
10(o) Research Agreement between the Company and The Research Foundation
of State University of New York, dated as of July 1, 1997(2)
(Incorporated by reference to Amendment No. 1 to Form SB-2
Registration Statement of the Company dated July 11, 1997 (No.
333-23037)).
10(p) Collaborative Research and License Agreement between the Company and
American Home Products Corporation, dated as of July 1, 1997(2)
(Incorporated by reference to Amendment No. 3 to Form SB-2
Registration Statement of the Company dated September 2, 1997 (No.
333-23037)).
10(q) Collaborative Evaluation Agreement between the Company and Chiron
Corporation, dated as of July 1, 1997 (Incorporated by reference to
Amendment No. 1 to Form SB-2 Registration Statement of the Company
dated July 11, 1997 (No. 333-23037)).
34
<PAGE>
10(r) Consulting Agreement between the Company and Dr. Scott Hultgren,
dated as of July 9, 1997 (Incorporated by reference to Amendment No.
1 to Form SB-2 Registration Statement of the Company dated July 11,
1997 (No. 333-23037)).
10(s) Letter of Intent between the Company and MedImmune, Inc., dated as
of July 10, 1997 (Incorporated by reference to Amendment No. 1 to
Form SB-2 Registration Statement of the Company dated July 11, 1997
(No. 333-23037)).
10(t) Research Collaboration and License Agreement between the Company and
The Washington University, dated as of February 6, 1998 (2).
(Incorporated by reference to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1997.
10(u) Settlement Agreement and Mutual Release between the Company and The
Washington University, dated as of February 17, 2000.
10(v) Technology Transfer Agreement between the Company and MedImmune,
Inc., dated as of February 10, 1998. (Incorporated by reference to
the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997).
10(w) Employment Agreement between the Company and Dr. Dennis Hruby, dated
as of January 1, 1998. (Incorporated by reference to the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1997).
Amendment to the Agreement, dated as of October 15, 1999.
10(x) Employment Agreement between the Company and Dr. Walter Flamenbaum,
dated as of February 1, 1998. (Incorporated by reference to the
Company's Annual Report on Form 10-KSB for the year ended December
31, 1997).
10(y) Employment Agreement between the Company and Thomas Konatich, dated
as of April 1, 1998. (Incorporated by reference to the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1997).
Extension and Amendment of the Agreement, dated as of January 19,
2000.
10(z) Consulting Agreement between the Company and Prism Ventures LLC,
dated as of January 15, 1998. (Incorporated by reference to the
Company's Annual Report on Form 10-KSB for the year ended December
31, 1997).
10(aa) Small Business Innovation Research Grant to the Company by the
National Institutes for Health, dated June 21, 1999.
10(bb) Small Business Innovation Research Grant to the Company by the
National Institutes for Health, dated September 27, 1999.
10(cc) Software Application Development Services Agreement between the
Company and Open-I Media, Inc., dated October 15, 1999
10(dd) Media Development Agreement Services Agreement between the Company
and Open-I Media, Inc., dated March 15, 2000
10(ee) Option Agreement between the Company and Ross Products Division of
Abbott Laboratories, dated February 28, 2000.
35
<PAGE>
10(ff) Consulting Agreement between the Company and Stefan Capital, dated
September 9, 1999.
10(gg) Warrant Agreement between the Company and Stefan Capital, dated
September 9, 1999
27 Financial Data Schedule
- ----------
(1) These agreements were entered into prior to the reverse split of the
Company's Common Stock and, therefore, do not reflect such reverse split.
(2) Confidential information is omitted and identified by a * and filed
separately with the SEC pursuant to a request for Confidential Treatment.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the registrant during the fourth
quarter of 1998.
36
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SIGA Technologies, Inc.
(Registrant)
Date: March 30, 2000 By: /s/ Joshua D. Schein
------------------------------
Joshua D. Schein, Ph. D.
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Capacity Date
/s/ Joshua D. Schein Chief Executive Officer
- ----------------------- Secretary and Director March 30, 2000
Joshua D. Schein, Ph.D.
/s/ Judson A. Cooper Chairman of the Board and
- ----------------------- Executive Vice President March 30, 2000
Judson A. Cooper
/s/ Thomas N. Konatich Chief Financial Officer March 30, 2000
- ----------------------
Thomas N. Konatich
Director ___________, 2000
- ----------------------
Jeffrey Rubin
/s/ Scott Eagle Director March 30, 2000
- ----------------------
Scott Eagle
Director ___________, 2000
- ----------------------
Thomas Lanier
37
<PAGE>
SIGA Technologies, Inc.
(A development stage company)
Financial Statements
December 31, 1999 and 1998
<PAGE>
SIGA Technologies, Inc.
(A development stage company)
Index to Financial Statements
- --------------------------------------------------------------------------------
Report of Independent Accountants..................................... F-2
Balance Sheet as of December 31, 1999 and 1998........................ F-3
Statement of Operations for the years ended December 31, 1999 and
1998, and for the period from inception through December 31, 1999. F-4
Statement of Changes in Stockholders' Equity for the period
from inception through December 31, 1999.......................... F-5
Statement of Cash Flows for the years ended December 31, 1999, and
1998, and for the period from inception through December 31, 1999. F-6
Notes to Financial Statements......................................... F-7
F-1
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders
of SIGA Technologies, Inc.
In our opinion, the accompanying balance sheet and related statements of
operations, of cash flows and of changes in stockholders' equity present fairly,
in all material respects, the financial position of SIGA Technologies, Inc. (a
development stage company) at December 31, 1999 and 1998, and the results of its
operations and cash flows for the years ended December 31, 1999 and 1998, and
for the period from December 28, 1995 ("Inception") through December 31, 1999,
in conformity with accounting principles generally accepted in the United
States. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
New York, NY
February 18, 2000, except as to Note 13
which is as of March 30, 2000
F-2
<PAGE>
SIGA Technologies, Inc.
(A development stage company)
Balance Sheet
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
1999 1998
------------ ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,758,541 $ 4,966,873
Accounts receivable 47,570 --
Prepaid expenses and other current assets 38,279 134,969
------------ ------------
Total current assets 1,844,390 5,101,842
Equipment, net 1,366,362 1,696,404
Investments -- 132,220
Other assets 147,002 147,002
------------ ------------
Total assets $ 3,357,754 $ 7,077,468
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 248,962 $ 266,371
Accrued expenses 104,096 143,364
Current portion of capital lease obligations 280,092 369,288
------------ ------------
Total current liabilities 633,150 779,023
Capital lease obligations, net of current portion 520,424 650,659
Commitments and contingencies (see Notes 6, 9, 10 and 11) -- --
Stockholders' equity:
Preferred stock ($.0001 par value, 10,000,000
shares authorized, none issued and -- --
outstanding)
Common stock ($.0001 par value, 25,000,000
shares authorized, 6,602,712 and 6,577,712
shares issued and outstanding at December 31, 1999
and December 31, 1998 respectively) 661 658
Additional paid-in capital 16,855,499 16,697,424
Unrealized losses on available for sale securities -- (34,816)
Deficit accumulated during the development stage (14,651,980) (11,015,480)
------------ ------------
Total stockholders' equity 2,204,180 5,647,786
------------ ------------
Total liabilities and stockholders' equity $ 3,357,754 $ 7,077,468
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
SIGA Technologies, Inc.
(A development stage company)
Statement of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period
December 28,
Year Ended 1995 (Date of
December 31, Inception) to
--------------------------- December 31,
1999 1998 1999
<S> <C> <C> <C>
Revenue:
Research and development contracts $ 519,561 $ 450,000 $ 1,644,561
------------ ------------ ------------
Operating expenses:
General and administrative 2,284,790 2,784,763 7,413,056
Research and development (including
amounts to related parties of $75,000, $81,750
and $309,581 for the years ended December 31,
1999 and 1998, and for the period from the date
of inception to December 31, 1999, respectively) 1,672,778 4,385,213 7,666,981
Patent preparation fees 193,567 197,071 1,130,844
Settlement of litigation 97,969 -- 97,969
Stock option and warrant compensation -- 14,407 450,450
------------ ------------ ------------
Total operating expenses 4,249,104 7,381,454 16,759,300
------------ ------------ ------------
Operating loss (3,729,543) (6,931,454) (15,114,739)
------------ ------------ ------------
Interest income, net 26,383 379,788 396,099
Net gain on sale of securities 66,660 -- 66,660
------------ ------------ ------------
Net loss (3,636,500) (6,551,666) (14,651,980)
------------ ------------ ------------
Basic and diluted loss per share $ (0.55) $ (1.00)
============ ============
Weighted average common shares
outstanding used for basic and
diluted loss per share 6,579,424 6,540,022
============ ============
Comprehensive loss:
Net loss $ (3,636,500) $ (6,551,666) $(14,651,980)
Unrealized gains (losses) on available for sale
securities 34,816 (34,816) --
------------ ------------ ------------
Total comprehensive income/(loss) $ (3,601,684) $ (6,586,482) $(14,651,980)
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
SIGA Technologies, Inc.
(A development stage company)
Statement of Changes in Stockholders' Equity
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional Stock During the
Paid-in Subscriptions Development
Shares Par Value Capital Outstanding Stage
<S> <C> <C> <C> <C> <C>
Issuance of common stock at inception 2,079,170 $ 208 $ 1,040 $ (1,248)
Net loss -- -- -- -- $ (1,000)
--------- -------- ----------- ---------- --------------
Balances at December 31, 1995 2,079,170 208 1,040 (1,248) (1,000)
Net proceeds from issuance and sale of common stock
($1.50 per share) 1,038,008 104 1,551,333 -- --
Net proceeds from issuance and sale of common stock
($3.00 per share) 250,004 25 748,985 --
Receipt of stock subscriptions outstanding -- -- -- 1,248 --
Issuance of compensatory options and warrants -- -- 367,461 -- --
Net loss -- -- -- -- (2,268,176)
--------- -------- ----------- ---------- --------------
Balances at December 31, 1996 3,367,182 337 2,668,819 -- (2,269,176)
Net proceeds from issuance and sale of common stock
($5.00 per share) 2,875,000 287 12,179,322
Issuance of warrants with bridge notes -- -- 133,000 -- --
Stock option and warrant compensation -- -- 68,582 -- --
Net loss -- -- -- -- (2,194,638)
--------- -------- ----------- ---------- --------------
Balance at December 31, 1997 6,242,182 624 15,049,723 -- (4,463,814)
Issuance of common stock to acquire third party's
right to certain technology ($4.34 per share) 335,530 34 1,457,424
Issuance of compensatory options and warrants -- -- 175,870 -- --
Stock option and warrant compensation -- -- 14,407 -- --
Unrealized losses on available for sale securities -- -- -- -- --
Net loss -- -- -- -- (6,551,666)
--------- -------- ----------- ---------- --------------
Balance at December 31, 1998 6,577,712 658 16,697,424 -- (11,015,480)
Issuance of common stock for software development ($1.25 per share) 25,000 3 31,247
Issuance of compensatory common stock,
options and warrants 51,550
Stock option and warrant compensation 75,278
Unrealized gains on available for sale securities
Net loss (3,636,500)
--------- -------- ----------- ---------- --------------
Balance at December 31, 1999 6,602,712 $ 661 $16,855,499 $ -- $ (14,651,980)
========= ======== =========== ========== ==============
<CAPTION>
Unrealized
Gains (Losses) Total
on Available Stockholders'
for Sale Equity
Securities (Deficit)
<S> <C> <C>
Issuance of common stock at inception $ --
Net loss -- $ (1,000)
--------- ------------
Balances at December 31, 1995 -- (1,000)
Net proceeds from issuance and sale of common stock
($1.50 per share) -- 1,551,437
Net proceeds from issuance and sale of common stock
($3.00 per share) -- 749,010
Receipt of stock subscriptions outstanding -- 1,248
Issuance of compensatory options and warrants -- 367,461
Net loss -- (2,268,176)
--------- ------------
Balances at December 31, 1996 -- 399,980
Net proceeds from issuance and sale of common stock
($5.00 per share) 12,179,609
Issuance of warrants with bridge notes -- 133,000
Stock option and warrant compensation -- 68,582
Net loss -- (2,194,638)
--------- ------------
Balance at December 31, 1997 -- 10,586,533
Issuance of common stock to acquire third party's
right to certain technology ($4.34 per share) 1,457,458
Issuance of compensatory options and warrants -- 175,870
Stock option and warrant compensation -- 14,407
Unrealized losses on available for sale securities (34,816) (34,816)
Net loss -- (6,551,666)
--------- ------------
Balance at December 31, 1998 (34,816) 5,647,786
Issuance of common stock for software development ($1.25 per share) 31,250
Issuance of compensatory common stock,
options and warrants 51,550
Stock option and warrant compensation 75,278
Unrealized gains on available for sale securities 34,816 34,816
Net loss (3,636,500)
--------- ------------
Balance at December 31, 1999 $ -- $ 2,204,180
========= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
SIGA Technologies, Inc.
(A development stage company)
Statement of Cash Flows
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period
December 28,
Year Ended 1995 (Date of
---------------------------- Inception) to
December 31, December 31, December 31,
1999 1998 1999
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (3,636,500) $ (6,551,666) $(14,651,980)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 366,816 211,520 594,797
Stock, option and warrant compensation 158,078 190,277 784,398
Loss on write-off of capital equipment 97,969 -- 97,969
Amortization of debt discount -- -- 133,000
Purchase of rights to certain technology -- 1,457,458 1,457,458
Realized gain on sale of marketable securities (66,660) -- (66,660)
Changes in assets and liabilities:
Accounts receivable (47,570) 150,000 (47,570)
Prepaid sponsored research -- 11,684 --
Prepaid expenses and other current assets 96,690 (91,271) (38,279)
Other assets -- (4,161) (147,002)
Accounts payable and accrued expenses (56,677) (55,873) 353,058
------------ ------------ ------------
Net cash used in operating activities (3,087,854) (4,682,032) (11,530,811)
------------ ------------ ------------
Cash flows from investing activities:
Capital expenditures (134,743) (1,878,110) (2,059,128)
Sale (purchase) of investment securities 233,696 (167,036) 66,660
------------ ------------ ------------
Net cash used in investing activities 98,953 (2,045,146) (1,992,468)
------------ ------------ ------------
Cash flows from financing activities:
Net proceeds from issuance of common stock -- -- 14,480,056
Receipt of stock subscriptions outstanding -- -- 1,248
Proceeds from bridge notes -- -- 1,000,000
Repayment of bridge notes -- -- (1,000,000)
Proceeds from sale and leaseback of equipment -- 1,139,085 1,139,085
Principle payments on capital lease obligations (219,431) (119,138) (338,569)
------------ ------------ ------------
Net cash provided from financing activities (219,431) 1,019,947 15,281,820
------------ ------------ ------------
Net increase in cash and cash equivalents (3,208,332) (5,707,231) 1,758,541
Cash and cash equivalents, beginning of period 4,966,873 10,674,104 --
------------ ------------ ------------
Cash and cash equivalents, end of period $ 1,758,541 $ 4,966,873 $ 1,758,541
============ ============ ============
</TABLE>
There were no cash payments for income taxes for the periods ended December 31,
1999 and 1998.
Cash paid for interest was $145,507 and $28,851 for the periods ended December
31, 1999 and 1998, respectively.
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
1. Organization and Basis of Presentation
Organization
SIGA Technologies, Inc. ("SIGA" or the "Company") was originally
incorporated in the State of Delaware on December 28, 1995 ("Inception")
as SIGA Pharmaceuticals, Inc. The Company is engaged in the discovery,
development and commercialization of vaccines, antibiotics, and novel
anti-infectives for the prevention and treatment of infectious diseases.
The Company's technologies are licensed from third parties. In 1998 the
Company opened its research facility in the State of Oregon, reducing the
Company's dependency on third parties to conduct research on its behalf.
In 1999, the Company launched an Internet initiative as a separate line of
business from its biomedical product development. The initial product of
this initiative will enable peer-to-peer communication and facilitate the
building of on-line communities on the Internet. In January 2000, as a
result of this new initiative, the shareholders of the Company agreed
changed its name to SIGA Technologies, Inc.
Basis of presentation
The Company's activities since inception have consisted primarily of
sponsoring and performing research and development, performing business
and financial planning, preparing and filing patent applications and
raising capital. Accordingly, the Company is considered to be a
development stage company.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. Since inception the Company has
incurred cumulative net operating losses of $14,651,980 and expects to
incur additional losses to perform further research and development
activities. These conditions raise substantial doubts about the Company's
ability to continue as a going concern. The Company does not have
commercial biomedical products, and does not expect to have such for
several years, if at all. In the current year, the Company introduced a
new business strategy and launched an Internet initiative, the outcome of
which is not assured. The Company's ability to continue as a going concern
is dependent upon its ability to meet its obligations as they become due,
and obtain additional funding to support its future operations.
In January and March 2000, the Company raised $1,500,000 and $3,000,000,
respectively, in private placements. See Note 13. Management believes that
the current resources will be sufficient to support its planned operations
through the end of 2000.
The Company anticipates that it will need additional funds to complete the
development of its biomedical products and the successful launch of its
Internet initiative.
2. Summary of Significant Accounting Policies
Cash and cash equivalents
Cash and cash equivalents consist of short term, highly liquid
investments, with original maturities of less than three months when
purchased and are stated at cost. Interest is accrued as earned.
Investments
The Company accounts for investments under the provisions of Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity
F-7
<PAGE>
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
Securities" ("SFAS 115"). At December 31, 1998 the Company classified its
investments in marketable securities as available for sale and reported
them at fair market value, with the unrealized holding gains and losses,
net of tax effect, reported as a separate component of stockholders'
equity. Any gains or losses from the sale of these securities were
recognized using the specific identification method. During 1999, the
Company sold its available for sale securities for $233,696, recognizing a
gain of $66,660.
Equipment
Equipment is stated at cost. Depreciation is provided on the straight-line
method over the estimated useful lives of the respective assets, which are
as follows:
Laboratory equipment 5 years
Leasehold improvements Life of lease
Computer equipment 3 years
Furniture and fixtures 7 years
Revenue recognition
The Company has been awarded government research grants from the National
Institutes of Health ("NIH"). The NIH grants are used to subsidize the
Company's research projects. NIH revenue is recognized on a pro rata basis
as subsidized research costs are incurred. Such method approximates the
straight-line basis over the lives of the grants.
Payments from Wyeth-Ayerst for contract research and development are used
to subsidize the Company's research and development efforts. Such amounts
are recognized as revenue as the related services are performed by the
Company, provided the collection of the resulting receivables is probable.
In situations where the Company receives payments in advance of
performance of services, such amounts are deferred and recognized as
revenue as the related services are performed.
Upon the achievement of defined events, Wyeth-Ayerst is required to make
milestone payments to the Company. Such amounts are included in contract
research and development revenue and are recognized as revenue upon the
achievement of the event and when the collection of the resulting
receivable is probable.
Research and development
Research and development costs are expensed as incurred and include costs
of third parties who conduct research and development, pursuant to
development and consulting agreements, on behalf of the Company. Costs
related to the acquisition of technology rights, for which development
work is still in process, and that have no alternative future uses, are
expensed as incurred and considered a component of research and
development costs.
Income taxes
Income taxes are accounted for under the asset and liability method
prescribed by Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." Deferred income taxes are recorded for
temporary differences between financial statement carrying amounts and the
tax basis of assets and liabilities. Deferred tax assets and liabilities
reflect the tax rates
F-8
<PAGE>
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
expected to be in effect for the years in which the differences are
expected to reverse. A valuation allowance is provided if it is more
likely than not that some or all of the deferred tax asset will not be
realized.
Net loss per common share
Effective December 31, 1997 the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS 128") which
requires presentation of basic earnings per share ("Basic EPS") and
diluted earnings per share ("Diluted EPS") by all entities that have
publicly traded common stock or potential common stock (options, warrants,
convertible securities or contingent stock arrangements). Basic EPS is
computed by dividing income (loss) available to common stockholders by the
weighted-average number of common shares outstanding during the period.
Diluted EPS gives effect to all dilutive potential common shares
outstanding during the period. The computation of Diluted EPS does not
assume conversion, exercise or contingent exercise of securities that
would have an antidilutive effect on earnings.
At December 31, 1999 and 1998, outstanding options to purchase 1,130,561
and 540,561 shares of common stock, respectively, with exercise prices
ranging from $1.00 to $5.50 have been excluded from the computation of
diluted loss per share as they are antidilutive. Outstanding warrants to
purchase 896,724 and 734,724 shares of common stock, at December 31, 1999
and 1998, respectively, with exercise prices ranging from $1.00 to $5.50
were also antidilutive and excluded from the computation of diluted loss
per share.
Accounting estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of expenses during the
reporting period. Actual results could differ from those estimates.
Fair value of financial instruments
The carrying value of cash and cash equivalents, and accounts payable and
accrued expenses approximates fair value due to the relatively short
maturity of these instruments.
Concentration of credit risk
The Company has cash in bank accounts that exceed the FDIC insured limits.
The Company has not experienced any losses on its cash accounts. No
allowance has been provided for potential credit losses because management
believes that any such losses would be minimal.
Accounting for stock based compensation
The Company has adopted Statement of Financial Accounting Standard No.
123, "Accounting for Stock-Based Compensation" ("SFAS 123"). As provided
for by SFAS 123, the Company has elected to continue to account for its
stock-based compensation programs according to the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees." Accordingly, compensation expense has been recognized to
the extent of employee
F-9
<PAGE>
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
or director services rendered based on the intrinsic value of compensatory
options or shares granted under the plans. The Company has adopted the
disclosure provisions required by SFAS 123.
Reclassifications
Certain prior year amounts have been reclassified to conform with the 1999
presentation.
New accounting pronouncements
On December 6, 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101, Revenue Recognition ("SAB 101"), which
provides guidance on the recognition, presentation and disclosure of
revenue in financial statements filed with the SEC. SAB 101 outlines the
basic criteria that must be met to recognize revenue and provides guidance
for disclosures related to revenue recognition policies. Management
believes that its revenue recognition policies and practices are in
conformance with SAB 101.
Effective January 1, 1998 the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosure about Segments of an Enterprise
and Related Information" ("SFAS 131"), which requires disclosure of
information about operating segments in annual financial statements for
reporting period beginning subsequent to December 15, 1997. Operating
segments are defined as components of an enterprise about which separate
financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and
in assessing performance. The adoption of FAS 131 did not have a material
impact on the Company's financial statements.
In July 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of the
FASB Statement No. 133, an Amendment of FASB Statement No. 133" ("SFAS
137"). SFAS No. 137 defers the effective date of SFAS 133, which
establishes accounting and reporting standards for derivative instruments
embedded in other contracts, (collectively referred to as derivatives) and
for hedging activities. SFAS 133 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. If certain
conditions are met, a derivative may be specifically designated as (a) a
hedge of the exposure to changes in the fair value of a recognized asset
or liability or an unrecognized firm commitment, (b) a hedge of the
exposure to variability in cash flows attributable to a particular risk,
or (c) a hedge of the foreign currency exposure of a net investment in a
foreign operation, an unrecognized firm commitment, an available for sale
security and a forecasted transaction. As a result of SFAS 137, the
Company will be required to implement SFAS 133 for all fiscal quarters of
fiscal years beginning after June 15, 2000. The Company does not expect
the adoption of this pronouncement to have a material effect on the
Company's results of operations, financial position or cash flows.
3. Equipment
Equipment consisted of the following at December 31, 1999 and 1998
F-10
<PAGE>
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
December 31,
1999 1998
----------- -----------
Laboratory equipment $ 785,888 $ 865,053
Leasehold improvements 618,315 618,315
Computer equipment 225,803 159,380
Furniture and fixtures 291,637 291,637
----------- -----------
1,921,643 1,934,385
Less - Accumulated depreciation (555,281) (237,981)
----------- -----------
Equipment, net $ 1,366,362 $ 1,696,404
=========== ===========
Depreciation expense for the years ended December 31, 1999 and December
31, 1998 was $366,541 and $221,520, respectively.
On December 31, 1999, title to fixed assets of $147,210, with accumulated
depreciation of $49,241, was transferred to Washington University as part
of the settlement agreement and mutual release with Washington University.
See Note 9.
At December 31, 1999 and 1998, laboratory equipment, computer equipment
and furniture included approximately $730,500, $117,000 and $291,600,
respectively, of equipment acquired under capital leases. Accumulated
depreciation related to such equipment approximated $246,000, $66,000 and
$66,000 respectively, at December 31, 1999, and $100,000, $27,000 and
$24,200 respectively, at December 31, 1998.
4. Stockholders' Equity
In September and October 1997, The Company completed an initial public
offering of 2,875,000 shares of its common stock at an offering price of
$5.00 per share. The Company realized gross proceeds of $14,375,000 and
net proceeds, after deducting underwriting discounts and commissions, and
other offering expenses payable by the Company, of $12,179,609.
Stock option plan and warrants
In January 1996, the Company implemented its 1996 Incentive and
Non-Qualified Stock Option Plan (the "Plan") whereby options to purchase
up to 333,333 shares of the Company's common stock may be granted to
employees, consultants and outside directors of the Company. In October
1998, the Company increased the number of options to purchase the
Company's common shares available for grant under the plan to 833,333. In
October 1999, the Company increased the number of options to purchase the
Company's common shares available for grant under the plan to 1,500,000.
The exercise period for options granted under the Plan, except those
granted to outside directors, is determined by a committee of the Board of
Directors. Stock options granted to outside directors pursuant to the Plan
must have an exercise price equal to or in excess of the fair market value
of the Company's common stock at the date of grant and become exercisable
over a period of three years with a third of the grant being exercisable
at the
F-11
<PAGE>
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
completion of each year of service subsequent to the grant. The fair
market value of the Company's common stock before its initial public
offering in September 1997, was determined by a committee of the Board of
Directors. The committee was comprised entirely of employees who receive
stock options under the Plan.
Transactions under the Plan are summarized as follows:
<TABLE>
<CAPTION>
Weighted
Average
Number of Exercise
Shares Price
<S> <C> <C>
Outstanding at December 31, 1997 117,061 $ 3.74
Granted 556,834 3.98
Forfeited (133,334) 4.14
---------- ---------
Outstanding at December 31, 1998 540,561 3.88
Granted 612,500 1.12
Forfeited (22,500) 1.37
---------- ---------
Total outstanding at December 31, 1999 1,130,561 $ 2.42
========== =========
Options available for future grant 369,439
Weighted average fair value of options granted during 1998 $ 2.45
Weighted average fair value of options granted during 1999 $ 0.87
</TABLE>
The following table summarizes information about options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------- -------------------------
Weighted Number
Number Average Weighted Exercisable Weighted
Outstanding Remaining Average at Average
December 31, Contractual Exercise December 31, Exercise
1999 Life (Years) Price 1999 Price
<S> <C> <C> <C> <C> <C>
$ 1.13 600,000 9.83 $1.13 75,000 $1.13
1.50 33,334 6.00 1.50 33,334 1.50
2.00 - 4.66 296,834 8.46 3.41 114,584 3.72
5.00 - 5.50 200,393 4.56 5.01 145,393 5.01
------------- ------------
1,130,561 368,311
============= ============
</TABLE>
On December 31, 1999, there were a total of 876,724 warrants outstanding.
In November 1999, 16,000 shares of the Company's common stock were granted
in exchange for professional services. The Company recognized non-cash
compensation expense of $21,500 for the year ended December 31, 1999 based
upon the fair value of the stock on the date of grant. The Company expects
to issue the shares in 2000.
F-12
<PAGE>
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
In September 1999 the Company entered into a consulting agreement with one
of its directors under which the director will provide the Company with
business valuation services in exchange for warrants to purchase 100,000
shares of the Company's common stock, at an exercise price of $1.00 per
share. Of these warrants, 50,000 vested on the date of grant and the
remaining 50,000 will vest on the first anniversary of the consulting
agreement. The warrants become exercisable one year after they vest. The
Company recognized non-cash compensation expense of $46,848 for the year
ended December 31, 1999, based upon the fair value of such warrants.
In June 1998 the Company granted a consultant options to purchase 150,000
shares of the Company's common stock at an exercise price of $5.00 per
share. 50,000 options vested immediately, and the remaining 100,000 vest
pro rata over a period of ten quarters. The Company recognized non-cash
compensation expense of $58,480 and $102,340 for the years ended December
31, 1999 and 1998, respectively, based upon the fair value of the options
on the date of the grant.
In May 1998, the Company granted a consultant options to purchase 5,000
shares of the Company's common stock, at an exercise price of $4.25. The
Company recognized non-cash compensation expense of $15,655 for the year
ended December 31, 1998 based upon the fair value of such options on the
date of the grant.
In January 1998 the Company issued warrants to a third party to purchase
16,216 shares of the Company's common stock, at an exercise price of $4.60
per share. The Company recognized non-cash compensation expense of $57,875
for the year ended December 31, 1998 based upon the fair value of such
warrants on the date the grant.
In September 1997, in connection with the Company's IPO, the Company
issued the underwriters warrants to purchase 225,000 shares of common
stock at an exercise price of $8.25 per share. All the warrants, which
have a term of five years, are exercisable at December 31, 1999.
In November 1996, the Company entered into an employment agreement with
its former President and Chief Executive Officer. Under the terms of the
agreement, the employee received warrants to purchase 461,016 shares of
common stock at $3.00 per share (see Note 6). These warrants expire on
November 18, 2006. Upon termination of the employment agreement on April
21, 1998, 230,508 warrants were surrendered to the Company.
The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations in
accounting for warrants issued to employees and stock options granted
under the Plan. During the year ended December 31, 1998 compensation
expense of $14,407 was recognized for warrants issued to employees.
Compensation expense was calculated based upon the difference between the
exercise price of the warrant or option and the fair market value of the
Company's common stock on the date of grant. Had compensation cost for
warrants issued and stock options granted been determined based upon the
fair value at the grant date for awards, consistent with the methodology
prescribed under SFAS 123, the Company's net loss and loss per share would
have been increased by approximately $245,400, or $0.04 per share for the
year ended
F-13
<PAGE>
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
December 31, 1999, and approximately $199,000, or $0.03 per share for the
year ended December 31, 1998.
The fair value of the options and warrants granted to employees and
consultants during 1999 and 1998 ranged from $0.73 to $3.47 on the date of
the respective grant using the Black-Scholes option-pricing model. The
following weighted-average assumptions were used for 1999: no dividend
yield, expected volatility of 100%, risk free interest rates of
5.78%-5.83%, and an expected term of 5 years. The following
weighted-average assumptions were used for 1998: no dividend yield,
expected volatility of 100%, risk free interest rates of 5.46%-5.55%, and
an expected term of 5 years.
5. Income Taxes
The Company has incurred losses since inception which have generated net
operating loss carryforwards of approximately $7,087,000 and $4,718,000,
respectively, at December 31, 1999 and 1998 for federal and state income
tax purposes. These carryforwards are available to offset future taxable
income and begin expiring in 2010 for federal income tax purposes. As a
result of a previous change in stock ownership, the annual utilization of
the net operating loss carryforwards is subject to limitation.
The net operating loss carryforwards and temporary differences, arising
primarily from deferred research and development expenses result in a
noncurrent deferred tax asset at December 31, 1999 and December 31, 1998
of approximately $5,631,000 and $4,343,000, respectively. In consideration
of the Company's accumulated losses and the uncertainty of its ability to
utilize this deferred tax asset in the future, the Company has recorded a
valuation allowance of an equal amount on such date to fully offset the
deferred tax asset.
For the years ended December 31, 1999 and December 31, 1998, the Company's
effective tax rate differs from the federal statutory rate principally due
to net operating losses and other temporary differences for which no
benefit was recorded, state taxes and other permanent differences.
6. Related Parties
Consulting agreements
In 1998 the Company entered into a two year consulting agreement, expiring
January 15, 2000, with Prism Ventures LLC ("Prism") under which Prism was
to provide the Company business development, operations and other advisory
services. Pursuant to the agreement Prism was to receive an annual
consulting fee of $150,000 and an annual stock option grant to purchase
16,667 of the Company's common shares. The Chief Executive Officer and
Chairman of the Company are principals of Prism. In October 1998 the
Company and Prism agreed to suspend the agreement for as long as the two
principals are employed by the Company under the provisions of their
amended employment agreements. During the year ended December 31, 1998,
the Company incurred expense of $112,500 pursuant to the agreement.
F-14
<PAGE>
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
In connection with the development of its licensed technologies the
Company entered into a consulting agreement with the scientist who
developed such technologies, under which the consultant serves as the
Company's Chief Scientific Advisor. The scientist, who is a stockholder,
shall be paid an annual consulting fee of $75,000. The agreement, which
commenced in January 1996 and is only cancelable by the Company for cause,
as defined in the agreement, had an initial term of two years and provided
for automatic renewals of three additional one year periods unless either
party notifies the other of its intention not to renew. Research and
development expense incurred under the agreement amounted to $75,000 and
$81,570 for the years ended December 31, 1999 and 1998, respectively.
Employment agreements
In November 1999, the Company entered into two year employment agreements
with three newly-hired Vice Presidents ("VPs"), of Business Development,
Investor Relations, and Marketing, at annual salaries of $95,000,
$100,000, and $120,000, respectively. Each VP was also granted options to
purchase 100,000 shares of the Company's common stock at an exercise price
of $1.125 per share, to vest ratably over two years.
In September 1998 the Company and its Chief Executive Officer and Chairman
("EVPs") entered into employment agreements commencing October 1, 1998 and
expiring on December 31, 2000. Under the agreements, the EVPs were each to
be paid an annual minimum compensation of $225,000, and to be granted a
minimum of 16,666 options to purchase shares of the Company's common stock
per annum. In addition, one EVP was appointed as the Company's Chairman
and the other was appointed as the Chief Executive Officer. The Company
incurred $450,000 and $352,002 of expense for the years ended December 31,
1999 and 1998, respectively, pursuant to these agreements.
In November 1999, the EVPs were each granted non-qualified stock options
to purchase 150,000 shares under the Company's 1996 Incentive and
Non-Qualified Stock Option Plan, at an exercise price of $1.30, to expire
in ten years. 37,500 options vested immediately. 75,000 will vest in
November 2000, and the remaining 37,500 will vest in November 2001.
In January 2000, the Company signed new employment agreements with the
EVPs expiring in January 2005. The new agreements provide for a base
salary of $250,000, with annual increases of at least 5%. In addition,
both of the EVP's were granted fully-vested options to purchase 500,000
shares of the Corporations' common stock at $2.00 per share. Under the
provisions of the agreements the EVPs would each receive a cash payment
equal to 1.5% of the total consideration received by the Company in a
transaction resulting in a greater than 50% change in ownership of the
outstanding common stock of the Company.
In November 1996, the Company entered into an employment agreement,
expiring in November 1999, with its former President and Chief Executive
Officer. Under the terms of the agreement, the employee was to receive
annual base compensation of $225,000 and options to purchase 16,667 shares
of the Company's common stock, exercisable at the fair market value on the
date of grant. Upon execution of the agreement, the Company granted the
employee options to purchase 16,667 shares of its common stock at an
exercise price of $3.00 per share. In addition,
F-15
<PAGE>
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
the employee was issued warrants to purchase 461,016 shares of common
stock at $3.00 per share (see Note 4). During the year ended December 31,
1998 the Company incurred $77,050 of expense pursuant to the agreement.
The agreement was terminated on April 21, 1998.
7. Technology Purchase Agreement
In February 1998, the Company entered into an agreement with a third party
pursuant to which the Company acquired the third party's right to certain
technology, intellectual property and related rights in the field of gram
negative antibiotics in exchange for 335,530 shares of the Company's
common stock . Research and development expense related to this agreement
amounted to $1,457,458 for the year ended December 31, 1998.
8. Collaborative Research and License Agreement
In July 1997, the Company entered into a collaborative research and
license agreement with Wyeth-Ayerst (the "Collaborator"). Under the terms
of the agreement, the Company has granted the collaborator an exclusive
worldwide license to develop, make, use and sell products derived from
specified technologies. The agreement required the collaborator to sponsor
further research by the Company for the development of the licensed
technologies for a period of two years from the effective date of the
agreement, in return for payments totaling $1,200,000. In consideration of
the license grant the Company is entitled to receive royalties equal to
specified percentages of net sales of products incorporating the licensed
technologies. The royalty percentages increase as certain cumulative and
annual net sales amounts are attained. The Company could receive milestone
payments, under the terms of the agreement of up to $13,750,000 for the
initial product and $3,250,000 for the second product developed from a
single compound derived from the licensed technologies. Such milestone
payments are contingent upon the Company making project milestones set
forth in the agreement, and, accordingly, if the Company is unable to make
such milestones, the Company will not receive such milestone payments.
During 1999 and 1998, the Company recognized $337,500 and $450,000,
respectively, in revenue related to this agreement. The Company is
currently in negotiations with the collaborator to extend research
payments beyond the initial two years. No assessment can be made as to the
outcome of these negotiations.
9. License and Research Support Agreements
In February of 1998, the company entered into a research collaboration and
license agreement with Washington University (the "University"). Under the
terms of the agreement, the Company was granted an exclusive world-wide
license to make, use and sell products derived from the licensed
technology, in exchange for royalty payments equal to a certain percentage
of net sales of products incorporating the licensed technology, and
certain milestone payments. Prior to this agreement, in July 1997 the
company had entered into a separate consulting agreement with a faculty
member of the University. A dispute arose between the Company and the
University and the consultant regarding, among other things, the
performance of the parties under the agreements. In May 1999, the
University sent the Company notice of intent to terminate the agreement in
90 days claiming certain payments were not made. It was the Company's
position that, among other things, such payments are not owed due to the
University's failure to perform.
F-16
<PAGE>
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
Under the arbitration clause of the agreement, the University, in July
1999, commenced an arbitration seeking an award in the amount of $230,000.
The Company also commenced an arbitration seeking a determination that
such amount is not owed the University and seeking its own award of $5
million. In February of 2000 the parties reached a settlement agreement
and mutual release of their obligations under the research collaboration
and licensing agreement entered into in February of 1998. Further, all
personal consulting agreements between the Company and Washington
University faculty members and employees were also terminated. Under the
terms of the settlement agreement any payments owed by the Company under
the research collaboration and licensing agreement are cancelled. In
addition, all payments owed faculty members under consulting agreements
are also cancelled. The University will reimburse the Company $37,037 for
certain patent expenses incurred under the research collaboration, and the
Company transferred title to equipment with a net book value of $98,000 to
the University. The Company recognized the write-off of fixed assets
during 1999. The Company has disclaimed any rights to patents licensed
under the February 1998 agreement. However, if the University successfully
commercializes any of the patents, it agrees to pay the Company licensing
revenue arising from products commercialized. Also as part of settlement
agreement and mutual release the Company and the University entered into
an agreement granting the Company a nonexclusive license to one of the
University's patents. Under the research collaboration and license
agreement, the Company incurred sponsored research expense of
approximately $187,000 during the year ended December 31, 1998. For the
quarter ended March 31, 1999, June 30, 1999, and September 30, 1999, the
Company recorded research and development expense payable to the
University under the research collaboration and license agreement in the
amounts of $25,000, $98,778, and $104,300, respectively. As a result of
the mutual settlement and release, these amounts were reversed as of
December 31, 1999.
In July and September, 1999 the Company was awarded two Phase I research
grants by the Small Business Innovation Research Program (SBIR) of $109,
072 and $293,446 respectively. The first grant was to help support the
Company's antibiotic discovery efforts for the period July 1, 1999 through
December 31, 1999. The second grant provides support for the Company's
effort to develop a vaccine targeting strep throat, in collaboration with
the National Institutes of Health (NIH). The grant award is for a period
of twelve months beginning on October 1, 1999. As of December 31, 1999 the
Company had recognized revenue from the two grants of $109,072 and $72,989
respectively.
In January 1996, the Company entered into a license and research support
agreement with Rockefeller University ("Rockefeller"). The Company agreed
to sponsor research by Rockefeller for the development of licensed
technologies for a period of two years from the date of the agreement, in
return for a payment of $725,000. The agreement expired in January 1998.
However, the Company has continued its relationship with Rockefeller under
similar terms. Sponsored research related to this third party amounted to
$125,000 and $360,000 for the years ended December 31, 1999 and 1998,
respectively.
10. Product Development Agreement
In October 1999 the Company entered into an agreement with Open-iMedia, a
software and web development company ("Development Company"). Under the
terms of the agreement the
F-17
<PAGE>
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
Company will acquire and the Development Company will continue to develop,
the source code for a client/server chat and instant messaging
application. The application is designed to enable peer-to-peer
communication and facilitate the building of on-line communities. In
exchange, the Company will pay the Development Company $200,000, payable
in three installments, and a grant of 125,000 shares of common stock. As
of December 31, 1999 the Development Company had received $100,000 and
25,000 shares of the Company's common stock.
In March 2000, the Company entered into an additional agreement with the
Development Company for creative and technical services, and for business
strategy consulting. In exchange, the Company will pay the Development
Company $280,000 and grant it 13,605 shares, each payable in three
installments.
11. Commitments and Contingencies
Operating lease commitments
The Company leases certain facilities and office space under operating
leases. Minimum future rental commitments under operating leases having
noncancelable lease terms in excess of one year are as follows:
Year ended December 31,
2000 $ 231,789
2001 234,672
2002 226,333
2003 105,002
2004 and thereafter 108,152
---------
$ 905,948
=========
Capital lease commitments
In July, August and September 1998, the Company sold certain laboratory
equipment, computer equipment and furniture to a third party for $493,329,
$385,422 and $260,333, respectively, under sale-leaseback agreements. The
leases have terms of 42 months and require minimum monthly payments of
$13,171, $10,290 and $6,950, respectively. The Company has an option to
purchase the equipment at 15% of the original cost at the end of the lease
term.
F-18
<PAGE>
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
Future minimum lease payments for assets under capital leases at December
31, 1999 are as follows:
Year ended December 31,
2000 $ 364,933
2001 438,931
2002 131,342
---------
Total minimum lease payments 935,206
Less: amounts representing interest 134,690
---------
Present value of future minimum lease payments 800,516
Less: current portion of capital lease obligations 280,092
---------
Capital lease obligations, net of current portion $ 520,424
=========
12. Segments
Since the announcement in September 1999 that the Company intends to
pursue its Internet initiative, the Company has operated the Internet
initiative as a separate segment. The Internet segment generated operating
expenses of approximately $317,000 during 1999 and has identifiable assets
of approximately $81,000 at December 31, 1999.
13. Subsequent Events
In January 2000 the shareholders of the Company voted at the Annual
Meeting to change the name of the Company to Siga Technologies, Inc., and
to increase the number of authorized shares to 50,000,000.
In January 2000 the Company sold $1,500,000 of 6% Convertible debentures
due January 2002 with warrants to purchase 1,043,478 shares of common
stock in the Company to a group of private investors. The warrants had a
purchase price of $0.05 per warrant. The Company received net proceeds of
$1,499,674 from the total $1,552,174 raised. The interest on the
debentures is payable in either cash or stock at the Company's discretion.
The debentures are convertible into common stock at $1.44 per share. The
warrants have a term of five years and are exercisable at a price of $3.41
per share. Under certain circumstances the Company can force exercise of
the warrants. An additional 275,000 warrants, with a term of five years
and exercisable at a price of $1.45 per share, were issued for
professional services related to the sale of debentures.
In January 2000, the Company and its Chief Financial Officer ("CFO")
entered into an amendment to the CFO's employment agreement, extending his
employment until April 2002. Under this amendment, the CFO received
options to purchase 100,000 shares of the Company's common stock at $2.00
per share. The options vest ratably over two years and expire in January
2010.
F-19
<PAGE>
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
In March 2000 the Company entered into an option agreement with the Ross
Products Division of Abbott Laboratories (Ross). The Agreement grants Ross
an exclusive option to negotiate an exclusive license to certain Company
technology and patents. In exchange for the option, Ross will make
payments to the Company amounting to $120,000 in three installments of
$40,000.
In March 2000 the Company raised $3,000,000 in a private offering of
common stock and warrants to purchase common stock. The Company sold
600,000 shares of common stock and 450,000 warrants. 210,000, 120,000 and
120,000 of the warrants are exercisable at $5.00, $6.38 and $6.90,
respectively. The warrants are redeemable by the Company upon meeting
certain conditions.
F-20
[LETTERHEAD OF SIGA PHARMACEUTICALS]
March 5, 1999
Oregon State University
Office of Contract Administration
306 Kerr Administration
Corvallis, Oregon 97331-2147
Attn: Mr. Clem LaCava
Dear Mr. LaCava:
This letter is to confirm Siga Pharmaceuticals, Inc.'s intent to continue
sponsored research at Oregon State University in the laboratory of Dr. Dennis
Hruby, (Contract # J0262A). The term of the renewal is for the period January 1,
1999 through December 31, 1999. Payment for the year will be $100,000 payable
in monthly installments of $8,333.33. The University will bill Siga at the end
of each month.
Siga Pharmaceuticals, Inc. has the option to cancel this agreement on thirty
days written notice.
If the terms of this agreement are acceptable to the University, please sign one
copy of this letter and return it to Siga.
Sincerely,
/s/ Joshua D. Schein
Joshua D. Schein, Ph.D.
Chief Executive Officer
Cc: Dr. Dennis Hruby
Accepted: /s/ Clem LaCava
-----------------------------
CLEM LaCAVA
Print Name: Asst Contract Administrator
Date: 3-9-99
[LETTERHEAD OF OREGON STATE UNIVERISTY OFFICE OF TECHNOLOGY TRANSFER]
November 30, 1999
Mr. Joshua Schein, CEO
SIGA Pharmaceuticals, Inc.
420 Lexington Avenue, Suite 620
New York, New York 10170
RE: Oregon State University Docket No. 97-24
Chlamydia Vaccine
Option Agreement Extension
Dear Mr. Schein:
I am pleased to enclose a fully executed amendment to the option agreement for
your files. The exclusive option will be extended to January 13, 2000, and can
be extended an additional three months if SIGA needs more time to work with this
technology.
Please send the $2,500 option extension fee to:
Director of Technology Transfer
312 Kerr Administration Bldg.
Oregon State University
Corvallis, Oregon 97331
If you have any questions, don't hesitate to call me at 541-737-4437.
Sincerely,
/s/ Laurel Halfpap
Laurel Halfpap
Sr. Licensing Associate
Enclosures
cc: Dr. Dan Rockey
Dr. Dennis Hruby
<PAGE>
AMENDMENT TO AGREEMENT
This Amendment To Agreement is effective upon the date of last signature by the
parties and is by and between SIGA Pharmaceuticals (hereinafter "Licensee"),
having its principal office at 420 Lexington Avenue, Suite 620, New York, New
York 10170 (hereafter "Company"), and The State of Oregon Acting by and through
the State Board of Higher Education on Behalf of Oregon State University, an
educational institution having a campus at Corvallis, Oregon 97331 (hereafter
"University").
WHEREAS:
Company and University are parties to an April 13, 1998, Exclusive Option
Agreement relating to a Chlamydia Vaccine, Oregon State University Docket No.
97-24, (hereafter the "Agreement"); and
Company and University wish to amend the Agreement as set forth herein.
NOW THEREFORE, Company and University agree as follows:
1. Under Section 3.3
The exclusive option period shall be extended for an additional three (3)
month period, from October 13, 1999 to January 13, 2000.
2. Under Section 3.2
Company shall pay a $2,500 option extension fee, due upon execution of
this Amendment to Agreement. The option extension fee should be made
payable to Oregon State University and should be mailed to the Director of
Technology Transfer at the address in Section 5.4.
3. Except as expressly set forth herein, the Agreement remains in full force
and effect.
ACCEPTED AND AGREED TO:
STATE OF OREGON, Acting by and SIGA PHARMACEUTICALS
through the STATE BOARD OF
HIGHER EDUCATION on behalf of
OREGON STATE UNIVERSITY
/s/ Benjamin E. Rawlins 22 Nov 99 /s/ Joshua Schein 11/11/99
- ------------------------------------ -----------------------------------
Benjamin E. Rawlins Date Joshua Schein Date
Director of Legal Services CEO
/s/ Wilson C. Hayes 10/29/99
- ------------------------------------
Wilson C. "Toby" Hayes Date
Vice Provost for Research
<PAGE>
[LETTERHEAD OF OREGON STATE UNIVERISTY OFFICE OF TECHNOLOGY TRANSFER]
March 6, 2000
Mr. Joshua Schein, CEO
SIGA Technologies, Inc.
420 Lexington Avenue, Suite 620
New York, New York 10170
RE: Oregon State University Docket No. 97-24
Chlamydia Vaccine
Second Amendment to the Option Agreement
Dear Josh:
Enclosed is an original fully executed second amendment to the option agreement
for your files. Please make the check for the $2,500 extension fee payable to
Oregon State University and mail it to the Director of Technology Transfer at
312 Kerr Administration Bldg., Oregon State University, Corvallis, OR 97331. I
look forward to completing our pending license agreement.
Sincerely,
/s/ Laurel Halfpap
Laurel Halfpap
Sr. Licensing Associate
Enclosures
cc: Dr. Dan Rockey, OSU
Dr. Dennis Hruby, SIGA Technologies
<PAGE>
SECOND AMENDMENT TO AGREEMENT
This Amendment To Agreement is effective upon the date of last signature by the
parties and is by and between SIGA Technologies, Inc. (hereinafter "Licensee"),
having its principal office at 420 Lexington Avenue, Suite 620, New York, New
York 10170 (hereafter "Company"), and The State of Oregon Acting by and through
the State Board of Higher Education on Behalf of Oregon State University, an
educational institution having a campus at Corvallis, Oregon 97331 (hereafter
"University").
WHEREAS:
Company and University are parties to an April 13, 1998, Exclusive Option
Agreement relating to a Chlamydia Vaccine, Oregon State University Docket No.
97-24, (hereafter the "Agreement"); and
Company and University wish to amend the Agreement as set forth herein.
NOW THEREFORE, Company and University agree as follows:
1. Under Section 3.3
The exclusive option period shall be extended for an additional three (3)
month period, from January 14, 2000, 1999 to April 14, 2000.
2. Under Section 3.2
Company shall pay a $2,500 option extension fee, due upon execution of
this Amendment to Agreement. The option extension fee should be made
payable to Oregon State University and should be mailed to the Director of
Technology Transfer at the address in Section 5.4.
3. Except as expressly set forth herein, the Agreement remains in full force
and effect.
ACCEPTED AND AGREED TO:
STATE OF OREGON, Acting by and SIGA Technologies, Inc
through the STATE BOARD OF
HIGHER EDUCATION on behalf of
OREGON STATE UNIVERSITY
/s/ Wendy A. Robinson for 3/3/00 /s/ Joshua Schein 2/18/00
- ------------------------------------ -----------------------------------
Benjamin E. Rawlins Date Joshua Schein Date
Director of Legal Services CEO
580-300-920129-00
/s/ Wilson C. "Toby" Hayes 02/28/00
- ------------------------------------
Wilson C. "Toby" Hayes Date
Vice Provost for Research
<PAGE>
[LETTERHEAD OF OREGON STATE UNIVERISTY OFFICE OF TECHNOLOGY TRANSFER]
March 6, 2000
Mr. Joshua Schein, CEO
SIGA Technologies, Inc.
420 Lexington Avenue, Suite 620
New York, New York 10170
RE: Oregon State University Docket No. 97-24
Chlamydia Vaccine
License Agreement for Signature
Dear Josh:
Enclosed are three original license documents for your signature. Please sign
all three and be sure to date them March 6, 2000 which is the date you signed
the faxed signature page. Please return them to my attention, and I will get
them signed by Wendy Robinson in the Oregon Department of Justice. One original
will be returned for your files.
I am delighted that SIGA has decided to license this technology, and I am
looking forward to a mutually rewarding partnership between OSU and SIGA
Technologies, Inc. Please call me at 541-737-4437 if you need anything in the
future.
Sincerely,
/s/ Laurel Halfpap
Laurel Halfpap
Sr. Licensing Associate
Enclosures
cc: Dr. Dan Rockey, OSU
Dr. Dennis Hruby, SIGA Technologies
<PAGE>
EXCLUSIVE LICENSE AGREEMENT
This Agreement, effective the date of last signature, is between SIGA
Technologies, Inc having a principal place of business at 420 Lexington Avenue,
Suite 620, New York, New York 10170, hereafter referred to as "Company", and the
State of Oregon Acting by and through the State Board of Higher Education on
Behalf of Oregon State University, an institution of higher education in the
State of Oregon, located at Corvallis, Oregon, hereafter referred to as
"University".
WITNESSETH:
WHEREAS, University is the owner by assignment from Drs. Daniel D. Rockey
and John P. Bannantine of their entire right, title and interest in the
invention entitled "Chlamydia Vaccine" which is the subject of three provisional
United States Patent Applications, Serial Numbers 60/082,438 filed April 20,
1998, 60/082,588 filed April 21, 1998, and 60/086,450 filed May 22, 1998, and
one PCT Application No. US99/08744, filed April 20, 1999, comprising Oregon
State University Docket Number 97-24, hereafter referred to as the "Invention",
and
WHEREAS, University is committed to a policy that ideas and creative works
produced at University should be used for the greatest possible public benefit;
and
WHEREAS, University accordingly believes that every reasonable incentive
should be provided for the prompt introduction of such ideas into public use,
all in a manner consistent with public interest; and
WHEREAS, Company is desirous of obtaining a worldwide license in order to
practice the above-identified Invention, and to manufacture, use and sell in the
commercial marketplace the products made in accordance therewith; and
WHEREAS, University is desirous of granting such license to Company in
accordance with the terms of this agreement; and
NOW, THEREFORE, in consideration of the foregoing premises, the parties
agree as follows:
Article I
Definitions
A. Patent Rights shall mean three provisional United States Patent
Applications, Serial Numbers 60/082,438 filed April 20, 1998, 60/082,588 filed
April 21, 1998, and 60/086,450 filed May 22, 1998, and one PCT Application No.
US99/08744, filed April 20, 1999, all divisions and continuations of these
applications, all US and foreign patents issuing from such application,
divisions, and continuations, and any reissues, reexaminations and extensions of
all such patents.
B. Licensed Products shall mean products claimed in Patent Rights or
products made in accordance with or by means of Licensed Processes.
C. Licensed Processes shall mean the processes claimed in Patent Rights.
Page 1 of 12
<PAGE>
D. Licensed Services shall mean all services that utilize the Patent
Rights.
E. Licensed Combination Products shall mean any product that is comprised
in part of a Licensed Product and in part of one or more other biologically
active diagnostic, preventive or therapeutic agents which are not themselves
Licensed Products (the "Other Agents"). "Other Agents" excludes diluents and
vehicles of Licensed Products.
F. Know-How shall mean unpatented discoveries, inventions, and
improvements, proprietary information, trade secrets, drawings, plans, designs,
or specifications provided by University pertaining to Licensed Products.
G. Net Sales with respect to Licensed Products shall mean the amount
billed or invoiced on sales of Licensed Products, Licensed Processes or Licensed
Services less:
1) Customary trade, quantity or cash discounts and commissions
actually allowed and taken;
2) Amounts repaid or credited by reason of rejection or return;
or
3) To the extent separately stated on purchase orders, invoices
or other documents of sales, taxes levied on and/or other
governmental charges made as to production, sale,
transportation, delivery or use, and paid by or on behalf of
Company.
H. Net Sales with respect to Licensed Combination Products shall mean the
amount billed or invoiced on sales of Licensed Combination Products, less the
deductions set forth in section G.l through G.3 above, multiplied by a fraction
having (i) a numerator of the gross sales price of the Licensed Product included
in such Licensed Combination Product as if sold separately or, if such sales
price is not available, the fair market value of such Licensed Product(s), and
(ii) a denominator of the gross sales price of such Licensed Combination
Product, or if such sales price is not available, the sum of the fair market
values of the Other Agents and the Product(s) contained in such Licensed
Combination Product, The "fair market value" for any Licensed Product or Other
Agent shall be determined for a quantity comparable to that included in the
Licensed Combination Product and of substantially comparable class, purity and
potency, and shall be mutually agreed to by University and Company. When no fair
market value is available, the fraction set forth above shall be changed to a
fraction having (x) a numerator of the cost to Company, its affiliates or
sublicensees, of the Licensed Product(s) included in such Licensed Combination
Product, and (y) a denominator of the sum of such cost plus the cost to Company,
its affiliates or sublicensees of the Other Agents contained in such Licensed
Combination Product, provided that in no event shall the fraction be less than
(A) one-half (1/2), if only one Other Agent is included with a Licensed
Product(s) in such Licensed Combination Product, (B) one-third (1/3), if two
Other Agents are included with a Licensed Product(s) in such Licensed
Combination Product, and (C) one-quarter (1/4), if three or more Other Agents
are included with a Licensed Product(s) in such Licensed Combination Product.
"Cost" as used above means the actual cost paid by Company, and/or its
affiliates or sublicensees in an arm's length transaction, if purchased, or if
not purchased but actually manufactured by any such entity, the sum of the
direct manufacturing cost as determined by such entity's internal cost
accounting system consistently applied.
Page 2 of 12
<PAGE>
I. Field of Use shall mean all fields of use.
J.Subsidiary shall mean any corporation, company or other entity fifty
percent (50%) or more of whose voting stock is owned or controlled, directly or
indirectly, by Company.
Article II
Grant
A. Subject to the terms and conditions of this agreement, University
hereby grants to Company a worldwide, exclusive license with right to
sublicense, to use Patent Rights and Know-How, to make, use, sell and have made
Licensed Products, Licensed Combination Products, Licensed Processes, and
Licensed Services in the Field of Use. Sublicensees shall be subject to the
terms and conditions of this Agreement.
B.Company and sublicensees shall alone have the obligation to ensure that
any Licensed Products or Licensed Combination Products it makes, uses, sells,
leases, or otherwise disposes of is not defective and that any Licensed Product
or Licensed Combination Product satisfies all applicable government regulations.
C. The University retains an irrevocable, nonexelusive and nontransferable
right to practice for its own educational and research purposes the Patent
Rights and Know How. University reserves the right to supply the Patent Rights
and Know How to academic research scientists, with such supply subject to
limitation of use by such scientists for research purposes and restriction upon
further distribution.
Article III
Diligence
A. Company shall use its best efforts, consistent with sound and
reasonable business practices and judgment, to effect commercialization of
Licensed Products, Licensed Combination Products, Licensed Processes or Services
as soon as practicable and to maximize these sales. "Best efforts" under this
clause shall mean satisfying the following goals:
Development Plan -- Chlamydia Research
SIGA Research Laboratories, hereafter "Company", and Oregon State University
(hereafter "University") Collaborative Project
Starting in 2/29/00
In collaboration with Dr. Dan Rockey at University, Company intends to
push forward research and development of vaccines for the prevention of
disease caused by one or more of the following: Chlamydia trachomatis,
Chlamydia pneumoniae, and Chlamydia psittaci. This work is based on Dr.
Rockey's discovery of the family of proteins involved in the formation of
inclusion bodies which are crucial in the Chlamydia life cycle -- IncA,
IncB, and IncC -- as well as TroA. To accomplish this goal, Company will
work closely with Dr. Rockey in formulating several vaccine delivery
strategies for these proteins. To further develop the
Page 3 of 12
<PAGE>
concept, promising early work by Dr. Rockey on the C. psittaci proteins
will be repeated in a guinea pig model to show that significant protection
can be achieved. In parallel, proteins from C. trachomatis have already
been cloned and will be developed using Company's proprietary vaccine
delivery technology, as well as other delivery systems in a mouse model.
Company's commitment to this technology includes both financial and
personnel resources. In meeting this responsibility, Company will use all
reasonable means to accomplish the proposed goals financially, including,
but not limited to: applications for Small Business Innovation Research
Grants (one is currently pending at NIH), review of and application to
other appropriate government and private Requests for
Proposals/Applications, and active pursuit of corporate partnerships (one
such collaborative partnership has just been established).
Article IV
Annual License Fee
University shall have the right to terminate this license in the event
that Company does not pay to University a nonrefundable annual license fee in
the sum of ten thousand dollars ($10,000) one year from the effective date of
this Agreement and every year thereafter with the following exceptions; Company
may omit this annual license fee during the years the milestones, Phase I IND,
Phase II IND, Phase III IND and the Product License Approval (PLA) are paid. The
annual license fee may be deducted from royalties due University during the
calendar year in which the annual license fee is paid.
Article V
Royalties
A. In addition to the terms of Article IV, Company agrees to pay
University a royalty of two percent (2%) of Net Sales of Licensed Products,
Licensed Combination Products, Licensed Processes or Services sold by Company,
its distributors, affiliates, and its sublicensees.
B. In the case of sublicenses, Company shall also pay to University twenty
percent (20%) of non-royalty sublicense income (e.g., license issue fees,
license maintenance fees, etc.) excluding research and development support and
milestone payments, to an aggregate maximum of one million ($1,000,000) dollars.
C. Licensed Products, Licensed Combination Products and Licensed Processes
or Services shall be deemed to have been sold when invoiced, or if not invoiced,
then when delivered, shipped or paid for, whichever is first.
D. Company agrees to pay University a royalty of one percent (1%) of Net
Sales of Licensed Products, Licensed Combination Products, and Licensed
Processes or Services sold or licensed for exclusive use within foreign
countries in which no patent has been applied for, until such time that Company
can show there exists some competing products which incorporate a material
aspect of the Licensed Product.
Page 4 of 12
<PAGE>
Article VI
Milestone Payments
As further consideration for the license grant provided in Article II, Company
agrees to pay the University the following amounts in the nature of milestone
payments:
A. Seventy-five Thousand ($75,000) Dollars within sixty (60) days
of FDA approval of a Phase I Investigational New Drug
Application (IND) on a Licensed Product, Licensed Combination
Product or Licensed Processes.
B. One Hundred Thousand ($100,000) Dollars within sixty (60) days
of FDA approval of a Phase II IND on a Licensed Product,
Licensed Combination Product or Licensed Process.
C. One Hundred and Twenty-five Thousand ($125,000) Dollars within
sixty (60) days of FDA approval of a Phase III IND on a
Licensed Product, Licensed Combination Product or Licensed
Process.
D. One Hundred and Fifty Thousand ($150,000) Dollars within sixty
(60) days of a Product License Approval (PLA) from the FDA on
a Licensed Product, Licensed Combination Product or Licensed
Process.
Article VII
Reports and Accounting
A. Prior to sales, Company shall provide written annual development
reports within thirty (30) days after each calendar year which shall
include, but not be limited to: reports of progress on research and
development, regulatory approvals, manufacturing, sublicensing, or
marketing during the preceding twelve (12) months as well as plans for the
coming year. After sales of Licensed Products, Licensed Combination
Products, Licensed Processes or Services begins, Company shall provide
written quarterly royalty reports within thirty (30) days after each
calendar quarter which shall include, but not be limited to: reports of
progress on research and development, regulatory approvals, manufacturing,
sublicensing, marketing and sales during the preceding three (3) months as
well as plans for the coming quarter. If progress differs from that
anticipated in the plan provided under Article III, Company shall explain
the reasons for the difference and propose a modified plan for
University's review and approval. Company shall also provide any
reasonable additional data University requires to evaluate Company's
performance.
B. In order to minimize Company time spent on royalty reports, a
brief one-page royalty report form is provided in Appendix A that will
satisfy the University's reporting requirements. With each royalty report,
Company shall pay the amount of royalty due, if any. Such report shall be
signed by an officer of Company and shall include a detailed listing of
all deductions from royalties as specified herein. If no royalties are
due to University for any reporting period, the written report shall so
state.
C. Any payments to University shall be made payable to Oregon State
University and be tendered to the Director of Technology Transfer, Oregon
State University for distribution in keeping with State Board of Higher
Education policies.
Page 5 of 12
<PAGE>
D. All payments due hereunder shall be payable in United States
dollars. Conversion of foreign currency to US dollars shall be made at the
conversion rate existing in the United States (as reported in the New York
Times or, if not in the Times, then in the Wall Street Journal) on the
last working day of each royalty period. Such payments shall be without
deduction or exchange, collection or other charges.
E. Late payments shall be subject to an interest charge of one and
one half percent (1.5%) per month.
Article VIII
Record Keeping
A. Company shall keep, and shall require sublicensees to keep
accurate and correct records of Licensed Products, Licensed Combination
Products or Licensed Processes or Services made, used or sold under this
Agreement, appropriate to determine the amount of royalties due hereunder
to University. Such records shall be retained for at least three (3) years
following a given reporting period. They shall be available during normal
business hours for inspection at the expense of University by University's
Internal Audit Department, or by a Certified Public Accountant selected by
University and approved by Company for the sole purpose of verifying
reports and payments hereunder. Such accountant shall not disclose to
University any information other than information relating to accuracy of
reports and payments made under this Agreement. In the event that any such
inspection shows an under reporting and under payment in excess of five
percent (5%) for any twelve (12) month period, then Company shall pay the
cost of such examination as well as any additional sum that would have
been payable to University had the Company reported correctly, plus
interest.
Article IX
Domestic and Foreign Patent Filing and Maintenance
A. Company shall reimburse University for all reasonable out of
pocket expenses University incurs for the preparation, filing, prosecution
and maintenance of Patent Rights upon execution of this Agreement,
however, expenses previously reimbursed by Company as part of an earlier
option agreement will not be included. Company shall reimburse University
for all such future expenses within thirty (30) days of Company's receipt
of invoices. University shall take responsibility for the preparation,
filing, prosecution and maintenance of any and all patent applications and
patents included in Patent Rights, provided however that University shall
first consult with Company as to the preparation, filing, prosecution and
maintenance of such patent applications and patents and shall furnish to
Company copies of documents relevant to any such preparation, filing,
prosecution or maintenance,
B. University and Company shall cooperate fully in the preparation,
filing, prosecution and maintenance of Patent Rights and of all patents
and patent applications licensed to Company hereunder, executing all
papers and instruments or requiring members of University to execute such
papers and instruments so as to enable University to apply for, to
prosecute and to maintain patent applications and patents in University's
name in any country. Each party shall provide to the other prompt notice
as to all matters which come to its attention and which may affect the
preparation, filing, prosecution or maintenance of any such patent
applications or patents.
Page 6 of 12
<PAGE>
C. If Company elects to no longer pay the expenses of a patent
application or patent included within Patent Rights, Company shall notify
University not less than sixty (60) days prior to such action and shall
thereby surrender its rights under such patent or patent application.
Article X
Infringement
A. With respect to any licensed Patent Rights under which Company is
exclusively licensed pursuant to this Agreement, Company or its
sublicensee shall have the right to prosecute in its own name and at its
own expense, any infringement of such patent, so long as such license is
exclusive at the time of the commencement of such action. University
agrees to notify Company promptly of each infringement of such patents of
which University is or becomes aware. Before Company or its sublicensee
commences an action with respect to any such infringement, Company shall
contact University to obtain University's view concerning any potential
effects such an action may bring and shall report such views to the
sublicensee.
B. If Company or its sublicensee elects to commence an action as
described above and University is a legal party to such action, University
shall have the right to assign to Company all of University's rights,
title and interest in licensed Patent Rights (subject to all University's
obligations to the government and others having rights in such licensed
Patent Rights). In this event, such assignment shall be irrevocable and
such action by Company on that patent shall thereafter be brought or
continued in the name of Company. Notwithstanding any such assignment to
Company by University, University shall cooperate fully with Company in
connection with any such action. Regardless of any licensed Patent Rights
assigned to Company by this clause, Company shall be required to continue
to meet its obligations to University under this Agreement as if licensed
Patent Rights were still licensed in the name of University.
C. If Company or its sublicensee elects to commence an action
described above and University is a legal party to such action, University
may join the action as a co-plaintiff. Upon so doing, University shall
jointly control the action with Company or its sublicensee.
D.Company shall reimburse University for any costs it incurs as part
of an action brought by Company or its sublicensee, irrespective of
whether University shall become a party to such action.
E. If Company or its sublicensee elects to commence an action as
described above Company may reduce, by up to fifty percent (50%), the
royalty due to University earned under the patent subject to suit by fifty
percent (50%) of the amount of the expenses and costs of such action,
including attorney fees. In the event that such fifty percent (50%) of
such expenses and costs exceed the amount of royalties withheld by Company
for any calendar year, Company may, to that extent, reduce the royalties
due to University from Company in succeeding calendar years, but never by
more than fifty percent (50%) of the royalty due in any one year.
F. No settlement, consent judgment or voluntary final disposition of
the suit may be entered into without the consent of University, which
consent shall not be unreasonably withheld.
Page 7 of 12
<PAGE>
G. Recoveries or reimbursements from such action shall first be
applied to reimburse Company and University for litigation costs not paid
from royalties and then to reimburse University for royalties withheld.
Any remaining recoveries or reimbursements shall be shared equally by
Company and University.
H. In the event that Company and its sublicensee, if any, elect not
to exercise their right to prosecute an infringement of Licensed Patent
Rights pursuant to the above clauses, University may do so at its own
expense, controlling such action and retaining all recoveries therefrom.
I. If a declaratory judgment action alleging invalidity of any
Licensed Patent Rights shall be brought against Company or University,
then University, at its sole option, shall have the right to intervene and
take over the sole defense of the action at its own expense.
Article XI
Term
A. The term of this Agreement shall be five (5) years or the life of
the last to issue patent in Licensed Patent Rights whichever is greater.
Article XII
Termination
A. In the event an order for relief is entered against Company under
the Federal Bankruptcy Code, or an order appointing a receiver for
substantially all of Company's assets is entered by a court of competent
jurisdiction, or Company makes an assignment for the benefit of creditors,
or a levy of execution is made upon substantially all of the assets of
Company and such levy is not quashed or dismissed within thirty (30) days,
this Agreement shall automatically terminate effective the date of such
order or assignment or in the case of such levy, the expiration of such
thirty (30) day period, provided, however, that such termination shall not
impair or prejudice any other right or remedy that University might have
under this Agreement.
B.Upon any material breach or default of this agreement by Company,
University shall have the right to terminate this Agreement and the
rights, privileges and licenses granted hereunder by ninety (90) days
notice to Company. Such termination shall become effective unless Company
shall have cured any such breach or default prior to the expiration of the
ninety (90) day period.
C. Company shall have the right to terminate this Agreement at any
time on ninety (90) days notice to University and upon payment of all
amounts due and payable to University through that date.
D. If at any time prior to the first commercial sale of Licensed
Product under this agreement Company shall cease to pursue commercial
development of Licensed Product as contemplated in Article III herein,
Company shall be obligated to so notify University and this Agreement
shall automatically terminate without obligation on the part of University
to refund any of the fees which may have been paid by Company prior to
such termination.
Page 8 of 12
<PAGE>
E. If Company stops development efforts as outlined in Article III
A, during any consecutive 12 month period, University shall have the right
to terminate this Agreement or make this Agreement non-exclusive by giving
Company written notice of termination or conversion to a non-exclusive
license to take effect thirty (30) days after notification as described in
Article XVI.
F. Upon termination of this Agreement under this Article XII, but
subject to the provisions of Article XII Section G, Company shall either
return to University Licensed Products or Licensed Combination Products in
its possession or certify to University in writing that Licensed Products
or Licensed Combination Products in its possession have been destroyed.
G. Termination of this Agreement for any reason shall not be
construed to release either party from any obligation that matured prior
to the effective date of such termination. Company and any sublicensee
thereof may, however, after the effective date of such termination, have
six (6) months to sell all Licensed Product or Licensed Combination
Products completed and in inventory.
H. Within thirty (30) days of the termination of this Agreement,
Company shall duly account to University for the sale of Licensed Product
or Licensed Combination Products and inventory in Company possession as of
the date of termination.
I. Upon termination of this Agreement for any reason, each
sublicense then in effect of any of the rights, privileges and licenses
granted hereunder shall continue in effect, provided that there then
exists no circumstance that, with the giving of notice or the lapse of
time or both, constitutes an event of default under any provisions of the
sublicense Agreement permitting termination of such sublicense for
default. Company's rights under all sublicenses continues in effect by the
provisions of this clause shall be deemed assigned to University upon
termination of the Agreement and Company agrees to execute any instrument
reasonably requested to confirm such assignment. Such assignment of rights
to University shall not impose any obligation on University other than to
permit the exercise of the licenses granted by such sublicenses.
Article XIII
Indemnification, Insurance and Limitation of Warranties
A. Company shall, at all times during the term of this Agreement,
indemnify, defend and hold University, its members, agents, officers,
employees and affiliates harmless against all claims and expenses,
including legal expenses and reasonable attorney fees arising out of the
death or injury to any person or persons or out of any damage to property
and against any other claim, proceeding, demand, expense and liability of
any kind whatsoever resulting from sale, use, lease or distribution of
Licensed Product, Licensed Combination Product, Licensed Processes and
Licensed Services by Company and its sublicensees or arising from any
obligations of Company hereunder, except for any claims or expenses
arising out of the negligence or willful actions of University or its
officers, members, agents or employees.
B. Company shall maintain in effect insurance in the combined amount
of one million dollars ($1,000,000) per occurrence for bodily injury and
property damages, including reasonable attorney fees, arising out of any
alleged defects in Licensed Product, Licensed Combination Product,
Licensed Processes and Licensed Services or in the use thereof. The policy
(ies) shall include an endorsement naming University as an additional
insured insofar as the Agreement is concerned and provide that notice
shall be given to University at least thirty (30) days prior to
Page 9 of 12
<PAGE>
cancellation or material change in the form of such policy(ies). The
insurance carrier must be authorized to do business in the State of
Oregon. Any sublicense to this Agreement shall provide insurance as
provided in this Article XIII.
C. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT,
UNIVERSITY MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND,
EITHER EXPRESS OR IMPLIED, WITH REGARD TO ANY LICENSED PATENT RIGHTS
HEREUNDER OR ANY PARTS THEREOF, AND UNIVERSITY EXPLICITLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY AND OF FITNESS FOR A PARTICULAR PURPOSE.
Article XIV
University's Name
A. Company agrees not to use the name of University or any of its
employees, in any advertisement or sales promotion relating to any
Licensed Product, Licensed Combination Product, Licensed Processes and
Licensed Services without prior written approval by University. University
will allow Company to use University's name as holder of Patent Rights and
developer of Licensed Products.
Article XV
Transfer of Rights and Obligations
A. This Agreement shall not be assignable by either party hereto
without the prior written consent of the other party, except to the
successor or assignee of all or substantially all of the assignor's
business to which this Agreement relates. When duly assigned in accordance
therewith, this Agreement shall be binding on and inure to the benefit of
the assignee.
Article XVI
Notices
A. All notices, demands, payments, reports or other writings
provided for in this Agreement shall be deemed to have been fully given,
made or sent when made in writing and delivered by hand or deposited in
the U.S. mail, first class, postage paid, and addressed as follows (unless
another address has been provided by the party affected):
To University:
Director of Technology Transfer
Research Office
312 Kerr Administration Building
Oregon State University
Corvallis, Oregon 97331-2140
Telephone: 503-737-0674
Facsimile: 503-737-3093
Page 10 of 12
<PAGE>
With a copy to:
Director of Legal Services
Oregon University System
Susan Campbell Hall
P.O. Box 3175
Eugene, Oregon 97403
Telephone: 541-346-5767
Facsimile: 541-346-5790
To Company: President/CEO
SIGA Technologies, Inc.
420 Lexington Avenue -- Suite 620
New York, New York 10170
Telephone: 212-672-9100
Facsimile: 212-697-3130
B. Any notice or communication given in conformity with this Article
shall be deemed to be effective when received by the addressee, if
delivered by hand or upon transmission, if delivered by facsimile, and
five (5) days after mailing, if mailed. The address to which any notice,
demand, payment or report or other writing may be given, made or sent to
any party may be changed upon written notice given by such party as above
provided.
Article XVII
Miscellaneous Provisions
A. This agreement shall be construed in accordance with the laws of
the State of Oregon. Any action brought hereunder shall be brought and
conducted solely and exclusively within the United States District Court
for the District of Oregon.
B. In the event that any provision hereof is found to be invalid or
unenforceable pursuant to a final judgement or decree, the remainder of
this agreement shall remain valid and enforceable according to its terms.
C. Nothing contained in this Agreement shall be construed as
creating a joint venture, partnership or employment relationship between
the parties hereto. Except as specified herein, neither party shall have
the right, power or implied authority to create any obligation or duty,
express or implied, on behalf of the other party hereto.
D. This document represents the entire Agreement between the parties
as to the matters set forth and integrates all prior discussions or
understandings between them. This Agreement may only be modified or
amended in writing by a document signed by an authorized representative of
University and Company.
E. The failure of either party to assert a right hereunder or to
insist upon compliance with any term or condition of the Agreement shall
not constitute a waiver of that right or excuse a similar subsequent
failure to perform any such term or condition by the other party.
Page 11 of 12
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals and duly
executed this Agreement effective as of the date of last signature.
STATE OF OREGON, Acting by and SIGA Technologies, Inc.
through the STATE BOARD OF
HIGHER EDUCATION on behalf of
OREGON STATE UNIVERSITY
/s/ Joshua Schein 3/6/00
- ------------------------------------ -----------------------------------
Benjamin E. Rawlins Date Joshua Schein Date
Director of Legal Services CEO
/s/ William [Illegible] for 3/6/00
- ------------------------------------
Wilson C. "Toby" Hayes Date
Vice Provost for Research
Page 12 of 12
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), effective as of January 19,
2000, between SIGA TECHNOLOGIES, INC., a Delaware corporation (with its
successors and assigns, referred to as the "Corporation") and Joshua D. Schein
(referred to as "Schein").
Preliminary Statement
The Corporation desires to employ Schein, and Schein wishes to be employed
by the Corporation, upon the terms and subject to the conditions set forth in
this Agreement. The Corporation and Schein also wish to enter into the other
agreements set forth in this Agreement, all of which are related to Schein's
employment under this agreement.
Agreement
Schein and the Corporation therefore agree as follows:
1. Employment for Term. The Corporation hereby employs Schein and
Schein hereby accepts employment with the Corporation for the period beginning
on the date of this Agreement and ending January 19, 2005. (the "Initial Term"),
or upon the earlier termination of the Term pursuant to Section 6. This
Agreement shall be automatically renewed for additional one-year periods (the
"Renewal Terms;" together with the Initial Term, the "Term") unless either party
notifies the other in writing of its intention not to so renew this Agreement no
less than 180 days prior to the expiration of the Initial Term or a Renewal
Term. The termination of Schein's employment under this Agreement shall end the
Term but shall not terminate Schein's or the Corporation's other agreements in
this Agreement, except as otherwise provided herein.
2. Position and Duties. During the Term, Schein shall serve as Chief
Executive Officer of the Corporation. During the Term, Schein shall also hold
such additional positions and titles as the Board of Directors of the
Corporation (the "Board") may determine from time to time. During the Term,
Schein shall devote as much time as is necessary to satisfactorily perform his
duties as an employee of the Corporation.
3. Compensation.
(a) Base Salary. The Corporation shall pay Schein a base salary,
beginning on the first day of the Term and ending on the last day of the Term,
of not less than $250,000 per annum, payable at least monthly on the
Corporation's regular pay cycle for professional employees.
(b) Stock Options. Pursuant to the Corporation's stock option plan
and subject to stockholder approval of the Corporation's Amended 1996 Incentive
and Non-Qualified Stock Option Plan, the Corporation shall grant to Schein
fully-vested options to purchase 500,000 shares of the Corporation's Common
Stock exercisable at $2.00 per share, the closing bid price of the Common Stock
of the Corporation on the date hereof. The options shall expire on the tenth
anniversary of this Agreement.
(c) Annual Increases. The Base Salary shall be increased at the end
of each year of service by the greater of (i) 5% or (ii) a percentage equal to
the increase, if any, in the United States Department of Labor Consumer Price
Index (or comparable index, if available) for the New York metropolitan area
over the previous 12 months.
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(d) Other and Additional Compensation. The preceding sections
establish the minimum compensation during the Term and shall not preclude the
Board from awarding Schein a higher salary or any bonuses or stock options in
the discretion of the Board during the Term at any time. The Company will adopt
a bonus plan and Schein will be eligible to participate in such plan. The
Corporation shall pay Schein a monthly car allowance of $500.
4. Employee Benefits. During the Term, Schein shall be entitled to the
employee benefits including vacation, 401(k) plan, health plan and other
insurance benefits made available by the Corporation to any other officers or
key employees of the Corporation.
5. Expenses. The Corporation shall reimburse Schein for actual
out-of-pocket expenses incurred by him in the performance of his services for
the Corporation upon the receipt of appropriate documentation of such expenses.
6. Termination.
(a) General. The Term shall end immediately upon Schein's death. The
Term may also end for Cause or Disability, as defined in Section 7.
(b) Notice of Termination. Promptly after it ends the Term, the
Corporation shall give Schein notice of the termination, including a statement
of whether the termination was for Cause or Disability (as defined in Section
7(a) and 7(b) below). The Corporation's failure to give notice under this
Section 6(b) shall not, however, affect the validity of the Corporation's
termination of the Term.
(c) Effective Termination by the Corporation. If the Corporation
reassigns Schein's base of operations outside of New York City, or materially
reduces Schein's duties during the term, including replacing Schein as Chief
Executive Officer, then, at his option, Schein may treat such reduction in
duties as a termination of the Term without Cause by the Corporation.
7. Severance Benefits.
(a) "Cause Defined". "Cause" means (i) willful malfeasance or
willful misconduct by Schein in connection with his employment; (ii) Schein's
gross negligence in performing any of his duties under this Agreement; (iii)
Schein's conviction of, or entry of a plea of guilty to, or entry of a plea of
nolo contendre with respect to, any crime other than a traffic violation or
infraction which is a misdemeanor; (iv) Schein's material breach of any written
policy applicable to all employees adopted by the Corporation which is not cured
to the reasonable satisfaction of the Corporation within fifteen (15) business
days after notice thereof; or (v) material breach by Schein of any of his
agreements in this Agreement which is not cured to the reasonable satisfaction
of the Corporation within fifteen (15) business days after notice thereof
(b) Disability Defined. "Disability" shall mean Schein's incapacity
due to physical or mental illness that results in his being substantially unable
to perform his duties hereunder for six consecutive months (or for six months
out of any nine month period). During a period of Disability, Schein shall
continue to receive his base salary hereunder, provided that if the Corporation
provides Schein with disability insurance coverage, payments of Schein's base
salary shall be reduced by the amount of any disability insurance payments
received by Schein due to such coverage. The Corporation shall give Schein
written notice of termination which shall take effect sixty (60) days after the
date it is sent to Schein unless Schein shall have returned to the performance
of his duties hereunder during such sixty (60) day period (whereupon such notice
shall become void).
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(c) Termination. If the Corporation ends the Term for Cause or
Disability, or if Schein resigns as an employee of the Corporation for reasons
other than a material breach by the Corporation of its obligations under this
Agreement or a material reduction of Schein's duties as provided in Section
6(c), or if Schein dies, then the Corporation shall have no obligation to pay
Schein any amount, whether for salary, benefits, bonuses, or other compensation
or expense reimbursements of any kind, accruing after the end of the Term, and
such rights shall, except as otherwise required by law, be forfeited immediately
upon the end of the Term, except that payments under 3(a) shall continue unless
the Corporation ends the Term for Cause or if Schein resigns for reasons other
than a material breach by the Corporation of its obligations under this
Agreement or a material reduction of his duties as provided in Section 6(c). If
the Corporation ends the Term without Cause, then the Corporation will be
obligated to continue to pay Schein's salary and all other amounts due hereunder
for the remainder of the Term. In addition, in the event of a change in the
ownership of greater than fifty percent (50%) of the Corporation's outstanding
voting stock or any transaction described in Section 9(b), Schein may elect to
terminate this agreement as if it were a termination by the Corporation without
Cause, and the Corporation shall be obligated to pay Schein's salary for the
remainder of the Term.
8. Confidentiality, Ownership, and Covenants.
(a) "Corporation Information" and "Inventions" Defined. "Corporation
Information" means all information, knowledge or data of or pertaining to (i)
the Corporation, its employees and all work undertaken on behalf of the
Corporation, and (ii) any other person, firm, corporation or business
organization with which the Corporation may do business during the Term, that is
not in the public domain (and whether relating to methods, processes,
techniques, discoveries, pricing, marketing or any other matters). "Inventions"
collectively refers to any and all inventions, trade secrets, ideas, processes,
formulas, source and object codes, data, programs, other works of authorship,
know-how, improvements, research, discoveries, developments, designs, and
techniques regarding any of the foregoing.
(b) Confidentiality. (i) Schein hereby recognizes that the value of
all trade secrets and other proprietary data and all other information of the
Corporation not in the public domain disclosed by the Corporation in the course
of his employment with the Corporation may be attributable substantially to the
fact that such confidential information is maintained by the Corporation in
strict confidentiality and secrecy and would be unavailable to others without
the expenditure of substantial time, effort or money. Schein, therefore, except
as provided in the next two sentences, covenants and agrees that all Corporation
Information shall be kept secret and confidential at all times during the Term
and for the five (5) year period after the end of the Term and shall not be used
or divulged by him outside the scope of his employment as contemplated by his
Agreement, except as the Corporation may otherwise expressly authorize by action
of the Board. In the event that Schein is requested in a judicial,
administrative or governmental proceeding to disclose any of the Corporation
Information, Schein will promptly so notify the Corporation so that the
Corporation may seek a protective order of other appropriate remedy and/or waive
compliance with this Agreement. If disclosure of any of the Corporation
Information is required. Schein may furnish the material so required to be
furnished, but Schein will furnish only that portion of the Corporation
Information that legally is required.
(ii) Schein also hereby agrees to keep the terms of this Agreement
confidential to the same extent that the Corporation maintains such
confidentiality (except with regard to any disclosure by the Corporation
required under applicable securities laws).
(c) Ownership of Inventions, Patents and Technology. Schein hereby
assigns to the Corporation all of Schein's rights (including patent rights,
copyrights, trade secret rights, and all other rights throughout the world),
title and interest in and to Inventions, whether or not patentable or
registrable under copyright or similar statutes, made or conceived or reduced to
practice or learned by Schein, either alone or jointly with others, during the
course of the performance of services for the Corporation. Schein shall also
assign to, or as directed by, the Corporation, all of Schein's right, title and
interest in and to any and all Inventions, the full title to which is required
to be in the United States government of any of its
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<PAGE>
agencies. The Corporation shall have all right, title and interest in all
research and work product produced by Schein as an employee of the Corporation,
including, but not limited to, all research materials and lab books.
(d) Non-Competition Period Defined. "Non-Competition Period" means
the period beginning at the end of the Term and ending one (1) year after the
end of the Term.
(e) Covenants Regarding the Term and Non-Competition Period. Schein
acknowledges and agrees that his services pursuant to this Agreement are unique
and extraordinary; that the Corporation will be dependent upon Schein for the
development of its products; and that he will have access to and control of
confidential information of the Corporation. Schein further acknowledges that
the business of the Corporation is international in scope and cannot be confined
to any particular geographic area. For the foregoing reasons and to induce the
Corporation to enter this Agreement, Schein covenants and agrees that, subject
to Section 8(h), during the Term and the Non-Competition Period Schein shall not
unless with written consent of the Corporation:
(i) engage in any business related to the research and development of
the products or processes in which the Corporation is engaged in
during the Term or in any other business conducted by the
Corporation during the Term (collectively the "Prohibited Activity")
in the World for his own account;
(ii) become interested in any individual, corporation, partnership or
other business entity (a "Person") engaged in any Prohibited
Activity in the World, directly or indirectly, as an individual,
partner, shareholder, officer, director, principal, agent, employee,
trustee, consultant or in any other relationship or capacity;
provided, however, that Schein may own directly or indirectly,
solely as an investment, securities of any Person which are traded
on any national securities exchange if Schein (x) is not a
controlling person of, or a member of a group which controls, such
person or (y) does not, directly or indirectly, own 5% or more of
any class of securities of such person; or
(iii) directly or indirectly hire, employ or retain any person who at any
time during the Term was an employee of the Corporation or directly
or indirectly solicit, entice, induce or encourage any such person
to become employed by any other person.
(f) Remedies. Schein hereby acknowledges that the covenants and
agreements contained in Section 8 are reasonable and valid in all respects and
that the Corporation is entering into this Agreement, inter alia, on such
acknowledgement. If Schein breaches, or threatens to commit a breach, of any of
the Restrictive Covenants, the Corporation shall have the following rights and
remedies, each of which rights and remedies shall be independent of the other
and severally enforceable, and all of which rights and remedies shall be in
addition to, and not in lieu of, any other rights and remedies available to the
Corporation under law or in equity: (i) the right and remedy to have the
Restrictive Covenants specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to the Corporation and that
money damages will not provide an adequate remedy to the Corporation; (ii) the
right and remedy to require Schein to account for and pay over to the
Corporation such damages as are recoverable at law as the result of any
transactions constituting a breach of any of the Restrictive Covenants; (iii) if
any court determines that any of the Restrictive Covenants, or any part thereof
is invalid or unenforceable, the remainder of the Restrictive Covenants shall
not thereby be affected and shall be given full effect, without regard to the
invalid portions; and (iv) if any court construes any of the Restrictive
Covenants, or any part thereof, to be unenforceable because of the duration of
such provision or the area covered thereby, such court shall have the power to
reduce the duration or area of such provision and, in its reduced form, such
provision shall then be enforceable and shall be enforced.
(g) Jurisdiction. The parties intend to and hereby confer
jurisdiction to enforce the Restrictive Covenants upon the courts of any
jurisdiction within the geographical scope of such Covenants. If the courts of
any one or more such jurisdictions hold the Restrictive Covenants wholly
unenforceable by
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<PAGE>
reason of the breadth of such scope or otherwise, it is the intention of the
parties that such determination not bar or in any way affect the Corporation's
right to the relief provided above in the courts of any other jurisdiction,
within the geographical scope of such Covenants, as to breaches of such
Covenants in such other respective jurisdiction such Covenants as they relate to
each jurisdiction being, for this purpose, severable into diverse and
independent covenants.
(h) Schein's agreements and covenants under Section 8(e) shall
automatically terminate if the Corporation ends the Terms without Cause or
Schein resigns due to a material breach by the Corporation of its obligations
under this Agreement or a material reduction of Schein's duties as provided in
Section 6(c).
9. Successors and Assigns.
(a) Schein. This Agreement is a personal contract, and the rights
and interests that the Agreement accords to Schein may not be sold, transferred,
assigned, pledged, encumbered, or hypothecated by him. All rights and benefits
of Schein shall be for the sole personal benefit of Schein, and no other person
shall acquire any right, title or interest under this Agreement by reason of any
sale, assignment, transfer, claim or judgement or bankruptcy proceedings against
Schein. Except as so provided, this Agreement shall inure to the benefit of and
be binding upon Schein and his personal representatives, distributes and
legatees.
(b) The Corporation. This Agreement shall be binding upon the
Corporation and inure to the benefit of the Corporation and of its successors
and assigns, including (but not limited to) any corporation that may acquire all
or substantially all of the corporation's assets or business or into or with
which the Corporation may be consolidated or merged. In the event that the
Corporation sells all or substantially all of its assets, merges or
consolidates, otherwise combines or affiliates with another business, dissolves
and liquidates, or otherwise sells or disposes of substantially all of its
assets and Schein does not elect to treat any such transaction as a termination
by the Corporation without Cause pursuant to Section 7(c), then this Agreement
shall continue in fill force and effect. The Corporation's obligations under
this Agreement shall cease, however, if the successor to, the purchaser or
acquirer either of the Corporation or of all or substantially all of its assets,
or the entity with which the Corporation has affiliated, shall assume in writing
the Corporation's obligations under this Agreement (and deliver and executed
copy of such assumption to Schein), in which case such successor or purchaser,
but not the Corporation, shall thereafter be the only party obligated to perform
the obligations that remain to be performed on the part of the Corporation under
this Agreement.
10. Change in Control. Upon the completion of a transaction resulting in a
Change in Control of the Corporation or any transaction described in Section
9(b), the Corporation shall pay to Schein, in consideration of his work on
behalf of the Corporation, a one time cash payment equal to one and one-half
percent (1.5%) of the total consideration received by the Corporation. "Change
in Control" shall mean any merger or consolidation of the Corporation into or
with another corporation, or any reorganization, recapitalization or like
transaction or series of transactions having substantially equivalent effect and
purpose, at the conclusion of which such merger, consolidation, reorganization,
recapitalization or like transaction the holders of the voting capital stock of
the Corporation immediately prior to such transaction or series of transactions
own less than a majority of the voting capital stock of the acquiring entity or
entity surviving or resulting from such transaction or series of transactions
immediately thereafter, or any sale, transfer or other disposition of all or
substantially all of the assets or capital stock of the Corporation.
11. Sale, Merger or Spin-out of Subsidiary. Upon the sale, merger or
public spin-out of any wholly-owned or partially-owned subsidiary of the
Corporation, or of any material asset of the Corporation, Schein shall receive a
success fee equal to one and one-half percent (1.5%) of the value of SIGA's
shares of the subsidiary, or of the value of the material asset, upon the sale,
merger or spin-out. In the event the subsidiary or material asset is sold for
cash, the 1.5% success fee shall be paid for in cash. In the event the
subsidiary or material asset is sold for equity in another company, the 1.5%
success fee shall be paid for in the form of equity received by the Corporation.
In the event of a merger or public spin-out of
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the subsidiary or of any material asset of the Corporation, the 1.5% success fee
shall be paid for in the form of shares of the subsidiary or in the form of
equity received by the Corporation.
12. Entire Agreement. This Agreement represents the entire agreement
between the parties concerning Schein's employment with the Corporation and
supersedes all prior negotiations, discussions, understanding and agreements,
whether written or oral, between Schein and the Corporation relating to the
subject matter of this Agreement.
13. Amendment or Modification, Waiver. No provision of this Agreement may
be amended or waived unless such amendment or waiver is agreed to in writing
signed by Schein and by a duly authorized officer of the Corporation. No waiver
by any party to this Agreement or any breach by another party of any condition
or provision of this Agreement to be performed by such other party shall be
deemed a waiver of a similar or dissimilar condition or provision at the same
time, any prior time or any subsequent time.
14. Notices. Any notice to be given under this Agreement shall be in
writing and delivered personally or sent by overnight courier or registered or
certified mail, postage prepaid, return receipt requested, addressed to the
party concerned at the address indicated below, or to such other address of
which such party subsequently may give notice in writing:
If to Schein: Joshua D. Schein
420 Lexington Avenue
Suite 620
New York, NY 10170
Fax: 212-697-3130
If to the Corporation: SIGA TECHNOLOGIES, INC.
420 Lexington Avenue
Suite 620
New York, NY 10170
Fax: 212-697-3130
Attention: Judson Cooper
with a copy to: Orrick, Herrington and Sutcliffe
666 Fifth Avenue
New York, NY 10103
Attention: Jeffrey Fessler
Any notice delivered personally or by overnight courier shall be deemed given on
the date delivered and any notice sent by registered or certified mail, postage
prepaid, return receipt requested, shall be deemed given on the date mailed.
15. Severability. If any provision of this Agreement or the application of
any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid and unenforceable to any extent,
the remainder of this Agreement or the application of such provision to such
person or circumstances other than those to which it is so determined to be
invalid and unenforceable shall not be affected, and each provision of this
Agreement shall be validated and shall be enforced to the fullest extent
permitted by law. If for any reason any provision of this Agreement containing
restrictions is held to cover an area or to be for a length of time that is
unreasonable or in any other way is construed to be too broad or to any extent
invalid, such provision shall not be determined to be entirely null, void and of
no effect; instead, it is the intention and desire of both the Corporation and
Schein that, to the extent that the provision is or would be valid or
enforceable under applicable law, any court of competent jurisdiction shall
construe and interpret or reform this Agreement to provide for a restriction
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having the maximum enforceable area, time period and such other constraints or
conditions (although not greater than those contained currently contained in
this Agreement) as shall be valid and enforceable under the applicable law.
16. Survivorship. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
17. Headings. All descriptive headings of sections and paragraphs in this
Agreement are intended solely for convenience of reference, and no provision of
this Agreement is to be construed by reference to the heading of any section or
paragraph.
18. Withholding Taxes. All salary, benefits, reimbursements and any other
payments to Schein under this Agreement shall be subject to all applicable
payroll and withholding taxes and deductions required by any law, rule or
regulation of and federal, state or local authority.
19. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together constitute one and same instrument.
20. Applicable Law; Arbitration. The validity, interpretation and
enforcement of this Agreement and any amendments or modifications hereto shall
be governed by the laws of the State of New York, as applied to a contract
executed within and to be performed in such State. The parties agree that any
disputes shall be definitively resolved by binding arbitration before the
American Arbitration Association in New York, New York and consent to the
jurisdiction to the federal courts of the Southern District of New York or, if
there shall be no jurisdiction, to the state courts located in New York County,
New York, to enforce any arbitration award rendered with respect thereto. Each
party shall choose one arbitrator and the two arbitrators shall choose a third
arbitrator. All costs and fees related to such arbitration (and judicial
enforcement proceedings, if any) shall be borne by the unsuccessful party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
SIGA TECHNOLOGIES INC
By: /s/ Judson Cooper
-----------------------
Judson Cooper
Chairman of the Board
/s/ Joshua D. Schein
-----------------------
Joshua D. Schein
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), effective as of January 19,
2000, between SIGA TECHNOLOGIES, INC., a Delaware corporation (with its
successors and assigns, referred to as the "Corporation") and Judson Cooper
(referred to as "Cooper").
Preliminary Statement
The Corporation desires to employ Cooper, and Cooper wishes to be employed
by the Corporation, upon the terms and subject to the conditions set forth in
this Agreement. The Corporation and Cooper also wish to enter into the other
agreements set forth in this Agreement, all of which are related to Cooper's
employment under this agreement.
Agreement
Cooper and the Corporation therefore agree as follows:
1. Employment for Term. The Corporation hereby employs Cooper and
Cooper hereby accepts employment with the Corporation for the period beginning
on the date of this Agreement and ending January 19, 2005. (the "Initial Term"),
or upon the earlier termination of the Term pursuant to Section 6. This
Agreement shall be automatically renewed for additional one-year periods (the
"Renewal Terms;" together with the Initial Term, the "Term") unless either party
notifies the other in writing of its intention not to so renew this Agreement no
less than 180 days prior to the expiration of the Initial Term or a Renewal
Term. The termination of Cooper's employment under this Agreement shall end the
Term but shall not terminate Cooper's or the Corporation's other agreements in
this Agreement, except as otherwise provided herein.
2. Position and Duties. During the Term, Cooper shall serve as Chairman
and Executive Vice President of the Corporation. During the Term, Cooper shall
also hold such additional positions and titles as the Board of Directors of the
Corporation (the "Board") may determine from time to time. During the Term,
Cooper shall devote as much time as is necessary to satisfactorily perform his
duties as an employee of the Corporation.
3. Compensation.
(a) Base Salary. The Corporation shall pay Cooper a base salary,
beginning on the first day of the Term and ending on the last day of the Term,
of not less than $250,000 per annum, payable at least monthly on the
Corporation's regular pay cycle for professional employees.
(b) Stock Options. Pursuant to the Corporation's stock option plan
and subject to stockholder approval of the Corporation's Amended 1996 Incentive
and Non-Qualified Stock Plan, the Corporation shall grant to Cooper
fully-vested options to purchase 500,000 shares of the Corporation's Common
Stock exercisable at $2.00 per share, the closing bid price of the Common stock
of the Corporation on the date hereof. The options shall expire on the tenth
anniversary of this Agreement.
(c) Annual Increases. The Base Salary shall be increased at the end
of each year of service by the greater of (i) 5% or (ii) a percentage equal to
the increase, if any, in the United States Department of Labor Consumer Price
Index (or comparable index, if available) for the New York metropolitan area
over the previous 12 months.
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(d) Other and Additional Compensation. The preceding sections
establish the minimum compensation during the Term and shall not preclude the
Board from awarding Cooper a higher salary or any bonuses or stock options in
the discretion of the Board during the Term at any time. The Company will adopt
a bonus plan and Cooper will be eligible to participate in such plan. The
Corporation shall pay Cooper a monthly car allowance of $500.
4. Employee Benefits. During the Term, Cooper shall be entitled to the
employee benefits including vacation, 401(k) plan, health plan and other
insurance benefits made available by the Corporation to any other officers or
key employees of the Corporation.
5. Expenses. The Corporation shall reimburse Cooper for actual
out-of-pocket expenses incurred by him in the performance of his services for
the Corporation upon the receipt of appropriate documentation of such expenses.
6. Termination.
(a) General. The Term shall end immediately upon Cooper's death. The
Term may also end for Cause or Disability, as defined in Section 7.
(b) Notice of Termination. Promptly after it ends the Term, the
Corporation shall give Cooper notice of the termination, including a statement
of whether the termination was for Cause or Disability (as defined in Section
7(a) and 7(b) below). The Corporation's failure to give notice under this
Section 6(b) shall not, however, affect the validity of the Corporation's
termination of the Term.
(c) Effective Termination by the Corporation. If the Corporation
reassigns Cooper's base of operations outside of New York City, or materially
reduces Cooper's duties during the term, including replacing Cooper as Chief
Executive Officer, then, at his option, Cooper may treat such reduction in
duties as a termination of the Term without Cause by the Corporation.
7. Severance Benefits.
(a) "Cause Defined". "Cause" means (i) willful malfeasance or
willful misconduct by Cooper in connection with his employment; (ii) Cooper's
gross negligence in performing any of his duties under this Agreement; (iii)
Cooper's conviction of, or entry of a plea of guilty to, or entry of a plea of
nolo contendre with respect to, any crime other than a traffic violation or
infraction which is a misdemeanor; (iv) Cooper's material breach of any written
policy applicable to all employees adopted by the Corporation which is not cured
to the reasonable satisfaction of the Corporation within fifteen (15) business
days after notice thereof; or (v) material breach by Cooper of any of his
agreements in this Agreement which is not cured to the reasonable satisfaction
of the Corporation within fifteen (15) business days after notice thereof.
(b) Disability Defined. "Disability" shall mean Cooper's incapacity
due to physical or mental illness that results in his being substantially unable
to perform his duties hereunder for six consecutive months (or for six months
out of any nine month period). During a period of Disability, Cooper shall
continue to receive his base salary hereunder, provided that if the Corporation
provides Cooper with disability insurance coverage, payments of Cooper's base
salary shall be reduced by the amount of any disability insurance payments
received by Cooper due to such coverage. The Corporation shall give Cooper
written notice of termination which shall take effect sixty (60) days after the
date it is sent to Cooper unless Cooper shall have returned to the performance
of his duties hereunder during such sixty (60) day period (whereupon such notice
shall become void).
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(c) Termination. If the Corporation ends the Term for Cause or
Disability, or if Cooper resigns as an employee of the Corporation for reasons
other than a material breach by the Corporation of its obligations under this
Agreement or a material reduction of Cooper's duties as provided in Section
6(c), or if Cooper dies, then the Corporation shall have no obligation to pay
Cooper any amount, whether for salary, benefits, bonuses, or other compensation
or expense reimbursements of any kind, accruing after the end of the Term, and
such rights shall, except as otherwise required by law, be forfeited immediately
upon the end of the Term, except that payments under 3(a) shall continue unless
the Corporation ends the Term for Cause or if Cooper resigns for reasons other
than a material breach by the Corporation of its obligations under this
Agreement or a material reduction of his duties as provided in Section 6(c). If
the Corporation ends the Term without Cause, then the Corporation will be
obligated to continue to pay Cooper's salary and all other amounts due hereunder
for the remainder of the Term. In addition, in the event of a change in the
ownership of greater than fifty percent (50%) of the Corporation's outstanding
voting stock or any transaction described in Section 9(b), Cooper may elect to
terminate this agreement as if it were a termination by the Corporation without
Cause, and the Corporation shall be obligated to pay Cooper's salary for the
remainder of the Term.
8. Confidentiality, Ownership, and Covenants.
(a) "Corporation Information" and "Inventions" Defined. "Corporation
Information" means all information, knowledge or data of or pertaining to (i)
the Corporation, its employees and all work undertaken on behalf of the
Corporation, and (ii) any other person, firm, corporation or business
organization with which the Corporation may do business during the Term, that is
not in the public domain (and whether relating to methods, processes,
techniques, discoveries, pricing, marketing or any other matters). "Inventions"
collectively refers to any and all inventions, trade secrets, ideas, processes,
formulas, source and object codes, data, programs, other works of authorship,
know-how, improvements, research, discoveries, developments, designs, and
techniques regarding any of the foregoing.
(b) Confidentiality. (i) Cooper hereby recognizes that the value of
all trade secrets and other proprietary data and all other information of the
Corporation not in the public domain disclosed by the Corporation in the course
of his employment with the Corporation may be attributable substantially to the
fact that such confidential information is maintained by the Corporation in
strict confidentiality and secrecy and would be unavailable to others without
the expenditure of substantial time, effort or money. Cooper, therefore, except
as provided in the next two sentences, covenants and agrees that all Corporation
Information shall be kept secret and confidential at all times during the Term
and for the five (5) year period after the end of the Term and shall not be used
or divulged by him outside the scope of his employment as contemplated by his
Agreement, except as the Corporation may otherwise expressly authorize by action
of the Board. In the event that Cooper is requested in a judicial,
administrative or governmental proceeding to disclose any of the Corporation
Information, Cooper will promptly so notify the Corporation so that the
Corporation may seek a protective order of other appropriate remedy and/or waive
compliance with this Agreement. If disclosure of any of the Corporation
Information is required, Cooper may furnish the material so required to be
furnished, but Cooper will furnish only that portion of the Corporation
Information that legally is required.
(ii) Cooper also hereby agrees to keep the terms of this Agreement
confidential to the same extent that the Corporation maintains such
confidentiality (except with regard to any disclosure by the Corporation
required under applicable securities laws).
(c) Ownership of Inventions, Patents and Technology. Cooper hereby
assigns to the Corporation all of Cooper's rights (including patent rights,
copyrights, trade secret rights, and all other rights throughout the world),
title and interest in and to Inventions, whether or not patentable or
registrable under copyright or similar statutes, made or conceived or reduced to
practice or learned by Cooper, either alone or jointly with others, during the
course of the performance of services for the Corporation. Cooper shall also
assign to, or as directed by, the Corporation, all of Cooper's right, title and
interest in and to any and all Inventions, the full title to which is required
to be in the United States government of any of its
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agencies. The Corporation shall have all right, title and interest in all
research and work product produced by Cooper as an employee of the Corporation,
including, but not limited to, all research materials and lab books.
(d) Non-Competition Period Defined. "Non-Competition Period" means
the period beginning at the end of the Term and ending one (1) year after the
end of the Term.
(e) Covenants Regarding the Term and Non-Competition Period. Cooper
acknowledges and agrees that his services pursuant to this Agreement are unique
and extraordinary; that the Corporation will be dependent upon Cooper for the
development of its products; and that he will have access to and control of
confidential information of the Corporation. Cooper further acknowledges that
the business of the Corporation is international in scope and cannot be confined
to any particular geographic area. For the foregoing reasons and to induce the
Corporation to enter this Agreement, Cooper covenants and agrees that, subject
to Section 8(h), during the Term and the Non-Competition Period Cooper shall not
unless with written consent of the Corporation:
(i) engage in any business related to the research and development of
the products or processes in which the Corporation is engaged in
during the Term or in any other business conducted by the
Corporation during the Term (collectively the "Prohibited Activity")
in the World for his own account;
(ii) become interested in any individual, corporation, partnership or
other business entity (a "Person") engaged in any Prohibited
Activity in the World, directly or indirectly, as an individual,
partner, shareholder, officer, director, principal, agent, employee,
trustee, consultant or in any other relationship or capacity;
provided, however, that Cooper may own directly or indirectly,
solely as an investment, securities of any Person which are traded
on any national securities exchange if Cooper (x) is not a
controlling person of, or a member of a group which controls, such
person or (y) does not, directly or indirectly, own 5% or more of
any class of securities of such person; or
(iii) directly or indirectly hire, employ or retain any person who at any
time during the Term was an employee of the Corporation or directly
or indirectly solicit, entice, induce or encourage any such person
to become employed by any other person.
(f) Remedies. Cooper hereby acknowledges that the covenants and
agreements contained in Section 8 are reasonable and valid in all respects and
that the Corporation is entering into this Agreement, inter alia, on such
acknowledgement. If Cooper breaches, or threatens to commit a breach, of any of
the Restrictive Covenants, the Corporation shall have the following rights and
remedies, each of which rights and remedies shall be independent of the other
and severally enforceable, and all of which rights and remedies shall be in
addition to, and not in lieu of, any other rights and remedies available to the
Corporation under law or in equity: (i) the right and remedy to have the
Restrictive Covenants specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to the Corporation and that
money damages will not provide an adequate remedy to the Corporation; (ii) the
right and remedy to require Cooper to account for and pay over to the
Corporation such damages as are recoverable at law as the result of any
transactions constituting a breach of any of the Restrictive Covenants; (iii) if
any court determines that any of the Restrictive Covenants, or any part thereof,
is invalid or unenforceable, the remainder of the Restrictive Covenants shall
not thereby be affected and shall be given full effect, without regard to the
invalid portions; and (iv) if any court construes any of the Restrictive
Covenants, or any part thereof, to be unenforceable because of the duration of
such provision or the area covered thereby, such court shall have the power to
reduce the duration or area of such provision and, in its reduced form, such
provision shall then be enforceable and shall be enforced.
(g) Jurisdiction. The parties intend to and hereby confer
jurisdiction to enforce the Restrictive Covenants upon the courts of any
jurisdiction within the geographical scope of such Covenants. If the courts of
any one or more such jurisdictions hold the Restrictive Covenants wholly
unenforceable by
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reason of the breadth of such scope or otherwise, it is the intention of the
parties that such determination not bar or in any way affect the Corporation's
right to the relief provided above in the courts of any other jurisdiction,
within the geographical scope of such Covenants, as to breaches of such
Covenants in such other respective jurisdiction such Covenants as they relate to
each jurisdiction being, for this purpose, severable into diverse and
independent covenants.
(h) Cooper's agreements and covenants under Section 8(e) shall
automatically terminate if the Corporation ends the Terms without Cause or
Cooper resigns due to a material breach by the Corporation of its obligations
under this Agreement or a material reduction of Cooper's duties as provided in
Section 6(c).
9. Successors and Assigns.
(a) Cooper. This Agreement is a personal contract, and the rights
and interests that the Agreement accords to Cooper may not be sold, transferred,
assigned, pledged, encumbered, or hypothecated by him. All rights and benefits
of Cooper shall be for the sole personal benefit of Cooper, and no other person
shall acquire any right, title or interest under this Agreement by reason of any
sale, assignment, transfer, claim or judgement or bankruptcy proceedings against
Cooper. Except as so provided, this Agreement shall inure to the benefit of and
be binding upon Cooper and his personal representatives, distributes and
legatees.
(b) The Corporation. This Agreement shall be binding upon the
Corporation and inure to the benefit of the Corporation and of its successors
and assigns, including (but not limited to) any corporation that may acquire all
or substantially all of the corporation's assets or business or into or with
which the Corporation may be consolidated or merged. In the event that the
Corporation sells all or substantially all of its assets, merges or
consolidates, otherwise combines or affiliates with another business, dissolves
and liquidates, or otherwise sells or disposes of substantially all of its
assets and Cooper does not elect to treat any such transaction as a termination
by the Corporation without Cause pursuant to Section 7(c), then this Agreement
shall continue in full force and effect. The Corporation's obligations under
this Agreement shall cease, however, if the successor to, the purchaser or
acquirer either of the Corporation or of all or substantially all of its assets,
or the entity with which the Corporation has affiliated, shall assume in writing
the Corporation's obligations under this Agreement (and deliver and executed
copy of such assumption to Cooper), in which case such successor or purchaser,
but not the Corporation, shall thereafter be the only party obligated to perform
the obligations that remain to be performed on the part of the Corporation under
this Agreement.
10. Change in Control. Upon the completion of a transaction resulting in a
Change in Control of the Corporation or any transaction described in Section
9(b), the Corporation shall pay to Cooper, in consideration of his work on
behalf of the Corporation, a one time cash payment equal to one and one-half
percent (1.5%) of the total consideration received by the Corporation. "Change
in Control" shall mean any merger or consolidation of the Corporation into or
with another corporation, or any reorganization, recapitalization or like
transaction or series of transactions having substantially equivalent effect and
purpose, at the conclusion of which such merger, consolidation, reorganization,
recapitalization or like transaction the holders of the voting capital stock of
the Corporation immediately prior to such transaction or series of transactions
own less than a majority of the voting capital stock of the acquiring entity or
entity surviving or resulting from such transaction or series of transactions
immediately thereafter, or any sale, transfer or other disposition of all or
substantially all of the assets or capital stock of the Corporation.
11. Sale, Merger or Spin-out of Subsidiary. Upon the sale, merger or
public spin-out of any wholly-owned or partially-owned subsidiary of the
Corporation, or of any material asset of the Corporation, Cooper shall receive a
success fee equal to one and one-half percent (1.5%) of the value of SIGA's
shares of the subsidiary, or of the value of the material asset, upon the sale,
merger or spin-out. In the event the subsidiary or material asset is sold for
cash, the 1.5% success fee shall be paid for in cash. In the event the
subsidiary or material asset is sold for equity in another company, the 1.5%
success fee shall be paid for in the form of equity received by the Corporation.
In the event of a merger or public spin-out of
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the subsidiary or of any material asset of the Corporation, the 1.5% success fee
shall be paid for in the form of shares of the subsidiary or in the form of
equity received by the Corporation.
12. Entire Agreement. This Agreement represents the entire agreement
between the parties concerning Cooper's employment with the Corporation and
supersedes all prior negotiations, discussions, understanding and agreements,
whether written or oral, between Cooper and the Corporation relating to the
subject matter of this Agreement.
13. Amendment or Modification, Waiver. No provision of this Agreement may
be amended or waived unless such amendment or waiver is agreed to in writing
signed by Cooper and by a duly authorized officer of the Corporation. No waiver
by any party to this Agreement or any breach by another party of any condition
or provision of this Agreement to be performed by such other party shall be
deemed a waiver of a similar or dissimilar condition or provision at the same
time, any prior time or any subsequent time.
14. Notices. Any notice to be given under this Agreement shall be in
writing and delivered personally or sent by overnight courier or registered or
certified mail, postage prepaid, return receipt requested, addressed to the
party concerned at the address indicated below, or to such other address of
which such party subsequently may give notice in writing:
If to Cooper: Judson Cooper
420 Lexington Avenue
Suite 620
New York, NY 10170
Fax: 212-697-3130
If to the Corporation: SIGA TECHNOLOGIES, INC.
420 Lexington Avenue
Suite 620
New York, NY 10170
Fax: 212-697-3130
Attention: Joshua D. Schein
with a copy to: Orrick, Herrington and Sutcliffe
666 Fifth Avenue
New York, NY 10103
Attention: Jeffrey Fessler
Any notice delivered personally or by overnight courier shall be deemed given on
the date delivered and any notice sent by registered or certified mail, postage
prepaid, return receipt requested, shall be deemed given on the date mailed.
15. Severability. If any provision of this Agreement or the application of
any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid and unenforceable to any extent,
the remainder of this Agreement or the application of such provision to such
person or circumstances other than those to which it is so determined to be
invalid and unenforceable shall not be affected, and each provision of this
Agreement shall be validated and shall be enforced to the fullest extent
permitted by law. If for any reason any provision of this Agreement containing
restrictions is held to cover an area or to be for a length of time that is
unreasonable or in any other way is construed to be too broad or to any extent
invalid, such provision shall not be determined to be entirely null, void and of
no effect; instead, it is the intention and desire of both the Corporation and
Cooper that, to the extent that the provision is or would be valid or
enforceable under applicable law, any court of competent jurisdiction shall
construe and interpret or reform this Agreement to provide for a restriction
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having the maximum enforceable area, time period and such other constraints or
conditions (although not greater than those contained currently contained in
this Agreement) as shall be valid and enforceable under the applicable law.
16. Survivorship. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
17. Headings. All descriptive headings of sections and paragraphs in this
Agreement are intended solely for convenience of reference, and no provision of
this Agreement is to be construed by reference to the heading of any section or
paragraph.
18. Withholding Taxes. All salary, benefits, reimbursements and any other
payments to Cooper under this Agreement shall be subject to all applicable
payroll and withholding taxes and deductions required by any law, rule or
regulation of and federal, state or local authority.
19. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together constitute one and same instrument.
20. Applicable Law; Arbitration. The validity, interpretation and
enforcement of this Agreement and any amendments or modifications hereto shall
be governed by the laws of the State of New York, as applied to a contract
executed within and to be performed in such State. The parties agree that any
disputes shall be definitively resolved by binding arbitration before the
American Arbitration Association in New York, New York and consent to the
jurisdiction to the federal courts of the Southern District of New York or, if
there shall be no jurisdiction, to the state courts located in New York County,
New York, to enforce any arbitration award rendered with respect thereto. Each
party shall choose one arbitrator and the two arbitrators shall choose a third
arbitrator. All costs and fees related to such arbitration (and judicial
enforcement proceedings, if any) shall be borne by the unsuccessful party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
SIGA TECHNOLOGIES INC
By: /s/ Joshua D. Schein
-----------------------
Joshua D. Schein
Chief Executive Officer
/s/ Judson Cooper
-----------------------
Judson Cooper
7
SETTLEMENT AGREEMENT
AND
MUTUAL GENERAL RELEASE
This Settlement Agreement and Mutual General Release (hereinafter
"Agreement") is entered into this 17th day of February, 2000 between Washington
University (hereinafter "WU"), having its principal office at One Brookings
Drive, Saint Louis, Missouri 63130 and Scott Hultgren, Ph.D., Professor of
Molecular Microbiology at WU, and SIGA Pharmaceuticals, Inc. (hereinafter
"SIGA"), a corporation duly organized and existing under the laws of the State
of Delaware and having its principal office at 420 Lexington Avenue, Suite 620,
New York, New York 10170.
Recitals
WHEREAS, WU through its research funded in part by WU, SIGA and others
have developed intellectual property comprising patent rights, copyrights,
know-how and technical data;
WHEREAS, SIGA is in the business of researching, developing, and
commercializing products based upon such intellectual property rights;
WHEREAS, on or about July 9, 1997 Dr. Hultgren and SIGA entered into a
personal consulting agreement (hereinafter "PCA") under which Dr. Hultgren
agreed to provide consulting services to SIGA regarding, among other things,
providing scientific scrutiny of programs funded by SIGA with respect to the
appropriateness of its research and development
<PAGE>
programs and potential impact of alternative technologies, advising SIGA
concerning developments in research and the potential of such developments as a
basis for developing new products and recommending persons who might be
appropriate as consultants or scientific staff for SIGA;
WHEREAS, on or about February 6, 1998 WU and SIGA entered into a Research
Collaboration and Licensing Agreement which was amended by letter agreement on
October 21, 1998 (hereinafter "RCLA") regarding the intellectual property rights
associated and generated under a research collaboration between SIGA and WU with
Dr. Hultgren as the primary investigator under the agreement;
WHEREAS, on or about July 23, 1999, WU made a demand for arbitration
regarding disputes arising from the RCLA pursuant to the rules of the American
Arbitration Association as required under the RCLA, and on July 26, 1999, SIGA
made a counter-demand for arbitration;
WHEREAS, on or about July 28, 1999 SIGA brought suit against Dr. Hultgren
in the United States District Court for the Southern District of New York
alleging various causes of action relating to the subject matter of both the PCA
and the RCLA;
WHEREAS, the parties hereto wish to settle the disputes regarding the RCLA
and the PCA, and any other disputes which exist or may exist between them on the
terms stated herein;
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NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by all the parties
hereto, the parties agree as follows:
Covenants and Conditions
1. Research Collaboration and Licensing Agreement. The Research
Collaboration and Licensing Agreement (hereinafter "RCLA") between WU and SIGA
and all rights granted therein (except as specifically noted below) are
terminated effective February 6, 1999. No obligations imposed on either party
under the RCLA, except for the maintenance of confidentiality regarding the
other party's confidential information under Article 7 of the RCLA, will survive
termination. Title to all equipment purchased under the RCLA and physically
maintained by WU hereby vests in WU.
2. Personal Consulting Agreements. All personal consulting agreements
between SIGA and any WU faculty members and/or employees, including the PCA
between SIGA and Dr. Hultgren, are hereby terminated. SIGA will neither propose
nor enter into any new consulting agreements with WU faculty members and/or
employees without first receiving WU's written consent.
3. Mutual Releases. Except with respect to the obligations created by or
arising out of this Agreement, SIGA for itself and on behalf of its parent,
subsidiary, and other affiliated corporations, divisions, directors, officers,
employees, agents, affiliates, representatives, and assigns who may claim
through it hereby release, acquit and forever discharge and covenant not to sue
individually or collectively WU, Dr. Hultgren and/or their agents, employees,
insurers,
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directors, officers, successors and assigns for, of and from any and all claims,
demands, damages, debts, liabilities, accounts, reckonings, obligations, costs,
expenses, liens, actions and causes of action of every kind and nature
whatsoever, including right to contribution or indemnification, equitable or
declaratory relief, whether now known or unknown, suspected or unsuspected,
which SIGA or its related parties either now has, owns or holds or at any time
heretofore ever had, owned or held, or could, shall or may hereafter have, own
or hold, resulting or to result from occurrences that happened at any time up
until the signing of this agreement, including, but not limited to, those
relating to, based upon or arising out of the RCLA, the PCA, or any other
personal consulting agreement with WU faculty members and/or employees, or any
of the facts or transactions asserted in the aforesaid arbitration proceedings
and suit by any of the parties. (All of which released claims are hereinafter
referred to as "SIGA's Released Matters"), SIGA and Dr. Hultgren will promptly
file after the effective date of this Agreement a Stipulation of Discontinuance
with Prejudice of SIGA's action against Dr. Scott Hultgren in Action no. 99 Civ,
6017 (DAB) pending in the United States District Court for the Southern District
of New York.
Except with respect to the obligations created by or arising out of this
Agreement, WU, Dr. Hultgren, for themselves and an behalf of their agents,
employees, insurers, directors, officers, successors, assigns and others who may
claim through them hereby release, discharge and covenant not to sue
individually or collectively SIGA, its parent, subsidiary and other affiliated
corporations, divisions, directors, officers, employees, agents, insurers and
its successors and assigns for, of and from any and all claims, demands,
damages, debts, liabilities, accounts, reckonings, obligations, costs, expenses,
liens, actions and causes of action of every kind and nature whatsoever,
including right to contribution or indemnification, equitable or declaratory
relief, whether now known or unknown, suspected or unsuspected, which WU, Dr.
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<PAGE>
Hultgren or their related parties either now has, owns or holds or at any time
heretofore ever had, owned or held, or could, shall or may hereafter have, or
own or hold, resulting or to result from occurrences that happened at any time
prior to the signing of this agreement, including, but not limited to, those
relating to, based upon or arising out of the RCLA, the PCA, or any other
personal consulting agreement with WU faculty members and/or employees, or any
of the facts or transactions which were or could have been asserted in the
aforesaid arbitration proceedings and suit by any of the parties. (All of which
released claims are hereinafter referred to as "WU's Released Matters").
The parties shall promptly file a mutual termination notice with the
American Arbitration Association concluding such proceedings in accordance with
this settlement.
It is the intention of the parties that this Agreement shall be effective
as a full and final accord and satisfaction and mutual release of and from all
of SIGA's Released Matters and WU's Released Matters.
4. Contract Construction. The parties hereby agree that this Agreement
shall be construed, interpreted, and applied in accordance with the following:
a. The invalidity or unenforceability of any provision hereof shall
in no way affect the validity or enforceability of any other provision of this
Agreement.
b. This Agreement contains the entire agreement among the parties
hereto and supersedes and cancels all previous agreements, negotiations,
commitments and writings with respect to the subject matter hereof, and may not
be released, discharged, abandoned, changed, or modified in any manner, orally
or in writing, except by an instrument in writing signed by a duly
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<PAGE>
authorized officer of each of the parties hereto. Any attempt to modify this
Agreement orally or in writing not duly executed by all parties hereto shall be
void.
c. This Agreement shall be deemed executed and delivered within the
state of Missouri, and the rights and obligations of the parties hereunder shall
be construed and enforced in accordance with, and governed by, the laws of the
State of Missouri.
d. No waiver of any breach of any term or provision of this
Agreement shall be construed to be, nor shall be, a waiver of any other breach
of this Agreement.
5. Effective date. The effective date of this Agreement shall be the date
on which this Agreement is finally executed by all parties hereto.
6. Confidentiality of the Agreement. Each party agrees to keep secret and
confidential the terms of this agreement except as follows. WU and its related
parties may disclose this Agreement and its terms to the extent necessary to
negotiate rights in the technology and related intellectual property to
prospective or future existing licensees or other recipients of such rights, or
to the extent necessary for it to comply with requirements for financial grant
applications or other funding agreements related to the technology. SIGA may
disclose this Agreement and its terms to the extent necessary for it to comply
with its reporting obligations as a public company, to the extent necessary for
it to comply with requirements for financial grant applications or other funding
agreements related to the technology, to the extent necessary to make required
bona fide disclosures to prospective investors in SIGA and to the extent
necessary to negotiate rights in
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<PAGE>
technology and related intellectual property to prospective clients regarding
pharmaceutical transactions when such disclosure should reasonably be made. All
parties may disclose portions of this Agreement as necessary for each party to
comply with a valid Court Order, federal and/or state agency or private action
subpoenas, provided reasonable notice is given to the other party of the Order
or subpoena prior to responding thereto.
7. Warranty of Persons executing this Agreement. Each person whose
signature appears below warrants and guarantees, on behalf of him or herself,
and on behalf of the party for whom he or she is executing this Agreement, that
such person had been duly authorized and has full authority to execute this
Agreement on behalf of the party for whom he or she is executing this Agreement.
8. Publicity. Notwithstanding any provisions of this Agreement:
a. Neither WU nor Dr. Hultgren may use the name or marks of SIGA or
of any of its employees or subcontractors in advertising, publicity or otherwise
without the prior written approval of SIGA; or
b. Neither SIGA nor any of its affiliates or employees may use the
name or marks of WU, nor the name of Dr. Hultgren, nor the names of other
investigators or employees of WU in advertising, publicity or otherwise without
the prior written approval of WU.
9. Patent Expenses. WU will reimburse SIGA the cost of patent expenses
arising from the RCLA in the amount of $37,037.04 within thirty (30) days of the
execution of this agreement.
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<PAGE>
10. Patent Rights. SIGA disclaims any rights, title or interest in and
hereby expressly assigns any rights, title and interest it has or may claim to
have in any proprietary technology, patents, patent applications, inventions and
improvements related to the RCLA project as defined in sections 1.8, 1.11 (as
amended, 10/21/98), 1.12, 1.17, and 1.18 of the RCLA to WU, whether developed by
WU employees or contractors and/or by SIGA employees or contractors. This
agreement does not encompass certain rights, title or interest SIGA has or
claims in certain patents and/or patent applications not arising from the RCLA
and which are specifically set forth in Appendix A attached hereto. In
particular, as to the patent rights associated with U.S. patent application
serial no. 60/140,990 (DegP Periplasmic Protease), Washington University and
SIGA each claim rights in said application based on inventorship by their
respective employees or agents. As to the remaining patents and/or patent
applications set forth in Appendix A, Washington University and SIGA each claim
rights in said patents or applications, on Washington University's part, based
on inventorship by its employees or agents, and on SIGA's part, based on
inventorship by employees or agents of Symbicom (AB) and on a written assignment
of Symbicom's patent rights therein to SIGA. Unless otherwise indicated by
subsequent agreement, WU and SIGA will equally share responsibility for the
administration and the expenses for the prosecution of patent applications
and/or patents specifically set forth in Appendix A attached hereto.
WU and SIGA have entered into a licensing agreement regarding U.S. Patent
Number 5,834,591 entitled "Polypeptides and Antibodies Useful for the Diagnosis
and Treatment of Pathogenic Neisseria and Other Micro Organisms having Type IV
Pilin" which technology was incorporated into the RCLA by letter amendment dated
October 21, 1998. The licensing agreement is attached hereto as Appendix B and
is hereby incorporated into this agreement.
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11. Licensing Revenues. WU agrees to pay SIGA a licensing revenue of 20%
of the first $2,000,000.00 of net licensing revenues (that is, up to
$400,000.00) that derive from the commercialization of products covered by valid
claims under any patent rights of section 10 of this Agreement, and 10% of the
next $1,0O0,000.00 of the net licensing revenues (that is, up to an additional
$100,000.00) that derive from the commercialization of products covered by valid
claims under any patent rights of section 10 of this Agreement, with the total
payment of licensing revenues to SIGA not to exceed $500,000.00 under any
circumstances. WU and SIGA agree that "net licensing revenues" includes
licensing fees, license maintenance fees, milestone payments and royalties, but
that "net licensing revenues" expressly excludes any research support funds.
12. Government Rights. This Agreement is subject to any rights pursuant to
research funding from the Federal Government, if any, and will be modified as
necessary to conform to government regulations.
13. Admissions. Nothing in this Agreement or the settlement of this
dispute shall constitute or be construed as an admission with respect to the
merits of any claim or cause of action, or of any other matter of law or fact
heretofore asserted in any proceeding by any party hereto. The parties further
agree that no representation of fact or opinion has been made by one of them to
the other with respect to the extent or nature of the claims or damages in order
to induce this compromise.
9
<PAGE>
[SENNIGER, POWERS, LEAVITT & ROEDEL LETTERHEAD]
February 18, 2000
Sigmund S. Wissner-Gross, Esq.
Heller, Horowitz & Feit, P.C.
292 Madison Avenue
New York, NY 10017
Re: Washington University vs. SIGA Pharmaceuticals, Inc.
Our File WSHU 2007
Dear Sigmund:
Enclosed please find fully executed originals of the Settlement Agreement
and Release and Nonexclusive License Agreement.
I will call you soon to discuss matters related to the pending patent
estate.
Yours truly,
/s/ G. Harley Blosser
G. Harley Blosser
GHB/bk
Enclosures
cc: Andrew Neighbour (via fax)
10
<PAGE>
14. Agent. No party shall be deemed to be an agent of another party as a
result of any transaction under or related to this Agreement, and shall not in
any way pledge the other party's credit or incur any obligation on behalf of the
other party.
15. Advice of Counsel. Each party has had the advice of counsel of their
own choosing before executing this Agreement. Each party also acknowledges that
they have reviewed this Agreement prior to execution and the execution hereof is
their free act and deed.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed in their respective corporate names by their duly authorized
officers, or in their individual capacity, as of the dates indicated.
/s/ Scott Hultgren
----------------------------------------
Dr. Scott Hultgren
Date: 2/17/00
----------------------------------
SIGA Pharmaceuticals, Inc.
By: /s/ Joshua D. Schein
------------------------------------
Name: Joshua D. Schein
----------------------------------
Title: Chief Executive Officer
---------------------------------
Date: 2/14/00
----------------------------------
Washington University
By: /s/ Theodore J. Cicero
------------------------------------
Name: Theodore J. Cicero, Ph.D.
----------------------------------
Title: Vice Chancellor for Research
---------------------------------
Date: 2/17/00
----------------------------------
11
<PAGE>
APPENDIX A
Patent Rights
1. U.S. Serial Number 60/140,990
DegP Periplasmic Protease, a New Anti-Infective Target and an In Vivo
Assay for DegP Protease Function.
2. New Zealand Application 311902:
Treatment or Prophylaxis of Diseases Caused by Pilus-Forming Bacteria.
3. Japanese Application Number 514666
Treatment or Prophylaxis of Diseases Caused by Pilus-Forming bacteria
4. Australian Patent Number 704114
Compounds and Pharmaceutical Compositions for the Treatment and
Prophylaxis of Bacterial Infections.
5. Canadian Application Number 2176808
Compounds and Pharmaceutical Compositions for the Treatment and
Prophylaxis of Bacterial Infections.
6. European Patent Application Number 95902653
A New Method for the Treatment and Prophylaxis of Bacterial Infection.
7. U.S. Serial Number 08/154,035 - Abandoned
Treatment or Prophylaxis of Diseases Caused by Pilus-Forming Bacteria.
8. U.S. Serial Number O8/462,436
Method for Treatment and Prophylaxis of Bacterial Infections.
9. U.S. Serial Number 08/465,275
Treatment or Prophylaxis of Diseases Caused by Pilus-Forming Bacteria.
10. U.S. Serial Number 08/640,877
Compounds and Pharmaceutical Compositions for the Treatment and
Prophylaxis of Bacterial Infections.
11. PCT/US94/13455 - Abandoned
Treatment or Prophylaxis of Diseases Caused by Pilus-Forming Bacteria.
<PAGE>
APPENDIX B
<PAGE>
NONEXCLUSIVE LICENSE AGREEMENT
Between
Washington University in St. Louis
Licensor
And
SIGA Pharmaceuticals, Inc.
Licensee
Introduction: This Agreement is made and entered into this ___ day of February,
2000 by and between Washington University in St. Louis, a corporation
established by special act of the Missouri General Assembly approved February
22, 1853 and acts amendatory thereto, having its principal office at One
Brookings Drive, St. Louis, Missouri 63130 (hereinafter "WU") and SIGA
Pharmaceuticals, Inc., having its principal office at 420 Lexington Ave, Suite
620, New York, NY 10120 (hereinafter "SIGA"). WU and SIGA may be referred to
individually as a "Party" or collectively as the "Parties".
1. Background. WU is the owner of certain Patent Rights, Tangible Research
Property and Technical Information (collectively, Intellectual Property,
all as hereinafter defined) relating to polypeptides and antibodies useful
for the diagnosis and treatment of pathogenic Neisseria and other
organisms having Type IV pilin, and WU has the right to grant licenses
thereto. WU wishes to allow the Intellectual Property to be used to
further scientific research and for new product development and other
applications in the public interest and is willing to grant a license for
such uses. SIGA represents to WU that it has the necessary product
development, manufacturing and marketing capabilities to commercialize
products based on such Intellectual Property. SIGA desires to obtain a
license to use these properties and information for its own commercial
research and development endeavors upon the terms and conditions set forth
in this Agreement. In consideration of these premises and the mutual
promises contained herein, the Parties further agree as follows.
2. Definitions. For the purposes of this Agreement, the following words and
phrases will have the meanings assigned to them below.
2.1 Agreement: This nonexclusive license agreement.
2.2 Calendar Half/Year: Each six months period or portion thereof beginning on
January 1 or July 1; or each twelve month period, or portion thereof,
beginning on January 1.
2.3 Combination Product: Any product that is comprised in part of a Licensed
Product and in part of one or more other components which are not
themselves Licensed Products (the "Other Components"). Other Components do
not include surfactants, diluents and carriers.
2.4 Effective Date: [The day, month and year written in the Introduction].
2.5 Field: Human and veterinary antimicrobial therapeutic and prophylactic
compounds and vaccines.
2.6 First Commercial Sale: The date of first transfer by SIGA or its
Sublicensees to an unrelated third party of a Licensed Product for
compensation (including equivalent cash value for trades or other non-cash
payments). The transfer of Licensed Products by SIGA and its Sublicensees
strictly for its own laboratory research and development purposes,
beta-testing and/or clinical testing does not constitute a First
Commercial Sale for the purposes of this Agreement, provided that SIGA
receives no payment for such Licensed Product in excess of the fully
burdened (i.e., direct and indirect) costs of producing and transporting
such materials.
2.7 Intellectual Property: Patent Rights patents and patent applications,
trademarks, service marks, copyrights, mask works, trade secrets, Tangible
Research Property and Technical Information.
2.8 Licensed Product: Any product or service which is made, made for, used,
sold or imported by SIGA and/or its Sublicensees which (a) in the absence
of this license Agreement would infringe at least one valid claim, (b)
uses, is used in, or is made using a process covered by a valid claim, or
(c) is made with or derived from a compound or composition covered by a
valid claim. Licensed Product includes any product made, and method or
process used, in whole or in part using Tangible Research Property or
Technical Information.
2.9 Net Sales: For purposes of computing royalties, gross amounts received by
SIGA or its Sublicensees for Sales of Licensed Products less qualifying
costs, taxes and discounts, as set forth below, which are
<PAGE>
actually invoiced and borne by SIGA and its Sublicensees. Deductions for
calculating Net Sales are limited to the following:
2.9.1 Trade, quantity and cash discounts
2.9.2 Credits, allowances or refunds, not exceeding the original invoice
amount, for claims, damaged goods, rejections or returns.
2.9.3 Prepaid outbound transportation expenses and freight insurance premiums
2.9.4 Excise, sale, use, value added or other taxes levied by a governmental
agency, other than income taxes.
2.10 Patent Rights: US Patent No. 5,834,591 and all foreign counterparts,
continuations, continuations-in-part, divisions, extensions,
reexaminations and reissues thereof, which trace their earliest priority
filing date by unbroken lineage to this patent and its parent
applications.
2.11 Sale: Any transaction in which a Licensed Product is exchanged for value.
A Sale of a Licensed Product will be deemed to have been made at the time
SIGA or its Sublicensee invoices, ships, or receives value for, whichever
occurs first, a Licensed Product.
2.12 Sublicensee: A person or entity to which SIGA has granted a sublicense
under the license rights granted to SIGA in Article 3 of this Agreement.
2.13 Sublicensing Revenue: All fees and cash equivalent for securities,
equipment and other property received by SIGA from its Sublicensees for
the grant of any sublicense. Said Sublicensing Revenue will exclude any
research payments made to SIGA by any Sublicensee.
2.14 Tangible Research Property: The physical embodiments of Patent Rights and
Technical Information, including all progeny and derivatives thereof.
2.15 Technical Information: All ideas, data, know-how, trade secrets, research
information, methods, procedures or processes, biological or chemical
materials, owned by WU, resulting from research performed by or under the
direction of Dr. Stephan Normark et al, which contribute to the practice
of the inventions in the Patent Rights and the commercialization of
Licensed Products.
2.16 Term: Commences on the Effective Date and continues until the expiration
of the last of the patents included in the Patent Rights to expire,
unless earlier terminated in accordance with this Agreement. A patent will
be understood to expire at midnight on the day of its expiration.
2.17 Territory: Anywhere in the world except for countries to which export of
technology or goods is prohibited by applicable U.S. export control laws
or regulations.
2.18 Valid Claim: A claim (a) of a pending Patent Rights patent application
which claim has not been pending for longer than seven years, or (b) of an
issued and unexpired Patent Rights patent which has not been held invalid
or unenforceable by a court or other governmental agency of competent
jurisdiction in a decision or order that is not subject to an appeal.
3. License Grant. Subject to the terms and conditions set forth in this
Agreement, WU hereby grants to SIGA and SIGA hereby accepts, the following
license during the Term in the Territory:
3.1 A nonexclusive, fee- and royalty-bearing license, including the right to
grant sublicenses, under the Intellectual Property, to make, have made,
sell, offer for sale, use, and import Licensed Products in the Field.
3.2 The right to grant sublicenses granted to SIGA under this Agreement is
subject to the following conditions:
3.2.1 In each sublicense, SIGA must prohibit the Sublicensee from further
sublicensing and require that the Sublicensee is subject to the terms
and conditions of the license granted to SIGA under this Agreement.
3.2.2 Within thirty days of the effective date of any sublicense, SIGA must
send to WU a complete copy of the sublicense. If the original sublicense
is written in a language other than English, then SIGA must also send to
WU within the allotted time a translation of the sublicense written in
English.
3.2.3 If SIGA enters bankruptcy or receivership, voluntarily or involuntarily,
Sublicensing Revenue then or thereafter due to SIGA will, upon notice
from WU to any Sublicensee, become owed directly to WU for the account
of SIGA. WU will remit to SIGA any amounts received that exceed the sum
actually owed by SIGA to WU.
3.2.4 Any sublicense granted by SIGA under this Agreement will remain in
effect in the event that this Agreement is terminated prior to
expiration. Any Sublicensee will automatically become a direct licensee
of WU under the rights originally sublicensed to it by SIGA provided the
<PAGE>
Sublicensee did not cause the termination of this Agreement and the
Sublicensee agrees to comply with all the terms of this Agreement and to
fulfill all the responsibilities of SIGA hereunder.
3.2.5 SIGA will be primarily liable to WU for all of SIGA's obligations
contained in this Agreement. Any act or omission by a Sublicensee that
would be a breach of this Agreement if imputed to SIGA will be deemed to
be a breach by SIGA of this Agreement.
3.3 The license "to have made" granted in Section 3.1 means that SIGA or its
Sublicensee may contract with a third party or parties to manufacture
Licensed Products for SIGA or its Sublicensee. SIGA will require any
contractors to assume confidentiality obligations consonant with Article 6
of this Agreement.
3.4 SIGA and its Sublicensees have no ownership rights of any kind in the
Intellectual Property licensed under this Agreement. All ownership rights
remain the property of WU. WU will retain all original versions of
Tangible Research Property and Technical Information licensed and will
retain control over the same at all times. The delivery of Tangible
Research Property and Technical Information and grant of license rights
thereto under this Agreement do not constitute a sale of the same.
3.5 In accordance with Public Laws 96-517, 97-256 and 98-620, codified at 35
U.S.C. section section 200-212, the United States government retains
certain rights to inventions arising from federally supported research or
development. Under these laws and implementing regulations, the government
may impose requirements on such Inventions. Licensed Products embodying
inventions subject to these laws and regulations sold in the United States
must be substantially manufactured in the United States. The license
rights granted in this Agreement are expressly made subject to these laws
and regulations as they may be amended from time to time. SIGA agrees to
abide by these laws and regulations.
3.6 SIGA will ensure that where applicable "Patent Pending" or the Patent
Rights patent number or application serial number appears on all Licensed
Products or their labels.
4. Fees, Payments and Royalties.
4.1 License Maintenance Payments. SIGA must pay to WU non-refundable,
non-creditable license maintenance payments as follows:
4.1.1 Payment equal to $10,000 per each Calendar Year Beginning on January 1,
2001 and each year thereafter.
4.1.2 The payments required in Sections 4.1.1 must be made no later than January
31 of each respective Calendar Year. License maintenance payments cease
the Calendar Year following the Year in which the First Commercial Sale in
the U.S. of a Licensed Product occurs.
4.2 SIGA will pay WU ten percent (10%) of all Sublicensing Revenue received
from its Sublicensees within 30 days of receipt by SIGA.
4.3 Milestone Payments. SIGA will pay the following milestone payments for
each discrete molecule that is a Licensed Product under this Agreement as
follows:
i. Completion of Phase I IND clinical trials - $50,000;
ii. Completion of Phase II IND clinical trials - $50,000;
iii. Completion of Phase III IND clinical trials - $200,000; and
iv. Product approval (PLA) - $250,000
4.4 Minimum Royalty. SIGA must pay to WU a non-refundable minimum royalty of
$50,000 for each Licensed Product sold by SIGA and/or its Sublicensees.
The first calendar period for which the minimum royalty will be paid will
begin on the first day of the Calendar Half following the Calendar Half in
which the First Commercial Sale in the U.S. of that Licensed Product
occurs.
4.5 Earned Royalty. SIGA must pay to WU an earned royalty of one percent (1%)
of the Net Sales of Licensed Product(s) made, made for, used, imported or
sold by SIGA or its Sublicensees.
4.5.1 Earned royalties paid are fully creditable against minimum royalties
called for in Section 4.4 for the period in which the earned royalties
are accumulated and reported.
4.5.2 Earned royalties will be accumulated and reported each Calendar Half.
SIGA will pay to WU earned royalties accumulated during a Calendar Half
on the January 31 or July 31 immediately following the end of that
Calendar Half.
4.6 Licensed Products may be made, used, imported or sold in combination
with or as part of other products which are covered by a claim of a
third party's patent or by other intellectual property rights of a third
party, requiring a license to enable
<PAGE>
SIGA to make, use, sell or offer for sale, or import Combination Products.
To calculate the value of Net Sales of Combination Products, the gross
sales of such Products will be multiplied by the fraction A/(A + B) where
A is the fair market value of the Licensed Product when sold separately,
and B is the fair market value of the Other Component when sold
separately. Allowed deductions may then be subtracted from the proportion
of gross sales attributable to the Licensed Product to compute Net Sales.
4.7 When a Licensed Product or its manufacture, use, sale or importation is
covered by more than one Valid Claim or patent or patent application
within the Patent Rights licensed hereunder, SIGA will only be obligated
to pay royalties and fees or make payments as if there were only one Valid
Claim.
4.8 Patent expenses will be borne equally by WU and SIGA. SIGA will reimburse
WU within thirty (30) days of receipt of invoices for one half of incurred
patent expenses. If WU grants additional nonexclusive licenses, then
future costs will be borne pro rata by WU, SIGA, and all such licensees.
5. Place and Method of Payment; Reports and Records; Audit; Interest.
5.1 All dollar ($) amounts referred to in this Agreement are expressed in
United States dollars. All payments to WU under this Agreement must be
made in United States dollars by check or electronic transfer payable to
"Washington University". Any Sales revenues for Licensed Products received
by SIGA in currency other than United States dollars will be converted to
United States dollars at the conversion rate for the foreign currency as
published in the eastern edition of The Wall Street Journal as of the last
business day in the United States of the applicable Calendar Half.
5.2 Checks will be dispatched to WU's correspondence address given in Article
14 below. Electronic transfers will be made to a bank account designated
by WU.
5.3 SIGA must deliver to WU within the time provided in Article 4 for making
the respective payment after the end of each Calendar Half in which earned
royalties are owed and payable, a written report setting forth the
calculation of the payments made to WU for that Calendar Half, including
at least the following:
5.3.1 The number of Licensed Products manufactured, sold, used or imported and
volume of Sales by country.
5.3.2 Gross receipts for Sales of Licensed Products including total amounts
invoiced, billed or received.
5.3.3 Allowed deductions as defined in Section 2.9, giving totals by each
type.
5.3.4 Net Sales of Licensed Products by country.
5.3.5 Royalties, fees and payments due to WU giving totals for each category.
5.3.6 Earned royalty amounts credited against minimum royalty payments or vice
versa.
5.4 SIGA must maintain, and require its Sublicensees to maintain, complete and
accurate books of account and records which would enable an independent
auditor to verify the amounts paid as royalties, fees and payments under
this Agreement. The books and records must be maintained for five years
following the Calendar Half after submission of the reports required by
this Article. Upon reasonable notice by WU, SIGA must give WU (or auditors
or inspectors appointed by and representing WU) access to all books and
records relating to Sales of Licensed Products by SIGA to conduct an audit
or review of those books and records. This access must be available at
least once during each Calendar Half, for a reasonable time, during
regular business hours, during the Term of the Agreement and for the five
calendar years following the year in which termination or expiration
occurs. If the independent auditor determines that amounts paid to WU as
royalties, fees and payments by SIGA differ by 5% or more from amounts
actually owed for any Calendar Half, then SIGA must pay WU the costs and
expenses of its accountants and auditors in connection with the review and
audit.
5.5 Any amounts that are not paid by SIGA to WU within thirty (30) days of the
due date will accrue interest from the due date until payment is made at
an annual rate equal to two percent above the prime rate published in the
Eastern edition of The Wall Street Journal during the period of arrearage
(or the maximum allowed by law, if less than prime.) This provision
applies to all payments that SIGA must make under this Agreement.
6. Confidentiality.
6.1 All Patent Rights patent applications, Tangible Research Property and
Technical Information designated by WU representatives as confidential at
the time of delivery to SIGA, or within a reasonable period after said
delivery, and all of Articles 4 and 5 of this Agreement, are Confidential
Information.
<PAGE>
6.2 SIGA will maintain in secrecy and not disclose to any third party any of
WU's Confidential Information after it has been so designated. SIGA will
ensure that its employees have access to WU's Confidential Information
only on a need-to-know basis and are obligated by written agreement to
keep SIGA's confidentiality obligations under this Agreement.
6.3 The obligations of confidentiality specified in this Article will not
extend to Confidential Information which:
6.3.1 Becomes part of the public domain through no fault of SIGA.
6.3.2 Was known to SIGA before disclosure to SIGA by WU as established by
clear and convincing documentary evidence;
6.3.3 Comprises identical subject matter to that which had been originally and
independently developed by SIGA personnel without knowledge or use of
any WU Confidential Information; or
6.3.4 Was disclosed to SIGA by a third party, having a right to make the
disclosure.
6.4 Notwithstanding the other terms of this Article 6, SIGA may, to the extent
necessary, use Confidential Information to secure governmental approval to
clinically test or market a Licensed Product, to comply with a court order
or governmental rule or regulation, or to show to a potential contractor
subject to an appropriate confidentiality agreement. SIGA will, in any
such use, take all reasonably available steps to maintain confidentiality
of the disclosed information and to guard against any further disclosure.
7. Representations and Warranties.
7.1 WU represents and warrants that:
7.1.1 WU is a corporation organized, existing and in good standing under the
laws of Missouri.
7.1.2 It has the authority to enter into this Agreement and that the person
signing on its behalf has the authority to do so.
7.1.3 To the best of its knowledge, it is the owner (subject to any rights
retained by the U.S. government by operation of law of the Intellectual
Property licensed in this Agreement and that it has the authority to
grant the licenses set forth herein.
7.2 SIGA represents and warrants that:
7.2.1 It is a corporation duty organized, existing, and in good standing under
the laws of Delaware.
7.2.2 The execution, delivery and performance of this Agreement have been
authorized by all necessary corporate action on the part of SIGA and
that the person signing the Agreement on behalf of SIGA has the
authority to do so.
7.2.3 The making or performance of this Agreement would not violate any
separate agreement it has with any other person or entity.
7.2.4 It is not a party to any agreement or arrangement that would prevent it
from performing its duties and fulfilling its obligations to WU under
this Agreement.
7.2.5 Has the insurance coverage called for in Article 10.
7.2.6 Is unaware of any pending litigation or claims against SIGA that could
impair its ability or capacity to perform and fulfill its duties and
obligations under this Agreement.
7.3 Nothing in this Agreement is or will be construed as:
7.3.1 A warranty or representation by WU as to the validity or scope of its
Patent Rights, Tangible Research Property or Technical Information.
7.3.2 Granting by implication, estoppel or otherwise any licenses or rights
under patents or other intellectual property rights of WU or other
persons, other than the rights expressly granted above to Intellectual
Property identified on the attached Exhibits.
7.3.3 An obligation to furnish any technology or technological information
other than that identified in the attached Exhibits.
7.3.4 A grant of rights to either Party to use the name of the other in
advertising, publicity, or otherwise, except as expressly authorized
herein, without the permission of the other Party.
7.4 THE INTELLECTUAL PROPERTY IS PROVIDED "AS IS" AND WU MAKES NO
REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR
IMPLIED. THERE ARE NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS OF ANY LICENSED PRODUCT FOR A PARTICULAR PURPOSE, OR THAT THE USE
OF ANY
<PAGE>
LICENSED PRODUCT WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK OR
OTHER RIGHTS, OR ANY OTHER EXPRESS OR IMPLIED WARRANTIES. WU WILL NOT BE
LIABLE TO SIGA ITS SUCCESSORS, ASSIGNS, CONTRACTORS OR SUBLICENSEES OR ANY
THIRD PARTY REGARDING ANY CLAIM ARISING FROM SIGA's USE OF LICENSED
INTELLECTUAL PROPERTY OR ANY LICENSED PRODUCT OR FROM THE MANUFACTURE,
USE, IMPORTATION OR SALE OF LICENSED PRODUCTS, OR ANY CLAIM FOR LOSS OF
PROFITS, LOSS OR INTERRUPTION OF BUSINESS, OR FOR INDIRECT, SPECIAL OR
CONSEQUENTIAL DAMAGES OF ANY KIND.
8. Infringement, Enforcement, and Defense.
8.1 This license includes the right, revocable by WU, to bring actions in WU's
name to enforce the Intellectual Property rights against third parties or
to defend the same in WU's name against claims by third parties, subject
to the terms and conditions set forth in this Agreement
8.2 WU and SIGA will immediately give to the other written notice of any known
or suspected infringement of the Patent Rights or unauthorized use of the
Tangible Research Property or Technical Information by third parties.
8.3 SIGA at its sole expense, if SIGA is the sole licensee (or prorated with
other licensees if any), will attempt to abate any infringement of the
Patent Rights or unauthorized use of Tangible Research Property or
Technical Information by third parties. SIGA has the right to institute
and conduct actions against third parties for infringement and unfair
trade practices through outside counsel of its choice who are reasonably
acceptable to WU. SIGA will keep WU informed of all proceedings and
provide copies of all pleadings and other papers related to such actions.
WU will provide reasonable assistance to SIGA in prosecuting any such
actions.
8.4 SIGA at its sole expense will defend third party claims of patent or
intellectual property infringement and injury, death or product liability
brought against SIGA and/or WU. SIGA will have the right to conduct the
defense of such actions through outside counsel of its choice who are
reasonably acceptable to WU. WU will provide all reasonable assistance for
the defense of such claims and SIGA will keep WU informed of all
proceedings and provide copies of all pleadings and other papers related
to such actions.
8.5 If more than one nonexclusive licensee participates in bringing or
defending an action under this Article, then the costs and fees for such
action will be shared pro-rata among such licensees.
8.6 Notwithstanding anything stated herein to contrary, SIGA will not be
permitted to settle or compromise any claim or action in a manner that may
impose restrictions or obligations on WU or grant rights or concessions to
Intellectual Property or Licensed Products without WU's prior written
consent.
8.7 SIGA will be entitled to offset 50% of its attorney's fees and expenses
incurred in abating third party infringement or unfair trade practices or
bringing or defending any action against third parties under this Article,
against the royalties due under Sections 4.4 and 4.5.
9. Indemnification. SIGA and its Sublicensees will indemnify, defend and hold
harmless WU, its trustees, faculty, staff, students and agents from and
against any and all liability, loss, damage, action, claim or expense
(including attorney's fees and costs at trial and appellate levels) in
connection with any claim, suit, action, demand or judgment arising out of
(a) the use of any Intellectual Property in the design, development,
production, manufacture, sale or offer for sale, use, importation, lease,
marketing or promotion of any Licensed Product by SIGA or its
Sublicensees, contractors or agents or (b) injury or death to any person,
or damage to property caused or allegedly caused by or relating in any way
to any person's use of any Licensed Products, or (c) any third party claim
that any use or licensing of the Intellectual Property under this
Agreement violates or infringes that party's intellectual property rights.
In legal actions undertaken or defended by SIGA pursuant to this
indemnification provision, SIGA may select counsel of its own choice who
are reasonably acceptable to WU.
10. Insurance.
10.1 SIGA and its Sublicensees will at all times comply, through insurance or
self-insurance, with all statutory workers' compensation and employers'
liability requirements covering all employees with respect to activities
undertaken in performance of this Agreement. This requirement may be met
by insurance or self-insurance coverage provided to SIGA by a Sublicensee.
10.2 In addition to the foregoing, SIGA and any Sublicensees as appropriate,
will at appropriate times obtain and maintain occurrence-based Broad Form
Comprehensive General Liability (BFCGL) insurance with a reputable and
financially secure insurance carrier(s) having at least an "A" rating and
An A.M. Best Class Size of at least X. Deviations from the rating or class
size must be approved in advance by WU. The BFCGL insurance will include,
among all other coverages standing in
<PAGE>
such BFCGL policies, coverage for product liability and contractual liability.
10.3 The insurance will provide to SIGA or each Sublicensee minimum annual
limits of $2 million in liability insurance for the WU Licensed Products,
and list WU as an additional insured.
10.4 All policies will be purchased and kept in force during the term of the
Agreement.
10.5 SIGA or any Sublicensee as appropriate, will provide WU with a certificate
of insurance and will provide a complete copy of the insurance policy to
WU as soon as one becomes available and notices or subsequent renewals.
The certificate must provide that SIGA's carrier will notify WU in writing
at least thirty days prior to cancellation or material change in coverage.
10.6 WU may periodically evaluate the adequacy of the minimum coverages of
insurance specified in this Article. WU reserves the right to require SIGA
to adjust the insurance coverages. The specified minimum coverages do not
constitute a limitation on SIGA's or its Sublicensees' obligation to
indemnify WU under this Agreement.
11. Termination.
11.1 SIGA may terminate this Agreement with or without cause on ninety days
written notice to WU. The license rights granted hereunder terminate at
the end of the ninety day period.
11.2 WU may terminate on thirty days written notice to SIGA upon breach by SIGA
of the Agreement. The termination becomes effective at the end of the
thirty day period unless SIGA has fully cured the breach within the thirty
days.
11.3 If SIGA enters bankruptcy or receivership, voluntarily or involuntarily,
all obligations of WU and all rights (but not obligations) of SIGA and
this Agreement terminate immediately without the need for either WU or
SIGA to take any action.
11.4 Upon termination of this Agreement for any reason, SIGA must return to WU
all Confidential Information (as defined in Article 6) received from WU
during the Term of this Agreement.
11.5 On termination by either Party for any reason, the license rights granted
to SIGA under Article 3 terminate when termination of the Agreement is
effective. SIGA's obligations to pay fees, royalties or other payments
accruing prior to termination survive termination.
12. Use of Names. Neither Party may use the name of the other for any
commercial, advertisement, or promotional purpose without the written
consent of the other.
13. Assignment or Pledge of Agreement. Neither this Agreement nor any portion
of it may be assigned by either Party to anyone else without the written
consent of the other Party, and such consent will not be unreasonably
withheld. Notwithstanding this, SIGA may assign the entire Agreement,
without WU's consent, to an entity that succeeds to substantially all of
its business or assets by way of merger, sale, acquisition or otherwise,
provided that the successor agrees in writing to assume all the
obligations and liabilities of SIGA to WU. The rights granted in this
Agreement may not be pledged in any way by SIGA or any Sublicensee to
secure any purchase, lease or loan.
14. Notice. Any required or permissive notice under this Agreement will be
sufficient if in writing and delivered personally, by recognized national
overnight courier, or by registered or certified mail, postage prepaid and
return receipt requested, to the address below and will be deemed to have
been given as of the date shown on the receipt if by certified or
registered mail, or the day following dispatch if by overnight courier.
If to WU:
Washington University
Center of Technology Management
Campus Box 8013
660 South Euclid Avenue
St. Louis MO 63110
If to SIGA:
Joshua D. Schein
SIGA Pharmaceuticals, Inc.
420 Lexington Avenue
Suite 620
New York, NY 10120
15. General Provisions.
15.1 This Agreement will be governed and interpreted according to the laws of
Missouri.
15.2 None of the terms or this Agreement can be waived except by mutual written
consent of the Parties.
15.3 This Instrument comprises the entire agreement and understanding of the
Parties relating to the subject matter of the Agreement.
<PAGE>
15.4 This Agreement cannot be changed, modified or amended except by a written
instrument subscribed by authorized representatives of the respective
Parties.
15.5 Neither Party is an agent or contractor of the other as a result of any
transaction under or related to this Agreement. Neither Party may in any
way pledge the other party's credit or incur any obligation on behalf of
the other Party.
15.6 Each Party is liable to the other only for actual damages for breach of
this Agreement or any warranty contained herein, and not for any special,
consequential, incidental, or indirect damages arising out of this
Agreement, however caused, under any theory of liability.
15.7 The provisions of this Agreement are severable in that if any provision in
the Agreement is determined to be invalid or unenforceable under any
controlling body of law, that will not affect the validity or
enforceability of the remaining provisions of the Agreement.
15.8 If the performance of any obligation under this Agreement is prevented or
impaired by acts of war, riot, acts or defaults of common carriers, or
governmental laws or regulations, a Party will be excused from performance
so long as such cause continued to prevent or impair that Party's
performance. The Party claiming force majeure excuse must promptly notify
the other Party of the existence of the cause and must at all times use
diligent efforts to resume and complete performance. This Section 15.8
will not excuse SIGA's obligation to pay fees, payments and royalties
under Article 4 of the Agreement.
15.9 WU has no responsibility for product design and development, servicing,
distribution, or marketing, or any decisions made or strategies devised in
areas related to Licensed Products.
15.l0 Articles 4, 5, 6, 9, 10, and 12 above will survive expiration or
termination of this Agreement.
15.11 This Agreement will be executed in two original versions, one belonging to
each Party. The originals are valid counterparts of each other.
Witness: The parties have caused this Agreement to be executed in duplicate by
their duly qualified representatives.
For SIGA For WU:
- ----------------------------------- -----------------------------------
Signature Signature
Name Name
Title Title
- ------------ ------------
Date Date
<PAGE>
NON EXCLUSIVE LICENSE AGREEMENT
Between
Washington University in St. Louis
Licensor
And
SIGA Pharmaceuticals, Inc.
Licensee
Introduction: This Agreement is made end entered into this 17th day of February,
2000 by and between Washington University in St. Louis, a corporation
established by special act of the Missouri General Assembly approved February
22, 1853 and acts amendatory thereto, having its principal office at One
Brookings Drive, St. Louis, Missouri 63130, (hereinafter "WU") and SIGA
Pharmaceuticals, Inc., having its principal office at 420 Lexington Ave, Suite
620, New York, NY 10120 (hereinafter "SIGA"). WU and SIGA may be referred to
individually as a "Party" or collectively as the "Parties".
1. Background. WU is the owner of certain Patent Rights, Tangible Research
Property and Technical Information (collectively, Intellectual Property,
all as hereinafter defined) relating to polypeptides and antibodies useful
for the diagnosis and treatment of pathogenic Nelsseria and other
organisms having type IV pllln, and WU has the right to grant licenses
thereto. WU wishes to allow the Intellectual Property to be used to
further scientific research end for new product development and other
applications in the public interest and is willing to grant a license for
such uses. SIGA represents to WU that it has the necessary product
development, manufacturing and marketing capabilities to commercialize
products based on such Intellectual Property. SIGA desires to obtain a
license to use these properties and information for its own commercial
research and development endeavors upon the terms and conditions set forth
in this Agreement, In consideration of these premises and the mutual
promises contained herein, the Parties further agree as follows.
2. Definitions. For the purposes of this Agreement, the following words and
phrases will have the meanings assigned to them below.
2.1 Agreement: This nonexclusive license agreement.
2.2 Calendar Half/Year: Each six month period or portion thereof beginning on
January 1 or July 1; or each twelve month period, or portion thereof,
beginning on January 1.
2.3 Combination Product: Any product that is comprised in part of a Licensed
Product and in part of one or more other components which are not
themselves Licensed Products (the "Other Components"). Other Components do
not include surfactants, diluents and carriers.
2.4 Effective Date: [The day, month and year written in the Introduction].
2.5 Field: Human and veterinary antimicrobial therapeutic and prophylactic
compounds and vaccines.
2.6 First Commercial Sale: The date of first transfer by SIGA or its
Sublicensees to an unrelated third party of a Licensed Product for
compensation (including equivalent cash value for trades or other non-cash
payments). The transfer of Licensed Products by SIGA and its Sublicensees
strictly for its own laboratory research and development purposes,
beta-testing and/or clinical testing does not constitute a First
Commercial Sale for the purposes of this Agreement, provided that SIGA
receives no payment for such Licensed Product in excess of the fully
burdened (i.e., direct and indirect) costs of producing end transporting
such materials.
2.7 Intellectual Property: Patent Rights patents and patent applications,
trademarks, service marks, copyrights, mask works, trade secrets, Tangible
Research Property and Technical Information.
2.8 Licensed Product: Any product or service which is made, made for, used,
sold or imported by SIGA and/or its Sublicensees which (a) in the absence
of this license Agreement would infringe at least one valid claim, (b)
uses, is used in, or is made using a process covered by a valid claim, or
(c) is made with or derived from a compound or composition covered by a
valid claim. Licensed Product includes any product made, and method or
process used, in whole or in part using Tangible Research Property or
Technical Information.
2.9 Net Sales: For purposes of computing royalties, gross amounts received by
SIGA or its Sublicensees for Sales of Licensed Products less qualifying
costs, taxes and discounts, as set forth below, which are
<PAGE>
actually invoiced and borne by SIGA and its Sublicensees. Deductions for
calculating Net Sales are limited to the following:
2.9.1 Trade, quantity and cash discounts
2.9.2 Credits, allowances or refunds, not exceeding the original invoice
amount, for claims, damaged goods, rejections or returns.
2.9.3 Prepaid outbound transportation expenses and freight insurance
premiums
2.9.4 Excise, sale, use, value added or other taxes levied by a
governmental agency, other than income taxes.
2.10 Patent Rights: US Patent No. 5,834,591 and all foreign counterparts,
continuations, continuations-in-part, divisions, extensions,
reexaminations and reissues thereof, which trace their earliest priority
filing date by unbroken lineage to this patent and its parent
applications.
2.11 Sale: Any transaction in which a Licensed Product is exchanged for value.
A Sale of a Licensed Product will be deemed to have been made at the time
SIGA or its Sublicensee Invoices, ships, or receives value for, whichever
occurs first, a Licensed Product.
2.12 Sublicensee: A person or entity to which SIGA has granted a sublicense
under the license rights granted to SIGA in Article 3 of this Agreement.
2.13 Sublicensing Revenue: All fees and cash equivalent for securities,
equipment and other property received by SIGA from its Sublicensees for
the grant of any sublicense. Said Sublicensing Revenue will exclude any
research payments made to SIGA by any Sublicensee.
2.14 Tangible Research Property: The physical embodiments of Patent Rights
Information, including all progeny and derivatives thereof.
2.15 Technical Information: All ideas, data, know-how, trade secrets, research
information, methods, procedures or processes, biological or chemical
materials, owned by WU, resulting from research performed by or under the
direction of Dr. Stephan Normark et al, which contribute to the practice
of the inventions in the Patent Rights and the commercialization of
Licensed Products.
2.16 Term: Commences on the Effective Date and continues until the expiration
of the last of the patents included in the Patent Rights to expire, unless
earlier terminated in accordance with this Agreement. A patent will be
understood to expire at midnight on the day of its expiration.
2.17 Territory: Anywhere in the world except for countries to which export of
technology or goods is prohibited by applicable U.S. export control laws
or regulations.
2.18 Valid Claim: A claim (a) of a pending Patent Rights patent application
which claim has not been pending for longer than seven years, or (b) of an
issued and unexpired Patent Rights patent which has not been held Invalid
or unenforceable by a court or other governmental agency of competent
jurisdiction in a decision or order that is not subject to an appeal.
3. License Grant. Subject to the terms and conditions set forth in this
Agreement, WU hereby grants to SIGA and SIGA hereby accepts, the following
license during the Term in the Territory:
3.1 A nonexclusive, fee- and royalty-bearing license, including the right to
grant sublicenses, under the Intellectual Property, to make, have made,
sell, offer for sale, use, and import Licensed Products in the Field.
3.2 The right to grant sublicenses granted to SIGA under this Agreement is
subject to the following conditions:
3.2.1 In each sublicense, SIGA must prohibit the Sublicensee from further
sublicensing and require that the Sublicensee is subject to the terms and
conditions of the license granted to SIGA under this Agreement.
2.9.1 Trade, quantity and cash discounts
3.2.2 Within thirty days of the effective date of any sublicense, SIGA must
send to WU a complete copy of the sublicense. If the original
sublicense is written in a language other than English, then SIGA
must also send to WU within the allotted time a translation of the
sublicense written in English.
3.2.3 If SIGA enters bankruptcy or receivership, voluntarily or
involuntarily, Sublicensing Revenue then or thereafter due to SIGA
will, upon notice from WU to any Sublicensee, become owed directly to
WU for the account of SIGA. WU will remit to SIGA any amounts received
that exceed the sum actually owed by SIGA to WU.
3.2.4 Any sublicense granted by SIGA under this Agreement will remain in
effect in the event that this Agreement is terminated prior to
expiration. Any Sublicensee will automatically become a direct
licensee of WU under the rights originally sublicensed to it by SEGA
provided the
<PAGE>
Sublicensee did not cause the termination of this Agreement and the
Sublicensee agrees to comply with all the terms of this Agreement and
to fulfill all the responsibilities of SIGA hereunder.
3.2.5 SIGA will be primarily liable to WU for all of SIGA's obligations
contained in this Agreement. Any act or omission by a Sublicensee that
would be a breach of this Agreement if imputed to SIGA will be deemed
to be a breach by SIGA of this Agreement.
3.3 The license "to have made" granted in Section 3.1 means that SIGA or its
Sublicensee may contract with a third party or parties to manufacture
Licensed Products for SIGA or its Sublicensee. SIGA will require any
contractors to assume confidentiality obligations consonant with Article 6
of this Agreement.
3.4 SIGA and its Sublicensees have no ownership rights of any kind in the
Intellectual Property licensed under this Agreement. All ownership rights
remain the property of WU. WU will retain all original versions of
Tangible Research Property and Technical Information licensed and will
remain control over the same at all times. The delivery of Tangible
Research Property and Technical Information and grant of license rights
thereto under this Agreement do not constitute a sale of the same.
3.5 In accordance with Public Laws 96-517, 97-256 and 98-620, codified at 35
U.S.C. ss.ss. 200-212, the United States government retains certain rights
to Inventions arising from federally supported research or development.
Under these laws and implementing regulations, the government may impose
requirements on such inventions. Licensed Products embodying inventions
subject to these laws and regulations sold in the United States must be
substantially manufactured in the United States. The license rights
granted in this Agreement are expressly made subject to these laws and
regulations as they may be amended from time to time. SIGA agrees to abide
by these laws and regulations.
3.6 SIGA will ensure that where applicable "Patent Pending" or the Patent
Rights patent number or application serial number appears on all Licensed
Products or their labels.
4. Fees, Payments and Royalties.
4.1 License Maintenance Payments. SIGA must pay to WU non-refundable,
non-creditable license maintenance payments as follows:
4.1.1 Payments equal to $10,000 per each Calendar Year beginning January 1,
2001 and each year thereafter.
4.1.2 The payments required in Sections 4.1.1 must be made no later than
January 31 of each respective Calendar Year. License maintenance
payments cease the Calendar Year following the Year in which the First
Commercial Sale in the U.S. of a Licensed Product occurs.
4.2 SIGA will pay WU ten percent (10%) of all Sublicensing Revenue received
from its Sublicensees within 30 days of receipt by SIGA.
4.2 Milestone Payments. SIGA will pay the following milestone payments for
each discrete molecule that is a Licensed Product under this Agreement as
follows:
i. Completion of Phase I IND clinical trials - $50,000;
ii. Completion of Phase II IND clinical trials - $50,000;
iii. Completion of Phase III IND clinical trials - $200,000; and
iv. Product approval (PLA) - $250,000
4.4 Minimum Royalty. SIGA must pay to WU a non-refundable minimum royalty of
$50,000 for each Licensed Product sold by SIGA and/or its Sublicensees.
The first calendar period for which the minimum royalty will be paid will
begin on the first day of the Calendar Half following the Calendar Half in
which the First Commercial Sale in the U.S. of that Licensed Product
occurs.
4.5 Earned Royalty. SIGA must pay to WU an earned royalty of one percent (1%)
of the Net Sales of Licensed Product(s) made, made for, used, imported or
sold by SIGA or its Sublicensees.
4.5.1 Earned royalties paid are fully creditable against minimum royalties
called for in Section 4.4 for the period in which the earned royalties
are accumulated and reported.
4.5.2 Earned royalties will be accumulated and reported each Calendar Half.
SIGA will pay to WU earned royalties accumulated during a Calendar
Half on the January 31 or July 31 immediately following the end of
that Calendar Half.
4.6 Licensed Products may be made, used, imported or sold in combination with
or as part of other products which are covered by a claim of a third
party's patent or by other intellectual property rights of a third party,
requiring a license to enable
<PAGE>
SIGA to make, use, sell or offer for sale, or import Combination Products.
To calculate the Value of Net Sales of Combination Products, the gross
sales or such Products will be multiplied by the fraction A/(A + B) where
A is the fair market value of the Licensed Product when sold separately,
and B is the fair market value of the Other Component when sold
separately. Allowed deductions may then be subtracted from the proportion
of gross sales attributable to the Licensed Product to compute Net Sales.
4.7 When a Licensed Product or its manufacture, use, sale or importation is
covered by more than one Valid Claim or patent or patent application,
within the Patent Rights licensed hereunder, SIGA will only be obligated
to pay royalties and fees or make payments as if there were only one Valid
Claim.
4.8 Patent expenses will be borne equally by WU and SIGA. SIGA will reimburse
WU within thirty (30) days of receipt of invoices for one half of incurred
patent expenses. If WU grants additional non-exclusive licenses, then
future costs will be borne pro rata by WU, SIGA, and all such licensees.
5. Place and Method of Payment; Reports and Records; Audit; Interest.
5.1 All dollar ($) amounts referred to in this Agreement are expressed in
United States dollars. All payments to WU under this Agreement must be
made in United States dollars by check or electronic transfer payable to
"Washington University". Any Sales revenues for Licensed Products received
by SIGA in currency other than United States dollars will be converted to
United States dollars at the conversion rate for the foreign currency as
published in the Eastern edition of The Wall Street Journal as of the last
business day in the United States of the applicable Calendar Half.
5.2 Checks will be dispatched to WU's correspondence address given in Article
14 below. Electronic transfers will be made to a bank account designated
by WU.
5.3 SIGA must deliver to WU within the time provided in Article 4 for making
the respective payment after the end of each Calendar Half in which earned
royalties are owed and payable, a written report setting forth the
calculation of the payments made to WU for that Calendar Half, including
at least the following:
5.3.1 The number of Licensed Products manufactured, sold, used or imported
and volume of Sales by country.
5.3.2 Gross receipts for Sales of Licensed Products including total amounts
invoiced, billed or received.
5.3.3 Allowed deductions as defined in Section 2.9, giving totals by each
type.
5.3.4 Net Sales of Licensed Products by country.
5.3.5 Royalties, fees and payments due to WU giving totals for each
category.
5.3.6 Earned royalty amounts credited minimum royalty payments or vice
versa.
5.4 SIGA must maintain, and require its Sublicensees to maintain, complete and
accurate books of account and records which would enable an independent
auditor to verify the amounts paid as royalties, fees and payments under
this Agreement. The books and records must be maintained for five years
following the Calendar Half after submission of the reports required by
this Article. Upon reasonable notice by WU, SIGA must give WU (or auditors
or inspectors appointed by and representing WU) access to all books end
records relating to Sales of Licensed Products by SIGA to conduct an audit
or review of those books and records. This access must be available at
least once during each Calendar Half, for a reasonable time, during
regular business hours, during the Term of the Agreement and for the five
calendar years following the year in which termination or expiration
occurs. If the independent auditor determines that amounts paid to WU as
royalties, fees and payments by SIGA differ by 5% or more from amounts
actually owed for any Calendar Half, then SIGA must pay WU the costs and
expenses of its accountants and auditors in connection with the review and
audit.
5.5 Any amounts that are not paid by SIGA to WU within thirty (30) days of the
due date will accrue interest from the due date until payment is made at
an annual rate equal to two percent above the prime rate published in the
Eastern edition of The Wall Street Journal during the period of arrearage
(or the maximum allowed by law, if less than prime.) This provision
applies to all payments that SIGA must make under this Agreement.
6. Confidentiality.
6.1 All Patent Rights patent applications, Tangible Research Property and
Technical Information designated by WU representatives as confidential at
the time of delivery to SIGA, or within a reasonable period after said
delivery, and all of Articles 4 and 5 of this Agreement, are Confidential
Information.
<PAGE>
6.2 SIGA will maintain in secrecy and not disclose to any third party any of
WU's Confidential Information after it has been so designated. SIGA will
ensure that its employees have access to WU's Confidential Information
only on a need-to-know basis and are obligated by written agreement to
keep SIGA's confidentiality obligations under this Agreement.
6.3 The obligations of confidentiality specified in this Article will not
extend to Confidential Information which:
6.3.1 Becomes part of the public domain through no fault of SIGA.
6.3.2 Was known to SIGA before disclosure to SIGA by WU as established by
clear and convincing documentary evidence;
6.3.3 Comprises identical subject matter to that which had been originally
and independently developed by SIGA personnel without knowledge or use
of any WU Confidential Information; or
6.3.4 Was disclosed to SIGA by a third party having a right to make the
disclosure.
6.4 Notwithstanding the other terms of this Article 6, SIGA may, to the extent
necessary, use Confidential Information to secure governmental approval to
clinically test or market a Licensed Product, to comply with a court order
or governmental rule or regulation, or to show to a potential contractor
subject to an appropriate confidentiality agreement. SIGA will, in any
such use, take all reasonably available steps to maintain confidentiality
of the disclosed Information and to guard against any further disclosure.
7. Representations and Warranties.
7.1 WU represents and warrants that:
7.1.1 WU is a corporation organized, existing and in good standing under the
laws of Missouri.
7.1.2 It has the authority to enter into this Agreement and that the person
signing on its behalf has the authority to do so.
7.1.3 To the best of its knowledge, it is the owner (subject to any rights
retained by the U.S. government by operation of law) of the
Intellectual Property licensed in this Agreement and that it has the
authority to grant the licenses set forth herein.
7.2 SIGA represents and warrants that:
7.2.1 It is a corporation duly organized, existing, and in good standing
under the laws of Delaware.
7.2.2 The execution, delivery and performance of this Agreement have been
authorized by all necessary corporate action on the part of SIGA and
that the person signing the Agreement on behalf of SIGA has the
authority to do so.
7.2.3 The making or performance of this Agreement would not violate any
separate agreement it has with any other person or entity.
7.2.4 It is not a party to any agreement or arrangement that would prevent
it from performing its duties and fulfilling its obligations to WU
under this Agreement.
7.2.5 Has the insurance coverage called for in Article 10.
7.2.6 Is unaware of any pending litigation or claims against SIGA that could
impair its ability or capacity to perform and fulfill its duties and
obligations under this Agreement.
7.3 Nothing in this Agreement is or will be construed as:
7.3.1 A warranty or representation by WU as to the validity or scope of its
Patent Rights, Tangible Research Property or Technical Information.
7.3.2 Granting by implication, estoppel or otherwise any licenses or rights
under patents or other intellectual property rights of WU or other
persons, other than the rights expressly granted above to Intellectual
Property identified on the attached Exhibits.
7.3.3 An obligation to furnish any technology or technological information
other than that identified in the attached Exhibits.
7.3.4 A grant of rights to either Party to use the name of the other in
advertising, publicity, or otherwise, except as expressly authorized
herein, without the permission of the other Party.
7.4 THE INTELLECTUAL PROPERTY IS PROVIDED "AS IS" AND WU MAKES NO
REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR
IMPLIED. THERE ARE NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS OF ANY LICENSED PRODUCT FOR A PARTICULAR PURPOSE, OR THAT THE USE
OF ANY
<PAGE>
LICENSED PRODUCT WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK OR
OTHER RIGHTS, OR ANY OTHER EXPRESS OR IMPLIED WARRANTES. WU WILL NOT BE
LIABLE TO SIGA ITS SUCCESSORS, ASSIGNS, CONTRACTORS OR SUBLICENSEES OR ANY
THIRD PARTY REGARDING ANY CLAIM ARISING FROM SIGA's USE OF LICENSED
INTELLECTUAL PROPERTY OR ANY LICENSED PRODUCT OR FROM THE MANUFACTURE,
USE, IMPORTATION OR SALE OF LICENSED PRODUCTS, OR ANY CLAIM FOR LOSS OR
PROFITS, LOSS OR INTERRUPTION OF BUSINESS, OR FOR INDIRECT, SPECIAL OR
CONSEQUENTIAL DAMAGES OF ANY KIND.
8. Infringement, Enforcement, and Defense.
8.1 This license includes the right, revocable by WU, to bring actions in WU's
name to enforce the Intellectual Property rights against third parties or
to defend the same in WU's name against claims by third parties, subject
to the terms and conditions set forth in this Agreement.
8.2 WU and SIGA will immediately give to the other written notice of any known
or suspected infringement of the Patent Rights or unauthorized use of the
Tangible Research Property or Technical Information by third parties.
8.3 SIGA at its sole expense, if SIGA is the sole licensee (or prorated with
other licensees if any), will attempt to abate any infringement of the
Patent Rights or unauthorized use of Tangible Research Property or
Technical Information by third parties. SIGA has the right to institute
and conduct actions against third parties for Infringement and unfair
trade practices through outside counsel of its choice who are reasonably
acceptable to WU. SIGA will keep WU informed of all proceedings and
provide copies of all pleadings and other papers related to such actions.
WU will provide reasonable assistance to SIGA in prosecuting any such
actions.
8.4 SIGA at its sole expense will defend third party claims of patent or
intellectual property infringement and injury, death or product liability
brought against SIGA and/or WU. SIGA will have the right to conduct the
defense of such actions through outside counsel of its choice who are
reasonably acceptable to WU. WU will provide all reasonable assistance for
the defense of such claims and SIGA will keep WU informed of all
proceedings and provide copies of all pleadings and other papers related
to such actions.
8.5 If more than one nonexclusive licensee participates in bringing or
defending an action under this Article, then the costs and fees for such
action will be shared pro-rata among such licensees.
8.6 Notwithstanding anything stated herein to contrary, SIGA will not be
permitted to settle or compromise any claim or action in a manner that may
impose restrictions or obligations on WU or grant rights or concessions to
Intellectual Property or Licensed Products without WU's prior written
consent.
8.7 SIGA will be entitled to offset 50% of its attorney's fees end expenses
incurred in abating third party infringement or unfair trade practices or
bringing or defending any action against third parties under this Article,
against the royalties due under Sections 4.4 and 4.5.
9. Indemnification. SIGA and its Sublicensees will indemnify, defend and hold
harmless WU, its trustees, faculty, staff, students and agents from and
against any and all liability, loss, damage, action, claim or expense
(including attorney's fees and costs at trial and appellate levels) in
connection with any claim, suit, action, demand or judgment arising out of
(a) the use of any Intellectual Property in the design, development,
production, manufacture, sale or offer for sale, use, importation, lease,
marketing or promotion of any Licensed Product by SIGA or its
Sublicensees, contractors or agents or (b) injury or death to any person,
or damage to property caused or allegedly caused by or relating in any way
to any person's use of any Licensed Products, or (c) any third party claim
that any use or licensing of the Intellectual Property under this
Agreement violates or infringes that party's intellectual property rights.
In legal actions undertaken or defended by SIGA pursuant to this
indemnification provision, SIGA may select counsel of its own choice who
are reasonably acceptable to WU.
10. Insurance.
10.1 SIGA and its Sublicensees will at all times comply, through insurance or
self-insurance, with all statutory workers' compensation and employers'
liability requirements covering all employees with respect to activities
undertaken in performance of this Agreement. This requirement may be met
by insurance or self-insurance coverage provided to SIGA by a Sublicensee.
10.2 In addition to the foregoing, SIGA and any Sublicensees as appropriate,
will at appropriate times obtain and maintain occurrence-based Broad Form
Comprehensive General Liability (BFCGL) insurance with a reputable and
financially secure insurance carrier(s) having at least an "A" rating and
an A.M. Best Class Size of at least X. Deviations from the rating or class
size must be approved in advance by WU. The BFCGL insurance will include,
among all other coverages standing in
<PAGE>
such BFCGL policies, coverage for product liability and contractual
liability.
10.3 The Insurance will provide to SIGA or each Sublicensee minimum annual
limits of $2 million in liability insurance for the WU Licensed Products,
and list WU as an additional insured.
10.4 All policies will be purchased and kept in force during the term of the
Agreement.
10.5 SIGA or any Sublicensee as appropriate, will provide WU with a certificate
of insurance and will provide a complete copy of the insurance policy to
WU as soon as one becomes available and notices of subsequent renewals.
The certificates must provide that SIGA's carrier will notify WU in
writing at least thirty days prior to cancellation or material change in
coverage.
10.6 WU may periodically evaluate the adequacy of the minimum coverages of
insurance specified in this Article. WU reserves the right to require SIGA
to adjust the insurance coverages. The specified minimum coverages do not
constitute a limitation on SIGA's or its Sublicensees' obligation to
indemnify WU under this Agreement.
11. Termination.
11.1 SIGA may terminate this Agreement with or without cause on ninety days
written notice to WU. The license rights granted hereunder terminate at
the end of the ninety day period.
11.2 WU may terminate on thirty days written notice to SIGA upon breach by SIGA
of the Agreement. The termination becomes effective at the end of the
thirty day period unless SIGA has fully cured the breach within the thirty
days.
11.3 If SIGA enters bankruptcy or receivership, voluntarily or involuntarily,
all obligations of WU and all rights (but not obligations) of SIGA and
this Agreement terminate immediately without the need for either WU or
SIGA to take any action.
11.4 Upon termination of this Agreement for any reason, SIGA must return to WU
all Confidential Information (as defined in Article 6) received from WU
during the Term of this Agreement.
11.5 On termination by either Party for any reason, the license rights granted
to SIGA under Article 3 terminate when termination of the Agreement is
effective. SIGA's obligations to pay fees, royalties or other payments
accruing prior to termination survive termination.
12. Use of Names. Neither Party may use the name of the other for any
commercial, advertisement, or promotional purpose without the written
consent of the other.
13. Assignment or Pledge of Agreement. Neither this Agreement nor any portion
of it may be assigned by either Party to anyone else without the written
consent of the other Party, and such consent will not be unreasonably
withheld. Notwithstanding this, SIGA may assign the entire Agreement,
without WU's consent, to an entity that succeeds to substantially all of
its business or assets by way of merger, sale, acquisition or otherwise,
provided that the successor agrees in writing to assume all the
obligations and liabilities of SIGA to WU. The rights granted in this
Agreement may not be pledged in any way by SIGA or any Sublicensee to
secure any purchase, lease or loan.
14. Notice. Any required or permissive notice under this Agreement will be
sufficient if in writing and delivered personally, by recognized national
overnight courier, or by registered or certified mail, postage prepaid and
return receipt requested, to the address below and will be deemed to have
been given as of the date shown on the receipt if by certified or
registered mail, or the day following dispatch if by overnight courier.
If to WU:
Washington University
Center of Technology Management
Campus Box 8013
660 South Euclid Avenue
St. Louis MO 63110
If to SIGA:
Joshua D. Schein
SIGA Pharmaceuticals, Inc.
420 Lexington Avenue
Suite 620
New York, NY 10120
15. General Provisions.
15.1 This Agreement will be governed and interpreted according to the laws of
Missouri.
15.2 None of the terms of this Agreement can be waived except by mutual written
consent of the Parties.
15.3 This instrument comprises the entire agreement and understanding of the
Parties relating to the subject matter of the Agreement.
<PAGE>
15.4 This Agreement cannot be changed, modified or amended except by a written
instrument subscribed by authorized representatives of the respective
Parties.
15.5 Neither Party is an agent or contractor of the other as a result of any
transaction under or related to this Agreement. Neither Party may in any
way pledge the other Party's credit or incur any obligation on behalf of
the other Party.
15.6 Each Party is liable to the other only for actual damages for breach of
this Agreement or any warranty contained herein, and not for any special,
consequential, incidental, or indirect damages arising out of this
Agreement, however caused, under any theory of liability.
15.7 The provisions of this Agreement are severable in that if any provision in
the Agreement is determined to be invalid or unenforceable under any
controlling body of law, that will not affect the validity or
enforceability of the remaining provisions of the Agreement.
15.8 If the performance of any obligation under this Agreement is prevented or
impaired by acts of war, riot, acts or defaults of common carriers, or
governmental laws or regulations, a Party will be excused from performance
so long as such cause continues to prevent or impair that Party's
performance. The Party claiming force majeure excuse must promptly notify
the other Party of the existence of the cause and must all times use
diligent efforts to resume and complete performance. This Section 15.8
will not excuse SIGA's obligation to pay fees, payments and royalties
under Article 4 of the Agreement
15.9 WU has no responsibility for product design and development, servicing,
distribution, or marketing, or any decisions made or strategies devised in
areas related to Licensed Products.
15.l0 Articles 4, 5, 6, 9, 10, and 12 above will survive expiration or
termination of this Agreement.
15.11 This Agreement will be executed in two original versions, one belonging to
each Party. The originals are valid counterparts of each other.
Witness: The parties have caused this Agreement to be executed in duplicate by
their duly qualified representatives.
For SIGA For WU:
/s/ Joshua D. Schein /s/ Andrew Neighbour
- ----------------------------------- -----------------------------------
Signature Signature
Name Joshua D. Schein Name Andrew Neighbour, Ph.D.
Title Chief Executive Officer Title Associate Vice Chancellor
For Technology Management
2/14/00 2/17/00
- ---------- ----------
Date Date
AMENDMENT TO EMPLOYMENT AGREEMENT BETWEEN SIGA
PHARMACEUTICALS, INC. AND DENNIS E. HRUBY DATED JANUARY 1, 1998
Paragraph 2 of the above Agreement shall be deleted in its entirety and replaced
with the following:
The Corporation hereby employs Hruby and Hruby hereby accepts employment with
the Corporation for the period beginning on the date of this Agreement and
ending on December 31, 2000 (the "Initial Term"), or upon the earlier
termination of the Term pursuant to Section 7. The foregoing notwithstanding,
Corporation shall have the right to terminate Hruby's employment under this
Agreement upon 90 days written notice and such termination will be treated as
Termination with Cause pursuant to Section 8 of this Agreement. Corporation also
agrees that the Term will not terminate prior to March 31, 2000. The termination
of Hruby's employment under this Agreement shall end the Term but shall not
terminate Hruby's or the Corporation's other agreements in this Agreement,
except as otherwise provided in this Agreement.
AGREED AND ACCEPTED:
SIGA PHARMACEUTICALS, INC.
By: /s/ Joshua D. Schein
-------------------------
Joshua D. Schein
Its: Chief Executive Officer
Date: 10/15/99
By: /s/ Dennis E. Hruby
-------------------------
Dennis E. Hruby
Date: 10/18/99
AMENDMENT TO EMPLOYMENT AGREEMENT BETWEEN SIGA TECHNOLOGIES,
INC. (FORMERLY SIGA PHARMACEUTICALS, INC.) AND THOMAS KONATICH
DATED APRIL 1, 1998
Effective January 19, 2000, the above Employment Agreement shall be amended as
follows:
Section 1. Employment for Term. shall be deleted in its entirety and replaced
with the following:
The Corporation hereby employs Konatich and Konatich hereby accepts
employment with the Corporation for the period beginning on the date of this
Agreement and ending on April 1, 2002 (the "Initial Term"), or upon the earlier
termination of the Term pursuant to Section 6. The termination of Konatich's
employment under this Agreement shall end the Term but shall not terminate
Konatich's or the Corporation's other agreements in this Agreement, except as
otherwise provided herein.
Section 3. Compensation. (b) Stock Options. shall remain in its entirety and the
following shall be added:
In addition to the above options to purchase 95,000 shares of the
Corporation's Common Stock, Konatich is hereby granted additional options as
follows: Pursuant to the Corporation's stock option plan and subject to
stockholder approval of the Corporation's Amended 1996 Incentive and
Non-Qualified Stock Option Plan, Konatich is hereby granted options to purchase
100,000 shares at an exercise price of $2.00 per share, the closing bid price of
the Common Stock of the Corporation on January 19, 2000, the date of this
Amendment. The options shall expire on January 19, 2010. These 100,000 options
will vest in eight equal installments on every three month anniversary of the
date of this Amendment, January 19, 2000. All unvested options shall
automatically vest upon the closing of a transaction in which at least 50.1% of
all outstanding shares are acquired by a person or entity in a change of control
transaction. In the event the closing bid price of the Company's common stock is
at least $10.00 per share for twenty consecutive trading days prior to January
19, 2001, the first four installments, or the unvested portion of the balance
thereof, shall immediately vest. Similarly, an additional 25,000 options shall
immediately vest if the closing bid price for such twenty day period is $15.00
per share, and an additional 25,000 options if the closing bid price equals or
exceeds $20.00 per share. The Company will provide a stock option agreement
providing, among other things, that all vested and non-vested stock options will
terminate immediately upon termination for Cause. In the event of termination
for any other reason, all vested options must be exercised within ninety (90)
days of termination and all non-vested options will terminate immediately.
AGREED AND ACCEPTED:
SIGA TECHNOLOGIES, INC.
By: /s/ Joshua D. Schein
-----------------------
Joshua D. Schein
Its: Chief Executive Officer
By: /s/ Thomas Konatich
-----------------------
Thomas Konatich
- --------------------------- NOTICE OF GRANT AWARD ------------------------------
SMALL BUSINESS INNOVATION RESEARCH PROG Issue Date: 06/21/1999
Department of Health and Human Services
National Institutes Of Health
NATIONAL INSTITUTE OF ALLERGY AND INFECTIOUS DISEASES
- --------------------------------------------------------------------------------
Grant Number: 1 R43 AI46043-01
Principal Investigator: HRUBY, DENNIS E MD
Project Title: BETA-LACTAM INHIBITOR OF PILUS BIOGENESIS
TOM KONATICH - CHIEF FINANCIAL 0
SIGA PHARMACEUTICALS, INC
420 LEXINGTON AVENUE, SUITE 620
NEW YORK, NY 10170
Budget Period: 07/01/1999 - 12/31/1999
Project Period: 07/01/1999 - 12/31/1999
Dear Business Official:
The National Institutes of Health hereby awards a grant in the amount of
$109,072 (see "Award Calculation" in Section I) to SIGA PHARMACEUTICALS, INC. in
support of the above referenced project. This award is pursuant to the authority
of 42 USC 241 42 CFR PART 52 15 USC 638 and is subject to attached terms and
conditions.
Acceptance of this award including attached Terms and Conditions is acknowledged
by the grantee when funds are drawn down or otherwise obtained from the grant
payment system.
Award recipients are responsible for appropriate acknowledgment of NIH support
when preparing publications, or issuing statements, press releases, request for
proposals, bid solicitations, and other documents describing projects or
programs funded in whole or in part with NIH support.
If you have any questions about this award, please contact the individual(s)
referenced in the attachments.
Sincerely yours,
/s/ Annette Hanopole
Annette Hanopole
Grants Management Officer
NATIONAL INSTITUTE OF ALLERGY AND INFECTIOUS DISEASES
Attachments
<PAGE>
SECTION I - AWARD DATA - 1 R43 AI46043-01
AWARD CALCULATION (U.S. Dollars):
Salaries and Wages $ 42,000
Personnel Costs $ 42,000
Consultant Services $ 10,000
Supplies $ 15,000
Travel Costs $ 1,500
Other Costs $ 5,000
Direct Costs $ 73,500
F&A Costs $ 29,400
APPROVED BUDGET $102,900
Fee $ 6,172
TOTAL $109,072
FISCAL INFORMATION:
CFDA Number: 93.856
EIN: 1133864870A1
Document Number: R3AI46043A
IC / CAN / FY1999
AI / 8425710 / 109,072
NIH ADMINISTRATIVE DATA:
PCC: M52 / OC: 41.4A / Processed: HANOPOLEA 990617 0201
SECTION II - PAYMENT/HOTLINE INFORMATION - 1 R43 AI46043-0l
For Payment and HHS Office of Inspector General Hotline Information, see the NIH
Home Page at http://www.nih.gov/grants/policy/awardconditions.htm
SECTION III - TERMS AND CONDITIONS - 1 R43 AI46043-0l
This award is based on the application submitted to, and as approved by, the NIH
on the above-titled project and is subject to the terms and conditions
incorporated either directly or by reference in the following:
a. The grant program legislation and program regulation cited in this Notice of
Grant Award.
b. The restrictions on the expenditure of federal funds in appropriations acts,
to the extent those restrictions are pertinent to the award.
c. 45 CFR Part 74 or 45 CFR Part 92 as applicable.
d. The NIH Grants Policy Statement, including addenda in effect as of the
beginning date of the budget period.
e. This award notice, INCLUDING THE TERMS AND CONDITIONS CITED BELOW.
(see NIH Home Page at http://www.nih.gov/grants/policy/awardconditions.htm for
certain references cited above.)
This grant is included under Expanded Authorities.
This grant is excluded from Streamlined Noncompeting Award Procedures (SNAP).
Treatment of Program Income:
Additional Costs
None of the funds appropriated in this title for the National Institutes of
Health and the
<PAGE>
Alcohol, Drug Abuse, and Mental Health Administration shall be used to pay the
salary of an individual, through a grant or other extramural mechanism, at a
rate in excess of $125,900 per year.
The fee or profit provided as part of this grant award is in addition to
allowable direct and indirect costs. If the total amount of direct and indirect
costs awarded is not spent, a proportionate amount of the fee or profit must be
shown as an unobligated balance on the Financial Status Report.
PAYMENT INFORMATION: The awardee organization will receive information and forms
from the Payment Management System of the Department of Health and Human
Services regarding requests for cash, manners of payment, and associated
reporting requirements. Payment may be made on a cost-reimbursement or advance
basis. Cost reimbursements may be requested monthly, quarterly, or at other
periodic intervals. Advance payments may be requested on a monthly basis only.
The telephone number for the Payment Management System Office is (301) 443-1660.
The total fixed fee for your Phase II project is $6,174 and is included in the
maximum allowable total costs. This fee is incrementally funded proportionately
for each budget period. $6,174 are allotted for payment of fixed fee for the
budget period covered by this Notice of Grant Award. Additional funds for the
remainder of the total fixed fee are intended to be allotted by a future
Notice(s) of Grant Award, and is reflected in the future year total cost
commitment base on this Notice of Grant Award. Unless and until such future
Notice(s) of Grant Award is (are) issued, the Government will not be obligated
to reimburse the grantee organization for more than the funds currently allotted
for payment of the fixed fee. An adjustment of the fee will be made in the event
the grant is terminated or future support is withheld. The fee allotted under
this Notice of Grant Award is to be drawn down from the HHS Payment System in
increments proportionate to the draw down of funds for costs.
Normally, the awardee organization retains the principal worldwide patent rights
to any invention developed with United States government support. Under Title 37
Code of Federal Regulations Part 401, the Government receives a royalty-free
license for its use, reserves the right to require the patent holder to license
others in certain circumstances, and requires that anyone exclusively licensed
to sell the invention in the United States must normally manufacture it
substantially in the United States. To the extent authorized by Title 35 United
States Code Section 205, the Government will not make public any information
disclosing a Government-supported invention for a 4-year period to allow the
awardee organization a reasonable time to file a patent application, nor will
the Government release any information that is part of that application.
When purchasing equipment or products under this SBIR award, the grantee shall
use only American-made items whenever possible.
The above referenced grant is scheduled to expire on December 31, 1999. Unless
an application for competitive renewal is funded, grant closeout documents must
be submitted within 90 days of the expiration of the grant. Grant closeout
documents consist of a Financial Status Report (OMB 269) , Final Invention
Statement (HHS 568) and a Final Progress Report.
The Final Progress Report may be typed on plain white paper and should include,
at a minimum, a summary statement of progress toward the achievement of the
originally stated aims, a list of results (positive and/or negative) considered
significant, and a list of publications resulting from the project as well as
plans for further publications. An original and one copy are required.
Please send the Final Progress Report and Final Invention Statement & a copy of
the Financial Status Report to the following address:
ATTENTION: CLOSEOUT
NIH, NIAID, Division of Extramural Activities
Grants Management Branch
Room 2200, Rockledge Drive, MSC-7614
Bethesda, Maryland 20892-7614
The Financial Status Report should be sent to:
Division of Financial Management, NIH
<PAGE>
9000 Rockville Pike, MSC-2052
Building 31, Room B1B05A
Bethesda, Maryland 20892-2052
Program Official Contact:
Christopher Tseng, Ph.D.
(301) 496-7453
Grants Management Contact:
Annette Hanopole
(301) 402-5937
[email protected]
Karen McVay, Grants Specialist
SPREADSHEET
GRANT NUMBER: 1 R43 AI46043-0l
P.1.: HRUBY, DENNIS E
INSTITUTION: SIGA PHARMACEUTICALS, INC.
YEAR 01
=======
Salaries and Wages 42,000
Personnel Costs 42,000
Consultant Services 10,000
Supplies 15,000
Travel Costs 1,500
Other Costs 5,000
TOTAL DC 73,500
TOTAL F&A 29,400
TOTAL COST 102,900
FEE 6,172
- --------------------------- NOTICE OF GRANT AWARD ------------------------------
SMALL BUSINESS INNOVATION RESEARCH PROG Issue Date: 09/27/1999
Department of Health and Human Services
National Institutes Of Health
NATIONAL INSTITUTE OF ALLERGY AND INFECTIOUS DISEASES
- --------------------------------------------------------------------------------
Grant Number: 1 R43 AI46176-01
Principal Investigator: HRUBY, DENNIS E MD
Project Title: DEVELOPMENT OF A GROUP A STREP SUBUNIT VACCINE
CHIEF FINANCIAL OFFICER
SIGA PHARMACEUTICALS INC
420 LEXINGTON AVE
SUITE 620
NEW YORK, NY 10170
Budget Period: 09/30/1999 - 09/29/2000
Project Period: 09/30/1999 - 09/29/2000
Dear Business Official:
The National Institutes of Health hereby awards a grant in the amount of
$293,446 (see "Award Calculation" in Section I) to SIGA PHARMACEUTICALS, INC. in
support of the above referenced project. This award is pursuant to the authority
of 42 USC 241 42 CFR PART 52 15 USC 638 and is subject to attached terms and
conditions.
Acceptance of this award including attached Terms and Conditions is acknowledged
by the grantee when funds are drawn down or otherwise obtained from the grant
payment system.
Award recipients are responsible for reporting inventions derived or reduced to
practice in the performance of work under this grant. Rights to inventions vest
with the grantee organization provided certain requirements are met and there is
acknowledgement of NIH support. In addition, recipients must ensure that patent
and license activities are consistent with their responsibility to make unique
research resources developed under this award available to the scientific
community, in accordance with NIH policy. For additional information, please
visit http://www.iedison.gov.
If you have any questions about this award, please contact the individual(s)
referenced in the attachments.
Sincerely yours,
/s/ Annette Hanopole
Grants Management Officer
NATIONAL INSTITUTE OF ALLERGY AND INFECTIOUS DISEASES
Attachments
<PAGE>
SECTION I - AWARD DATA - 1 R43 AI46176-01
AWARD CALCULATION (U.S. Dollars):
Salaries and Wages $132,340
Personnel Costs $132,340
Consultant Services $ 10,000
Supplies $ 48,400
Travel Costs $ 2,000
Other Costs $ 5,000
Direct Costs $197,740
F&A Costs $ 79,096
APPROVED BUDGET $276,836
Fee $ 16,610
TOTAL $293,446
FISCAL INFORMATION:
CFDA Number: 93.856
EIN: 1133864870A1
Document Number: R3AI46176A
IC / CAN / FY1999
AI / 8425710 / 293,446
NIH ADMINISTRATIVE DATA:
PCC: M58 / OC: 41.4A / Processed: NORWOODL 990923 0500
SECTION II - PAYMENT / HOTLINE INFORMATION - 1 R43 AI46176-0l
For Payment and HHS Office of Inspector General Hotline Information, see the NIH
Home Page at http://www.nih.gov/grants/policy/awardconditions.htm
SECTION III - TERMS AND CONDITIONS - 1 R43 AI46176-0l
This award is based on the application submitted to, and as approved by, the NIH
on the above-titled project and is subject to the terms and conditions
incorporated either directly or by reference in the following:
a. The grant program legislation and program regulation cited in this Notice of
Grant Award.
b. The restrictions on the expenditure of federal funds in appropriations acts,
to the extent those restrictions are pertinent to the award.
c. 45 CFR Part 74 or 45 CFR Part 92 as applicable.
d. The NIH Grants Policy Statement, including addenda in effect as of the
beginning date of the budget period.
e. This award notice, INCLUDING THE TERMS AND CONDITIONS CITED BELOW.
(see NIH Home Page at http://www.nih.gov/grants/policy/awardconditions.htm for
certain references cited above.)
This grant is excluded from Expanded Authorities.
Treatment of Program Income:
Additional Costs
The fee or profit provided as part of this grant award is in addition to
allowable direct and indirect costs. If the total amount of direct and indirect
costs awarded is not spent, a proportionate amount of the fee or profit must be
shown as an unobligated balance on the Financial Status Report.
<PAGE>
The total cost (direct, indirect, and fixed fee) for Phase I of this SBIR may
not exceed $300,000.
PAYMENT INFORMATION: The awardee organization will receive information and forms
from the Payment Management System of the Department of Health and Human
Services regarding requests for cash, manners of payment, and associated
reporting requirements. Payment may be made on a cost-reimbursement or advance
basis. Cost reimbursements may be requested monthly, quarterly, or at other
periodic intervals. Advance payments may be requested on a monthly basis only.
The telephone number for the Payment Management System Office is (301) 443-1660.
The fixed fee provided as part of this grant award is included in the maximum
allowable total costs. An adjustment of the fee will be made in the event the
grant is terminated. The fee is to be drawn down from the HHS Payment Management
System in increments proportionate to the drawdown of funds for costs.
Normally, the awardee organization retains the principal worldwide patent rights
to any invention developed with United States government support. Under Title 37
Code of Federal Regulations Part 401, the Government receives a royalty-free
license for its use, reserves the right to require the patent holder to license
others in certain circumstances, and requires that anyone exclusively licensed
to sell the invention in the United States must normally manufacture it
substantially in the United States. To the extent authorized by Title 35 United
States Code Section 205, the Government will not make public any information
disclosing a Government-supported invention for a 4-year period to allow the
awardee organization a reasonable time to file a patent application, nor will
the Government release any information that is part of that application.
When purchasing equipment or products under this SBIR award, the grantee shall
use only American-made items whenever possible.
Grants Management Contact:
Lesia A. Norwood
Tel: (301) 402-6581 email: [email protected]
Program Official Contact:
Fran A. Rubin, Ph.D.
Tel: (301) 496-9655
Lesia Norwood, Grants Specialist
SPREADSHEET
GRANT NUMBER: 1 R43 AI46176-0l
P.I.: HRUBY, DENNIS E
INSTITUTION: SIGA PHARMACEUTICALS, INC.
YEAR 01
=======
Salaries and Wages 132,340
Personnel Costs 132,340
Consultant Services 10,000
Supplies 48,400
Travel Costs 2,000
Other Costs 5,000
TOTAL DC 197,740
TOTAL F&A 79,096
TOTAL COST 276,836
Software Application Development
Services Agreement
Between
Open-i Media, Inc.
and
SIGA PHARMACEUTICALS, INC.
<PAGE>
This AGREEMENT (the "Agreement") is hereby entered as of this 11th day of
October, 1999 (the "Effective Date"), by and between Open-i Media, Inc., a
corporation with offices at 73 Franklin Street, New York, New York 10013
("Open-i") and, SIGA PHARMACEUTICALS, INC., a corporation with offices at 420
Lexington Avenue, Suite 620, New York, New York 10017, ("CLIENT"), under the
following terms and conditions:
WHEREAS. Open-i is in the business of providing Internet World Wide Web
development, programming and related services, including technical and creative
services;
WHEREAS, CLIENT wishes to retain the services of Open-i to perform certain
Internet world wide web development, programming and related services,
including, technical and creative services as described herein; and
WHEREAS, Open-i wishes to provide CLIENT with such services;
NOW, THEREFORE, in consideration of the conditions and covenants set forth
hereinafter, it is agreed as follows:
- --------------------------------------------------------------------------------
1. DEFINITIONS
- --------------------------------------------------------------------------------
1.1. "Deliverable" shall mean the Internet World Wide Web site ("Web Site") and
Dynamic Community Application ("Client Application(s)") for CLIENT, which is the
Content, Software and other materials to be produced by Open-i pursuant to the
specifications.
1.2. "Confidential Information" shall mean any information of either party
whether or not developed by the other, marked in writing as "Confidential,"
including but not limited to preexisting or new information which relates to all
ideas, designs, methods, discoveries, improvements, products, Software, Content,
or other results of consulting or development services, trade secrets, product
data and specifications, proprietary rights, business affairs, product
developments, customer information or employee information, however,
Confidential Information shall not include any of these items that are already
known to that party, in the public domain or has not been previously received
from a third party not bound by a confidentiality agreement.
1.3. "Content" shall mean all text, graphics, photographs, animation, images,
digital and/or audio clips, including that which is posted on or found in a
bulletin board, banner advertisement, hypertext link, chat room, or discussion
forum.
1.4. "Software" shall mean everything except Content. By way of examply only,
Software includes, but is not limited to, all computer code (both source and
object) including, but not limited to, all interfaces navigational devices,
menus, menu structures or arrangements, icons, help, operational instructions,
scripts, information, HTML, JavaScript, Java, Visual Basic, C++, SQL or any
other programming or procedural language, commands syntax, graphical designs,
audio and/or digital slide Components and the literal and non-literal
expressions of ideas that operate, cause, create, direct, manipulate, access or
otherwise affect the Content whether created or licensed from third Parties by
Open-i including is without limitation, and copyrights, trade secrets and other
intellectual or industrial property rights therein Open-i to develop an
operational corporate web site and client application as per the Specifications
and install on a web server selected by the CLIENT the Deliverables.
1.6. "Phase(s)" when used in this Agreement, refers to a portion or portion(s)
of the entire Project, which includes but is not limited to the Web Sites and
Client Applications conceptual design, programming, and testing.
1.7. "Specifications," when used in this Agreement, shall refer to the final
document(s) created by Open-i and submitted to CLIENT for CLIENT's approval,
that shall:
1.7.1. provide detailed requirements for the Deliverable;
1.7.2. sets forth the Phases for delivery of the Deliverable;
1.7.3. sets forth the fees and fee payment schedule for the Project, and
1.7.4. when approved by CLIENT, it shall be incorporated into this
Agreement.
1.8. "Web Site and Client Application Proposal," when used in this Agreement,
shall mean the document created by Open-i and submitted to CLIENT for the
purpose of outlining the Project, which includes but is not limited to estimated
Phases, fees, and related services that upon the parties execution of this
Agreement will be superseded by the Specifications.
- --------------------------------------------------------------------------------
2. STATEMENT OF SERVICES
- --------------------------------------------------------------------------------
2.1. CLIENT hereby retains Open-i as an Internet web development and services
provider, effective as of the Effective Date, and Open-i hereby accepts such
retention by CLIENT.
2.2. Open-i will complete the Project, and deliver the Deliverable in Phases.
Each Phase will require Acceptance by the CLIENT prior to Open-i's commencement
of the succeeding Phase.
2.3. Approval of the Specifications shall proceed as follows.
2.3.1. Open-i will consult with CLIENT for the purpose of creating the
Specifications.
2.3.2. Open-i shall submit for CLIENT's review the proposed
Specifications.
2.3.3 CLIENT within ten (10) business days receipt of the Specifications
will either approve or reject the Specifications, in writing and such
approval shall not be unreasonably withheld.
2.3.4. If CLIENT does not reject the Specifications in writing within ten
(10) business days receipt then approval is automatic on the sixth
business day, and Open-i shall invoice CLIENT for the amount specified for
the first Phase.
2.3.5. If CLIENT rejects the Specifications, Open-i shall have ten (10)
business days within which to resubmit the Specifications.
2.3.6. If CLIENT rejects the resubmitted Specifications, Open-i and CLIENT
will negotiate in good faith one of the following courses of action: (i)
Re-negotiate the terms of the Specifications; or (ii) Terminate this
Agreement.
2.3.7. If at anytime during this Agreement Specifications, such
modifications will be in writing signed by the parties, and attached to
this Agreement as an amendment to the Specifications.
2.4. Upon CLIENT's approval of the Specifications, Open-i will invoice CLIENT in
the amount specified for the Phase, and will thereafter invoice CLIENT in
accordance with the payment schedule. All invoices are payable to Open-i within
thirty (30) days following receipt of invoice by CLIENT.
2.5. "Acceptance" for each Phase stated in the Specifications and for the
completed Deliverable shall be as follows:
2.5.1. Open-i will only commence services for a subsequent Phase when
CLIENT has Accepted and paid for the preceding Phase.
2.5.2. Upon Open-i's completion of a particular Phase, CLIENT shall
evaluate that portion of the Project and submit Open-i with written
approval.
2.5.3. If CLIENT does not reject the particular Phase in writing within
ten (10) business days receipt then Acceptance will be automatic on the
sixth business day, and Open-i shall proceed with the next Phase.
2.5.4. If CLIENT rejects the Phase, Open-i shall have ten (10) business
days within which to correct. If CLIENT thereafter withholds approval,
Open-i and CLIENT will negotiate in good faith one of the following
courses of action: (i) Re-negotiate the terms of the Specifications; or
(ii) Terminate this Agreement.
2.6. Acceptance of Deliverable: CLIENT shall be deemed so have Accepted the
Deliverable for all purposes under this Agreement upon the earlier of any one of
the following events: 1) use of the Deliverable on the Internet, 2) licensing or
distribution of the Deliverable to any third party; or 3) no written notice of
rejection from CLIENT within fifteen (15) days from the date of CLIENT's receipt
of the Deliverable.
2.7. Any delays attributable to CLIENT'S failure to respond with Acceptance will
extend any and all deadlines for an amount of time equal to CLIENT's delay.
- --------------------------------------------------------------------------------
3. OWNERSHIP OF RIGHTS
- --------------------------------------------------------------------------------
3.1. Provided that Open-i has received all compensation provided for under this
Agreement:
3.1.1 Open-i hereby irrevocably assigns, conveys and otherwise transfers
to CLIENT all rights, title, and interests worldwide in and to the
Deliverable and all proprietary rights therein, including, without
limitation, all copy rights, trademarks design patents, trade secret
rights, moral rights, and all contract and licensing rights, and all
claims and causes of action of any kind with respect to and of the
foregoing, whether now known or hereafter to become known. In the event
that it has rights in and to the Deliverable that cannot be assigned to
CLIENT, Open-i hereby unconditionally and irrevocably waives the
enforcement of all such rights, and all claims and causes of action of any
kind with respect to any of the foregoing against CLIENT, its distributors
and customers, whether now known or hereafter to become known and agrees,
at the request and expense of CLIENT to consent to and
<PAGE>
join in any action to enforce such rights and to procure a waiver of such
rights from the holders of such rights.
3.1.2. Open-i shall retain no rights to use the Deliverable and agrees not
to challenge the validity of the ownership by CLIENT of the Deliverable.
- --------------------------------------------------------------------------------
4. CLIENT'S RESPONSIBILITIES FOR CONTENT
- --------------------------------------------------------------------------------
4.1. CLIENT shall furnish Content and other related information requested by
Open-i that is necessary for Open-i to fulfill its responsibilities under this
Agreement. CLIENT shall provide adequate access to Open-i personnel necessary
for Open-i to fulfill its responsibilities under this Agreement.
4.2. CLIENT assumes sole responsibility for (a) acquiring any authorization(s)
necessary for hypertext links to third party web sites, (b) the accuracy of
materials, including, without limitation, Content, descriptive claims,
warranties, guarantees, nature of business, and address where business is
conducted, and (c) ensuring that the CLIENT Content does not infringe or violate
any right of any third party.
4.3. CLIENT shall not place or cause to be placed Content that contains any
communication, or materials which are obscene, threatening, malicious, which
infringe on or violate any applicable laws or regulation or any proprietary,
contract, privacy or other third party right, or which otherwise exposes Open-i
to civil or criminal liability. Any such materials which do not satisfy the
foregoing requirements shall be deemed to be a material breach of this
Agreement.
4.4. If notified of allegedly infringing, defamatory, damaging, obscene,
illegal, or offensive Content, Open-i's sole obligation will be to inform CLIENT
of such allegations. Open-i shall not be liable for any damages incurred by
CLIENT because of any such claim or action. CLIENT shall hold Open-i harmless
from any damages resulting from CLIENT's acts or omissions with regard thereto.
- --------------------------------------------------------------------------------
5. EXPENSES
- --------------------------------------------------------------------------------
5.1. Open-i will be reimbursed by CLIENT for all reasonable out-of-pocket
expenditures that are incurred solely for the purpose of providing the Included
Services under this Agreement. For all related expenses aggregating in excess of
$1,000.00, Open-i will obtain CLIENT's prior written approval. Open-i will
maintain all receipts for all expenses.
- --------------------------------------------------------------------------------
6. DOMAIN NAME REGISTRATION
- --------------------------------------------------------------------------------
6.1. As part of CLIENT's responsibilities, CLIENT shall provide Open-i with a
registered domain name, which it will own. In the event CLIENT does not provide
Open-i with a registered domain name, Open-i shall register, at CLIENT's written
request, a domain name(s) selected by CLIENT, which CLIENT will own, provided
that such domain name is available for registration and does not violate
InterNIC's or any other registration services' policies, or any law or
regulation. CLIENT agrees to promptly reimburse Open-i for all fees incurred by
Open-i in connection with the registration and maintenance of such domain name.
- --------------------------------------------------------------------------------
7. TERM OF AGREEMENT
- --------------------------------------------------------------------------------
7.1. The term of this Agreement ("Term") shall begin upon execution of this
Agreement, and unless terminated earlier by mutual agreement of the parties, the
Term shall end upon the earlier of:
7.1.1. Acceptance of all Phases contemplated for the Project; or
7.1.2. the termination of this Agreement in accordance with its terms.
- --------------------------------------------------------------------------------
8. TERMINATION
- --------------------------------------------------------------------------------
8.1. Either party may terminate this Agreement if a bankruptcy proceeding is
instituted against the other party which is acquiesced in and not dismissed
within ninety (90) days, or results in an adjudication of bankruptcy, or the
other party materially breaches any of its representations, warranties or
obligations under this Agreement, and such breach is not cured within thirty
(30) days of the breaching party's receipt of notice specifying the breach.
8.2. In the event that CLIENT fails to pay its fees within thirty (30) days from
the date of issue, or applicable due date, such non-payment shall be deemed a
material breach of this Agreement, and will be sufficient cause for termination
of this Agreement by Open-i if CLIENT cannot cure such breach within five (5)
business days. CLIENT shall be liable for any costs associated with such
collection, including, but not limited to, legal costs, attorneys' fees, court
costs, and collection agency fees.
8.3. Upon termination or expiration of this Agreement, for any reason:
8.3.1. CLIENT shall pay all outstanding fees up to the date of the
effective date of termination or effective date of expiration of this
Agreement. Upon payment in full of all outstanding invoices, client shall
own all deliverables.
- --------------------------------------------------------------------------------
9. CONFIDENTIAL INFORMATION
- --------------------------------------------------------------------------------
9.1. Each party will (i) keep in confidence the other party's Confidential
Information made available to it, (ii) not use the other party's Confidential
Information other than for the aforesaid purposes provided herein and (iii) not
disclose to any third party any Confidential Information, except as required by
order of a court or other government entity.
9.2 Each party shall notify its respective employees, representatives, and
agents of their confidentiality obligations with respect to the Confidential
Information and shall require its employees to comply with these obligations.
The confidentiality obligations of each party and its respective employees,
representatives, and agents shall survive the expiration or termination of this
Agreement.
9.3. The provisions of this Section shall survive termination of this Agreement.
- --------------------------------------------------------------------------------
10. REPRESENTATIONS, WARRANTIES AND LIMITATIONS
- --------------------------------------------------------------------------------
10.1. The following representations and warranties are provided solely for the
benefit of the parties to this Agreement, and no other person or entity.
10.2. Open-i warrants, represents and covenants that:
10.2.1. The Software hereunder shall perform in accordance with the
Specifications, and all services provided hereunder shall be provided in a
professional manner.
10.2.2. neither the Software nor the services hereunder infringe any
copyright or misappropriate any trade secrets of a third party.
10.3. CLIENT warrants, represents and covenants that
10.3.1. it has the right to disclose the Content it provides to Open-i,
that authorization is not required from any third party in order for
Open-i to provide the services requested by CLIENT under this Agreement,
and that the services Open-i will provide under this Agreement does not
violate the rights of any third party.
10.4. Open-i DOES NOT WARRANT ANY SOFTWARE OR INCLUDED SERVICES AGAINST FAILURE
OF PERFORMANCE DUE TO FAILURE OF COMPUTER HARDWARE OR COMMUNICATIONS SYSTEM.
Open-i DOES NOT PROVIDE ANY GOODS OR SERVICES UNDER THIS AGREEMENT, EXCEPT AS
SPECIFICALLY PROVIDED IN THIS AGREEMENT. Open-i HEREBY DISCLAIMS WITH RESPECT TO
ALL SERVICES AND OBLIGATIONS PROVIDED HEREUNDER, ALL IMPLIED WARRANTIES,
INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY, TITLE, OR FITNESS FOR A
PARTICULAR PURPOSE.
10.5. The parties acknowledge that the following provisions have been negotiated
by them and reflect a fair allocation of risk:
10.5.1. Remedies. In addition to its right of termination and excluding
remedies for any breach of the representations and warranties contained
herein, CLIENT's sole and exclusive remedies for Open-i's default
hereunder shall be to obtain the repair, replacement or correction of the
defective services or Deliverable to the extent warranted under this
Agreement. If such remedy is not economically or technically feasible or
effective, then CLIENT may obtain an equitable partial or full credit or
refund of amounts paid with respect to the defective services or
deliverable, subject to the limitation set forth immediately below.
10.5.2. Limitation of Liability. IN NO EVENT SHALL Open-i BE LIABLE TO
CLIENT OR ANY THIRD PARTY, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE
OR OTHERWISE, FOR (i) ANY AMOUNT IN EXCESS OF THE AMOUNT PAID BY CLIENT TO
Open-i FOR ANY SERVICES DURING THE TWELVE MONTHS PRIOR TO THE EVENT GIVING
RISE TO THE ALLEGED CLAIM, OR (ii) ANY
<PAGE>
DIRECT. INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES (INCLUDING, BUT NOT
LIMITED TO, LOST PROFIT OR BUSINESS INTERRUPTION EVEN IF NOTIFIED IN
ADVANCE OF SUCH POSSIBILITY) ARISING OUT OF OR RELATING TO THIS AGREEMENT.
10.5.3. CLIENT, at its own expense, shall defend, indemnify, and hold
harmless Open-i, its agents, affiliates, successors, and assigns with
respect to any damages, expenses (including but not limited to attorney's
fees), claim, or action brought against Open-i, its agents, affiliates,
successors, and assigns that arises out of or in connection with CLIENT's
representations, acts or omissions under this Agreement, including, but
not limited to: (1) the Content; (2) unauthorized use of the Software;
(3) any use of Internet facilities conducted or permitted by CLIENT; (4)
the conduct of any business, advertising, marketing or sales in connection
therewith; and, (5) any negligent or illegal act or omission of CLIENT or
any of its agents, contractors, servants, employees, or other users or
accesses. Open-i shall promptly notify CLIENT of any claim or action,
shall provide reasonable assistance in connection with the defense and/or
settlement thereof, and shall permit CLIENT to control the defense and/or
settlement thereof.
10.6. Open-i agrees to indemnify, hold harmless, and defend CLIENT from and
against any and all damages, costs, and expenses, including reasonable
attorneys' fees incurred in connection with a claim which, if true, would
constitute a breach of the foregoing warrantees in this Section (a "Claim");
provided Open-i is notified promptly in writing of such Claim and has sole
control over its defense or settlement, and CLIENT provides reasonable
assistance in the defense of such Claim. Following notice of a Claim, Open-i may
at its expense, without obligation to do so, procure for CLIENT the right to
continue to use the Software or, without obligation to do so, may replace or
modify the Software to make it non-infringing. If Open-i elects to replace or
modify the Software, such replacement shall substantially meet the
specifications of the Software that is accused of infringement.
10.7. Notwithstanding anything to the contrary herein, neither party shall
settle or compromise any claim subject to this Section without the other party's
prior written consent, not to be unreasonably withheld or delayed.
10.7.1. The provisions of this Section shall survive termination of this
Agreement.
- --------------------------------------------------------------------------------
11. MISCELLANEOUS
- --------------------------------------------------------------------------------
11.1. DEVELOPMENT CREDIT AND PUBLICITY. Neither party shall use any trademarks,
service marks, nor properties owned, controlled, licensed or otherwise
proprietary to either party, whether or not such materials are incorporated into
the CLIENT Web Site, without the other party's prior written consent.
11.2 INJUNCTIVE RELIEF. Both parties acknowledge that the disclosure of any
aspect of the Confidential Information of the other party shall immediately give
rise to continuing irreparable injury to the non-disclosing party inadequately
compensable in damages at law and without prejudice to any other remedy
available to the non-disclosing party, and shall entitle the non-disclosing
party to obtain injunctive relief.
11.3. INDEPENDENT CONTRACTOR Neither party shall have the power to bind the
other party, nor shall either party make any such representation. The parties'
relation to the other shall be that of an independent contractor solely
responsible for the manner and means by which the duties hereunder are carried
out. Neither party shall be construed for any purpose to be an employee subject
to the control and direction of the other party.
11.4. FORCE MAJEURE Except for CLIENT's payment obligations, if the performance
of any part of this Agreement by either party is prevented, hindered, delayed or
otherwise made impracticable by reason of any flood, riot, fire, judicial or
governmental action, labor disputes, act of God or any other causes beyond the
control of either party, that party shall be excused from such to the extent
that it is prevented, hindered or delayed by such causes.
11.5. NOTICE Any notice provided pursuant to this Agreement, if specified to be
in writing, shall be in writing and shall be deemed given (i) if by hand
delivery, upon receipt thereof, (ii) if by mail, five (5) days after deposit in
the United States mails, postage prepaid, certified mail, return receipt
requested, (iii) if by facsimile transmission, upon electronic confirmation
thereof, or (iv) if by next day delivery service, upon such delivery. All
notices shall be addressed as follows (or such other address as either party may
in the future specify in writing to the other):
To James Chong:
Open-i Media. Inc
Address first listed
To Josh Schein
SIGA PHARMACEUTICALS, INC
Address first listed
11.6. WAIVER. The waiver by either party of any breach or failure to enforce any
of the terms and conditions of this Agreement at any time shall not in any way
affect, limit or waive either party's rights thereafter to enforce and compel
strict compliance with every term and condition of this Agreement.
11.7. SEVERABILITY. If any provision of this Agreement is determined to be
invalid under any applicable statute or rule of law, it is to that extent to be
deemed omitted, and the balance of the Agreement shall remain enforceable.
11.8. COUNTERPARTS. This Agreement may be executed in several counterparts, all
of which taken together shall constitute the entire agreement between the
Parties hereto.
11.9. HEADINGS AND RECITALS. The section headings used herein are for reference
and convenience only and shall not enter into the interpretation hereof. The
entire recitals portion (the Whereas statements) of this Agreement are
incorporated into this Agreement by reference.
11.10. ENTIRE AGREEMENT. This Agreement, including any and all Exhibits, or
invoices annexed hereto, sets forth the entire agreement between the parties on
this subject and supersedes all prior negotiations, understandings, and
agreements between the parties concerning the subject matter. No amendment or
modification hereof shall be binding unless in writing and duly executed by both
parties.
11.11. MEDIATION. Any dispute between the parties arising from this Agreement
must first be referred to non-binding mediation by a mediator from the American
Arbitration Association with knowledge of web development services, the costs of
whom shall be paid jointly by both parties. Each party shall cooperate in such
mediation, but may terminate mediation at any time after the expiration of
ninety (90) days from commencement thereof. Nothing in this paragraph shall
preclude either party from exercising any and all legal rights available to it
in a court of competent jurisdiction for injunctive relief. No offer, finding,
action, inaction, or recommendation made or taken in or as a result of mediation
shall be considered for any purpose an admission of a party, nor shall it be
offered or entered into evidence in any legal proceeding.
11.12. CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAW PROVISIONS) OF
THE STATE OF NEW YORK AND SHALL BENEFIT AND BE BINDING UPON THE PARTIES HERETO
AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS LITIGATION.
11.13. Any controversy or claim arising out of or relating to this contract, or
the breach of thereof not resolved by Mediation, shall be resolved in litigation
in the appropriate State or Federal District Court venued in the State of New
York. Both parties consent to jurisdiction and venue in such courts in New York
IN WITNESS WHEREOF, for adequate consideration and intending to be legally
bound, the parties hereto have caused this Agreement to be executed by their
duly authorized representatives.
Open-i Media, Inc.
BY: /s/ James Chong
----------------------
James Chong, President
SIGA PHARMACEUTICALS, INC.
BY: /s/ Josh O. Schein
----------------------
Josh O. Schein, CEO
Media Development
Services Agreement
Between
Open-i Media, Inc.
And
SIGA Technologies, Inc.
<PAGE>
SERVICE AGREEMENT
This Agreement is made as of March 9, 2000, ("Effective Date") by and
between SIGA Technologies, Inc., a corporation with its principal place of
business at 420 Lexington Ave., Suite 620, New York, NY 10017 ("SIGA") and
Open-i Media, Inc., a corporation with offices at 73 Franklin Street, New York,
NY 10013 ("Open-i").
RECITALS
A. SIGA is engaged in the development of internet-based multimedia tools
and products for use by its clients and customers.
B. Open-i is a multimedia development firm with experience in the design
and production of media appropriate to SIGA's business. SIGA wishes to engage
Open-i to provide such services.
C. This Agreement shall establish the terms and conditions for services
performed by Open-i for SIGA. These terms govern the general conduct of
contracting including disclosure of information and intellectual property rights
and, where a conflict may occur, supersede the terms of any purchase order
issued for such services.
NOW, THEREFORE, in consideration of these premises and the mutual
covenants contained herein, the parties agree as follows:
1. Services. Open-i shall provide the services set forth on the attached
Exhibit A (the "Scope of Work"), or as otherwise agreed upon by the parties.
2. Fees and Expenses. As compensation for the services provided under this
Agreement, SIGA shall pay to Open-i fees for services rendered ("Fees"), in
accordance with the schedule set forth on the attached Exhibit B. For all Fees
payable in stock, the stock shall be common stock of SIGA Technologies, Inc. and
shall be valued at the closing price on the Effective Date, which is $9.1875 per
share. Open-i shall be entitled to reimbursement for all reasonable ordinary and
necessary expenses directly incurred in connection with the performance of the
consulting services provided hereunder ("Expenses"). Any expense in excess of
Five Hundred Dollars ($500.00) shall be subject to the prior written approval of
SIGA. Travel and living expenses and Consultant's overhead (i.e. office rent and
insurance) are not reimbursable expenses.
3. Invoices and Payment. Within ten (10) business days following the end
of each calendar month. Open-i shall submit to SIGA an invoice, setting forth
Fees accrued (hours billed, if applicable), and Expenses incurred by Open-i.
during the preceding month, specifying dates, time spent. and a description of
the billable activity, during the preceding month. Invoices shall include
documentary evidence for all Expenses, in form and content reasonably
satisfactory to SIGA. All fees payable by SIGA for a given month shall be paid
within 30 days following the date when each monthly invoice is submitted.
2.
<PAGE>
4. Term and Termination. This Agreement shall be effective as of the
Effective Date. This agreement may be terminated by SIGA with or without cause,
upon fifteen (15) days written notice of the termination. Open-i shall have the
right to terminate this Agreement in the event of a material breach by the other
party, provided that written notice has been given and SIGA has not cured the
material breach within thirty (30) days of receipt of the notice. SIGA may
terminate this agreement immediately upon written notice, if the material breach
by Open-i constitutes a violation of Section 7, which notice shall specify such
breach. Upon expiration or earlier termination of this Agreement prior to
completion of the services outlined in Exhibit A, Open-i shall deliver to SIGA
copies of all work in progress and other materials developed for SIGA hereunder.
The following provisions shall survive expiration or earlier termination of this
Agreement: Sections 2 and 3 (with respect only to services rendered to SIGA by
Open-i prior to the date of termination), and Sections 5, 6, 7, 8, 9, and 11.
5. Reporting Requirements and Records. Open-i shall keep the designated
representative of SIGA apprised of all material developments in Consultant's
tasks, and shall regularly provide oral summaries of Consultant's progress. SIGA
may, from time to time, request written summaries, which Open-i shall provide to
SIGA in a timely fashion. Upon the request of SIGA, Open-i shall make available
to SIGA finished or completed draft documents, work in progress, and other data
maintained or developed by Open-i in connection with Open-i's performance under
this Agreement. Open-i agrees to retain such records, documents and data for a
period of not less than one (1) year from termination or expiration of this
Agreement. All materials prepared by' Open-i under this Agreement for the
benefit of SIGA shall become the sole property of SIGA upon delivery, and shall
not be used by Open-i for any other purposes.
6. Status of Open-i as an Independent Contractor. Open-i shall at all
times be and be deemed to be an independent contractor with SIGA. SIGA is
interested only in the results obtained by Open-i, and Open-i shall have sole
control of the manner and means of performing Open-i's obligations hereunder.
Open-i hereby acknowledges that SIGA will not be required to withhold state and
Federal income taxes, or to make payments for FICA, unemployment insurance or
any other payroll taxes, and that Open-i will report such earnings as corporate
earnings when he files his state and Federal income tax returns. Open-i shall be
obligated to pay federal and state income tax, if any, on any money earned
pursuant to this Agreement. Open-i will not be entitled to workers compensation,
or be covered by any benefits or compensation plans provided for SIGA employees.
Open-i is neither an employee nor an agent of SIGA and shall not, under any
circumstances, have authority to create any contract or obligation, express or
implied, on behalf of, in the name of or binding upon SIGA.
7. Confidentiality Requirement. It is agreed during Open-i's retention and
thereafter that both SIGA and Open-i shall maintain as confidential any and all
information obtained from SIGA the other, whether oral or stored in any media,
including, but not limited to, technical or non-technical data, formulas,
patterns, compilations, programs, software, models, data models, object models,
class libraries, architectures, devices, methods, techniques, drawings,
processes, financial and customer data, product plans, and templates, or
developed in the course of Open-i's services under this Agreement, which
information is of a confidential and proprietary nature and was not previously
known to to the other or publicly available, prior to disclosure of such
information to the parties by SIGA the other or prior to development of such
information under this Agreement. This obligation shall cease only when such
information becomes publicly available through publication by either party SIGA
or rightful publication by others.
7.1 Notwithstanding anything else contained in this Agreement to the
contrary, SIGA and Open-i shall be free to use the "Residuals" for any purpose,
including use in development, manufacture, marketing, and maintenance of its own
or third parties' products and services; provided that neither party may avoid
its confidentiality obligations in this Agreement for item of confidential
information merely by having a person commit such item to memory so as to reduce
it to intangible form. "Residuals" shall mean anything in non-tangible form (as
opposed to
3.
<PAGE>
written or documentary form, which includes disk, tape, paper or electronic
form) which may be retained by any party having had rightful access to the
Confidential Information during the term of this Agreement; provided, however,
that it shall not include any trade secret nor any patents, copyrights, or
trademarks of either of the parties or a client of SIGA.
8. Assignment of Intellectual Property Rights. It is agreed that all
right, title and interest Open-i may have in and to any intellectual property
(conceived either individually or jointly), including any inventions, whether
patentable or not, any mask work rights, trademarks, or copyrights and which
arise out of Open-i's performance under this Agreement, shall be the property of
SIGA, and Open-i shall execute all papers necessary for obtaining or perfecting
any patents, trademarks or copyrights or other similar rights in any such
intellectual property. Where applicable, works of authorship created by Open-i
for SIGA in the performance of this Agreement shall be considered "works made
for hire" as defined under U.S. Copyright Law.
8.1 Open-i has non-exclusive, non-transferable, irrevocable, perpetual,
royalty-free right and license to reproduce, distribute, perform, display, and
create derivative works any of the materials delivered by Open-i under this
Agreement for Open-i's business, provided that Open-i removes all SIGA materials
therein provided to Open-i under this Agreement.
9. Information of Contractor or Third Parties. Open-i warrants that work
performed under this Agreement will or have been original to Open-i, and will
not infringe upon any rights of others or contain libelous material. In
performance of its obligations under this Agreement, Open-i shall, to the best
of its knowledge and ability, avoid infringement of any patent, copyright, mask
work right, or trademark, or the disclosure of any trade secret or other
confidential and proprietary of other any third party. Even when permission has
been obtained from the affected third party(ies) Open-i agrees that it shall not
knowingly furnish or use any such patented or copyrighted information or any
such mask work or trademarks in the performance of this Agreement, nor shall
Open-i knowingly use the trade secrets or other confidential and proprietary
information of Open-i or others, without the prior written consent of SIGA.
Open-i shall indemnify SIGA in the event of an infringement action by any third
party against SIGA arising out of Open-i's use of any patents, copyrights, mask
work rights, trademarks, trade secrets, or other confidential and proprietary
information.
10. Representations of the parties. As a material inducement for both
parties to enter into this Agreement, the parties hereby represent to the other
and agree as follows: (a) each party holds any and all required and necessary
rights and licenses in order for Open-i to undertake the services to be provided
hereunder; (b) Consultant, and all contractors employed by either party to
complete work hereunder, shall be fully capable of performing the obligations
required to complete such work in a professional, safe and workmanlike manner;
(c) each party shall at all times comply with all Federal, State and local laws
and ordinances applicable to its obligations under this Agreement; and (d) each
party shall acquire and maintain in good standing its own insurance, including
unemployment compensation, disability insurance, automobile insurance, and
general liability insurance.
11. General Provisions.
(a) Waivers. Any waiver of any right under this Agreement must be in
writing and signed by the waiving party.
(b) Written Agreement to Govern. This Agreement is the entire
understanding between the parties relating to the subjects it covers and
supersedes all other prior agreements, representations and covenants, oral or
written. Amendments to this Agreement must be in writing and signed by both
parties.
4.
<PAGE>
(c) Attorneys' Fees. The prevailing party in any arbitration, action
or other proceeding brought to enforce this Agreement shall be entitled to
recover its reasonable attorneys' fees, costs, and expenses in connection with
such action or proceeding from the either party.
(d) Severability. If any term or provision of this Agreement is
deemed unenforceable for any reason, such provision shall be severed from this
Agreement and shall not affect the remainder of this Agreement.
(e) Governing Law. This Agreement shall be governed in accordance
with the laws of the State of California.
(f) Dispute Resolution. Any disputes between the parties which
cannot be resolved among themselves or shall be resolved in the state or federal
courts located in New York, NY. Open-i hereby agrees and submits to the
jurisdiction of these courts for the purpose of this Agreement.
(g) Further Assurances. In addition to the actions specifically
mentioned in this Agreement, the parties shall each do whatever may be
reasonably necessary to accomplish the transactions contemplated in this
Agreement. Wherever this Agreement requires the consent of the other party,
unless otherwise specified, such consent shall not be unreasonably withheld or
delayed.
(h) Counterparts. This Agreement may be executed in any number of
counterparts and all such counterparts taken together shall be deemed to
constitute one and the same agreement.
(i) Recitals and Attachments. The recitals set forth above and the
attached Schedule(s) shall be deemed to be a part of this Agreement as though
such provisions had been set forth in full in this Agreement.
(j) Notices and Other Communications. Every notice required by this
Agreement shall be delivered either by (i) personal delivery, (ii) overnight
courier requiring the signature of the recipient (e.g. Federal Express), (iii)
postage prepaid return receipt requested certified mail, or (iv) by facsimile
transmission confirmed by delivery of a copy in accordance with the methods
described in (i), (ii) or (iii), above, addressed to the party for whom intended
at the addresses appearing below the recipient's signature, below, or at such
other address as the intended recipient shall have designated by written notice.
5.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the day and date first written above.
SIGA: Open-i:
SIGA Technologies, Inc. Open-i Media, Inc.
a Delaware corporation A New York corporation
By: /s/ [Illegible] By: /s/ [Illegible]
------------------- ------------------
Its: Chief Executive Its: President
Officer
Address: Address:
420 Lexington Ave. 73 Franklin Street
Suite 620 Ground Floor
New York, NY 10017 New York, NY 10013
Attn: Joshua Schein Attn: James Chong
Fax: (212)697-3130 Fax: (212)343-1065
6.
[LETTERHEAD OF ROSS PRODUCTS DIVISION o ABBOTT LABORATORIES]
OPTION AGREEMENT
This Agreement, effective as of the date signed by both parties, is between ROSS
PRODUCTS DIVISION of Abbott Laboratories, with principal offices at 625
Cleveland Avenue, Columbus, Ohio 43215 ("Abbott") and SIGA TECHNOLOGIES having
an office at 420 Lexington Ave. Suite 620, New York, New York 10170 (hereinafter
SIGA).
1. SIGA has developed new technology for expressing peptides on the
surface of gram positive bacteria. SIGA plans to administer these
genetically modified bacteria to individuals as a vehicle for
delivering peptides.
2. Oregon State University has discovered a new group of peptides
capable of producing an antigenic response to Chlamydia.
3. SIGA has licensed this technology from Oregon State University and
is interested in determining if it can express these chlamydia
peptides on the surface of a gram positive organism, thereby
creating a vaccine.
4. Abbott is interested in potentially obtaining a chlamydia vaccine
and is willing to fund SIGA's R&D program, in exchange for being
offered rights to future products.
By execution and delivery of this Agreement, the parties agree as follows:
1.0 DEFINITIONS
Where used in this Agreement, the following terms shall have the meanings as
described below and the singular shall be deemed to include the plural and vice
versa;
1.1 "Affiliate" shall mean any corporation or other entity that directly, or
indirectly through one or more intermediaries, controls, is controlled by,
or is under common control with the designated party, but only for so long
as such relationship exists. For the purposes of this section, "Control"
shall mean ownership of at least fifty percent (or such lesser percent as
may be the maximum that may be owned by foreign interests pursuant to the
laws of the country of incorporation) of the shares of stock entitled to
vote for directors in the case of a corporation and at least fifty percent
(or such lesser percent as may be the maximum that may be owned by foreign
interests pursuant to the laws of the country of
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domicile) of the interests in profits in the case of a business entity
other than a corporation.
1.2 Agreement means this Agreement, including all Exhibits attached hereto.
1.3 Compound means proteins, or fragments thereof, encoded by the Inc. or Tro
genes of Chlamydia spp., as well as any other substance developed by,
acquired by or licensed to SIGA that is capable of producing a protective
response against the etiologic agent of a sexually transmitted diseases in
mammals.
1.4 Expression Vector means a recombinant gram positive bacteria that
expresses, is capable of expressing, or contains Compound.
1.5 FDA means the United States Food and Drug Administration or any successor
entity thereto.
1.6 Research Project refers to a study in which SIGA and Abbott will determine
if: 1) the Inc A, B and/or C peptides can be expressed on the surface of a
gram positive bacteria, and 2) if the transformed bacteria will confer
immunity against infection by chlamydia, in test animals. The specific
milestones to be achieved in the Research Project, the time for their
completion, and the manner by which they should be evaluated and
documented have been mutually agreed upon by the research personnel of
SIGA and Abbott and are outlined in Exhibit B.
1.7 Final ReDort means the report provided to Abbott by SIGA, providing all
requested data, observations, Know-How, technical information, samples,
results, etc., at the conclusion of the Research Project, as outlined in
Exhibit B.
1.8 Confidential Information means any information including, but not limited
to, ideas, proposals, plans, Know-How, reports, drawings, designs, data,
discoveries, inventions, Improvements, suggestions, specifications,
samples, components and materials relating to the Product, Expression
Vector or Compound and all information relating to the manufacture,
formulation, analysis, stability, pharmacology, toxicology, pathology,
clinical data, results of clinical efficacy studies, clinical effects and
indications for use of the Product, Expression Vector, or Compound which a
party discloses to the other party, except for any information which:
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(i) is known to the receiving party at the time of disclosure;
(ii) is disclosed to the receiving party, by a third party, who has a
right to make such disclosure;
(iii) is in the public domain as a result of acts by a third person
obtaining such information as a matter of right; or information
which is independently developed by or for the receiving party.
1.9 Effective Date means the date on which the Agreement has been signed by
both parties.
1.10 Exclusive License means a license whereby Abbott's rights shall be sole
and exclusive and shall operate to exclude all others, including SIGA.
1.11 Improvements means any and all new developments relating to the Compound,
Expression Vector, Product or Know-How made by SIGA, including improved
methods of manufacture and production techniques, and shall include, but
not be limited to, developments intended to enhance the safety and
efficacy of the Compound, Expression Vector, or Product in the health care
field.
1.12 Know-How means that proprietary technology developed by SIGA for
manufacturing, using, or formulating Compound, Expression Vector, or
Product including, but not limited to, manufacturing data, formulation or
production technology, methods of synthesis, isolation and purification
methods and other manufacturing information required to manufacture
Compound, Expression Vector or Product and that proprietary data developed
by SIGA related to pharmacology, toxicology, pathology, clinical data,
results of clinical efficacy studies, clinical effects and indications for
use of the Product, Expression Vector or Compound.
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1.13 Patents means: (i) any patent or patent application listed in Exhibit A;
(ii) any patent or patent application hereafter filed or acquired by SIGA
and any patent or patent application under which SIGA becomes licensed
(and has a right to sublicense), during the term of this Agreement and
within the scope of this Agreement regarding the Compound, Expression
Vector, Product, their manufacture, use or sale, including methods of use
and screening or processes that use the Compound; (iii) all patents
arising from applications identified in (i) or (ii) and any divisions,
continuations and continuations-in-part defined in (i) or (ii); (iv) any
extension, renewal or reissue of a patent identified in (i), (ii) or
(iii); and (v) any counterparts wherever issued of any patents identified
in (i) through (iv). SIGA shall promptly notify Abbott of any such patent
or patent application hereafter acquired or filed by SIGA and any patent
or patent application under which SIGA becomes licensed and with the right
to sublicense to Abbott, and such patent or patent application shall be
added to Exhibit A.
1.14 Product means any composition, preparation, admixture, dosage form,
delivery vehicle, etc., which contains Compound, Expression Vector, or a
combination of Compound and Expression Vector.
1.15 Proprietary Rights means all of SIGA's property rights (except Patent
Rights) and all of SIGA's interests of every nature in, to, or covering
the Compound, Expression Vector, Product or preparations containing the
Compound and/or Expression Vector, or the manufacture or use of them or
any of them, to the extent that such property rights and interests are of
such legal status and nature as to permit the same to be lawfully licensed
and, without limiting the generality thereof, specifically include
unpatented inventions, ideas, data, Know-How, technology, trade secrets,
and Confidential Information.
1.16 Territory means the entire world.
1.17 SIGA Intellectual Property shall mean all inventions, improvements,
technical information, data, or discoveries, whether patentable or not,
which are conceived and reduced to practice solely by employees of SIGA in
carrying out the Research Project. For the purposes of this Agreement,
SIGA Intellectual Property shall be considered to be an Improvement as
detailed in section 1.11. SIGA Intellectual Property shall belong to SIGA.
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1.18 Joint Intellectual Property shall mean all inventions, data, technical
information, or discoveries, whether patentable or not, which are: 1)
jointly conceived or jointly reduced to practice by an employee of SIGA
and an employee of ABBOTT, or 2) conceived of by an employee of SIGA or
ABBOTT and reduced to practice by an employee of the other party, in
carrying out the Research Project. For the purposes of this Agreement,
SIGA's rights in Joint intellectual Property shall be considered
Improvement as detailed in section 1.11. Joint Intellectual Property shall
belong jointly to SIGA and Abbott.
1.19 ABBOTT Intellectual Property shall mean all inventions, data, technical
information or discoveries, whether patentable or not, which are conceived
and reduced to practice solely by employees of ABBOTT in carrying out the
Research Project. Abbott Intellectual Property shall belong to Abbott and
shall not be subject to the terms and conditions of this Agreement.
1.20 Field shall mean sexually transmitted diseases (STD's).
2.0 EXCLUSIVE OPTION TO NEGOTIATE
2.1 Grant SIGA hereby grants to Abbott the exclusive option to negotiate an
Exclusive License, to SIGA's Patents and Proprietary Rights in the Field,
as more fully set forth in sections 3 and 4, upon the terms and conditions
set forth in this Agreement.
2.2 Exercise Abbott may exercise its option by written notice to SIGA at any
time during the Option Period. Unless the option is exercised during the
Option Period, the parties shall have no further rights or obligations
under this Agreement, except as provided in section 9 regarding
Confidential Information.
2.3 Period a.) Option Period for Chlamydia: The option period for Chlamydia
("Chlamydia Option Period") shall commence on the Effective Date and
shall terminate six (6) months after Abbott's acceptance of the Final
Report (the "Termination Date"), unless extended by the mutual consent of
the parties. In the event that Abbott exercises its option, then the
Chlamydia Option Period shall be extended for an additional six (6) months
after the Termination Date, to allow the parties to negotiate the
remaining terms of the license agreement (i.e. twelve (12) months after
the receipt of the Final Report).
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b.) Option Period for STD's other than Chlamydia: The option period
for STD's other than Chlamydia ("STD Option Period" and together with the
Chlamydia Option Period, the "Option Period") shall commence on the
Effective Date and shall terminate on March 31, 2001, unless extended by
the mutual consent of the parties. In the event that Abbott exercises its
option, then the option shall be extended until September 30, 2001 to
allow the negotiation of the remaining terms of the license agreement. The
expiration of the broader option for STD's shall have no adverse impact
upon Abbott's option relating to chlamydia as described in Section 2.3(a)
above.
2.4 Payments In consideration for this option, Abbott shall pay to SIGA, one
hundred and twenty thousand dollars ($120,000.00) contingent upon the
completion of the milestones listed below:
a) Forty Thousand Dollars ($40,000.00) upon the execution of this
Agreement by both parties;
b) Forty Thousand Dollars ($40,000.00) upon the completion by SIGA of
Milestone #1, and
c) Forty Thousand Dollars ($40,000.00) upon the completion of Milestone
#2 by SIGA, and acceptance by Abbott of the Final Report.
2.5 Extension of Option Period With SIGA's consent, Abbott may extend the
Option Periods described above in Section 2.3(a) and (b) by providing
SIGA, prior to the Termination Date, additional funding to further its
research efforts directed to the development of a chlamydia vaccine.
Abbott's Option Period shall automatically be extended until six (6)
months after Abbott's acceptance of the Final Report for such additional
research. If Abbott exercises its option, then as described in Section
2.3, the Option Period shall be extended an additional six (6) months
after exercise, to allow the parties to negotiate the remaining terms of
the license agreement (i.e. twelve (12) months after the acceptance of the
Final Report).
3.0 TERMS OF LICENSE
The specific terms of the license agreement shall be negotiated by the parties
upon Abbott's exercise of its option granted hereunder. However any such license
shall at a minimum contain the following terms:
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3.1 Scope SIGA shall grant to Abbott an Exclusive License in the Territory to
make, have made, import, export, use, offer for sale, and sell Compound,
Expression Vectors, and Product under the Patents and Proprietary Rights
in the Field, with the right to grant sublicenses to Affiliates and third
persons. Any such license shall be irrevocable.
3.2 Improvements SIGA shall grant to Abbott a royalty-free, (other than the
underlying royalty to be negotiated pursuant to this paragraph)
irrevocable Exclusive License in the Territory to make, have made, import,
export, use, offer to sell and sell any Improvements, under the Patents
and Proprietary Rights in the Field, with the right to grant sublicenses
to Affiliates and Third Parties.
4.0 LICENSE NEGOTIATION
4.1 Good Faith In the event that Abbott exercises its option hereunder, each
party agrees to negotiate in good faith the remaining terms of the license
agreement.
4.2 Negotiation with Third Party During the Option Period, SIGA shall not
offer or grant to any person or entity (other than Abbott) any right under
the Patents and Proprietary Rights in the Field, and shall not discuss or
negotiate with, or consider or accept any offer from, any person or entity
(other than Abbott) concerning any rights relating to the Patents or
Proprietary Rights in the Field.
5.0 RESEARCH PROJECT
5.1 SIGA shall use all reasonable efforts to conduct and complete the Research
Project as outlined in Exhibit B. SIGA warrants that all work shall be
conducted according to scientifically accepted standards and all
applicable laws, rules and regulations. SIGA further agrees that all
applicable NIH guidelines regarding the handling and disposal of genetic
materials shall be observed.
5.2 SIGA shall use all reasonable efforts to meet the Completion Dates
specified in Exhibit B for the Research Project.
5.3 The parties shall keep each other advised of the status of the Research
Project. This shall be done by telephone conferences and/or written
correspondence between
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personnel of Abbott and SIGA at least once monthly, and up to weekly, if
requested by either party. SIGA shall communicate to Abbott and provide
copies as requested of all data, information, discoveries, etc. generated
in the Research Project.
5.4 SIGA shall allow the personnel of Abbott associated with the Research
Project, the opportunity to inspect the facilities and laboratories where
the Research Project is being carried out. Abbott shall give an advance
notice of at least five (5) business days. Abbott shall conduct such
inspection during normal business hours. SIGA shall make their personnel
working on the Research Project available for consultations during any
such inspection, provided that such consultations do not interfere in a
material manner with the Research Project. SIGA shall allow personnel of
Abbott to inspect notebooks, reports, and other documentation relating to
the Research Project.
5.5 SIGA shall not subcontract or delegate any of the work associated with the
Research Project, to a third party, without the prior written consent of
Abbott.
5.6 In addition to the updates described above for the chlamydia project, SIGA
shall keep Abbott apprised of all research and development efforts in
other STD diseases within the scope of its option. The updates shall be
carried out in the same manner as described in sections 5.3 and 5.4 above.
6.0 TERM AND TERMINATION
6.1 Term Unless otherwise terminated as herein provided, this Agreement shall
commence on the Effective Date and shall terminate at the conclusion of
the Option Period or any extension thereof.
6.2 Early Termination
(i) Bankruptcy or Material Breach. A party may terminate this Agreement
by giving to the other party sixty (60) days prior written notice as
follows:
(A) To the extent permitted by law, upon the bankruptcy or the
insolvency of the other party; or
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(B) Upon the material breach of this Agreement by the other party,
if the breach is not cured within sixty (60) days after
written notice thereof to the party in default.
6.3 Consequences of Termination
(i) Survival of Liability. Termination or expiration of this Agreement
shall not relieve the parties of any obligation accruing prior
thereto and shall be without prejudice to the rights and remedies of
either party with respect to any antecedent breach of any of the
provisions of this Agreement.
7.0 REPRESENTATIONS AND WARRANTIES
SIGA represents and warrants that:
(a) SIGA has the full right and power to perform the obligations and grant the
option to the Exclusive License in the Field set forth in this Agreement
and there are no outstanding agreements, assignments or encumbrances in
existence in conflict with the provisions of this Agreement;
(b) to the best of SIGA's knowledge, there are no actions, threatened or
pending, before any court relating to the Patents and/or Proprietary
Rights;
(c) SIGA has not authorized others to practice the Patents and/or Proprietary
Rights in the Field;
(d) SIGA owns and possesses all right, title and interest in and to the
Patents and the Proprietary Rights, or has obtained an exclusive license
to the Patents and the Proprietary Rights (with the right to grant
sublicenses) and, to the best of SIGA's knowledge, no third person has
acquired, owns or possesses any right, title or interest in or to the
Patents and/or Proprietary Rights that is in conflict with the rights
granted to Abbott herein;
(e) SIGA has no agreement with any third person which:
(i) gives any rights to such third person; or
(ii) imposes obligations upon SIGA or gives any rights to SIGA which, in
either case, would materially adversely affect the rights of Abbott or the
obligations of SIGA under this Agreement; and
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(f) All of the inventors named in the patents and patent applications listed
in Exhibit A have assigned, or are under an obligation to assign, to SIGA,
or to its licensor, all of their right, title and interest in the
inventions claimed.
(g) To the best of SIGA's knowledge, there are no other patents or patent
applications that SIGA is the owner or licensee of, or has an interest in,
that would dominate Abbott's commercialization of the Compound, Expression
Vector, or Product.
8.0 PATENT MATTERS
8.1 Unless otherwise agreed to by the parties, during the Option Period and
any extension thereof, SIGA shall diligently prosecute all Patents. SIGA
shall consult with Abbott regarding the prosecution of the Patents. This
shall include: 1) providing Abbott with a copy of any communication
received from the United States Patent and Trademark Office, or any
foreign equivalent, regarding one of the Patents, 2) providing Abbott with
a copy of any response SIGA is planning to file in response to such
communication, and 3) providing Abbott an opportunity to review and
comment upon such proposed response, SIGA shall be responsible for all the
costs associated with filing, prosecuting and maintaining licensed
patents.
8.2 At the conclusion of the Research Project, counsel for the respective
parties shall confer and determine how to protect the SIGA Intellectual
Property and Joint Intellectual property. If the parties decide that
patent filings should be made, then each party agrees to make available to
the other all information in its possession required to complete the
patent filing and prosecution. Each party shall cooperate with the other
and execute those documents required to complete the patent filing and
prosecution thereof. SIGA shall be responsible for preparing and filing
all such patent applications. SIGA shall provide Abbott ample opportunity
to review and comment on such patent applications prior to their filing.
The costs and prosecution of such applications shall be handled as
described in Section 8.1.
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9.0 CONFIDENTIALITY
9.1 Confidentiality Neither party, their respective officers, directors,
stockholders, consultants, agents and advisors, shall use or disclose any
Confidential Information received by it pursuant to this Agreement without
the prior written consent of the other. This obligation will continue for
a period of five (5) years after expiration or prior termination of this
Agreement or any extension thereof.
9.2 Disclosure Nothing contained in this Article shall be construed to
restrict the parties from disclosing Confidential Information or this
Agreement as required:
(i) for regulatory, tax or customs reasons;
(ii) for securities' law purposes;
(iii) for audit purposes;
(iv) by Court order or other government order or request, as long as
reasonable efforts have been made to assure its confidentiality or
the other party is timely notified to make such efforts; or
(iv) from using such Confidential Information as is reasonably necessary
to perform acts permitted by this Agreement.
10.0 NO PUBLICITY
No party shall issue any publicity, news release or other public announcement,
written or oral, whether to the public press, stockholders or otherwise,
relating to this Agreement or performance hereunder, or use the name of the
other in any publicity, news release or other public announcement, except with
the prior written consent of the other party.
11.0 ASSIGNMENT
This Agreement may not be assigned or transferred by either party. Either
party may assign this Agreement in the event that all, or substantially all, of
the business and assets of such party, are sold or transferred.
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12.0 SUCCESSORS AND ASSIGNS
This Agreement shall inure to the benefit of and be binding upon the
parties hereto, their successors and permitted assigns.
13.0 RELATIONSHIPS OF PARTIES
The relationship of the parties under this Agreement is that of independent
contractors. Nothing contained in this Agreement is intended, or is to be
construed, so as to constitute the parties as partners, joint ventures, or
either party as an agent or employee of the other. Neither party has any express
or implied rights under this Agreement to assume or create any obligation on
behalf of, or in the name of, the other, or to bind the other party to any
contract, agreement, or undertaking with any third party, and no conduct of the
parties shall be deemed to imply such a right.
14.0 EXHIBITS
All exhibits referenced herein are hereby made a part of this Agreement. No
Exhibit may be modified without the mutual consent of both parties, which must
be in writing. (Except that new patents or patent applications may be added to
Exhibit A.)
15.0 WAIVER
No waiver by either party of any default, right, or remedy shall be effective
unless in writing. Nor shall any such waiver operate as a waiver of any other or
of the same default, right, or remedy respectively, on a future occasion.
16.0 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between Abbott and SIGA with
respect to the subject matter hereof and shall not be modified, amended or
terminated except as herein provided, or except by another agreement in writing
executed by the parties hereto.
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17.0 SEVERABLE
The provisions of this Agreement are severable, and in the event that any
provisions of this Agreement are determined to be invalid or unenforceable under
any controlling body of the law, such invalidity or unenforceability shall not
in any way affect the validity or enforceability of the remaining provisions
hereof.
18.0 NOTICES
Any and all notices provided for hereunder shall be sent to the respective
parties at the following addresses by certified or registered mail, return
receipt requested, or sent by an internationally recognized overnight delivery
service:
If to ABBOTT: Senior Counsel
Department 108150
625 Cleveland Avenue
Columbus, Ohio 43215
If to SIGA: CEO
SIGA TECHNOLOGIES
420 Lexington Ave.
Suite 620
New York, New York 10170
The effective date of such notice shall be the date it is received by the
receiving party.
19.0 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of Illinois, not including its conflicts of law principals.
20.0 Alternative Dispute Resolution.
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In the event of a dispute between the parties regarding this Agreement the
parties agree to amicably try to settle the dispute. Further, the parties agree
that any dispute that arises in connection with this Agreement shall first be
presented to the respective presidents of the Ross Products Division of Abbott
and of SIGA for resolution. If no resolution is reached, then such dispute shall
be resolved by binding Alternative Dispute Resolution ("ADR") in the manner
described in Exhibit C.
The parties hereto have caused this Agreement to be duly executed by their duly
authorized representatives as of the date first written above.
ACCEPTED: ACCEPTED:
ROSS PRODUCT DIVISION SIGA TECHNOLOGIES, INC,
By:/s/ Arthur L. Hecker By: /s/ Joshua D. Schein
Arthur L. Hecker, Ph.D. Joshua D. Schein, PH.D.
Vice President CHIEF EXECUTIVE OFFICER
Research & Development
Date: 3/4/00 Date: 2/28/00
14
As of September 9, 1999
Stefan Capital, LLC
1500 Hempstead Turnpike
East Meadow, NY 11554
Attention: Jeffrey Rubin
Dear Jeff:
We are pleased you have agreed to serve as a consultant to SIGA
Pharmaceuticals, Inc. (the "Company"). In this letter, I would like to present
the terms of your engagement with the Company.
1. Duties and Term. In connection with your engagement, you will consult with
the Company concerning its strategic review and development of alternative
internet and related technologies, as requested from time to time by its
Chairman or President. You agree to be reasonably available to meet with
or discuss with the senior officers of the Company as well as to evaluate
potential strategic acquisitions or transactions.
2. Compensation. In consideration for your services, the Company will issue
to you warrants (the "Warrants") to purchase an aggregate of 100,000
shares of the Company's Common Stock at an exercise price of $1.00 per
share, of which 50,000 warrants are immediately vested, and will become
exercisable on the first anniversary of the date hereof. The other 50,000
warrants will vest as of the date of grant, and will become exercisable on
the second anniversary of the date hereof. The Warrants will have cashless
exercise provisions and will be represented by a Warrant Agreement dated
as of the date hereof and have certain registration rights, as reflected
in a Registration Rights Agreement dated as of the date hereof, which have
been executed by the Company and by you.
3. Additional Compensation. In addition to the compensation referred to
above, if you introduce the Company to a person or entity with whom the
Company enters into a transaction involving a merger or acquisition, asset
acquisition or sale, strategic alliance or joint venture, or equity or
debt financing transaction involving the issuance of securities and/or the
borrowing of money, the Company will pay to you an agreed-upon fee, which
may consist of cash and/or securities, based upon the size of the
transaction and your involvement therein.
4. Other Benefits. You will not be entitled to any other compensation or
benefits for your services, regardless of the compensation or benefits
offered by the Company to its employees or other consultants. The Company
will reimburse you for actual out-of-pocket expenses incurred by you in
the performance of your services
<PAGE>
Stefan Capital, LLC
As of September 9, 1999
Page 2
provided that such expenditures have been approved in advance by an
officer of the Company in writing.
5. Confidentiality. As a consultant to the Company, you may have access to
information about the Company and third parties which is confidential in
nature. You agree that you will not disclose any such information to any
other person or entity, nor shall you use such information for any purpose
other than the performance of your duties with the Company.
6. Miscellaneous. The agreements set forth in this letter are personal, and
your rights set forth above may not be transferred or assigned by you
without the Company's prior written consent. This letter agreement
represents the entire agreement between you and the Company concerning
your consulting and supersedes all prior negotiations and agreements,
whether written or oral, relating to your engagement.
This letter agreement may not be amended or waived unless pursuant to a
writing signed by you and an officer of the Company. No waiver or any term
of this letter agreement or of any breach of any condition or provision to
be performed under this letter agreement shall be deemed a waiver or a
similar or dissimilar condition or provision at the same time, any prior
time or any subsequent time.
You will bear full and complete liability for the payment of all
applicable income, payroll, withholding and other taxes and deductions
required to be paid on account of amounts received by you pursuant to this
Agreement by any law, rule or regulation of any federal, state or local
authority.
The laws of the State of New York shall govern the interpretation,
validity and performance of the terms of this letter agreement, without
reference to conflicts of laws rules.
You agree that you are an independent contractor to, and not an employee
or agent of, the Company, and that you do not have any authority or right
to enter into any agreements or binding obligations on behalf of the
Company.
<PAGE>
Stefan Capital, LLC
As of September 9, 1999
Page 3
To acknowledge your agreement to the terms of your engagement set forth
above, please sign a copy of this letter where indicated and return it to me at
your earliest convenience. We look forward to working with you.
Very truly yours,
SIGA PHARMACEUTICALS, INC.
By: [ILLEGIBLE]
-----------------------------
An authorized officer
Chairman
ACCEPTED AND AGREED AS OF
THE DATE FIRST WRITTEN ABOVE
STEFAN CAPITAL, LLC
By: /s/ Jeffrey Rubin
------------------------------
Jeffrey Rubin, Managing Member
[STEFAN CAPITAL WARRANTS]
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of September 9, 1999, between SIGA
PHARMACEUTICALS, INC, a Delaware corporation (the "Company"), and Stefan
Capital, LLC ("Holder").
W I T N E S S E T H:
WHEREAS, Holder, in connection with and consideration for its provision of
financial advisory consulting services pursuant to a Consulting Agreement dated
as of the date hereof between the Company and Holder, shall be issued warrants
(the "Warrants") to purchase an aggregate of 100,000 shares of Common Stock of
the Company ("Shares") at an exercise price of $1.00 per Share.
NOW, THEREFORE, in consideration of the premises herein set forth and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Issue. The Company hereby issues to Holder a certificate (the "Warrant
Certificate") dated as of the date hereof providing Holder with the right to
purchase 100,000 Shares (subject to adjustment as provided in Section 8 hereof)
at an initial exercise price (subject to adjustment as provided in Section 8
hereof) equal to $1.00 per Share (collectively, all of such shares shall be
referred to herein as the "Warrant Shares").
2. Warrant Certificate. The Warrant Certificate to be delivered pursuant
to this Agreement shall be in the form set forth in Exhibit X, attached hereto
and made a part hereof, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Agreement.
3. Exercisability of Warrants. Fifty thousand (50,000) Warrants granted
hereunder shall be exercisable commencing on the first anniversary of the date
hereof and the remaining fifty thousand (50,000) Warrants shall be exercisable
on the second anniversary of the date hereof provided, however, that in the
event of a sale of all, or substantially all, of the assets or capital stock of
the Company or the licensing of all or substantially all of the Company's
technology, then, upon the occurrence of such event, the Warrants shall all
become exercisable immediately. All Warrants must be exercised on or prior to
5:30 p.m., New York time, on September 9, 2004.
4. Procedure for Exercise Warrants.
4.1 Cash Exercise. The Warrants are exercisable at an aggregate initial
exercise price per Share set forth in Section 7 hereof payable by certified
check or official bank check in New York Clearing House funds. Upon surrender of
a Warrant Certificate with the annexed Form of Election to Purchase duly
executed, together with payment of the Exercise Price (as hereinafter defined)
for
<PAGE>
the Warrant Shares purchased, at the Company's principal offices in New York
(presently located at 420 Lexington Avenue, Suite 620, New York, NY 10170).
Holder shall be entitled to receive a certificate for the Warrant Shares so
purchased. The purchase rights represented by the Warrant Certificate are
exercisable at the option of the Holder thereof, in whole or in part (but not as
to fractional Shares underlying the Warrants). In the case of the purchase of
less than all the Warrant Shares purchasable under the Warrant Certificate, the
Company shall cancel said Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate of like tenor for the
balance of the Warrant Shares purchasable thereunder.
4.2 Cashless Exercise. In addition to the exercise of all or a portion of
the Warrants by the payment of the Exercise Price in cash or check as set forth
in Section 4.1 above, and in lieu of any such payment, the Holder has the right
to exercise the Warrants, in full or in part, by surrendering the Warrant
Certificate with the annexed Form of Election to Purchase duly executed, in
exchange for the number of Shares equal to the product of (x) the number of
Shares as to which the Warrants are being exercised multiplied by (y) a
fraction, the numerator of which is the Current Market Price of the Shares (as
defined below) less the Exercise Price then in effect and the denominator of
which is the Current Market Price.
4.3 Current Market Price. The term "Current Market Price" shall mean (i)
if the Shares are traded in the over-the-counter market or on the National
Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ"),
the average per Share closing bid prices on the 5 consecutive trading days
immediately preceding the date of exercise, as reported by NASDAQ or an
equivalent generally accepted reporting service, or (ii) if the Shares are
traded on a national securities exchange, the average for the 20 consecutive
trading days immediately preceding the exercise date of the daily per Share
closing prices on the principal stock exchange on which the Shares are listed,
as the case may be. The closing price referred to in clause (ii) above shall be
the last reported sales price or, if no such reported sale takes place on such
day, the average of the reported closing bid and asked prices, in either case on
the national securities exchange on which the Shares are then listed.
5. Issuance of Certificate. Upon the exercise of the Warrants, the
issuance of a certificate for Warrant Shares shall be made forthwith (and in any
event within five (5) business days thereafter) without charge to the Holder
thereof including, without limitation, any tax which may be payable in respect
of the issuance thereof, and such certificate shall (subject to the provisions
of Sections 6 and 8 hereof) be issued in the name of, or in such names as may be
directed by, the Holder thereof; provided, however, that the Company shall not
be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate in a name other
than that of the Holder and the Company shall not be required to issue or
deliver such certificate unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
The Warrant Certificate and the certificate representing the Warrant
Shares shall be executed on behalf of the Company by the manual or facsimile
signature of the then present Chairman or Vice
2
<PAGE>
Chairman of the Board of Directors or President or any Vice President of the
Company under its corporate seal reproduced thereon, attested to by the manual
or facsimile signature of the then present Secretary or any Assistant Secretary
of the Company. The Warrant Certificate shall be dated the date of execution by
the Company upon initial issuance, division, exchange, substitution or transfer.
6. Transfer of Warrants. The Holder of the Warrant Certificate, by its
acceptance thereof, covenants and agrees that the Warrants are being acquired as
an investment and not with a view to the distribution thereof. The Warrants may
be sold, transferred, assigned, hypothecated or otherwise disposed of, in whole
or in part, without restriction, subject to compliance with applicable
securities laws.
7. Exercise Price.
7.1 Initial and Adjusted Exercise Price. Except as otherwise provided in
Section 7 hereof, the initial exercise price of each Warrant shall be the price
set forth in Section 1 hereof per Warrant Shares issued thereunder. The adjusted
exercise price shall be the price which shall result from time to time from any
and all adjustments of the initial exercise price in accordance with the
provisions of Section 9 hereof.
7.2 Exercise Price. The term "Exercise Price" herein shall mean the
initial exercise price or the adjusted exercise price, depending upon the
context.
8. Registration Under the Securities Act of 1933. Subject to the
Registration Rights Agreement between the Company and the Holder dated as of the
date hereof, the Warrants, the Warrant Shares and any of the Other Securities
issuable upon exercise of the Warrants have not been registered under the
Securities Act of 1933, as amended (the "Act"). Upon exercise, in whole or in
part, of the Warrants, a certificate representing the Warrant Shares underlying
the Warrants, and any of the Other Securities issuable upon exercise of the
Warrants (collectively, the "Warrant Securities") shall bear the following
legend unless such Warrant Shares previously have been registered under the Act
in accordance with the terms hereof.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT") AND MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR
ANY SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES),
OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY
SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION
UNDER THE ACT IS AVAILABLE.
9. Adjustments to Exercise Price and Number of Securities The Exercise
Price and, in some cases, the number of Warrant Shares purchasable upon the
exercise of the Warrants, shall be subject
<PAGE>
to adjustment from time to time Upon the occurrence of certain events described
in this Section 9.
9.1 Subdivision or Combination of Shares and Share Dividend. In case the
Company shall at any time subdivide its outstanding Shares into a greater number
of Shares or declare a dividend upon its Shares payable solely in Shares, the
Exercise Price in effect immediately prior to such subdivision or declaration
shall be proportionately reduced, and the number of Warrant Shares issuable upon
exercise of the Warrants shall be proportionately increased. Conversely, in case
the outstanding Shares of the Company shall be combined into a smaller number of
Shares, the Exercise Price in effect immediately prior to such combination shall
be proportionately increased, and the number of Warrant Shares issuable upon
exercise of the Warrants shall be proportionately reduced.
9.2 Dilutive Issuances. In the event that the Company shall sell or issue
at any time after the date of this Warrant and prior to its termination, Shares
(other than Excluded Shares, as defined in Section 9.2.5) at a consideration per
Share less than the Exercise Price then in effect, then the Exercise Price shall
be adjusted to a new Exercise Price (calculated to the nearest cent) determined
by dividing
(a) an amount equal to (i) the total number of Shares
Outstanding (as defined below and subject to adjustment in the
manner set forth in Section 9.1) on the date of issuance of this
Warrant multiplied by the Exercise Price in effect on the date of
issuance of this Warrant (subject, however, to adjustment in the
manner set forth in Section 9.1), plus (ii) the aggregate of the
amount of all consideration, if any, received by the Company for the
issuance or sale of Shares since the date of issuance of this
Warrant, by
(b) the total number of Shares Outstanding immediately after
such issuance or sale.
In no event shall any such adjustment be made pursuant to this Section 9.2 if it
would increase the Exercise Price in effect immediately prior to such
adjustment, except as provided in Sections 9.2.3 and 9.2.4. Upon each adjustment
of the Exercise Price pursuant to this Section 9.2, the holder of this Warrant
shall thereafter be entitled to purchase, at the Exercise Price resulting from
such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares purchasable pursuant hereto immediately prior to such adjustment,
and dividing the product thereof by the Exercise Price resulting from such
adjustment.
9.2.1 Definitions. For purposes of this Section 9.2, the
following definitions shall apply:
(a) "Convertible Securities" shall mean any indebtedness or
securities convertible into or exchangeable for Shares.
4
<PAGE>
(b) "Options" shall mean any rights, warrants or options to
subscribe for or purchase Shares or Convertible Securities other than rights,
warrants or options to purchase Excluded Securities (as defined in Section
9.2.5).
(c) "Shares Outstanding" shall mean the aggregate of all
Shares outstanding and all Shares issuable upon exercise of all outstanding
Options and conversion of all outstanding Convertible Securities.
9.2.2 For the purposes of this Section 9.2, the following
provisions shall also be applicable:
9.2.2.1 Cash Consideration. In case of the issuance or sale of
additional Shares for cash, the consideration received by the Company
therefor shall be deemed to be the amount of cash received by the Company
for such Shares (or, if such Shares are offered by the Company for
subscription, the subscription price, or, if such Shares are sold to
underwriters or dealers for public offering without a subscription
offering, the public offering price), without deducting therefrom any
compensation or discount paid or allowed to underwriters or dealers or
others performing similar services or for any expenses incurred in
connection therewith.
9.2.2.2 Non-Cash Consideration. In case of the issuance
(otherwise than upon conversion or exchange of Convertible Securities) or
sale of additional Shares, Options or Convertible Securities for a
consideration other than cash or a consideration a part of which shall be
other than cash, the fair value of such consideration as determined by the
Board of Directors (if any, otherwise by the Managers) of the Company in
the good faith exercise of its business judgment, irrespective of the
accounting treatment thereof, shall be deemed to be the value, for
purposes of this Section 9, of the consideration other than cash received
by the Company for such securities.
9.2.2.3 Options and Convertible Securities. In case the
Company shall in any manner issue or grant any Options or any Convertible
Securities, the total maximum number of Shares of issuable upon the
exercise of such Options or upon conversion or exchange of the total
maximum amount of such Convertible Securities at the time such Convertible
Securities first become convertible or exchangeable shall (as of the date
of issue or grant of such Options or, in the case of the issue or sale of
Convertible Securities other than where the same are issuable upon the
exercise of Options, as of the date of such issue or sale) be deemed to be
issued and to be outstanding for the purpose of this Section 9.2 and to
have been issued for the sum of the amount (if any) paid for such Options
or Convertible Securities and the amount (if any) payable upon the
exercise of such Options or upon conversion or exchange of such
Convertible Securities at the time such Convertible Securities first
become convertible or exchangeable; provided that, subject to the
provisions of Section 9.2.3, no further adjustment of the Exercise Price
shall be made upon the actual issuance of any such
5
<PAGE>
Shares or Convertible Securities or upon the conversion or exchange of
any such Convertible Securities.
9.2.3 Change in Option Price or Conversion Rate. In the event
that the purchase price provided for in any Option referred to in subsection
9.2.2.3, or the rate at which any Convertible Securities referred to in
subsection 9.2.2.3 are convertible into or exchangeable for Shares shall change
at any time (other than under or by reason of provisions designed to protect
against dilution), then, for purposes of any adjustment required by Section 9.2,
the Exercise Price in effect at the time of such event shall forthwith be
readjusted to the Exercise Price that would have been in effect at such time had
such Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or conversion rate, as the case
may be, at the time initially granted, issued or sold, provided that if such
readjustment is an increase in the Exercise Price, such readjustment shall not
exceed the amount (as adjusted by Sections 9.1 and 9.2) by which the Exercise
Price was decreased pursuant to Section 9.2 upon the issuance of the Option or
Convertible Security. In the event that the purchase price provided for in any
such Option referred to in subsection 9.2.2.3, or the additional consideration
(if any) payable upon the conversion or exchange of any Convertible Securities
referred to in subsection 9.2.2.3, or the rate at which any Convertible
Securities referred to in subsection 9.2.2.3 are convertible into or
exchangeable for Shares, shall be reduced at any time under or by reason of
provisions with respect thereto designed to protect against dilution, then in
case of the delivery of Shares upon the exercise of any such Option or upon
conversion or exchange of any such Convertible Security; the Exercise Price then
in effect hereunder shall, upon issuance of such Shares, be adjusted to such
amount as would have obtained had such Option or Convertible Security never been
issued and had adjustments been made only upon the issuance of the Shares
delivered as aforesaid and for the consideration actually received for such
Option or Convertible Security and the Shares, provided that if such
readjustment is an increase in the Exercise Price, such readjustment shall not
exceed the amount (as adjusted by Sections 9 1 and 9.2) by which the Exercise
Price was decreased pursuant to Section 9.2 upon the issuance of the Option or
Convertible Security.
9.2.4 Termination Of Option or Conversion Rights, In the event
of the termination or expiration of any right to purchase Shares under any
Option granted after the date of this Warrant or of any right to convert or
exchange Convertible Securities issued after the date of this Warrant, the
Exercise Price shall, upon such termination, be readjusted to the Exercise Price
that would have been in effect at the time of such expiration or termination had
such Option or Convertible Security, to the extent outstanding immediately prior
to such expiration or termination, never been issued, and the Shares issuable
thereunder shall no longer be deemed to be Shares Outstanding, provided that if
such readjustment is an increase in the Exercise Price, such readjustment shall
not exceed the amount (as adjusted by Sections 9.1 and 9.2) by which the
Exercise Price was decreased pursuant to Section 9.2 upon the issuance of the
Option or Convertible Security. The termination or expiration of any right to
purchase Shares under any Option granted prior to the date of this Warrant or of
any right to convert or exchange Convertible Securities issued prior to the date
of this Warrant shall not trigger any adjustment to the Exercise Price, but the
Shares issuable under such Options or Convertible Securities shall no longer be
counted in determining the number of
6
<PAGE>
Shares Outstanding on the date of issuance of this Warrant for purposes of
subsequent calculations under this Section 9.2.
9.2.5 Excluded Shares. Notwithstanding anything herein to the
contrary, the Exercise Price shall not be adjusted pursuant to this Section 9,2
by virtue of the issuance and/or sale of Excluded Shares, which shall mean the
following: (a) Shares issuable upon the exercise of the Warrants; (b) Shares,
Options or Convertible Securities to be issued and/or sold to employees,
advisors (including, without limitation, financial, technical and legal
advisers), directors, or officers or consultants to, the Company or any of its
subsidiaries pursuant to a share grant, share option plan, share purchase plan,
pension or profit sharing plan or other share agreement or arrangement existing
as of the date hereof or approved by the Company's Board of Directors; (c) the
issuance of Shares, Options and/or Convertible Securities pursuant to Options
and Convertible Securities outstanding as of the date of this Warrant; and (d)
the issuance of Shares, Options or Convertible Securities as a share dividend or
upon any subdivision or combination of Shares or Convertible Securities (for
which appropriate adjustments are to be made pursuant to Section 9.1 hereof).
For all purposes of this Section 9.2, all Shares of Excluded Shares shall be
deemed to have been issued for an amount of consideration per Share equal to the
initial Exercise Price (subject to adjustment in the manner set forth in Section
9.1). In addition, if the amount of any adjustment pursuant to this Section 9
shall be less than two cents (2 (cents)) per Warrant Share no adjustment to the
Exercise Price or to the number of Warrant Shares issuable upon the exercise of
the Warrants shall be made; provided, however, that in such case any adjustment
that would otherwise be required then to be made shall be carried forward and
shall be made at the time of and together with the next subsequent adjustment
which, together with any adjustment so carried forward, shall amount to at least
two cents (2 (cents)) per Warrant Share.
9.3 Notice of Adjustment. Promptly after adjustment of the Exercise Price
or any increase or decrease in the number of Warrant Shares purchasable upon the
exercise of this Warrant, the Company shall give written notice thereof, by
first class mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company. The
notice shall be signed by the Company's chief financial officer and shall state
(i) the effective date of the adjustment and the Exercise Price resulting from
such adjustment and (ii) the increase or decrease, if any, in the number of
Shares purchasable at such price upon the exercise of this Warrant, setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based.
9.4 Other Notices. If at any time:
(a) the Company shall declare any cash dividend upon its Shares;
(b) the Company shall declare any dividend upon its Shares payable
in securities (other than a dividend payable solely in Shares) or make any
special dividend or other distribution to the holders of its Shares;
7
<PAGE>
(c) there shall be any consolidation or merger of the Company with
another corporation, or a sale of all or substantially all of the Company's
assets to another corporation; or
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in any one or more of said cases, the Company shall give, by certified or
registered mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company, (i)
at least 15 days' prior written notice of the date on which the books of the
Company shall close or a record shall be taken for such dividend, distribution
or subscription rights or for determining rights to vote in respect of any such
dissolution, liquidation or winding-up; (ii) at least 10 days' prior written
notice of the date on which the books of the Company shall close or a record
shall be taken for determining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger or sale, and (iii) in
the case of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding-up, at least 15 days' written notice
of the date when the same shall take place. Any notice given in accordance with
clause (i) above shall also specify, in the case of any such dividend,
distribution or option rights, the date on which the holders of Shares shall be
entitled thereto. Any notice given in accordance with clause (iii) above shall
also specify the date on which the holders of Shares shall be entitled to
exchange their Shares for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, as the case may be. If the Holder of the Warrant does
not exercise this Warrant prior to the occurrence of an event described above,
except as provided in Sections 9.1 and 9.5, the Holder shall not be entitled to
receive the benefits accruing to existing holders of the Shares in such event.
9.5 Changes in Shares. In case at any time the Company shall be a party to
any transaction (including, without limitation, a merger, consolidation, sale of
all or substantially all of the Company's assets or recapitalization of the
Shares) in which the previously outstanding Shares shall be changed into or
exchanged for different securities of the Company or common stock or other
securities of another corporation or interests in a non-corporate entity or
other property (including cash) or any combination of any of the foregoing (each
such transaction being herein called the "Transaction" and the date of
consummation of the Transaction being herein called the "Consummation Date"),
then, as a condition of the consummation of the Transaction, lawful and adequate
provisions shall be made so that each Holder, upon the exercise hereof at any
time on or after the Consummation Date, shall be entitled to receive, and this
Warrant shall thereafter represent the right to receive, in lieu of the Shares
issuable upon such exercise prior to the Consummation Date, the highest amount
of securities or other property to which such Holder would actually have been
entitled as a shareholder upon the consummation of the Transaction if such
Holder had exercised such Warrant immediately prior thereto. The provisions of
this Section 9.5 shall similarly apply to successive Transactions.
10. Exchange and Replacement of Warrant Certificate. The Warrant
Certificate is exchangeable without expense, upon the surrender thereof by the
registered Holder at the principal executive office of the Company, for a new
Warrant Certificate of like tenor and date representing
8
<PAGE>
in the aggregate the right to purchase the same number of Warrant Shares in such
denominations as shall be designated by the Holder thereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of the Warrant Certificate, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
11. Elimination of Fractional Interests. The Company shall not be required
to issue certificates representing fractions of Shares upon the exercise of the
Warrants, nor shall it be required to issue scrip or pay cash in lieu of
fractional interests, it being the intent of the parties that all fractional
interests shall be eliminated by rounding any fraction up to the nearest whole
number of Shares or Other Securities.
12. Reservation of Securities. The Company shall at all times reserve and
keep available out of its authorized Shares, solely for the purpose of issuance
upon the exercise of the Warrants, such number of Shares or Other Securities as
shall be issuable upon the exercise thereof. The Company covenants and agrees
that, upon exercise of the Warrants and payment of the Exercise Price therefor,
all Shares or Other Securities issuable upon such exercise shall be duly and
validly issued, fully paid, non-assessable and not subject to the preemptive
rights of any shareholder.
13. Notices to Warrant Holder. Except as otherwise provided in Section
9.4, nothing contained in this Agreement shall be construed as conferring upon
the Holder by virtue of his holding the Warrant the right to vote or to consent
or to receive notice as a shareholder in respect of any meetings of shareholders
for the election of directors or any other matter, or as having any rights
whatsoever as a shareholder of the Company.
14. Notices.
All notices, requests, consents and other communications hereunder shall
be in writing and shall be deemed to have been duly made and sent when
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder of the Warrants, to the address of
such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 4 hereof
or to such other address as the Company may designate by notice to the
Holder.
15. Supplements and Amendments. The Company and Holder may from time to
time supplement or amend this Agreement in order to cure any ambiguity, to
correct or supplement any provision contained herein which may be defective or
inconsistent with any provisions herein, or to
9
<PAGE>
make any other provisions in regard to matters or questions arising hereunder
which the Company and Holder may deem necessary or desirable.
16. Successors. All the covenants and provisions of this Agreement shall
be binding upon and inure to the benefit of the Company, the Holder and their
respective successors and assigns hereunder. Any reference herein to the
"Company" shall include any corporation which is a successor to the limited
liability company structure currently used by the Company.
17. Termination. This Agreement shall terminate at the close of business
on the tenth anniversary of the issuance of the Warrants.
18. Governing Law. This Agreement and the Warrant Certificate issued
hereunder shall be deemed to be a contract made under the laws of the State of
New York and for all purposes shall be construed in accordance with the laws of
the State of New York without giving effect to the rules of the State of New
York governing the conflicts of laws.
19. Entire Agreement; Modification. This Agreement, including all exhibits
hereto, and a certain Registration Rights Agreement dated the date hereof
between the parties hereto, contains the entire understanding between the
parties hereto with respect to the subject matter hereof and may not be modified
or amended except by a writing duly signed by the party against whom enforcement
of the modification or amendment is sought.
20. Severability. If any provision of this Agreement shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provision of this Agreement.
21. Captions. The caption headings of the Sections of this Agreement are
for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
22. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and Holder
any legal or equitable right, remedy or claim under this Agreement; and this
Agreement shall be for the sole and exclusive benefit of the Company and Holder.
10
<PAGE>
23.Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed, as of the day and year first above written.
SIGA PHARMACEUTICALS, INC
By: /s/ Jason Cooper
----------------------------
Name: Jason Cooper
Title: Chairman
STEFAN CAPITAL, LLC
By: /s/ Jeffrey Rubin
----------------------------
Jeffrey Rubin
Managing Member
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