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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
[ x ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarter Ended December 31, 1996
or
[ ] Transition report pursuant to Section 13 or 15(d) of Securities
Exchange Act of 1934
Commission file number 1-14430
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MAXIM PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware 87-0279983
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(State of incorporation) (I.R.S. Employer Identification No.)
3099 Science Park Road, Suite 150, San Diego, CA 92121
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(Address of principal executive offices) (Zip Code)
(619) 453-4040
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(Registrant's telephone number, including area code)
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
---- ----
As of February 7, 1997, the registrant had 6,671,237 shares of Common Stock,
$.001 par value, outstanding.
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MAXIM PHARMACEUTICALS, INC.
(A Development Stage Company)
INDEX
PART I - FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Balance Sheets -
December 31, 1996 (unaudited) and September 30, 1996 . . . . . 1
Statements of Operations (unaudited) -
Three Months Ended December 31, 1996
and 1995, and from Inception (October 23, 1989)
through December 31, 1996 . . . . . . . . . . . . . . . . . . . 2
Statements of Cash Flows (unaudited) -
Three Months Ended December 31, 1996 and 1995
and from Inception (October 23, 1989) through
December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . 3
Notes to Financial Statements . . . . . . . . . . . . . . . . . 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . 5
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . 7
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEETS
MAXIM PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
DECEMBER 31, 1996 September 30, 1996
----------------- ------------------
<S> <C> <C>
ASSETS (UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents $ 130,387 $ 4,070,089
Short-term investments in marketable securities 14,651,759 12,563,622
Accrued interest and other current assets 978,637 709,285
------------- -------------
Total current assets 15,760,783 17,342,996
Investments in marketable securities 2,725,478 2,510,366
Patents and licenses, net 1,813,179 1,367,235
Property and equipment, net 208,258 31,037
Deposits 203,397 3,397
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Total assets $ 20,711,095 $ 21,255,031
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 738,752 $ 405,760
Accrued expenses 349,299 478,623
Current portion of long-term debt 247,000 247,000
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Total current liabilities 1,335,051 1,131,383
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value,
5.000,000 shares authorized - -
Common stock, $.001 par value,
20,000,000 shares authorized;
6,671,237 shares issued and outstanding
at December 31, 1996 and September 30, 1996 6,672 6,672
Additional paid-in capital 34,172,618 34,172,618
Deficit accumulated during the development stage (14,701,463) (13,936,903)
Deferred compensation (101,783) (118,739)
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Total stockholders' equity 19,376,044 20,123,648
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Total liabilities and stockholders' equity $ 20,711,095 $ 21,255,031
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</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
1
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STATEMENTS OF OPERATIONS (UNAUDITED)
MAXIM PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
Three Months Ended October 23, 1989
December 31 (inception) to
1996 1995 December 31, 1996
---------- ---------- -----------------
<S> <C> <C> <C>
Operating expenses:
Product development $ 539,592 $ 219,388 $ 10,540,850
Business development 63,754 31,388 125,754
General and administrative 408,266 178,299 7,934,073
---------- ---------- -------------
Total operating expenses 1,011,612 429,075 18,600,677
Other income (expense):
Investment income 265,242 3,539 552,972
Interest expense (17,333) (131,214) (1,921,142)
Other expense (857) (14,129) (102,645)
Research grant revenue - - 2,946,001
Gain on sale of subsidiary - - 2,288,474
---------- ---------- -------------
Total other income (expense) 247,052 (141,804) 3,763,660
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Discontinued operations:
Loss from operation of discontinued
diagnostic division - - (347,608)
Gain on sale of diagnostic division - - 483,162
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Net loss $ (764,560) $ (570,879) $ (14,701,463)
---------- ---------- -------------
---------- ---------- -------------
Net loss per share of common stock $ (0.11) $ (0.12)
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Weighted average shares outstanding 6,671,237 4,945,450
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</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
2
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STATEMENTS OF CASH FLOWS (UNAUDITED)
MAXIM PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
Three Months Ended
December 31 October 23, 1989
------------------------- (inception) to
1996 1995 December 31, 1996
------------------------- -----------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (764,560) $ (570,879) $ (14,701,463)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 37,289 10,065 818,433
Amortization of premium on investments 43,706 - 43,706
Stock options issued as compensation 16,956 - 293,216
Gain on sale of subsidiary - - (2,288,474)
Loss on write-off of patents - - 189,068
Loss on disposal of property & equipment - - 128,248
Loss on write-off of receivable from related party - - 147,803
Other - - 27,032
Write-off of obsolete inventory - - 24,669
Gain on sale of diagnostic division - - (483,162)
Loss on write-off of purchased research
and development - - 2,646,166
Cumulative effect of reorganization - - 1,152,667
Changes in operating assets and liabilities:
Accrued interest and other current assets (269,352) (4,626) (978,637)
Other assets (200,000) (24,016) (351,200)
Accounts payable 332,992 25,391 738,752
Accrued expenses (129,324) 264,379 370,509
---------- ---------- ---------------
Net cash used in operating activities (932,293) (299,686) (12,222,667)
INVESTING ACTIVITIES:
Purchases of marketable securities (2,346,955) - (17,420,943)
Additions to patents (475,610) (75,622) (2,318,397)
Purchases of property and equipment (184,844) - (993,085)
Cash acquired in acquisition of business - - 985,356
Proceeds from sale of diagnostic division - - 496,555
---------- ---------- ---------------
Net cash used by investing activities (3,007,409) (75,622) (19,250,514)
FINANCING ACTIVITIES:
Proceeds from issuance of notes payable and
long term debt - 81,675 4,576,423
Payments on notes payable and long-term debt - (2,260,000) (2,770,505)
Proceeds from issuance of notes payable to
related parties - - 4,982,169
Payments on notes payable to related parties - - (1,329,885)
Net proceeds from issuance of common stock
and warrants - - 25,657,866
Net proceeds from issuance of preferred stock - 2,250,000 487,500
---------- ---------- ---------------
Net cash provided by financing activities - 71,675 31,603,568
---------- ---------- ---------------
Net increase (decrease) in cash and cash equivalents (3,939,702) (303,633) 130,387
Cash and cash equivalents at beginning of period 4,070,089 512,928 -
---------- ---------- ---------------
Cash and cash equivalents at end of period $ 130,387 $ 209,295 $ 130,387
---------- ---------- ---------------
---------- ---------- ---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
3
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MAXIM PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY)
1. PRINCIPLES OF INTERIM PERIOD REPORTING
Maxim Pharmaceuticals, Inc. (the "Company") has not earned significant revenues
from planned principal operations. Accordingly, the Company's activities have
been accounted for as those of a "Development Stage Enterprise" as set forth in
Financial Accounting Standards Board Statement No. 7 ("FAS 7").
In the opinion of the Company, the unaudited financial statements contain all of
the adjustments, consisting only of normal recurring adjustments and accruals,
necessary to present fairly the financial position of the Company as of December
31, 1996 and September 30, 1996, and the results of operations for the three
months ended December 31, 1996 and 1995 and from inception (October 23, 1989) to
December 31, 1996. The results of operations for the three months ended
December 31, 1996 are not necessarily indicative of the results to be expected
in subsequent periods or for the year as a whole. For further information,
refer to the consolidated financial statements and footnotes thereto for the
year ended September 30, 1996.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MAXIM PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY)
THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY CAUSE SUCH
DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED UNDER "RISK
FACTORS" AND ELSEWHERE IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED SEPTEMBER 30, 1996, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
INCLUDING THE UNCERTAINTIES ASSOCIATED WITH PRODUCT DEVELOPMENT, THE RISK THAT
PRODUCTS THAT APPEARED PROMISING IN EARLY CLINICAL TRIALS DO NOT DEMONSTRATE
EFFICACY IN LARGER-SCALE CLINICAL TRIALS, THE RISK THAT CLINICAL TRIALS WILL NOT
COMMENCE WHEN PLANNED, THE RISK THAT THE COMPANY WILL NOT BE ABLE TO COMPLETE
CORPORATE COLLABORATIONS.
RESULTS OF OPERATIONS FOR THE QUARTERS ENDED DECEMBER 31, 1996 AND 1995
PRODUCT DEVELOPMENT EXPENSES - For the quarter ended December 31, 1996,
product development expenses were $540,000, an increase of $320,000, or 146%,
over the same period in the prior year. This increase was primarily
attributable to increased activity related to cancer clinical trials of the
Company's MAXAMINE-TM- therapy, including hiring additional clinical and
development personnel, and consulting and other costs associated with
preparation for planned Phase III clinical trials in the United States. The
current quarter increase also resulted from increased efforts relating to
preclinical development of the Company's MAXVAX-TM- mucosal vaccine
technology, including the addition of laboratory personnel and establishment
of internal research capabilities.
BUSINESS DEVELOPMENT AND GENERAL AND ADMINISTRATIVE EXPENSES - For the
quarter ended December 31, 1996, business development expenses totaled
$64,000, approximately double the $31,000 in expense recorded in the same
quarter in the prior year. This increase was due to additional personnel and
other resources devoted to corporate partnering efforts and market
evaluations. General and administrative expenses for the quarter ended
December 31, 1996 increased $229,000, or 129%, over the prior year quarter
and totaled $408,000. This increase is in a large part due to the increased
personnel, insurance, reporting and compliance costs associated with
operation as a public company.
OTHER INCOME (EXPENSE) - Investment income was $265,000 for the quarter ended
December 31, 1996, compared to $4,000 for the same period in the prior year, due
to income on the proceeds of the Company's initial public offering completed in
July 1996. Interest expense was $17,000 compared to $131,000 for the same
quarter in the prior year; the current quarter decrease is due to the repayment
of approximately $2.85 million of notes payable and long-term debt subsequent to
the end of the prior year quarter.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations primarily through the sale of its equity
securities, including an initial public offering of common stock and redeemable
common stock purchase warrants in July 1996 which provided approximately $18.2
million, net of financing costs, to the Company.
As of December 31, 1996, the Company had cash, cash equivalents and
investments totaling approximately $17.5 million. For the quarter ended
December 31, 1996, net cash used in the Company's operating activities was
approximately $932,000. The Company expects its cash requirements to increase
significantly in future periods as it conducts additional product development
activities including internal product research, development and testing,
preclinical studies and clinical testing of its potential products and
marketing of any products that are developed. Among the specific planned
activities which are expected
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to result in an increase in cash requirements are the commencement of Phase III
clinical trials in the U.S. for the MAXAMINE therapy, and an expansion of
internal capabilities and increased research efforts relating to preclinical
development of the MAXVAX technology.
The Company's cash requirements may vary materially from those now planned
because of the results of research, development and clinical trials, the time
and costs involved in obtaining regulatory approvals, the cost of filing,
prosecuting, defending and enforcing patent claims and other intellectual
property rights, competing technological and market developments, changes in the
Company's existing research relationships, the ability of the Company to
establish collaborative arrangements and the development of the Company's
product commercialization activities. As a result of these factors, it is
difficult to predict accurately the timing and amount of the Company's cash
requirements.
In order to successfully commercialize any of its products, the Company expects
that it will ultimately be required to seek additional funds through public or
private financings or collaborative arrangements with corporate partners. The
issuance of additional equity securities could result in substantial dilution to
the Company's stockholders. There can be no assurance that additional funding
will be available on terms acceptable to the Company, if at all. The failure to
fund its capital requirements would have a material adverse effect on the
Company's business.
The Company has never paid a cash dividend and does not contemplate the payment
of cash dividends in the foreseeable future.
6
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PART II-OTHER INFORMATION
a.) EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
10.18 Amended and restated 1993 Long-Term Incentive Plan.
10.19 Employment Agreement dated October 1, 1996 between the
Registrant and Kurt R. Gehlsen.
10.20 Employment Agreement dated October 1, 1996 between the
Registrant and Dale A. Sander.
10.21 Employment Agreement dated November 12, 1996 between
the Registrant and Larry G. Stambaugh.
b.) REPORTS ON FORM 8-K
DATE OF REPORT ITEM REPORTED FINANCIAL STATEMENTS FILED
None None No
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Maxim Pharmaceuticals, Inc.
Date: February 7, 1997 /s/ Dale A. Sander
-------------------------
Dale A. Sander
Chief Financial Officer
(Principal Accounting Officer and Officer
duly authorized to sign this report on
behalf of the registrant)
7
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EXHIBIT 10.18
MAXIM PHARMACEUTICALS, INC.
1993 LONG-TERM INCENTIVE PLAN
As Amended and Restated March 18, 1996
As Amended and Restated December 20, 1996
1. DEFINITIONS
In this Plan, except where the context otherwise indicates, the following
definitions apply:
1.1 "Agreement" means a written agreement implementing a grant of an
Option, Right or Performance Unit or an award of Restricted Stock or Incentive
Shares.
1.2 "Board" means the Board of Directors of the Company.
1.3 "Board Committee" means a current or future committee of the Board.
1.4 "Board Committee Meeting" means a meeting of a Board Committee.
1.5 "CEO" means the Company's chief executive officer.
1.6 "Code" means the Internal Revenue Code of 1986, as amended.
1.7 "Committee" means the committee of the Board meeting the standards of
Rule 16b-3(c)(2)(i) under the Exchange Act, or any similar successor rule,
appointed by the Board to administer the Plan. Unless otherwise determined by
the Board, the Compensation Committee of the Board shall be the Committee.
1.8 "Common Stock" means the common stock, par value $.001 per share, of
the Company.
1.9 "Company" means Maxim Pharmaceuticals, Inc.
1.10 "Consultant" means any person or entity performing services for the
Company or any Subsidiary other than as a Director or employee of the Company,
and who is not also a director or officer of the Company for purposes of Section
16(a) of the Exchange Act or a person who would be a director or officer of the
Company for purposes of Section 16(a) of the Exchange Act if the Common Stock
was registered under Section 12 of the Exchange Act.
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1.11 "Consultant-Director" means any member of the Board who also is
performing services for the Company or any Subsidiary other than as a Director
or an employee of the Company.
1.12 "Covered Employee" means the CEO and the four (4) other highest
compensated officers of the Company for whom total compensation is required to
be reported to stockholders under the Exchange Act, as determined for purposes
of Section 162(m) of the Code.
1.13 "Date of Exercise" means the date on which the Company receives
notice of the exercise of an Option, Right or Performance Unit in accordance
with the terms of Article 10.
1.14 "Date of Grant" means the date on which an Option, Right or
Performance Unit is granted or Restricted Stock or Incentive Shares are awarded
by the Committee or the CEO, as the case may be.
1.15 "Director" means any person who is a member of the Board and who is
not also an employee of the Company.
1.16 "Employee" means any person determined by the CEO to be an employee
of the Company or any Subsidiary and who is not also a director or officer of
the Company for purposes of Section 16(a) of the Exchange Act or a person who
would be a director or officer of the Company for purposes of Section 16(a) of
the Exchange Act if the Common Stock was registered under Section 12 of the
Exchange Act.
1.17 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
1.18 "Excused Absence" means a Director's absence from a Scheduled Meeting
or a Board Committee Meeting due to illness, disability or family emergency.
1.19 "Fair Market Value" of a Share means the amount equal to the closing
sales price for a Share in the principal trading market for the Shares as
reported by such source as the Committee may select, or, if such price
quotations of the Common Stock are not then reported, then the fair market value
of a Share as determined by the Committee pursuant to a reasonable method
adopted in good faith for such purpose.
1.20 "Grantee" means an Employee, Covered Employee, Key Employee,
Consultant-Director or Consultant to whom Restricted Stock has been awarded
pursuant to Article 12 or Incentive Shares have been awarded pursuant to
Article 13.
1.21 "Incentive Shares" means Shares awarded pursuant to the provisions of
Article 13.
2
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1.22 "Incentive Stock Option" means an Option granted under the Plan that
qualifies as an incentive stock option under Section 422 of the Code and that
the Company designates as such in the Agreement granting the Option.
1.23 "Key Employee" means any person determined by the Committee to be an
employee of the Company or any Subsidiary and who is a director or officer of
the Company for purposes of Section 16(a) of the Exchange Act, or who would be a
director or officer of the Company for purposes of Section 16(a) of the Exchange
Act if the Common Stock was registered under Section 12 of the Exchange Act.
1.24 "Nonstatutory Stock Option" means an Option granted under the Plan
that is not an Incentive Stock Option.
1.25 "Option" means an option to purchase Shares granted under the Plan in
accordance with the terms of Article 7.
1.26 "Optionee" means a Director, Employee, Covered Employee, Key
Employee, Consultant-Director or Consultant to whom an Option, Right or
Performance Unit has been granted.
1.27 "Option Period" means the period during which an Option may be
exercised.
1.28 "Option Price" means the price per Share at which an Option may be
exercised. The Option Price shall be determined by the Committee, or by the
CEO, in the case of an Option granted to an Employee or Consultant, except that
in no event shall the Option Price be less than the par value of the Common
Stock or, in the case of an Incentive Stock Option, the greater of the Fair
Market Value per Share determined as of the Date of Grant or the par value of
the Common Stock.
1.29 "Outside Director" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
1.30 "Performance Unit" means a performance unit granted under the Plan in
accordance with the terms of Article 9.
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1.31 "Performance Unit Period" means the period during which a Performance
Unit may be exercised.
1.32 "Plan" means the Maxim Pharmaceuticals, Inc. 1993 Long-Term Incentive
Plan.
1.33 "Related Option" means the Option with which, or by amendment to
which, a specified Right or Performance Unit is granted.
1.34 "Related Performance Unit" means the Performance Unit granted in
connection with, or by amendment to, a specified Option.
1.35 "Related Right" means the Right granted in connection with, or by
amendment to, a specified Option.
1.36 "Restricted Stock" means Shares awarded pursuant to the provisions of
Article 12.
1.37 "Right" means a stock appreciation right granted under the Plan in
accordance with the terms of Article 8.
1.38 "Right Period" means the period during which a Right may be
exercised.
1.39 "Scheduled Meeting" means the four regular meetings of the Board
scheduled to be held during each of the Company's fiscal years or, if more than
four regular meetings are scheduled, the four meetings designated as Scheduled
Meetings by the Board in scheduling its regular meetings for the year.
1.40 "Share" means a share of Common Stock.
1.41 "Subsidiary" means a corporation at least 50% of the total combined
voting power of all classes of stock of which is owned by the Company either
directly or through one or more Subsidiaries.
2. PURPOSE
This Plan is intended to aid in attracting qualified employees, directors
and consultants and in maintaining and developing strong management and employee
loyalty through encouraging the ownership of Common Stock by Directors and
selected Employees, Covered Employees, Key Employees, Consultant-Directors and
Consultants through stimulating their efforts by giving suitable recognition, in
addition to other remuneration, to the ability and industry which contribute
materially to the success of the Company's business interests, and to provide an
incentive to the continued service of such
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Directors, Employees, Covered Employees, Key Employees, Consultant-Director and
Consultants.
3. ADMINISTRATION (OTHER THAN GRANTS OR AWARDS TO EMPLOYEES AND CONSULTANTS)
Except with respect to grants or awards to Employees and Consultants, this
Plan shall be administered by the Committee. In addition to any other powers
granted to the Committee, the Committee shall have the following powers, subject
to the express provisions of the Plan:
3.1 subject to the provisions of Articles 5, 7, 8, 9, 10, 11, 12 and 13,
to determine in its discretion the Directors, Covered Employees, Key Employees
and Consultant-Directors to whom Options, Rights or Performance Units shall be
granted and to whom Restricted Stock and Incentive Shares shall be awarded, the
number of Shares to be subject to each Option, Right, Performance Unit,
Restricted Stock or Incentive Share award, and the terms upon which Options,
Rights or Performance Units may be acquired and exercised and the terms and
conditions of Restricted Stock and Incentive Share awards;
3.2 to determine all other terms and provisions of each Agreement, which
need not be identical;
3.3 without limiting the foregoing, to provide in its discretion in an
Agreement:
(i) for an agreement by the Optionee or Grantee to render services
to the Company or a Subsidiary upon such terms and conditions as may be
specified in the Agreement, provided that the Committee shall not have the power
by virtue of the Plan to commit the Company or a Subsidiary to employ or
otherwise retain any Optionee or Grantee;
(ii) for restrictions on the transfer, sale or other disposition of
Shares issued to the Optionee upon the exercise of an Option, Right or
Performance Unit, for other restrictions permitted by Article 12 with respect to
Restricted Stock and for conditions with respect to the issuance of Incentive
Shares;
(iii) for an agreement by the Optionee or Grantee to resell to the
Company, under specified conditions, Shares issued upon the exercise of an
Option, Right or Performance Unit or awarded as Restricted Stock or Incentive
Shares;
(iv) for the payment of the Option Price upon the exercise of an
Option otherwise than in cash, including without limitation by delivery of
Shares (other than Restricted Stock) valued at Fair Market Value on the Date of
Exercise of the Option, or a
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combination of cash and Shares, or for the payment in part of the Option Price
with a promissory note in accordance with the terms of Section 10.2; and
(v) for the deferral of receipt of amounts that otherwise would be
distributed upon exercise of a Performance Unit, the terms and conditions of any
such deferral and any interest or dividend equivalent or other payment that
shall accrue with respect to deferred distributions;
3.4 to construe and interpret the Agreements and the Plan;
3.5 to require, whether or not provided for in the pertinent Agreement,
of any person exercising an Option, Right or Performance Unit or acquiring
Restricted Stock or Incentive Shares, at the time of such exercise or
acquisition, the making of any representations or agreements which the Committee
may deem necessary or advisable in order to comply with the securities laws of
the United States or of any state;
3.6 to provide for satisfaction of an Optionee's or Grantee's tax
liabilities arising in connection with the Plan through, without limitation,
retention by the Company of Shares otherwise issuable on the exercise of a
Nonstatutory Stock Option, Right or Performance Unit or pursuant to an award of
Incentive Shares or through delivery of Shares to the Company by the Optionee or
Grantee under such terms and conditions as the Committee deems appropriate; and
3.7 to make all other determinations and take all other actions necessary
or advisable for the administration of the Plan, including action delegating to
a subcommittee of two (2) or more Outside Directors any of the administrative
powers the Committee is authorized to exercise (and references in this Plan to
the Committee shall thereafter be to such a subcommittee).
Any determinations or actions made or taken by the Committee pursuant to
this Article 3 shall be binding and final.
4. ADMINISTRATION FOR GRANTS AND AWARDS TO EMPLOYEES AND CONSULTANTS
In the case of grants or awards to Employees and Consultants, this Plan
shall be administered by the CEO. In addition to any other powers granted to
the CEO, the CEO shall have all of the powers with respect to grants or awards
to Employees and Consultants set forth in Article 3 that the Committee has with
respect to grants or awards to Directors, Covered Employees, Key Employees and
Consultant-Directors. When exercising authority pursuant to this Plan, the CEO
shall be acting as a committee of the Board. If the CEO is not a member of the
Board, then the powers of the CEO hereunder shall be exercised by the Committee.
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5. ELIGIBILITY
Options, Rights, Performance Units, Restricted Stock and Incentive Shares
may be granted or awarded only to Directors, Employees, Covered Employees, Key
Employees, Consultant-Directors and Consultants, except that Directors,
Consultant-Directors and Consultants (other than Consultants who also are
Employees, Covered Employees or Key Employees) are not eligible to receive
Incentive Stock Options. A Director, Employee, Covered Employee, Key Employee,
Consultant-Director or Consultant who has been granted an Option, Right or
Performance Unit or awarded Restricted Stock or Incentive Shares may be granted
additional Options, Rights or Performance Units or awarded additional Restricted
Stock or Incentive Shares.
6. STOCK SUBJECT TO THE PLAN
6.1 There is hereby reserved for issuance upon the exercise of Options,
Rights or Performance Units or for awards of Restricted Stock or Incentive
Shares an aggregate of 1,000,000 authorized but unissued or reacquired Shares.
6.2 If an Option, Right or Performance Unit (other than a Related Right
or Related Performance Unit) expires or terminates for any reason (other than,
in the case of an Option, termination by virtue of the exercise of a Related
Right or Related Performance Unit) without having been fully exercised, if
Shares of Restricted Stock are forfeited or if Incentive Shares are not issued,
any unissued or forfeited Shares which had been subject to the Agreement
relating thereto shall become available for the grant of other Options, Rights
or Performance Units or for the award of additional Restricted Stock or
Incentive Shares, provided, that in the case of forfeited Shares, the Grantee
has received no dividends prior to forfeiture with respect to such Shares.
6.3 The Shares issued upon the exercise of a Right or Performance Unit
(or, if cash is payable in connection with such exercise, that number of Shares
with respect to which the Right or Performance Unit is exercised), shall be
charged against the number of Shares issuable under the Plan and shall not
become available for the grant of other Options, Rights or Performance Units or
for the award of Restricted Stock or Incentive Shares.
6.4 Subject to the provisions of Article 14 relating to capital
adjustments, no Director, Employee, Covered Employee, Key Employee, Consultant-
Director, or Consultant shall be eligible to be granted Options and Rights
covering more than two hundred thousand (200,000) shares of Common Stock in any
calendar year. Shares subject to an Option or Right that is canceled shall
continue to be counted against the maximum award of Options and Rights permitted
to be granted pursuant to this Section
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6.4. The repricing of an Option and/or Right which results in a reduction of
the exercise price, shall be deemed to be a cancellation of the original Option
and/or Right and the grant of a substitute Option and/or Right; in the event of
such repricing, both the original and the substituted Options and Rights shall
be counted against the maximum awards of Options and Rights permitted to be
granted pursuant to this Section 6.4. The provisions of this Section 6.4 shall
be applicable only to the extent required by Section 162(m) of the Code.
7. OPTIONS
7.1 Subject to the provisions of Article 5, the Committee is hereby
authorized to grant Options to Directors, Covered Employees, Key Employees and
Consultant-Directors, and the CEO is hereby authorized to grant Options to
Employees and Consultants.
7.2 All Agreements granting Options shall contain a statement that the
Option is intended to be either (i) a Nonstatutory Stock Option or (ii) an
Incentive Stock Option.
7.3 The Option Period shall be determined by the Committee, or, in the
case of an Option granted to an Employee or Consultant, by the CEO, and
specifically set forth in the Agreement, provided, however, that an Option shall
not be exercisable after ten years from the Date of Grant.
7.4 All Incentive Stock Options granted under the Plan shall comply with
the provisions of the Code governing incentive stock options and with all other
applicable rules and regulations.
7.5 All other terms of Options granted under the Plan shall be determined
by the Committee in its sole discretion, or, in the case of an Option granted to
an Employee or Consultant, by the CEO in his sole discretion.
8. RIGHTS
8.1 The Committee is hereby authorized to grant Rights to Covered
Employees, Key Employees and Consultant-Directors, and the CEO is hereby
authorized to grant Rights to Employees and Consultants.
8.2 A Right may be granted under the Plan:
(i) in connection with, and at the same time as, the grant of an
Option under the Plan;
(ii) by amendment of an outstanding Nonstatutory Stock Option
granted under the Plan; or
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(iii) independently of any Option granted under the Plan.
A Right granted under clause (i) or (ii) of the preceding sentence is a
Related Right. A Related Right may, in the Committee's discretion, or, in the
case of a Right granted to an Employee or Consultant, in the CEO's discretion,
apply to all or a portion of the Shares subject to the Related Option.
8.3 A Right may be exercised in whole or in part as provided in the
Agreement, and, subject to the provisions of the Agreement, entitles its
Optionee to receive, without any payment to the Company (other than required tax
withholding amounts), either cash or that number of Shares (equal to the highest
whole number of Shares), or a combination thereof, in an amount or having a Fair
Market Value determined as of the Date of Exercise not to exceed the number of
Shares subject to the portion of the Right exercised multiplied by an amount
equal to the excess of (i) the Fair Market Value of a Share on the Date of
Exercise of the Right over (ii) either (A) the Fair Market Value of a Share on
the Date of Grant of the Right if it is not a Related Right, or (B) the Option
Price as provided in the Related Option if the Right is a Related Right.
8.4 The Right Period shall be determined by the Committee, or, in the
case of a Right granted to an Employee or Consultant, by the CEO, and
specifically set forth in the Agreement, provided, however --
(i) a Right may not be exercised until the expiration of six months
from the Date of Grant (except that this limitation need not apply in the case
of a cash-only Right or in the event of the death or disability of the Optionee
within the six-month period);
(ii) a Right will expire no later than the earlier of (A) ten years
from the Date of Grant, or (B) in the case of a Related Right, the expiration of
the Related Option;
(iii) a Right may be exercised only when the Fair Market Value of a
share of Common Stock exceeds either (A) the Fair Market Value of a share of
Common Stock on the Date of Grant of the Right if it is not a Related Right, or
(B) the Option Price as provided in the Related Option if the Right is a Related
Right; and
(iv) a Right that is a Related Right to an Incentive Stock Option
may be exercised only when and to the extent the Related Option is exercisable.
8.5 The exercise, in whole or in part, of a Related Right shall cause a
reduction in the number of Shares subject to the Related Option equal to the
number of Shares with respect to which the Related Right is exercised.
Similarly, the exercise, in whole or in part, of a Related Option shall cause a
reduction in the number of Shares subject to the
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Related Right equal to the number of Shares with respect to which the Related
Option is exercised.
8.6 Unless the Committee otherwise requires, Rights granted under the
Plan (other than cash-only Rights) to Covered Employees, Key Employees and
Consultant-Directors shall comply with the requirements of Rule 16b-3(e) under
the Exchange Act beginning with the date the Company's Common Stock is first
registered under Section 12 of the Exchange Act. Should any provision of this
Article 8 necessary for that purpose at the date of adoption of this Plan by the
Board no longer be necessary to comply with the requirements of Rule 16b-3(e) or
should any additional provisions be necessary for this Article 8 to comply with
the requirements of Rule 16b-3(e), the Board or the Committee may amend this
Plan to delete, add to or modify the provisions of the Plan accordingly. The
Company intends to comply, if and to the extent applicable, with the public
information and reporting requirements of Rule 16b-3(e)(1); however, the
Company's failure for any reason whatsoever to comply with such requirements or
with any other requirements of Rule 16b-3, and any resultant unavailability of
Rule 16b-3(e) to Optionees shall not impose any liability on the Company to any
Optionee or any other party.
8.7 To the extent required by Rule 16b-3(e) under the Exchange Act or
otherwise provided in the Agreement, the Committee shall have sole discretion to
consent to or disapprove the election of any Optionee who is a Covered Employee,
Key Employee or Consultant-Director to receive cash in full or partial
settlement of a Right. In cases where an election of settlement in cash must be
consented to by the Committee, the Committee may consent to, or disapprove, such
election at any time after such election, or within such period for taking
action as is specified in the election, and failure to give consent shall be
disapproval. Consent may be given in whole or as to a portion of the Right
surrendered by the Optionee. If the election to receive cash is disapproved in
whole or in part, the Right shall be deemed to have been exercised for Shares,
or, if so specified in the notice of exercise and election, not to have been
exercised to the extent the election to receive cash is disapproved.
9. PERFORMANCE UNITS
9.1 The Committee is hereby authorized to grant Performance Units to
Covered Employees, Key Employees and Consultant-Directors, and the CEO is hereby
authorized to grant Performance Units to Employees and Consultants.
9.2 A Performance Unit may be granted under the Plan:
(i) in connection with, and at the same time as, the grant of an
Option under the Plan;
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(ii) by amendment of an outstanding Nonstatutory Stock Option
granted under the Plan; or
(iii) independently of any Option granted under the Plan.
A Performance Unit granted under clause (i) or (ii) of the preceding
sentence is a Related Performance Unit. A Related Performance Unit may, in the
Committee's discretion, or, in the case of a Performance Unit granted to an
Employee or Consultant, in the CEO's discretion, apply to all or a portion of
the Shares subject to the Related Option. A Performance Unit may not be granted
in connection with, or by amendment to, an Incentive Stock Option.
9.3 A Performance Unit may be exercised in whole or in part as provided
in the Agreement, and, subject to the provisions of the Agreement, entitles its
Optionee to receive, without any payment to the Company (other than required tax
withholding amounts), cash, Shares or a combination of cash and Shares, based on
the degree to which performance standards established by the Committee or the
CEO, as the case may be, and specified in the Agreement have been achieved.
Such performance standards may be particular to an Employee, Covered Employee,
Key Employee, Consultant-Director or Consultant or the department, branch,
Subsidiary or other division in which the Optionee works, or may be based on the
performance of the Company generally, and may cover such period as may be
specified by the Committee or the CEO, as the case may be. The performance
standards may be based on earnings or earnings growth, return on assets, equity
or investment, regulatory compliance, improvement of financial ratings,
achievement of balance sheet or income statement objectives, or any other
objective goals established by the Committee or the CEO, as the case may be, and
may be absolute in their terms or measured against or in relationship to other
companies comparably, similarly or otherwise situated.
9.4 The Performance Period shall be determined by the Committee, or, in
the case of a Performance Unit granted to an Employee or Consultant, by the CEO,
and specifically set forth in the Agreement, provided, however --
(i) if required for purposes of Rule 16b-3 under the Exchange Act
or otherwise under the terms of the Agreement, a Performance Unit may not be
exercised until the expiration of six months from the Date of Grant (except that
this limitation need not apply in the case of a cash-only Performance Unit or in
the event of the death or disability of the Optionee within the six-month
period); and
(ii) a Performance Unit will expire no later than the earlier of (A)
ten years from the Date of Grant, or (B) in the case of a Related Performance
Unit, the expiration of the Related Option.
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9.5 Each Agreement granting Performance Units shall specify the number of
Performance Units granted, provided, however, that the maximum number of Related
Performance Units may not exceed the maximum number of Shares subject to the
Related Option.
9.6 The exercise, in whole or in part, of a Related Performance Unit
shall cause a reduction in the number of Shares subject to the Related Option
and the number of Performance Units in accordance with the terms of the
Agreement. Similarly, the exercise, in whole or in part, of a Related Option
shall cause a reduction in the number of Shares subject to the Related
Performance Unit equal to the number of Shares with respect to which the Related
Option is exercised.
9.7 In the case of a Performance Unit that qualifies as a "derivative
security" within the meaning of Rule 16a-1(c) under the Exchange Act, and unless
the Committee otherwise requires, Performance Units granted under the Plan
(other than cash-only Performance Units) to Covered Employees, Key Employees or
Consultant-Directors shall comply with the requirements of Rule 16b-3 beginning
with the date the Company's Common Stock is first registered under Section 12 of
the Exchange Act. Should any provision of this Article 9 necessary for that
purpose at the date of adoption of this Plan by the Board no longer be necessary
to comply with the requirements of Rule 16b-3 or should any additional
provisions be necessary for this Article 9 to comply with the requirements of
Rule 16b-3, the Board or the Committee may amend this Plan to delete, add to or
modify the provisions of the Plan accordingly. The Company intends to comply,
if and to the extent applicable, with the public information and reporting
requirements of Rule 16b-3(e)(1); however, the Company's failure for any reason
whatsoever to comply with such requirements or with any other requirements of
Rule 16b-3, and any resultant unavailability of Rule 16b-3 to Optionees shall
not impose any liability on the Company to any Optionee or any other party.
9.8 To the extent required by Rule 16b-3(e) under the Exchange Act or
otherwise provided in the Agreement, the Committee shall have sole discretion to
consent to or disapprove the election of any Optionee who is a Covered Employee,
Key Employee or Consultant-Director to receive cash in full or partial
settlement of a Performance Unit. In cases where an election of settlement in
cash must be consented to by the Committee, the Committee may consent to, or
disapprove, such election at any time after such election, or within such period
for taking action as is specified in the election, and failure to give consent
shall be disapproval. Consent may be given in whole or as to a portion of the
Performance Unit surrendered by the Optionee. If the election to receive cash
is disapproved in whole or in part, the Performance Unit shall be deemed to have
been exercised for Shares, or, if so specified in the notice of exercise and
election, not to have been exercised to the extent the election to receive cash
is disapproved.
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10. EXERCISE
10.1 An Option, Right or Performance Unit may, subject to the provisions
of the Agreement under which it was granted, be exercised in whole or in part by
the delivery to the Company of written notice of the exercise, in such form as
the Committee or the CEO, in the case of an Option, Right or Performance Unit
granted to an Employee or Consultant, may prescribe, accompanied, in the case of
an Option, by full payment for the Shares with respect to which the Option is
exercised, unless and to the extent that the Committee, or the CEO, as the case
may be, agreed in the Agreement in which an Option was granted to accept a
promissory note as provided in Section 10.2 hereof.
10.2 To the extent permitted by applicable law, the Committee or the CEO,
in the case of an Option, Right or Performance Unit granted to an Employee or
Consultant, may agree in the Agreement in which an Option is granted to accept
as partial payment for the Shares a promissory note of the Optionee evidencing
his or her obligation to make future cash payment thereof; provided, however,
that in no event may the Committee or the CEO accept a promissory note for an
amount in excess of the difference between the aggregate Option Price and the
par value of the Shares. Promissory notes made pursuant to this Section 10.2
shall be payable as determined by the Committee or the CEO, in the case of an
Option granted to an Employee or Consultant, shall be secured by a pledge of the
Shares and shall bear interest at a rate fixed by the Committee or the CEO, in
the case of an Option granted to an Employee or Consultant.
11. NONTRANSFERABILITY
Options, Rights, Performance Units and Incentive Shares granted or awarded
under the Plan shall not be transferable otherwise than (i) by will or the laws
of descent and distribution, or (ii) except in the case of an Incentive Stock
Option, pursuant to a qualified domestic relations order as defined in
Section 414(p) of the Code, and an Option, Right or Performance Unit may be
exercised during the Optionee's lifetime only by the Optionee or, in the event
of the Optionee's legal disability, by his or her legal representative. A
Related Right or Related Performance Unit is transferable only when the Related
Option is transferable and only with the Related Option and under the same
conditions.
12. RESTRICTED STOCK AWARDS
12.1 The Committee is hereby authorized to award shares of Restricted
Stock to Covered Employees, Key Employees and Consultant-Directors, and the CEO
is hereby authorized to award shares of Restricted Stock to Employees and
Consultants.
12.2 Restricted Stock awards under the Plan shall consist of Shares that
are restricted against transfer, subject to forfeiture, and subject to such
other terms and
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conditions intended to further the purposes of the Plan as may be determined by
the Committee or the CEO, in the case of Restricted Stock awarded to an Employee
or Consultant.
12.3 Restricted Stock awards shall be evidenced by Agreements containing
provisions setting forth the terms and conditions governing such awards. Each
such Agreement shall contain the following:
(i) prohibitions against the sale, assignment, transfer, exchange,
pledge, hypothecation, or other encumbrance of (A) the Shares awarded as
Restricted Stock under the Plan, (B) the right to vote the Shares, or (C) the
right to receive dividends thereon in each case during the restriction period
applicable to the Shares; provided, however, that the Grantee shall have all the
other rights of a shareholder including, but not limited to, the right to
receive dividends and the right to vote the Shares;
(ii) at least one term, condition or restriction constituting a
"substantial risk of forfeiture" as defined in Section 83(c) of the Code;
(iii) such other terms, conditions and restrictions as the Committee
or the CEO, in the case of Restricted Stock awarded to Employees or Consultants,
in its or his discretion may specify (including, without limitation, provisions
creating additional substantial risks of forfeiture);
(iv) a requirement that each certificate representing shares of
Restricted Stock shall be deposited with the Company, or its designee, and shall
bear the following legend:
"This certificate and the shares of stock represented
hereby are subject to the terms and conditions (including
the risks of forfeiture and restrictions against transfer)
contained in the Maxim Pharmaceuticals, Inc. 1993
Long-Term Incentive Plan and an Agreement entered into
between the registered owner and Maxim Pharmaceuticals,
Inc. Release from such terms and conditions shall be made
only in accordance with the provisions of the Plan and the
Agreement, a copy of each of which is on file in the
office of the Secretary of Maxim Pharmaceuticals, Inc."
(v) the applicable period or periods of any terms, conditions or
restrictions applicable to the Restricted Stock, provided, however, that the
Committee or the CEO, in the case of Restricted Stock awarded to an Employee or
Consultant, in its or his discretion may accelerate the expiration of the
applicable restriction period with respect to any part or all of the Shares
awarded to a Grantee; and
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(vi) the terms and conditions upon which any restrictions upon
shares of Restricted Stock awarded under the Plan shall lapse and new
certificates free of the foregoing legend shall be issued to the Grantee or his
or her legal representative.
12.4 The Committee or the CEO, in the case of Restricted Stock awarded to
an Employee or Consultant, may include in an Agreement a requirement that in the
event of a Grantee's termination of employment or other service with the Company
for any reason prior to the lapse of restrictions, all shares of Restricted
Stock shall be forfeited by the Grantee to the Company without payment of any
consideration by the Company, and neither the Grantee nor any successors, heirs,
assigns or personal representatives of the Grantee shall thereafter have any
further rights or interest in the Shares or certificates.
13. INCENTIVE SHARE AWARDS
13.1 The Committee is hereby authorized to award Incentive Shares to
Covered Employees, Key Employees and Consultant-Directors, and the CEO is hereby
authorized to award Incentive Shares to Employees and Consultants.
13.2 Incentive Shares shall be Shares that shall be issued at such times,
subject to achievement of such performance or other goals and on such other
terms and conditions as the Committee or the CEO, in the case of Incentive
Shares awarded to an Employee or Consultant, shall deem appropriate and specify
in the Agreement relating thereto.
14. CAPITAL ADJUSTMENTS
The number of Shares subject to each outstanding Option, Right or
Performance Unit or Restricted Stock or Incentive Share award and the aggregate
number of shares for which grants or awards thereafter may be made automatically
shall be adjusted proportionately in the event of a stock split or stock
dividend of or with respect to the Common Stock, and the number and class of
Shares subject to each outstanding Option, Right or Performance Unit or
Restricted Stock or Incentive Share award, the Option Price and the aggregate
number and class of shares for which grants or awards thereafter may be made
shall be subject to such adjustment, if any, as the Committee in its sole
discretion deems appropriate to reflect such events as adoption of stock rights
plans, recapitalizations, mergers, consolidations or reorganizations of or by
the Company.
15. TERMINATION OR AMENDMENT
The Board shall have the power to terminate the Plan and to amend it in any
respect, provided that, after the Plan has been approved by the shareholders of
the Company, the Board may not, without the approval of the shareholders of the
Company if such approval is then required by applicable law or in order for the
Plan to continue to satisfy the requirements of Rule 16b-3 under the Exchange
Act, amend the Plan so as to
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increase materially the number of Shares that may be issued under the Plan
(except as provided in Article 14), to modify materially the requirements as to
eligibility for participation in the Plan, to change the class of persons
eligible to receive Incentive Stock Options, or to increase materially the
benefits accruing to participants under the Plan. The Board may in its sole
discretion submit any other amendment to the Plan for shareholder approval,
including, but not limited to, amendments to the Plan intended to satisfy the
requirements of Section 162(m) of the Code and the regulations promulgated
thereunder regarding the exclusion of performance-based compensation from the
limit on corporate deductibility of compensation paid to Covered Employees. No
termination or amendment of the Plan shall, without his or her consent,
adversely affect the rights or obligations of any Optionee or Grantee.
16. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS, RIGHTS, PERFORMANCE UNITS,
RESTRICTED STOCK AND INCENTIVE SHARES
Subject to the terms and conditions and within the limitations of the Plan,
the Committee or the CEO, in the case of a grant or award to an Employee or
Consultant, may modify, extend or renew outstanding Options, Rights and
Performance Units, or accept the surrender of outstanding options, rights and or
performance units (to the extent not theretofore exercised) granted under the
Plan or under any other plan of the Company or a company or similar entity
acquired by the Company or a Subsidiary, and authorize the granting of new
Options, Rights and Performance Units pursuant to the Plan in substitution
therefor (to the extent not theretofore exercised), and the substituted Options
may specify a lower exercise price than the surrendered options, and the
substituted Options, Rights and Performance Units may specify a longer term than
the surrendered options, rights and performance units or have any other
provisions that are authorized by the Plan. Subject to the terms and conditions
and within the limitations of the Plan, the Committee or the CEO, in the case of
a grant or award to an Employee or Consultant, may modify the terms of any
outstanding Agreement providing for awards of Restricted Stock or Incentive
Shares. Notwithstanding the foregoing, however, no modification of an Option or
Right granted under the Plan, or an award of Restricted Stock or Incentive
Shares, shall, without the consent of the Optionee or Grantee, alter or impair
any of the Optionee's or Grantee's rights or obligations.
17. EFFECTIVENESS OF THE PLAN
The Plan and any amendments requiring shareholder approval pursuant to
Article 15 are subject to approval by vote of the shareholders of the Company
within 12 months after their adoption by the Board. Subject to that approval,
the Plan and any amendments are effective on the date on which they are adopted
by the Board. Options, Rights, Performance Units, Restricted Stock and
Incentive Shares may be granted or awarded prior to shareholder approval of the
Plan or amendments, but each such Option, Right,
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Performance Unit, Restricted Stock or Incentive Share grant or award shall be
subject to the approval of the Plan or amendments by the shareholders. Except
to the extent required to satisfy the requirements of Rule 16b-3 under the
Exchange Act, the date on which any Option, Right, Performance Unit, Restricted
Stock or Incentive Shares granted or awarded prior to shareholder approval of
the Plan or amendment is granted or awarded shall be the Date of Grant for all
purposes as if the Option, Right, Performance Units, Restricted Stock or
Incentive Shares had not been subject to approval. No Option, Right or
Performance Unit may be exercised prior to such shareholder approval, and any
Restricted Stock or Incentive Shares awarded shall be forfeited if such
shareholder approval is not obtained.
18. TERM OF THE PLAN
Unless sooner terminated by the Board pursuant to Article 15, the Plan
shall terminate on September 30, 2003 and no Options, Rights, Performance Units,
Restricted Stock or Incentive Shares may be granted or awarded after
termination. The termination shall not affect the validity of any Option,
Right, Performance Unit, Restricted Stock or Incentive Shares outstanding on the
date of termination.
19. INDEMNIFICATION OF COMMITTEE AND CEO
In addition to such other rights of indemnification as they may have as
Directors or as members of the Committee, the members of the Committee and the
CEO, in the case of a grant or award to an Employee or Consultant, shall be
indemnified by the Company against the reasonable expenses, including attorneys'
fees, actually and reasonably incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein, to which
they or any of them may be a party by reason of any action taken or failure to
act under or in connection with the Plan or any Option, Right, Performance Unit,
Restricted Stock or Incentive Shares granted or awarded hereunder, and against
all amounts reasonably paid by them in settlement thereof or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, if such
members or the CEO, as the case may be, acted in good faith and in a manner
which they believed to be in, and not opposed to, the best interests of the
Company.
20. GENERAL PROVISIONS
20.1 The establishment of the Plan shall not confer upon any Director,
Employee, Covered Employee, Key Employee, Consultant-Director or Consultant any
legal or equitable right against the Company, any Subsidiary, the Committee or
the CEO, except as expressly provided in the Plan.
20.2 The Plan does not constitute inducement or consideration for the
employment of any Employee, Covered Employee, or Key Employee, or the service of
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any Director, Consultant-Director or Consultant, nor is it a contract between
the Company or a Subsidiary and any Director, Employee, Covered Employee, Key
Employee, Consultant-Director or Consultant. Participation in the Plan shall
not give a Director, Employee, Covered Employee, Key Employee,
Consultant-Director or Consultant any right to be retained in the service of the
Company or a Subsidiary.
20.3 The Company and a Subsidiary may assume options, warrants, or rights
to purchase stock issued or granted by other companies whose stock or assets
shall be acquired by the Company or a Subsidiary, or which shall be merged into
or consolidated with the Company or a Subsidiary. Neither the adoption of this
Plan, nor its submission to the shareholders, shall be taken to impose any
limitations on the powers of the Company or its affiliates to issue, grant, or
assume options, warrants, rights, performance units, restricted stock or
incentive shares, otherwise than under this Plan, or to adopt other stock
option, stock appreciation right, performance unit, restricted stock or
incentive share plans or to impose any requirement of shareholder approval upon
the same.
20.4 The interests of any Director, Employee, Covered Employee, Key
Employee, Consultant-Director or Consultant under the Plan are not subject to
the claims of creditors and may not, in any way, be assigned, alienated or
encumbered except as provided in Article 11.
20.5 The Plan shall be governed, construed and administered in accordance
with the laws of Delaware and the intention of the Company that Incentive Stock
Options granted under the Plan qualify as such under Section 422 of the Code.
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Exhibit 10.19
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
effective as of October 1, 1996, by and between Maxim Pharmaceuticals, Inc.,
(the "Company"), and Kurt Gehlsen, Ph.D. ("Executive"). The Company and
Executive are hereinafter collectively referred to as the "Parties," and
individually referred to as a "Party."
RECITALS
A. The Company desires assurance of the association and services of
Executive in order to retain Executive's experience, skills, abilities,
background and knowledge, and is willing to engage Executive's services on the
terms and conditions set forth in this Agreement.
B. Executive desires to be in the employ of the Company, and is willing
to accept such employment on the terms and conditions set forth in this
Agreement.
AGREEMENT
In consideration of the foregoing recitals and the mutual promises and
covenants herein contained, and for other good and valuable consideration, the
Parties, intending to be legally bound, agree as follows:
1. EMPLOYMENT.
1.1 The Company hereby employs Executive, and Executive hereby accepts
employment by the Company, upon the terms and conditions set forth in this
Agreement, effective as of the date first set forth above ("Commencement Date").
This Agreement shall continue in until December 31, 1997, unless terminated
earlier pursuant to Section 5 below.
1.2 Executive shall be the Vice-President, Development and Chief
Technical Officer of the Company and shall serve in such other capacity or
capacities as the Chief Executive Officer and/or the Company's Board of
Directors ("Board") may from time to time prescribe.
1.3 Executive shall do and perform all services, acts or things necessary
or advisable to manage and conduct the business of the Company and which are
normally associated with the position of Vice-President, Development and Chief
Technical Officer, consistent with the Bylaws of the Company, as well as its
general employment policies and practices, including, but not limited to
management of the Company's research and development programs issuing from its
technologies, including; primary responsibility for business development and
corporate partnering activities, over-site and administration of clinical
trials, supervision of collaborator and contract laboratory relationships,
planning and supervision of research programs, preparation of strategic
development and marketing plans for the Company's technologies, evaluation of
scientific and other technologies for acquisition, and participation in
financing presentations and otherwise representing the Company at various
meetings. However, at all times during his employment Executive shall be subject
to the direction and policies from time to time established by the Board.
1.4 Unless the Parties otherwise agree in writing, during the term of
this Agreement, Executive shall perform the services he is required to perform
pursuant to this Agreement at the Company's offices, located at 3099 Science
Park Road, Suite 150, San Diego, CA 92121 or at any other place at which the
Company maintains an office; provided, however, that the Company may from time
to time require Executive to travel temporarily to other locations in connection
with the Company's business.
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2. LOYAL AND CONSCIENTIOUS PERFORMANCE; NONCOMPETITION.
2.1 During his employment by the Company, Executive shall devote his full
business energies, interest, abilities and productive time to the proper and
efficient performance of his duties under this Agreement.
2.2 During the term of this Agreement, Executive shall not engage in
competition with the Company, either directly or indirectly, in any manner or
capacity, as adviser, principal, agent, partner, officer, director, employee,
member of any association or otherwise, in any phase of the business of
developing, manufacturing and marketing of products which are in the same field
of use or which otherwise compete with the products or proposed products of the
Company.
2.3 Ownership by Executive, as a passive investment, of less than one
percent (1%) of the outstanding shares of capital stock of any corporation with
one or more classes of its capital stock listed on a national securities
exchange or publicly traded in the over-the-counter market shall not constitute
a breach of this paragraph.
3. COMPENSATION OF EXECUTIVE.
3.1 While employed by the Company, as compensation for proper and
satisfactory performance of all duties to be performed hereunder, the Company
shall pay Executive an annual base salary of One Hundred Forty Thousand Dollars
($140,000) per year (the "Base Salary"), payable in regular periodic payments in
accordance with Company policy. Such salary shall be prorated for any partial
year of employment on the basis of a 365-day fiscal year. In addition,
Executive will be eligible for an incentive bonus of up to $28,000, based upon
defined milestones, during the agreement period.
3.2 Executive's compensation may be changed from time to time by mutual
agreement of Executive and the Board.
3.3 All of Executive's compensation shall be subject to customary
withholding taxes and any other employment taxes as are commonly required to be
collected or withheld by the Company.
3.4 Executive shall be entitled to vacation and illness days consistent
with the Company's standard practice for its employees generally.
3.5 Executive shall, at the discretion of the Board, be entitled to
participate in the benefits for which he is eligible under the terms and
conditions of the standard Company benefits which may be in effect from time to
time and provided by the Company.
4. EXPENSE REIMBURSEMENT.
4.1 Executive shall be entitled to receive prompt reimbursement of all
reasonable business and travel expenses incurred by Executive in connection with
the business of the Company. Such expenses must be properly accounted for under
the policies and procedures established by the Company.
5. TERMINATION.
5.1 The Company may terminate Executive's employment under this Agreement
"for cause" by delivery of written notice to Executive specifying the cause or
causes relied upon for such termination. If Executive's employment under this
Agreement is terminated by the Company for cause under this section, Executive
shall be entitled to receive only accrued Base Salary and other accrued benefits
required by law, prorated to the date of termination. Executive will not be
entitled to severance pay, pay in lieu of notice or any other such compensation.
Grounds for the Company to terminate this Agreement "for cause" shall be limited
to the occurrence of any of the following events:
2
<PAGE>
5.1.1 If Executive is in material breach of any provision of this
Agreement;
5.1.2 Executive's engaging or in any manner participating in any
activity which is competitive with or intentionally injurious to the Company or
which violates any provision of Section 7 of this Agreement;
5.1.3 Executive's commission of any fraud against the Company or
use or appropriation for his personal use or benefit of any funds or properties
of the Company not authorized by the Board to be so used or appropriated;
5.1.4 Executive's conviction of any crime involving dishonesty or
moral turpitude;
5.1.5 Conduct by Executive which in good faith and reasonable
determination of the Board demonstrates gross unfitness to serve.
Any notice of termination given pursuant to this Section 5.1 shall effect
termination as of the date specified in such notice or, in the event no such
date is specified, on the last day of the month in which such notice is
delivered or deemed delivered as provided in Section 9 below.
5.2 The Company may terminate the Executive's employment at any time
without cause upon delivery of written notice to the Executive. Any notice of
termination given pursuant to this Section 5.2 shall effect termination as of
the date specified in such notice or, in the event no such date is specified, on
the last day of the month in which such notice is delivered or deemed
deliverable as provided in Section 9 below. If such termination shall occur
under this Section 5.2, then Executive shall be entitled to continuation of Base
Salary and health benefits for a period of six (6) months from said date of
termination with such Base Salary continuation to be at the rate set forth in
Section 3.1 or, as the case may be, at the rate of Executive's then current Base
Salary in effect as of the date of termination.
5.3 The parties may mutually agree at any time to terminate this
Agreement upon such terms and conditions as may be agreed upon in writing.
5.4 This Agreement shall terminate without notice upon the date of
Executive's death or the date when Executive becomes "completely disabled" as
that term is defined in Section 6.2
5.5 Notwithstanding any provision to the contrary herein, unless
otherwise provided herein or unless otherwise provided by law, Executive may at
any time terminate his employment with the Company hereunder. In such event,
the Company shall not be liable to Executive for the payment of any amount other
than accrued Base Salary and other accrued benefits required by law, prorated to
the date of termination. Executive will not be entitled to severance pay, pay
in leui of notice or any other such compensation.
6. DEATH OR DISABILITY DURING TERM OF EMPLOYMENT.
6.1 Upon termination of Executive's employment pursuant to Section 5.4,
Executive or his estate or personal representative, as the case may be, shall be
entitled to receive Executive's Base Salary and benefits for a period of one
month following the date of death or the date when Executive becomes completely
disabled.
6.2 The term "completely disabled" as used in this Agreement shall mean
the inability of Executive to perform the essential functions of his position
under this Agreement by reason of any incapacity, physical or mental, which the
Board of the Company, based upon medical advice or an opinion provided by a
licensed physician acceptable to the Board of the Company and approved by the
Executive, which approval shall not be unreasonably withheld, determines to have
incapacitated Executive from satisfactorily performing any or all essential
functions of his position for the Company during the foreseeable future. Based
upon such medical advice or opinion, the determination of the Board of the
Company shall be final and binding and the date such determination is made shall
be the date of such complete disability for purposes of this Agreement.
3
<PAGE>
7. CONFIDENTIAL INFORMATION; NONSOLICITATION.
7.1 Executive recognizes that his employment with the Company will
involve contact with information of substantial value to the Company, which is
not old and generally known in the trade, and which gives the Company an
advantage over its competitors who do not know or use it, including but not
limited to, techniques, designs, drawings, processes, inventions, developments,
equipment, prototypes, sales and customer information, and business and
financial information relating to the business, products, practices and
techniques of the Company, (hereinafter referred to as "Confidential
Information"). Executive will at all times regard and preserve as confidential
such Confidential Information obtained by Executive from whatever source and
will not, either during his employment with the Company or thereafter, publish
or disclose any part of such Confidential Information in any manner at any time,
or use the same except on behalf of the Company, without the prior written
consent of the Company. As a condition of this Agreement, Executive will sign
and return a copy of the Company's "Proprietary Information and Inventions
Agreement," attached as Exhibit A.
7.2 While employed by the Company and for one (1) year thereafter, the
Executive agrees that in order to protect the Company's confidential and
proprietary information from unauthorized use, that Executive will not, either
directly or through others, solicit or attempt to solicit any employee,
consultant or independent contractor of the Company to terminate his or her
relationship with the Company in order to become an employee, consultant or
independent contractor to or for any other person or business entity; or the
business of any customer, vendor or distributor of the Company which, at the
time of termination or one (1) year immediately prior thereto, was listed on
Company's customer, vendor or distributor list.
8. ASSIGNMENT AND BINDING EFFECT.
8.1 This Agreement shall be binding upon and inure to the benefit of
Executive and Executive's heirs, executors, personal representatives, assigns,
administrators and legal representatives. Because of the unique and personal
nature of Executive's duties under this Agreement, neither this Agreement nor
any rights or obligations under this Agreement shall be assignable by Executive.
This Agreement shall be binding upon and inure to the benefit of the Company and
its successors, assigns and legal representatives.
9. NOTICES.
9.1 All notices or demands of any kind required or permitted to be given
by the Company or Executive under this Agreement shall be given in writing and
shall be personally delivered (and receipted for) or mailed by certified mail,
return receipt requested, postage prepaid, addressed as follows:
9.1.1 If to the Company:
Larry Stambaugh
MAXIM PHARMACEUTICALS, INC.
3099 SCIENCE PARK ROAD
SUITE 150
SAN DIEGO, CA 92121
9.1.2 If to Executive:
Kurt Gehlsen, Ph.D.
MAXIM PHARMACEUTICALS, INC.
4
<PAGE>
3099 SCIENCE PARK ROAD
SUITE 150
SAN DIEGO, CA 92121
Any such written notice shall be deemed received when personally delivered or
three (3) days after its deposit in the United States mail as specified above.
Either Party may change its address for notices by giving notice to the other
Party in the manner specified in this section.
10. CHOICE OF LAW.
10.1 This Agreement is made in San Diego, California. This Agreement
shall be construed and interpreted in accordance with the laws of the State of
California.
11. INTEGRATION.
11.1 This Agreement contains the complete, final and exclusive agreement
of the Parties relating to the subject matter of this Agreement, and supersedes
all prior oral and written employment agreements or arrangements between the
Parties.
12. AMENDMENT.
12.1 This Agreement cannot be amended or modified except by a written
agreement signed by Executive and the Company.
13. WAIVER.
13.1 No term, covenant or condition of this Agreement or any breach
thereof shall be deemed waived, except with the written consent of the Party
against whom the wavier in claimed, and any waiver or any such term, covenant,
condition or breach shall not be deemed to be a waiver of any preceding or
succeeding breach of the same or any other term, covenant, condition or breach.
14. SEVERABILITY.
14.1 The finding by a court of competent jurisdiction of the
unenforceability, invalidity or illegality of any provision of this Agreement
shall not render any other provision of this Agreement unenforceable, invalid or
illegal. Such court shall have the authority to modify or replace the invalid
or unenforceable term or provision with a valid and enforceable term or
provision which most accurately represents the parties' intention with respect
to the invalid or unenforceable term or provision.
15. INTERPRETATION; CONSTRUCTION.
15.1 The headings set forth in this Agreement are for convenience of
reference only and shall not be used in interpreting this Agreement. This
Agreement has been drafted by legal counsel representing the Company, but
Executive has been encouraged, and has consulted with, his own independent
counsel and tax advisors with respect to the terms of this Agreement. The
Parties acknowledge that each Party and its counsel has reviewed and revised, or
had an opportunity to review and revise, this Agreement, and the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement.
16. REPRESENTATIONS AND WARRANTIES.
16.1 Executive represents and warrants that he is not restricted or
prohibited, contractually or otherwise, from entering into and performing each
of the terms and covenants contained in this Agreement, and that his execution
and performance of this Agreement will not violate or breach any other
agreements between Executive and any other person or entity.
5
<PAGE>
17. COUNTERPARTS.
17.1 This Agreement may be executed in two counterparts, each of which
shall be deemed an original, all of which together shall contribute one and the
same instrument.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
The Company:
MAXIM PHARMACEUTICALS, INC.
By: /s/ LARRY G. STAMBAUGH
---------------------------------------------
Larry G. Stambaugh
Chairman of the Board, President and Chief
Executive Officer
EXECUTIVE:
/s/ KURT R. GEHLSEN
---------------------------------------------
Kurt Gehlsen, Ph.D.
6
<PAGE>
EXHIBIT 10.20
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
effective as of October 1, 1996, by and between Maxim Pharmaceuticals, Inc.,
(the "Company"), and Dale Sander ("Executive"). The Company and Executive are
hereinafter collectively referred to as the "Parties," and individually referred
to as a "Party."
RECITALS
A. The Company desires assurance of the association and services of
Executive in order to retain Executive's experience, skills, abilities,
background and knowledge, and is willing to engage Executive's services on the
terms and conditions set forth in this Agreement.
B. Executive desires to be in the employ of the Company, and is willing
to accept such employment on the terms and conditions set forth in this
Agreement.
AGREEMENT
In consideration of the foregoing recitals and the mutual promises and
covenants herein contained, and for other good and valuable consideration, the
Parties, intending to be legally bound, agree as follows:
1. EMPLOYMENT.
1.1 The Company hereby employs Executive, and Executive hereby accepts
employment by the Company, upon the terms and conditions set forth in this
Agreement, effective as of the date first set forth above ("Commencement Date").
This Agreement shall continue in effect for a period beginning with the
Commencement Date and ending December 31, 1997, unless terminated earlier
pursuant to Section 5 below.
1.2 Executive shall be the Vice-President, Finance, Chief Financial
Officer and Corporate Secretary of the Company and shall serve in such other
capacity or capacities as the Chief Executive Officer and/or the Company's Board
of Directors ("Board") may from time to time prescribe.
1.3 Executive shall do and perform all services, acts or things necessary
or advisable to manage and conduct the business of the Company and which are
normally associated with the position Vice-President, Finance, Chief Financial
Officer and Corporate Secretary of the Company, consistent with the Bylaws of
the Company, as well as its general employment policies and practices,
including, but not limited to management of the corporate administrative
activities, record keeping and reporting requirements, preparation and review of
corporate documents related to regulatory requirements and board activities,
preparation of budgets and strategic business plans, analysis for acquisitions
and other business transactions, investor relations and development and
maintenance of financial community relationships necessary for raising
additional debt and/or equity capital. However, at all times during his
employment Executive shall be subject to the direction and policies from time to
time established by the Board.
1.4 Unless the Parties otherwise agree in writing, during the term of
this Agreement, Executive shall perform the services he is required to perform
pursuant to this Agreement at the Company's offices, located at 3099 Science
Park Road, Suite 150, San Diego, CA 92121 or at any other place at which the
Company maintains an office; provided, however, that the Company may from time
to time require Executive to travel temporarily to other locations in connection
with the Company's business.
<PAGE>
2. LOYAL AND CONSCIENTIOUS PERFORMANCE; NONCOMPETITION.
2.1 During his employment by the Company, Executive shall devote his full
business energies, interest, abilities and productive time to the proper and
efficient performance of his duties under this Agreement.
2.2 During the term of this Agreement, Executive shall not engage in
competition with the Company, either directly or indirectly, in any manner or
capacity, as adviser, principal, agent, partner, officer, director, employee,
member of any association or otherwise, in any phase of the business of
developing, manufacturing and marketing of products which are in the same field
of use or which otherwise compete with the products or proposed products of the
Company.
2.3 Ownership by Executive, as a passive investment, of less than one
percent (1%) of the outstanding shares of capital stock of any corporation with
one or more classes of its capital stock listed on a national securities
exchange or publicly traded in the over-the-counter market shall not constitute
a breach of this paragraph.
3. COMPENSATION OF EXECUTIVE.
3.1 While employed by the Company, as compensation for proper and
satisfactory performance of all duties to be performed hereunder, the Company
shall pay Executive an annual base salary of One Hundred Twenty Five Thousand
Dollars, $125,000 per year (the "Base Salary"), payable in regular periodic
payments in accordance with Company policy. Such salary shall be prorated for
any partial year of employment on the basis of a 365-day fiscal year.
3.2 Executive's compensation may be changed from time to time by mutual
agreement of Executive and the Board.
3.3 All of Executive's compensation shall be subject to customary
withholding taxes and any other employment taxes as are commonly required to be
collected or withheld by the Company.
3.4 Executive shall be entitled to vacation and illness days consistent
with the Company's standard practice for its employees generally.
3.5 Executive shall, at the discretion of the Board, be entitled to
participate in the benefits for which he is eligible under the terms and
conditions of the standard Company benefits which may be in effect from time to
time and provided by the Company.
4. EXPENSE REIMBURSEMENT.
4.1 Executive shall be entitled to receive prompt reimbursement of all
reasonable business and travel expenses incurred by Executive in connection with
the business of the Company. Such expenses must be properly accounted for under
the policies and procedures established by the Company.
5. TERMINATION.
5.1 The Company may terminate Executive's employment under this Agreement
"for cause" by delivery of written notice to Executive specifying the cause or
causes relied upon for such termination. If Executive's employment under this
Agreement is terminated by the Company for cause under this section, Executive
shall be entitled to receive only accrued Base Salary and other accrued benefits
required by law, prorated to the date of termination. Executive will not be
entitled to severance pay, pay in lieu of notice or any other such compensation.
Grounds for the Company to terminate this Agreement "for cause" shall be limited
to the occurrence of any of the following events:
2
<PAGE>
5.1.1 If Executive is in material breach of any provision of this
Agreement;
5.1.2 Executive's engaging or in any manner participating in any
activity which is competitive with or intentionally injurious to the Company or
which violates any provision of Section 7 of this Agreement;
5.1.3 Executive's commission of any fraud against the Company or
use or appropriation for his personal use or benefit of any funds or properties
of the Company not authorized by the Board to be so used or appropriated;
5.1.4 Executive's conviction of any crime involving dishonesty or
moral turpitude;
5.1.5 Conduct by Executive which in good faith and reasonable
determination of the Board demonstrates gross unfitness to serve.
Any notice of termination given pursuant to this Section 5.1 shall effect
termination as of the date specified in such notice or, in the event no such
date is specified, on the last day of the month in which such notice is
delivered or deemed delivered as provided in Section 9 below.
5.2 The Company may terminate the Executive's employment at any time
without cause upon delivery of written notice to the Executive. Any notice of
termination given pursuant to this Section 5.2 shall effect termination as of
the date specified in such notice or, in the event no such date is specified, on
the last day of the month in which such notice is delivered or deemed
deliverable as provided in Section 9 below. If such termination shall occur
under this Section 5.2, then Executive shall be entitled to continuation of Base
Salary and health benefits for a period of six (6) months from said date of
termination with such Base Salary continuation to be at the rate set forth in
Section 3.1 or, as the case may be, at the rate of Executive's then current Base
Salary in effect as of the date of termination.
5.3 The parties may mutually agree at any time to terminate this
Agreement upon such terms and conditions as may be agreed upon in writing.
5.4 This Agreement shall terminate without notice upon the date of
Executive's death or the date when Executive becomes "completely disabled" as
that term is defined in Section 6.2
5.5 Notwithstanding any provision to the contrary herein, unless
otherwise provided herein or unless otherwise provided by law, Executive may at
any time terminate his employment with the Company hereunder. In such event,
the Company shall not be liable to Executive for the payment of any amount other
than accrued Base Salary and other accrued benefits required by law, prorated to
the date of termination. Executive will not be entitled to severance pay, pay
in leui of notice or any other such compensation.
6. DEATH OR DISABILITY DURING TERM OF EMPLOYMENT.
6.1 Upon termination of Executive's employment pursuant to Section 5.4,
Executive or his estate or personal representative, as the case may be, shall be
entitled to receive Executive's Base Salary and benefits for a period of one
month following the date of death or the date when Executive becomes completely
disabled.
6.2 The term "completely disabled" as used in this Agreement shall mean
the inability of Executive to perform the essential functions of his position
under this Agreement by reason of any incapacity, physical or mental, which the
Board of the Company, based upon medical advice or an opinion provided by a
licensed physician acceptable to the Board of the Company and approved by the
Executive, which approval shall not be unreasonably withheld, determines to have
incapacitated Executive from satisfactorily performing any or all essential
functions of his position for the Company during the foreseeable future. Based
upon such medical advice or opinion, the determination of the Board of the
Company shall be final and binding and the date such determination is made shall
be the date of such complete disability for purposes of this Agreement.
3
<PAGE>
7. CONFIDENTIAL INFORMATION; NONSOLICITATION.
7.1 Executive recognizes that his employment with the Company will
involve contact with information of substantial value to the Company, which is
not generally known in the trade, and which gives the Company an advantage over
its competitors who do not know or use it, including but not limited to,
techniques, designs, drawings, processes, inventions, developments, equipment,
prototypes, sales and customer information, and business and financial
information relating to the business, products, practices and techniques of the
Company, (hereinafter referred to as "Confidential Information"). Executive
will at all times regard and preserve as confidential such Confidential
Information obtained by Executive from whatever source and will not, either
during his employment with the Company or thereafter, publish or disclose any
part of such Confidential Information in any manner at any time, or use the same
except on behalf of the Company, without the prior written consent of the
Company. As a condition of this Agreement, Executive will sign and return a
copy of the Company's "Proprietary Information and Inventions Agreement,"
attached as Exhibit A.
7.2 While employed by the Company and for one (1) year thereafter, the
Executive agrees that in order to protect the Company's confidential and
proprietary information from unauthorized use, that Executive will not, either
directly or through others, solicit or attempt to solicit any employee,
consultant or independent contractor of the Company to terminate his or her
relationship with the Company in order to become an employee, consultant or
independent contractor to or for any other person or business entity; or the
business of any customer, vendor or distributor of the Company which, at the
time of termination or one (1) year immediately prior thereto, was listed on
Company's customer, vendor or distributor list.
8. ASSIGNMENT AND BINDING EFFECT.
8.1 This Agreement shall be binding upon and inure to the benefit of
Executive and Executive's heirs, executors, personal representatives, assigns,
administrators and legal representatives. Because of the unique and personal
nature of Executive's duties under this Agreement, neither this Agreement nor
any rights or obligations under this Agreement shall be assignable by Executive.
This Agreement shall be binding upon and inure to the benefit of the Company and
its successors, assigns and legal representatives.
9. NOTICES.
9.1 All notices or demands of any kind required or permitted to be given
by the Company or Executive under this Agreement shall be given in writing and
shall be personally delivered (and receipted for) or mailed by certified mail,
return receipt requested, postage prepaid, addressed as follows:
9.1.1 If to the Company:
Larry Stambaugh
MAXIM PHARMACEUTICALS, INC.
3099 SCIENCE PARK ROAD
SUITE 150
SAN DIEGO, CA 92121
9.1.2 If to Executive:
Dale Sander
MAXIM PHARMACEUTICALS, INC.
3099 SCIENCE PARK ROAD
SUITE 150
SAN DIEGO, CA 92121
4
<PAGE>
Any such written notice shall be deemed received when personally delivered or
three (3) days after its deposit in the United States mail as specified above.
Either Party may change its address for notices by giving notice to the other
Party in the manner specified in this section.
10. CHOICE OF LAW.
10.1 This Agreement is made in San Diego, California. This Agreement
shall be construed and interpreted in accordance with the laws of the State of
California.
11. INTEGRATION.
11.1 This Agreement contains the complete, final and exclusive agreement
of the Parties relating to the subject matter of this Agreement, and supersedes
all prior oral and written employment agreements or arrangements between the
Parties.
12. AMENDMENT.
12.1 This Agreement cannot be amended or modified except by a written
agreement signed by Executive and the Company.
13. WAIVER.
13.1 No term, covenant or condition of this Agreement or any breach
thereof shall be deemed waived, except with the written consent of the Party
against whom the wavier in claimed, and any waiver or any such term, covenant,
condition or breach shall not be deemed to be a waiver of any preceding or
succeeding breach of the same or any other term, covenant, condition or breach.
14. SEVERABILITY.
14.1 The finding by a court of competent jurisdiction of the
unenforceability, invalidity or illegality of any provision of this Agreement
shall not render any other provision of this Agreement unenforceable, invalid or
illegal. Such court shall have the authority to modify or replace the invalid
or unenforceable term or provision with a valid and enforceable term or
provision which most accurately represents the parties' intention with respect
to the invalid or unenforceable term or provision.
15. INTERPRETATION; CONSTRUCTION.
15.1 The headings set forth in this Agreement are for convenience of
reference only and shall not be used in interpreting this Agreement. This
Agreement has been drafted by legal counsel representing the Company, but
Executive has been encouraged, and has consulted with, his own independent
counsel and tax advisors with respect to the terms of this Agreement. The
Parties acknowledge that each Party and its counsel has reviewed and revised, or
had an opportunity to review and revise, this Agreement, and the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement.
16. REPRESENTATIONS AND WARRANTIES.
16.1 Executive represents and warrants that he is not restricted or
prohibited, contractually or otherwise, from entering into and performing each
of the terms and covenants contained in this Agreement, and that his execution
and performance of this Agreement will not violate or breach any other
agreements between Executive and any other person or entity.
5
<PAGE>
17. COUNTERPARTS.
17.1 This Agreement may be executed in two counterparts, each of which
shall be deemed an original, all of which together shall contribute one and the
same instrument.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
The Company:
MAXIM PHARMACEUTICALS, INC.
By: /s/ LARRY G. STAMBAUGH
---------------------------------------------
Larry G. Stambaugh
Chairman of the Board, President and Chief
Executive Officer
EXECUTIVE:
/s/ DALE A. SANDER
---------------------------------------------
Dale Sander
6
<PAGE>
Exhibit 10.21
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of the 12th day of November, 1996 between
Maxim Pharmaceuticals, Inc. ("Company") and Larry G. Stambaugh ("Executive").
PRELIMINARY STATEMENT
WHEREAS, the Company wishes to retain the Executive as Chairman of the
Board of Directors, President and Chief Executive Officer of the Company, and
the Executive wishes to continue in such positions, all on the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises, and for other good and
valuable consideration, the Company and the Executive agree as follows:
1. TERM OF AGREEMENT. This Agreement shall commence on October 1, 1996
and shall continue in effect for a term ending on December 31, 1998 ("Term"),
except as hereinafter provided.
2. POSITION AND DUTIES. Except as may otherwise be agreed upon between
the Company and the Executive, the Company agrees to employ the Executive, and
the Executive agrees to serve the Company, as Chairman of the Board of
Directors, President and Chief Executive Officer. The Executive shall render
such services to the Company as are customary for such positions and perform all
other services incident thereto. At all times, the Executive shall report
directly to the Board of Directors of the Company. The Executive shall devote
substantially all of his working time and efforts to the business and affairs of
the Company, except for time spent for service on the boards of directors of
other corporations, vacations as defined by Company policy and civic and
charitable activities, and shall represent the Company within its industry.
3. PLACE OF PERFORMANCE. In connection with his employment by the
Company, the Executive shall, except as the Executive may otherwise agree,
perform his principal activities at the offices of the Company located in San
Diego, California, subject to travel reasonably required for the Company's
business.
<PAGE>
4. COMPENSATION AND RELATED MATTERS.
4.1 BASE SALARY. During the Term, the Company shall pay to the
Executive, in approximately equal installments not less often than twice per
month, a base salary of not less than $225,000 per year through December 31,
1998 and such base salary shall be subject to increase from time to time based
upon recommendations from the Compensation Committee to the Board of Directors.
All amounts payable to the Executive pursuant to this Agreement shall be paid
subject to such reporting and withholding requirements, if any, as may be
imposed by applicable law and applicable Company policy.
4.2 INCENTIVE PLAN. The Executive shall be eligible to receive
bonus payments pursuant to a plan to be prepared by the Company's Board of
Directors with the Executive's participation ("Bonus Plan"). The parties shall
endeavor to establish the initial Bonus Plan at the earliest practicable time.
The Bonus Plan shall provide that, assuming reasonable satisfaction of the
performance criteria to be set forth in the Bonus Plan, the Executive shall be
eligible to earn an annual bonus with respect to each of the Company's fiscal
years during the Term in an amount up to 30% of the Executive's annualized base
salary hereunder, such bonus to be payable within ninety days after the end of
each such fiscal year. The bonus will be based upon the annualized base salary
for the year in which the bonus applies.
4.3 BENEFIT PLANS AND ARRANGEMENT. The Executive shall be entitled
to participate in and receive benefits under the Company's employee benefit
plans and arrangements in effect during the Term. The Company shall pay the
entire cost of the Executive's health, life and disability insurance coverage
under the Company's plans and policies during the Term, notwithstanding anything
to the contrary in such plans and policies.
4.4 PERQUISITES. During the Term, the Executive shall be entitled
to receive fringe benefits ordinarily and customarily provided by the Company to
its senior officers.
4.5 EXPENSES. The Company shall promptly reimburse the Executive
for all normal out-of-pocket expenses related to the Company's business actually
paid or incurred by him in the performance of his services under this Agreement.
4.6 STOCK OPTIONS. In addition to previously awarded options, the
Company's Board of Directors will award the Executive options to acquire 83,333
shares of Common Stock of the Company at $9.00, a price which is considered the
fair market value of such stock at the date of this Agreement.
-2-
<PAGE>
Options issued will be 25% vested as of September 30, 1997 and the balance will
vest at 25% on each September 30 thereafter.
5. TERMINATION. The Executive's employment hereunder may be terminated
under the following circumstances (without impairing the Executive's rights
under benefit plans and arrangements and the Company's policies and procedures):
5.1 TERMINATION UPON DEATH OR PERMANENT DISABILITY. The Term shall
automatically terminate in the event of the death or permanent disability of
Executive. For purposes of this Agreement, "permanent disability" shall mean
the inability to perform services hereunder for a period of six consecutive
months.
5.2 TERMINATION BY COMPANY FOR CAUSE. The Company shall have the
option to terminate the Term (a) for cause in the event the Executive engages in
grossly negligent conduct or willful misconduct in connection with the execution
of his duties hereunder which materially and adversely affects the Company,
after written notice by the Company to the Executive of the specific acts that
form the basis for the termination, and (b) for the Executive's material
nonperformance of his duties hereunder, provided the nonperformance continues
uncorrected for a period of thirty days after written notice thereof by the
Company to the Executive specifically identifying the manner in which the
Company believes the Executive has not performed his duties. For purposes of
this Section 5.2, no act, or failure to act, on the Executive's part shall be
considered "willful" unless done, or omitted to be done, by him not in good
faith and without reasonable belief that his act or omission was in the best
interests of the Company.
5.3 SEVERANCE AND LIFE INSURANCE. If the Company terminates
Executive's employment other than for cause pursuant to Section 5.2, Executive,
in lieu of all other remedies and as liquidated damages, shall be entitled to
receive a severance payment equal to his then annual base salary plus health
care insurance coverage for one year or the remainder of the term of this
Agreement, whichever is greater.
The Company shall also during the Term hereof maintain for Executive a term life
insurance policy in the amount of $1,000,000, with Executive's nominee as
beneficiary. Nothing herein shall derogate from the Executive's rights under
employee benefit plans, programs and arrangements or under applicable law.
-3-
<PAGE>
5.4 CONSTRUCTIVE DISCHARGE. Any significant reduction or adverse
change in the nature or scope of the Executive's authority, duties, status or
position contemplated by Section 2 hereof, including an involuntary relocation,
or a reduction the base salary and/or benefits of the Executive from those
provided for in Section 4 hereof as they may from time to time be in effect,
will be the basis for the Executive's termination of this Agreement by giving at
least 30 days prior notice to the Company and in such event the termination will
be treated as a termination by the Company without cause under Section 5.3.
5.5 BENEFITS UPON TERMINATION FOR CAUSE OR VOLUNTARY TERMINATION BY
EXECUTIVE. In the event the Company properly terminates Executive's employment
under this Agreement for cause pursuant to Section 5.2 or Executive voluntary
resigns from his employment during the Term:
a. all salary shall be prorated as of the date of termination
and such prorated amount shall be paid to Executive;
b. all stock options or stock appreciation rights granted to
Executive shall be governed by the instruments granting such rights; and
c. the Company shall (i) make such other and further payment to
Executive, his designated beneficiaries and his dependents as may be provided
pursuant to the terms of any employee benefit plan and other compensation plans,
programs and structures, or fringe benefit programs in which Executive is a
participant at the time of the termination of his employment with the Company
and (ii) promptly reimburse the Executive for any then unreimbursed out-of-
pocket expenses pursuant to Section 4.6.
6. ATTORNEYS FEES. If litigation shall be instituted to enforce or
interpret any provision hereof the prevailing party will reimburse the other
part for his reasonable attorneys' fees and disbursements incurred in such
proceeding and will pay prejudgment interest at the legal rate then in effect on
any money judgment or award obtained in such proceeding.
7. NOTICE. For the purposes of this Agreement, notices, demands and all
other communications provided for in the Agreement shall be in writing and shall
be deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed as
follows:
-4-
<PAGE>
If to the Executive:
Larry G. Stambaugh
17947 Corazon Place
San Diego, California 92127
If to the Company:
Maxim Pharmaceuticals, Inc.
4350 Executive Drive, Suite 310
San Diego, California 92121
Attn: Corporate Secretary
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change in address shall
be effective only upon receipt.
8. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provision or conditions
at the same or at any proper or subsequent time. No agreements or
representations, oral otherwise, expressed or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly or referred to in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of California relating to contracts to be performed entirely therein.
9. VALIDITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
10. HEADINGS. The headings of the paragraphs herein are for convenience
only and shall have no significance in the interpretation of this Agreement.
11. BIND AND INURE. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their heirs, personal representatives and
successors, including any successor of the Company by reason of any dissolution,
merger, consolidation, sale of assets or other reorganization of the Company.
-5-
<PAGE>
12. 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 will constitute one and the same instrument.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and its seal to be affixed hereunto by its officer thereunto duly authorized,
and Executive has signed this Agreement, as of the day and year first above
written.
MAXIM PHARMACEUTICALS, INC.
By: /s/ G. STEVEN BURRILL
-----------------------
/s/ LARRY G. STAMBAUGH
------------------------
Executive
-6-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
INTERIM FINANCIAL STATEMENTS FOR THE PERIOD ENDED DECEMBER 31, 1996, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 130,387
<SECURITIES> 14,651,759
<RECEIVABLES> 45,876
<ALLOWANCES> 45,876
<INVENTORY> 0
<CURRENT-ASSETS> 15,760,783
<PP&E> 241,030
<DEPRECIATION> 32,773
<TOTAL-ASSETS> 20,711,095
<CURRENT-LIABILITIES> 1,335,051
<BONDS> 0
0
0
<COMMON> 6,672
<OTHER-SE> 19,369,372
<TOTAL-LIABILITY-AND-EQUITY> 20,711,095
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 539,592
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,333
<INCOME-PRETAX> (764,560)
<INCOME-TAX> 0
<INCOME-CONTINUING> (764,560)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (764,560)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
