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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, 1998
or
[ ] Transition report pursuant to Section 13 or 15(d) of Securities Exchange Act
of 1934
Commission file number 1-14430
MAXIM PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 87-0279983
-------------------------------------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
8899 UNIVERSITY CENTER LANE, SUITE 400, SAN DIEGO, CA 92122
-----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(619) 453-4040
----------------------------------------------------
(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 8, 1999, the registrant had 9,981,101 shares of Common Stock,
$.001 par value, outstanding.
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MAXIM PHARMACEUTICALS, INC.
(A Development Stage Company)
INDEX
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<CAPTION>
PART I - FINANCIAL INFORMATION PAGE
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Item 1. Financial Statements
Balance Sheets -
December 31, 1998 (unaudited) and September 30, 1998 ................1
Statements of Operations (unaudited) -
Three Months Ended December 31, 1998 and 1997
and from Inception (October 23, 1989) to
December 31, 1998....................................................2
Statements of Cash Flows (unaudited) Three Months Ended
December 31, 1998 and 1997 and from Inception (October 23,
1989) to
December 31, 1998....................................................3
Notes to Financial Statements........................................4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........................5
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PART II - OTHER INFORMATION
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Item 2. Changes in Securities and Use of Proceeds............................8
Item 6. Exhibits and Reports on Form 8-K.....................................8
SIGNATURE .....................................................................9
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BALANCE SHEETS
MAXIM PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
DECEMBER 31, 1998 SEPTEMBER 30, 1998
(UNAUDITED)
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 7,421,001 $ 11,217,429
Short-term investments in marketable securities 19,063,274 21,031,568
Accrued interest and other current assets 2,423,942 2,491,308
------------------ ------------------
Total current assets 28,908,217 34,740,305
Investments in marketable securities 508,561 3,519,554
Patents and licenses, net 2,175,055 1,839,167
Property and equipment, net 1,720,960 1,693,402
Deposits and other assets 229,157 229,157
------------------ ------------------
Total assets $ 33,541,950 $ 42,021,585
------------------ ------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 9,679,183 $ 9,014,831
Accrued expenses 230,849 374,652
Note payable 153,175 176,784
Current portion of long-term debt 473,418 361,675
------------------ ------------------
Total current liabilities 10,536,625 9,927,942
Long-term debt, less current portion 1,253,419 977,213
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value, 5,000,000 shares authorized; -- --
none issued or outstanding.
Common stock, $.001 par value, 20,000,000 shares authorized; 9,915,570 and
9,885,576 shares issued and outstanding at
December 31, 1998 and September 30, 1998, respectively 9,916 9,886
Additional paid-in capital 73,885,098 73,807,327
Deficit accumulated during the development stage (52,134,829) (42,686,624)
Deferred compensation (8,279) (14,159)
------------------ ------------------
Total stockholders' equity 21,751,906 31,116,430
------------------ ------------------
Total liabilities and stockholders' equity $ 33,541,950 $ 42,021,585
------------------ ------------------
------------------ ------------------
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SEE NOTES TO FINANCIAL STATEMENTS
1
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STATEMENTS OF OPERATIONS (UNAUDITED)
MAXIM PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY)
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<CAPTION>
Three Months Ended October 23, 1989
December 31 (inception) to
1998 1997 December 31, 1998
---------------- ---------------- ------------------------
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Research revenue $ 88,000 $ -- $ 3,214,751
Operating expenses:
Research and development 8,779,013 2,909,584 44,280,085
Business development
and marketing 453,331 121,845 2,379,440
General and administrative 693,974 628,631 12,704,917
---------------- ---------------- -------------------
Total operating expenses 9,926,318 3,660,060 59,364,442
Other income (expense):
Investment income 428,820 528,416 3,891,177
Interest expense (38,707) (18,662) (2,109,179)
Other expense -- -- (191,164)
Gain on sale of subsidiary -- -- 2,288,474
---------------- ---------------- -------------------
Total other income (expense) 390,113 509,754 3,879,308
---------------- ---------------- -------------------
Discontinued operations:
Loss from operation of discontinued
diagnostic division -- -- (347,608)
Gain on sale of diagnostic division -- -- 483,162
---------------- ---------------- -------------------
Net loss $ (9,448,205) $ (3,150,306) $ (52,134,829)
---------------- ---------------- -------------------
Net loss per share of common stock $ (0.95) $ (0.37)
---------------- ----------------
Weighted average shares outstanding 9,902,900 8,583,517
---------------- ----------------
SEE NOTES TO FINANCIAL STATEMENTS
</TABLE>
2
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STATEMENTS OF CASH FLOWS
MAXIM PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
Three Months Ended October 23, 1989
December 31 (inception) to
1998 1997 December 31, 1998
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (9,448,205) $ (3,150,306) $ (52,134,829)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 158,437 80,770 1,609,890
Amortization of premium on investments 72,272 32,223 358,217
Stock options issued as compensation 5,880 14,110 534,062
Stock contributions to 401(k) plan 13,811 -- 40,418
Net book value of disposed assets 2,551 481 209,915
Loss on write-off of patents -- -- 262,262
Gain on sale of subsidiary -- -- (2,288,474)
Loss on write-off of receivable from related party -- -- 147,803
Other -- -- 51,701
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 67,366 (429,190) (2,231,455)
Other assets and deposits - 386,893 (376,960)
Accounts payable 664,352 22,094 9,679,182
Accrued expenses (143,803) 3,568 252,059
------------ ----------- -------------
Net cash used in operating activities (8,607,339) (3,039,357) (40,570,538)
INVESTING ACTIVITIES:
Purchases of marketable securities (4,742,985) (12,821,105) (66,225,102)
Maturities of marketable securities 9,650,000 3,144,500 46,295,050
Additions to patents and licenses (384,269) (37,260) (3,092,056)
Purchases of property and equipment (140,164) (23,887) (2,851,445)
Cash acquired in acquisition of business -- -- 985,356
Proceeds from sale of diagnostic division -- -- 496,555
------------ ----------- -------------
Net cash provided (used) by investing activities 4,382,582 (9,737,752) (24,391,642)
FINANCING ACTIVITIES:
Net proceeds from issuance of common stock
and warrants 63,990 34,870,402 65,185,830
Proceeds from issuance of notes payable and
long-term debt 444,434 51,981 6,432,077
Payments on notes payable and long-term debt (80,095) (44,021) (3,374,510)
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 preferred stock -- -- 487,500
------------- ------------ -------------
Net cash provided by financing activities 428,329 34,878,362 72,383,181
------------ ------------ -------------
Net increase (decrease) in cash and cash equivalents (3,796,428) 22,101,253 7,421,001
Cash and cash equivalents at beginning of period 11,217,429 447,523 --
------------ ----------- -------------
Cash and cash equivalents at end of period $ 7,421,001 $ 22,548,776 $ 7,421,001
------------ ----------- -------------
------------ ----------- -------------
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
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 ("SFAS 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, 1998 and September 30, 1998, and the results of operations for the three
months ended December 31, 1998 and 1997 and from inception (October 23, 1989) to
December 31, 1998. The results of operations for the three months ended December
31, 1998 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 financial statements and footnotes thereto for the year ended September 30,
1998.
2. NET LOSS PER SHARE OF COMMON STOCK
In accordance with Financial Accounting Standards Board Statement No. 128,
"Earnings per Share" ("SFAS 128"), net loss per share of common stock is
computed by dividing the net loss by the weighted average number of shares of
common stock outstanding during the period. Dilutive loss per share, calculated
by including the additional common shares issuable upon exercise of outstanding
options and warrants in the weighed average share calculation, is not presented
as these securities are antidilutive.
3. LINE OF CREDIT AGREEMENT
In March 1997 the Company entered into a line of credit agreement with a bank.
Under the agreement the Company was permitted to borrow up to $900,000 during
1997 to fund qualified equipment purchases. At January 1, 1998, $718,620 in
outstanding advances under the line of credit converted to a term loan payable
in equal installments over 48 months, including interest at prime plus 0.5%. In
1998 the line of credit agreement was amended to permit the Company to borrow up
to an additional $1,000,000 during 1998. At January 1, 1999, $983,619 in
outstanding advances under the amended line of credit converted to a term loan
payable in 48 equal installments, including interest at prime plus 0.25%. Both
term loans are secured by all assets of the Company.
4. STOCKHOLDERS' EQUITY
SHARES ISSUED UPON EXERCISE OF COMMON STOCK OPTIONS AND WARRANTS - During the
three months ended December 31, 1998 the Company issued 21,330 and 7,794 shares
of common stock upon the exercise of warrants and options, respectively.
4
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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. SUCH FORWARD-LOOKING STATEMENTS INCLUDE STATEMENTS REGARDING CASH
REQUIREMENTS. SUCH STATEMENTS ARE ONLY PREDICTIONS AND THE COMPANY'S ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED OR PROJECTED IN SUCH
FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO
DIFFERENCES INCLUDE RISKS ASSOCIATED WITH CLINICAL TRIALS AND PRODUCT
DEVELOPMENT, REGULATORY APPROVAL AND GOVERNMENT REGULATION OF THE COMPANY'S
PRODUCTS, THE NEED FOR ADDITIONAL FUNDS AND THE UNCERTAINTY OF ADDITIONAL
FUNDING AND DEPENDENCE ON COLLABORATIVE PARTNERS. THESE FACTORS AND OTHERS ARE
MORE FULLY DESCRIBED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED SEPTEMBER 30, 1998.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
RESEARCH REVENUE - Research revenue consisting of collaborative support related
to the Company's MAXAMINE clinical trials totaled $88,000 for the quarter ended
December 31, 1998. There were no such revenues earned for the quarter ended
December 31, 1997.
RESEARCH AND DEVELOPMENT EXPENSES - For the quarter ended December 31, 1998,
research and development expenses were $8,779,000, an increase of $5,869,000, or
202%, over the same period in the prior year. This increase was primarily
attributable to increased activity related to late-stage cancer clinical trials
of MAXAMINE, including clinical trial site and contract research organization
costs, hiring additional clinical and development personnel, and other clinical
costs. These clinical trials include a Phase III clinical trial in malignant
melanoma commenced in the United States in July 1997, an international Phase III
malignant melanoma clinical trial commenced in November 1997, and an
international Phase III clinical trial in acute myelogenous leukemia commenced
in February 1998.
BUSINESS DEVELOPMENT AND MARKETING AND GENERAL AND ADMINISTRATIVE EXPENSES -
Business development and marketing expenses for the quarter ended December 31,
1998 were $453,000, an increase of $331,000, or 272%, over the same quarter of
the prior year. This increase was due to additional personnel and other
resources devoted to preparation for the potential market launch of MAXAMINE,
including corporate partnering efforts, market evaluations and third-party
reimbursement evaluations. For the quarter ended December 31, 1998, general and
administrative expenses were $694,000, an increase of 10%, over the same period
in the prior year due to general expenses associated with the Company's expanded
operations.
OTHER INCOME (EXPENSE) - Investment income was $429,000 for the quarter ended
December 31, 1998, a decrease of $100,000, or 19%, from the same period in the
prior year. This decrease is a result of a reduction in the principal balance of
interest-bearing investments used to finance the operations of the Company.
Interest expense for the quarter ended December 31, 1998 was $39,000,
approximately double the $19,000 in expense recorded in the same quarter in the
prior year. This increase was primarily attributable to interest incurred on
additional advances made under the Company's line of credit agreement used to
finance qualified equipment purchases.
NET LOSS - Net loss for the quarter ended December 31, 1998 totaled $9,448,000,
an increase of $6,386,000, or 203%, over the prior year. The increase was due to
the expansion of research and development and general corporate activities
described above. Net loss per share of common stock for the three month period
ended December 31, 1998 was $0.95, an increase of $0.58 per share over the same
period of the prior year, due to the increase in net loss for the year offset
partially by an increase in the number of shares of common stock outstanding.
5
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LIQUIDITY AND CAPITAL RESOURCES
The Company, as a development stage enterprise, anticipates incurring
substantial additional losses over at least the next several years due to, among
other factors, the need to expend substantial amounts on its ongoing and planned
clinical trials, other research and development activities, and business
development and general corporate expenses associated with these activities. The
Company has financed its operations primarily through the sale of its equity
securities, including an initial public offering in July 1996 and an
international follow-on public offering in October 1997 which provided net
proceeds to the Company of approximately $22.3 million (including amounts
received on the exercise of warrants) and $34.7 million, respectively.
As of December 31, 1998, the Company had cash, cash equivalents and investments
totaling approximately $27 million. For the quarter ended December 31, 1998, net
cash used in the Company's operating activities was approximately $8.6 million.
The Company expects that its cash requirements may increase in future periods as
it conducts additional research and development activities including clinical
trials, other research and development activities, and efforts associated with
the commercial launch of any products that are approved for sale by government
regulatory bodies. Among the activities that may result in an increase in cash
requirements are three Phase III cancer clinical trials of MAXAMINE currently
underway.
The Company's cash requirements may vary materially from those now planned
because of the results and scope of clinical trials and other research and
development activities, the time required to obtain regulatory approvals, the
cost of filing, prosecuting, defending and enforcing patent claims and other
intellectual property rights, the ability of the Company to establish marketing
alliances and collaborative arrangements and the cost of the Company's internal
marketing 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, financial condition and results of operations. The Company has never
paid a cash dividend and does not contemplate the payment of cash dividends in
the foreseeable future.
IMPACT OF THE YEAR 2000 ISSUE
The Year 2000 issue is related to computer software utilizing two digits rather
than four to define the appropriate year. As a result, any of the Company's
computer programs or any of the Company's suppliers or vendors that have date
sensitive software may incur system failures or generate incorrect data if "00"
is recognized as 1900 rather than 2000.
The Company has determined that the computer systems utilized internally in its
daily operations are Year 2000 compliant. The Company is in the process of
verifying whether its major suppliers, service providers and financial
institutions are Year 2000 compliant and expects to complete this review by
March 31, 1999. The total cost of this process is expected to be less than
$50,000. Although the Company has no material systems that interface directly
with third party systems, there can be no assurance that the systems and
networks of its key suppliers and service providers will not be affected by the
Year 2000 issues, which could have an adverse effect on the Company's business,
operating results and financial condition. In particular, the Company has
engaged several third parties to retain and maintain all of the clinical,
statistical and other information related to the Company's clinical trials.
These third parties have indicated that they are aggressively working to
identify and remediate any Year 2000 issues they may have, and that they expect
to have any necessary remediation completed by December 1999. However, in the
event these third parties' Year 2000 compliance efforts are unsuccessful, data
relating to the Company's clinical trials could be destroyed or corrupted, which
could have a material adverse effect on the Company's business, operating
results and financial condition. In an effort to minimize the potential risks of
the failure of such third parties' Year 2000 efforts, the Company intends to
archive data, both in electronic and paper formats, through December 1999, after
which paper backup will be used. The Company's archival records will be updated
on a monthly basis.
6
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QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We invest our excess cash in interest-bearing investment-grade securities that
we hold for the duration of the term of the respective instrument. We do not
utilize derivative financial instruments, derivative commodity instruments or
other market risk sensitive instruments, positions or transactions in any
material fashion. Accordingly, we believe that, while the investment-grade
securities we hold are subject to changes in the financial standing of the
issuer of such securities, we are not subject to any material risks arising from
changes in interest rates, foreign currency exchange rates, commodity prices,
equity prices or other market changes that affect market risk sensitive
instruments.
7
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PART II-OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) For the quarter ended December 31, 1998, the Company issued 21,330 shares of
Common Stock upon exercise of warrants at a price per share of $3.00. The
Company issued such shares in reliance upon the exemption provided by Section
4(2) of the Securities Act of 1933.
(d) Of the net offering proceeds to the Company of $22,336,000, including
$18,220,000 received at the time of the initial public offering and $4,116,000
received upon subsequent exercises of Redeemable Warrants, through December 31,
1998, the following payments have been made:
<TABLE>
<CAPTION>
<S> <C> <C>
(A) (B)
Purchase and installation of 1,241,000
machinery and equipment
Repayment of indebtedness 289,000 875,000
Interest earning bonds and securities --
Research and development expenses 15,396,000
Business development expenses 977,000
General and administrative 2,637,000
Intellectual property 921,000
(A) Direct or indirect payments to directors, officers, general partners of the
issuer or their associates; to persons owning ten percent or more of any
class of equity securities of the issuer; and to affiliates of the issuer.
(B) Direct or indirect payments to others.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) EXHIBITS
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
10.15 (1) Employment Agreement dated October 1, 1998 between the Registrant and
Kurt R. Gehlsen
10.16 (1) Employment Agreement dated October 1, 1998 between the Registrant and
Dale A. Sander
10.17 (1) Employment Agreement dated November 9, 1998 between the Registrant and
Larry G. Stambaugh
10.23 (1) Employment Agreement dated October 1, 1998 between the Registrant and
Geoffrey B. Altman
10.25 License Agreement dated November 6, 1998, among
the Registrant, Professional Pharmaceutical, Inc.,
Bruce A. Jack, D.D.S. and B. Thomas White, R.PH.
</TABLE>
8
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<CAPTION>
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27.1 Financial Data Schedule
</TABLE>
(1) Previously filed as an exhibit to Registrant's Annual Report on Form 10-K
(File No. 1-4430) for the year ended September 30, 1998
B.) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended December 31, 1998.
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 8, 1999 /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)
9
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LICENSE AGREEMENT
By and Among
MAXIM PHARMACEUTICALS, INC.
and
PROFESSIONAL PHARMACEUTICAL, INC.
and
BRUCE A. JACK, D.D.S.
and
B. THOMAS WHITE, R.PH.
Dated as of November 6, 1998
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LICENSE AGREEMENT
This LICENSE AGREEMENT (the "Agreement") is entered into as of November
6, 1998 (the "Effective Date") by and among MAXIM PHARMACEUTICALS, INC., a
Delaware corporation, with its principal place of business at 8899 University
Center Lane, San Diego, California 92122-1010 ("Maxim"), PROFESSIONAL
PHARMACEUTICAL, INC., a New Mexico corporation, with its principal place of
business at 10820 Comanche N.E., Suite C, Albuquerque, New Mexico 87111 ("PPI"),
and Bruce A. Jack, D.D.S. and B. Thomas White, R.Ph., individuals residing in
New Mexico (together, the "Inventors").
WITNESSETH:
WHEREAS, PPI owns, or possesses licenses under, certain patents, patent
applications, know-how and other intellectual property relating to histamine and
analogs of histamine; and
WHEREAS, Maxim desires to receive, and PPI is willing to grant to
Maxim, an exclusive license under such patents, patent applications, know-how
and other intellectual property on the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
covenants and undertakings contained herein and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties, intending to be legally bound, hereby agree as follows:
ARTICLE 1
DEFINITIONS
In addition to the other terms defined elsewhere herein, the following
terms shall have the following meanings when used herein (any term defined in
the singular shall have the same meaning when used in the plural and vice versa,
unless stated otherwise):
1.1 "AFFILIATE" of any specified Person means any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with the specified Person, where
"control" means the direct or indirect ownership or control by the specified
Person of fifty percent (50%) or more of the stock or other equity interests of
such Person entitled to vote for the election of the Board of Directors or
similar governing body of such Person.
1.2 "FIRST PRODUCT" means the first Product to receive U.S. Product
Approval.
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1.3 "KNOW-HOW" means data, formulae, processes, methodologies,
biological materials, chemical compounds, specifications and other proprietary
information.
1.4 "LOSSES" means losses, liabilities, suits, claims, costs, expenses
(including reasonable attorneys' fees), penalties, fines, judgments and/or
damages (including personal injury or property damages but excluding indirect,
incidental, special or consequential damages).
1.5 "NET PRODUCT REVENUES" means the total of the gross invoice prices from
revenues (including product sales, royalties from sublicenses, and/or proceeds
from the sale, grant or sublicense of marketing rights) derived from the
Products by Maxim and its Affiliates, less the sum of the following deductions
where applicable: (i) cash, trade, or quantity discounts allowed and taken; (ii)
sales, use, tariff, import/export duties or other excise taxes imposed upon
particular sales; (iii) transportation and transportation shipping charges; (iv)
allowances or credits to customers because of rejections or returns, to the
extent allowed and taken; and (v) uncollectible receivables; provided, however,
that:
(a) "Net Product Revenues" shall exclude revenues derived from
transactions between Maxim and its Affiliates;
(b) "Net Product Revenues" shall exclude revenues from contract
research and equity investments, including transactions in
which Maxim or any of its Affiliates receives funding from
Third Parties to assist in the development and
commercialization of Products; and
(c) In the event that any Product is sold as part of an
integrated system in which such Product is combined with a
product/products which is/are not Products, then "Net
Product Revenues" attributable to such Product shall equal
the pro rata share of the total sales price of the
integrated system attributable to such Product, calculated
based on the relative stand-alone sales prices of each
individual product included within the integrated system. If
such products are not routinely sold separately and
therefore do not have a stand-alone sales price, then the
"Net Product Revenues" attributable to such Product included
within the integrated system shall be calculated based upon
some other equitable allocation methodology.
1.6 "PARTY" means Maxim, PPI, or any Inventor, and "PARTIES" means
Maxim, PPI, and the Inventors.
1.7 "PATENT RIGHTS" means patents and patent applications, including
any patents issuing on such patent applications and any reissues,
reexaminations, renewals, extensions, divisionals, continuations and
continuations-in-part of the foregoing.
2
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1.8 "PERSON" means a natural person, a corporation, a partnership, a
limited liability company, a trust, a joint venture, any governmental authority
or any other entity or organization.
1.9 "PPI KNOW-HOW" means the Know-How relating to histamine and
analogs of histamine which, as of the date hereof, is owned by PPI or licensed
to PPI with the right to sublicense.
1.10 "PPI PATENT RIGHTS" means the Patent Rights set forth on Schedule
1.10 attached hereto and all other Patent Rights owned by PPI, in whole or in
part, or licensed to PPI with the right to sublicense, that claim priority from
or have common priority with such listed Patent Rights.
1.11 "PRODUCT" means any topical antiviral or topical healing product
containing histamine or analogs of histamine as an active agent, the
manufacture, use or sale of which is covered, in whole or in part, by any Valid
Claim of any patent included in the PPI Patent Rights.
1.12 "PRODUCT APPROVAL" with respect to a Product and country, means
approval to market such Product in such country by the governmental authority of
competent jurisdiction.
1.13 "TERRITORY" means all countries of the world.
1.14 "THIRD PARTY" means any Person that is not a Party to this
Agreement.
1.15 "TRADEMARK" means the "VIRAGEL" trademark registered in the name
of PPI as described more fully in Schedule 1.15 attached hereto.
1.16 "U.S. PRODUCT APPROVAL" with respect to a Product means approval
to market such Product in the United States by the U.S. Food and Drug
Administration (the "FDA").
1.17 "VALID CLAIM" means a claim of an issued and unexpired patent
that has not been (a) held permanently revoked, unenforceable or invalid by a
decision of a court or governmental agency of competent jurisdiction over such
claim, which decision is unappealable or unappealed within the time allowed for
appeal or (b) admitted to be invalid or unenforceable through disclaimers,
consent decrees or otherwise.
ARTICLE 2
PROPRIETARY RIGHTS
2.1 LICENSE GRANT. As of the date hereof, and subject to the terms and
conditions hereof, PPI hereby grants to Maxim and its Affiliates, and Maxim
hereby accepts on behalf of itself and its Affiliates, a sole and exclusive
license under the PPI Patent Rights and PPI Know-How to make, have made, use,
import, offer for sale, sell and/or have sold products and to otherwise practice
the inventions claimed in the PPI
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Patent Rights and the PPI Know-How in the Territory. The foregoing license grant
shall include the right of Maxim and its Affiliates to grant sublicenses to any
Third Party.
2.2 TRADEMARK LICENSE GRANT. As of the date hereof, and subject to the
terms and conditions hereof, PPI hereby grants to Maxim and its Affiliates, and
Maxim hereby accepts on behalf of itself and its Affiliates, an exclusive
license to use the Trademark. The Parties agree that the foregoing license shall
not impose or be construed to impose any obligation upon Maxim or any of its
Affiliates to use the Trademark in connection with the sale of Products or for
any other purpose.
2.3 FUTURE PROPRIETARY RIGHTS. Each of PPI and the Inventors hereby
solely and exclusively licenses to Maxim all intellectual property relating to
histamine and analogs of histamine, including any improvements or modifications
to the PPI Patent Rights and PPI Know-How, developed, conceived or reduced to
practice by PPI or the Inventors at any time following the date hereof, whether
in the form of Patent Rights or Know-How, under the terms outlined in this
Agreement. PPI shall not permit any Person to perform work on its behalf in
connection with histamine or analogs of histamine unless that Person first has
signed a written agreement assigning to Maxim all of that Person's right, title
and interest in and to all Patent Rights and Know-How, developed, conceived or
reduced to practice by such Person in connection with histamine or analogs of
histamine. PPI shall cause its employees and agents to execute and deliver, and
each of the Inventors shall execute and deliver, any documents reasonably
requested by Maxim to carry out the provisions of this Section 2.3.
2.4 DISCLOSURE AND DELIVERY OF REPRODUCIBLE PATENT RIGHTS AND
KNOW-HOW. Promptly upon execution of this Agreement, PPI shall disclose and
deliver to Maxim copies of the reproducible PPI Patent Rights and PPI Know-How
at the address specified by Maxim and in the manner mutually agreed upon by
Maxim and PPI. Thereafter, on a regular basis or upon the request of Maxim, each
of PPI and the Inventors shall disclose and deliver to Maxim copies of all
reproducible Patent Rights and Know-How relating to histamine and analogs of
histamine developed, conceived or reduced to practice by PPI or the Inventors at
any time following the date hereof at such address as may be specified by Maxim
and in such manner as shall be mutually agreed upon by the Parties.
2.5 REGULATORY APPROVALS. Maxim shall be responsible for obtaining
Product Approvals for all Products and shall be responsible for all expenses
relating thereto. Maxim shall prepare and file in its own name any necessary
applications for such Product Approval in any country in the Territory. Maxim
shall own all right, title and interest in and to all such applications and any
Products Approvals issuing therefrom. Maxim shall notify PPI of receipt of U.S.
and any other Product Approval for a Product within ten business days after
receipt of Product Approval for such Product.
2.6 PUBLICATION RIGHTS. The Parties hereby confirm that Maxim shall
have the sole right and discretion to prepare and publish scientific articles,
abstracts, presentations, and any other materials of any nature whatsoever
relating to the PPI Patent Rights, the PPI Know-How, and/or all intellectual
property relating to histamine and analogs of histamine, including any
improvements or modifications to the PPI Patent Rights and PPI
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Know-How, developed, conceived or reduced to practice by PPI or the Inventors at
any time following the date hereof. PPI and the Inventors shall have no right to
publish any scientific article, abstract, or presentation, or any other material
of any nature whatsoever, relating to the PPI Patent Rights, the PPI Know-How,
and/or all intellectual property relating to histamine and analogs of histamine,
including any improvements or modifications to the PPI Patent Rights and PPI
Know-How, developed, conceived or reduced to practice by PPI or the Inventors at
any time following the date hereof. Each of PPI and the Inventors shall maintain
the confidentiality of all such information in accordance with Article 7 of this
Agreement, and shall ensure that each of its employees and agents complies with
the foregoing obligation.
ARTICLE 3
FINANCIAL TERMS
3.1 CONSIDERATION. As consideration for the licenses and other rights
granted by PPI in Article 2 above, Maxim shall pay to PPI:
(a) A payment of $300,000 within five business days following
the execution of this Agreement;
(b) A payment of $100,000 per year commencing on the second
anniversary of the Effective Date and continuing through the
anniversary of the Effective Date occurring immediately
prior to the receipt of U.S. Product Approval for the First
Product;
(c) A payment of $150,000 upon Maxim's receipt of U.S. Product
Approval for the First Product; and
(d) A royalty equal to 2% of the Net Product Revenues received
by Maxim and its Affiliates, payable on a quarterly basis
commencing with the quarter in which occurs the first
commercial sale of any Product.
3.2 TRAVEL EXPENSES. In the event that, at any time during the term of
this Agreement, Maxim requests that PPI provide technical assistance to Maxim in
connection with the licenses and other rights granted hereunder and any PPI
employees or agents are required to travel at the request of Maxim for the
purpose of providing such technical assistance, Maxim shall reimburse PPI for
all reasonable travel and lodging expenses incurred by such PPI employees or
agents for such travel.
3.3 ROYALTY REPORTS. On or before 30 days after the end of each
calendar quarter commencing with the quarter in which occurs the first
commercial sale of any Product, Maxim shall deliver to PPI a true and
accurate written report showing the following as they apply to the calendar
quarter immediately preceding the date of such report:
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(a) The quantities of Product sales of which have been
invoiced by Maxim and its Affiliates during the
immediately preceding calendar quarter; the amount
of royalties received by Maxim and its Affiliates
during the immediately preceding calendar quarter
from sublicenses in connection with Products; and
the amount of proceeds received by Maxim and its
Affiliates during the immediately preceding
calendar quarter from the sale of marketing rights
in connection with Products;
(b) The computation of the Net Product Revenues
attributable to such Products (including a
detailed accounting of any allowed deductions from
the invoiced amounts to arrive at Net Product
Revenues); and
(c) The U.S. Dollar value of the amount of royalties,
if any, due under Section 3.1(d) above on the Net
Product Revenues attributable to such Products.
If no royalties are due, it shall be so reported. The correctness and
completeness of each such royalty report shall be certified in writing by the
Chief Financial Officer of Maxim. On or before the date which is 60 days after
the end of the calendar quarter in which this Agreement expires or is
terminated, Maxim shall provide to PPI a written report that complies in all
respects with this Section 3.3. If any allowed deductions to arrive at Net
Product Revenues related to a calendar quarter are incurred or identified
subsequent to the payment of royalties for said quarter, such deductions shall
be applied against the royalty payment due for the calendar quarter said
deductions are incurred or identified.
3.4 PAYMENT PROCEDURES.
(a) Maxim shall pay to PPI all amounts due under Section
3.1(d) above within 30 days of the end of each calendar quarter, with respect to
Net Product Revenues generated during such calendar quarter, together with a
written report setting forth the calculation of the amount payable to PPI.
(b) All payments due to PPI hereunder shall be paid to PPI in
U.S. Dollars by check drawn on a U.S. bank, or by such other method mutually
agreed upon by PPI and Maxim, in each case at the expense of the payor, for
value no later than the due date thereof, to the address of PPI specified in
Section 9.5, or to such other address as PPI shall designate in writing within a
reasonable period of time prior to such due date:
3.5 LATE PAYMENT. If Maxim fails to pay any payment required under
this Agreement on or before the due date therefor, then Maxim shall pay annually
compounded interest on such amount at an annual rate equal to the lowest prime
rate as published by The Wall Street Journal on or nearest to such due date plus
three percent (3%), which interest shall accrue from the date the payment not
timely made became due until the date such payment is paid in full.
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3.6 APPLICATION OF PAYMENTS. Any payments received by PPI shall be
applied first to the satisfaction of the oldest of any unpaid, accrued interest
charges and, following payment of all such interest charges, to the satisfaction
of the oldest of any unpaid fees or other amounts due hereunder.
3.7 BOOKS AND RECORDS. Maxim shall keep full, true and accurate books
of account containing all particulars and reasonable supporting documentation
that may be necessary for the purpose of determining the amounts payable to PPI
hereunder. All such books of account and reasonable supporting documentation
shall be located at the principal place of business of Maxim and shall be open
for inspection for such purpose by PPI or any independent certified public
accountant retained by PPI, at a time mutually acceptable to Maxim and PPI
during normal business hours but no more frequently than twice each calendar
year for five years following the end of the calendar year to which they pertain
(and access shall not be denied thereafter if reasonably available).
ARTICLE 4
PATENT PROSECUTION, MAINTENANCE AND ENFORCEMENT
4.1 PROSECUTION AND MAINTENANCE.
(a) Maxim, at its cost and expense, shall have the sole
right and discretion to prosecute any patent applications included in
the PPI Patent Rights and to maintain any patents issuing therefrom
and any other patents included in the PPI Patent Rights. Maxim shall
provide PPI with copies of all material correspondence relating to
such prosecution and maintenance, and, prior to making any filing in
connection therewith, shall provide a draft of such filing to PPI at
least 15 days prior to the date of such filing so as to allow for
review and comment by PPI (but PPI shall be deemed to have waived such
right if it does not provide any comments to Maxim within 14 days of
PPI's receipt of such draft).
(b) Maxim shall advise PPI in writing at least 30 days
prior to any abandonment by Maxim in any jurisdiction of any patent
application or any patent included in the PPI Patent Rights, and,
in such event, PPI shall have the right to prosecute such patent
application or maintain such patent, at PPI's cost and expense, in
such jurisdiction.
4.2 ENFORCEMENT AND DEFENSE.
(a) PPI shall act in good faith to inform Maxim of any
infringement of which it becomes aware by any Third Party of any PPI Patent
Rights. Maxim shall have the right in its sole discretion to determine when to
take legal action, at its cost and expense, to enforce such Patent Rights
against infringement by Third Parties. Any amounts awarded to Maxim in
connection with such enforcement action shall be applied first to reimburse
Maxim for the reasonable out-of-pocket costs and expenses (including reasonable
attorneys' fees) payable by Maxim in such action and the balance shall be
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divided between Maxim and PPI, with PPI receiving 2% and Maxim retaining 98% of
the amount of such balance.
(b) In the event that Maxim, upon receiving notice of an
alleged infringement by a Third Party of any PPI Patent Rights, does not take
legal action to enforce such PPI Patent Rights within 180 days of receiving such
notice, then PPI shall have the option to take legal action to enforce such
Patent Rights at PPI's cost and expense. Any amounts awarded to PPI in
connection with such enforcement action shall be applied first to reimburse PPI
for the reasonable out-of-pocket costs and expenses (including reasonable
attorneys' fees) payable by PPI in such action and the balance shall be divided
between the Parties, with Maxim receiving 50% and PPI retaining 50% of the
amount of such balance.
(c) If a Third Party commences an action challenging any PPI
Patent Rights, Maxim, at its cost and expense, shall defend such Patent Rights
against such challenge using reasonable legal and business judgment. In the
event that Maxim does not, on a timely basis, commence to defend such Patent
Rights against such challenge, then PPI, at PPI's cost and expense, may commence
to defend such Patent Rights against such challenge.
(d) Each of Maxim and PPI shall cooperate fully with the other
in any action brought by either Maxim or PPI to enforce any PPI Patent Rights
against infringement by Third Parties or in any defense by the other Party of
such Patent Rights against challenge by Third Parties and shall provide all
assistance reasonably requested by the other party in carrying on such action or
defense. Maxim or PPI, at its cost and expense, shall have the right to join in
any such action or defense of the other party. In no event shall any enforcement
action or defense be settled by PPI without the prior written consent of Maxim.
4.3 PRODUCT LABELING: Maxim shall include on the labeling and/or
packaging of Products sold commercially references to PPI Patent Rights to the
extent required to provide the level of protection for such rights standard in
the pharmaceutical industry.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES OF MAXIM. Maxim represents and
warrants to PPI and the Inventors that:
(a) Maxim has the full corporate right, power and
authority to execute, deliver and perform this
Agreement and to consummate the transactions
contemplated hereby;
(b) The execution, delivery and performance of this
Agreement and the consummation of the transactions
contemplated hereby have
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been duly authorized by all necessary corporate
action on the part of Maxim;
(c) This Agreement has been duly executed and
delivered by an authorized officer of Maxim, and
is a legal, valid and binding obligation of Maxim
enforceable against it in accordance with its
terms, except as enforcement may be limited by
general principles of equity (regardless of
whether such enforceability is considered in a
proceeding at law or in equity) and the effect of
applicable bankruptcy, insolvency, moratorium and
other similar laws of general application relating
to or affecting creditors' rights generally,
including, without limitation, the effect of
statutory or other laws regarding fraudulent
conveyances and preferential transfers;
(d) Maxim's execution, delivery and performance of
this Agreement shall not constitute a breach or
default under any contract or agreement to which
Maxim is a party or by which it is bound or
otherwise violate the rights of any Third Party;
and
(e) No consent, approval or authorization of or from
any governmental entity or any other Person not a
Party to this Agreement, whether prescribed by
law, regulation, contract or agreement, is
required for Maxim's execution, delivery and
performance of this Agreement or consummation of
the transactions contemplated hereby.
5.2 REPRESENTATIONS AND WARRANTIES OF PPI AND THE INVENTORS. Each of
PPI and the Inventors represents and warrants to Maxim that:
(a) PPI has the full corporate right, power and
authority to execute, deliver and perform this
Agreement and to consummate the transactions
contemplated hereby;
(b) The execution, delivery and performance of this
Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by
all necessary corporate action on the part of PPI;
(c) This Agreement has been duly executed and
delivered by an authorized officer of PPI, and is
a legal, valid and binding obligation of PPI
enforceable against it in accordance with its
terms, except as enforcement may be limited by
general principles of equity (regardless of
whether such enforceability is considered in a
proceeding at law or in equity) and the effect of
applicable bankruptcy, insolvency, moratorium and
other similar laws of general application relating
to or affecting creditors' rights
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generally, including, without limitation, the
effect of statutory or other laws regarding
fraudulent conveyances and preferential transfers;
(d) Such Party's execution, delivery and performance
of this Agreement shall not constitute a breach or
default under any contract or agreement to which
such Party is a party or by which it is bound or
otherwise violate the rights of any Third Party;
(e) No consent, approval or authorization of or from
any governmental entity or any other Person not a
Party to this Agreement, whether prescribed by
law, regulation, contract or agreement, is
required for such Party's execution, delivery and
performance of this Agreement or consummation of
the transactions contemplated hereby;
(f) PPI owns, or has the right to use, all of the PPI
Patent Rights and PPI Know-How and has the full
power and right to grant to Maxim and its
Affiliates the license set forth in Section 2.1
above, and PPI owns, or has the right to use, the
Trademark and has the full power and right to
grant to Maxim and its Affiliates the license set
forth in Section 2.2 above;
(g) Such Party has not granted to any Third Party any
license or right to use any of the PPI Patent
Rights or PPI Know-How; and
(h) Such Party has not received any notice from any
Third Party that the practice of the PPI Patent
Rights or PPI Know-How infringes and, to the best
of PPI's knowledge, the practice of the PPI Patent
Rights and PPI Know-How does not infringe, any
patent or other proprietary rights of any Third
Party. To the best of such Party's knowledge, the
PPI Patent Rights are valid and enforceable.
ARTICLE 6
INDEMNIFICATION
6.1 INDEMNITY.
(a) PPI shall not be liable to Maxim or any other
Person for, and Maxim shall indemnify and hold
harmless PPI, and its respective directors,
officers, employees and agents (collectively, the
"PPI Indemnitees"), from and against any Losses
that are incurred by the PPI Indemnitees arising
out of or resulting from (i) any
misrepresentation, breach of warranty, or
nonfulfillment or nonperformance of any agreement
on the part of Maxim under this Agreement or any
noncompliance on the part of Maxim with applicable
law, or (ii) any product liability claim arising
out of the sale by Maxim of Product.
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(b) Maxim shall not be liable to PPI or any other
Person for, and PPI shall indemnify and hold
harmless Maxim, and its respective directors,
officers, employees and agents (collectively, the
"Maxim Indemnitees"), from and against any Losses
that are incurred by the Maxim Indemnitees arising
out of or resulting from (i) any
misrepresentation, breach of warranty, or
nonfulfillment or nonperformance of any agreement
on the part of PPI under this Agreement or any
noncompliance on the part of PPI with applicable
law, or (ii) the practice or use by PPI or the
Inventors of the PPI Patent Rights and the PPI
Know-How.
6.2 PROCEDURE. Any PPI Indemnitee or Maxim Indemnitee, as the case may
be, shall notify Maxim or PPI (the "Indemnifying Party") promptly in writing of
an indemnifiable claim or cause of action under Section 6.1 upon receiving
notice or being informed of the existence thereof. The Indemnifying Party shall
assume, at its cost and expense, the sole defense of such claim or cause of
action through counsel selected by the Indemnifying Party and reasonably
acceptable to the other Party. The Indemnifying Party shall maintain control of
such defense, including any decision as to settlement; provided that, in the
event that the Indemnifying Party does not maintain control of such defense on a
timely basis, then, without prejudice to any other rights and remedies available
to the other Party under this Agreement, the other Party may take over such
defense with counsel of its choosing, at the Indemnifying Party's cost and
expense. The other party may, at its option and expense, participate in the
Indemnifying Party's defense, and if the other Party so participates, the
parties shall cooperate with one another in such defense. The Indemnifying Party
shall bear the total costs of any court award or settlement of such claim or
cause of action and all other costs, fees and expenses related to the resolution
thereof (including reasonable attorneys' fees except for attorneys' fees for
which the other Party is responsible in the event that the other Party
participates in the Indemnifying Party's defense of such claim or cause of
action).
ARTICLE 7
CONFIDENTIALITY
7.1 CONFIDENTIALITY OBLIGATION. Each of the Parties (the "Receiving
Party") shall keep strictly confidential any information disclosed by any other
Party (the "Disclosing Party") or otherwise made available to the Receiving
Party concerning the PPI Patent Rights and PPI Know-How or the Disclosing
Party's performance of this Agreement or otherwise concerning the business,
operations, trade secrets or other proprietary information of the Disclosing
Party (whether in written media or otherwise) ("Confidential Information"),
using at least the same degree of care that it uses to protect its own
confidential or proprietary information. "Confidential Information" shall not
include information: (a) which is or becomes generally available to the public
other than as a result of disclosure thereof by the Receiving Party; (b) which
is lawfully received by the Receiving Party on a nonconfidential basis from a
Third Party that is not itself under any obligation of confidentiality or
nondisclosure to the Disclosing Party or any other Person with respect to such
information; (c) which is independently developed by the Receiving Party; or (d)
which was in the Receiving Party's possession prior to receipt from the
Disclosing Party.
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7.2 NONDISCLOSURE OF CONFIDENTIAL INFORMATION. The Receiving Party
shall use Confidential Information solely for the purposes of this Agreement and
the transactions contemplated hereby and shall not disclose or disseminate any
Confidential Information to any Person at any time, except for disclosure to
those of its directors, officers, employees, accountants, attorneys, advisers
and agents whose duties reasonably require them to have access to such
Confidential Information, provided that such directors, officers, employees,
accountants, attorneys, advisers and agents are bound to maintain the
confidentiality of such Confidential Information to the same extent as if they
were Parties hereto.
7.3 EXCEPTION. The foregoing confidentiality and nondisclosure
obligations shall not apply to information which is required to be publicly
disclosed by law or by regulation; provided, however, that, in such event, the
Receiving Party provides the Disclosing Party with prompt advance notice of such
disclosure so that the Disclosing Party has the opportunity if it so desires to
seek a protective order or other appropriate remedy.
7.4 SURVIVAL. The confidentiality and nondisclosure obligations of
this Article 7 shall survive the expiration or termination of this Agreement and
remain in effect for a period of seven years following the expiration or
termination of this Agreement.
ARTICLE 8
TERM AND TERMINATION
8.1 TERM. This Agreement shall commence as of the date hereof and
shall continue in full force and effect, unless terminated sooner in accordance
with Section 8.2 below, until the later of:
(a) The expiration date of the last Valid Claim of the
PPI Patent Rights; or
(b) 15 years from the date of the first commercial
sale of the last Product with respect to which
sales have commenced subsequent to the receipt of
U.S. Product Approval.
8.2 TERMINATION RIGHTS OF PPI AND MAXIM. Each of Maxim and PPI shall
have the right to terminate this Agreement in the event of the material breach
by the other Party of, or the failure of the other Party to perform, any of its
material obligations hereunder and the failure to remedy such material breach or
nonperformance within 60 days following the receipt of written notice of such
material breach or nonperformance from the nonbreaching Party. Such termination
shall be immediately effective upon the receipt by the breaching or
nonperforming Party of written notice of termination from the nonbreaching
Party.
8.3 EFFECTS OF TERMINATION. Upon the termination of this Agreement:
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(a) The licenses granted by PPI to Maxim and its
Affiliates hereunder shall terminate immediately,
along with any sublicenses granted by Maxim and
its Affiliates under the PPI Patent Rights and PPI
Know-How to any Third Parties; and
(b) The manufacture, use and sale of Products shall
cease immediately, provided, however, that sales
of any Product inventory that remains unsold as of
the date of termination may proceed as long as
such sales are completed within six months of the
date of termination and PPI receives its
percentage share of the Net Product Revenues from
sales in accordance with the terms and conditions
of this Agreement.
8.4 SURVIVAL. All rights granted to and obligations undertaken by the
Parties hereunder shall terminate immediately upon the expiration or termination
of this Agreement except for the following, which shall survive according to
their terms:
(a) The obligation of Maxim to pay to PPI any and all
payments accrued under Article 3;
(b) The right of PPI to inspect the books and records
of Maxim as provided in Section 3.7;
(c) The indemnification obligations of Article 6;
(d) The confidentiality and nondisclosure obligations
of Article 7;
(e) The obligations of PPI and Maxim under Section
8.3; and
(f) The provisions of Sections 9.2, 9.3, 9.5, 9.14 and
9.15 below.
In addition, expiration or termination of this Agreement shall not affect the
remedies of any Party otherwise available at law or in equity in relation to any
rights accrued under this Agreement prior to expiration or termination.
ARTICLE 9
MISCELLANEOUS
9.1 RELATIONSHIP OF THE PARTIES. Nothing in this Agreement is intended
or shall be deemed to constitute a partnership, agency or joint venture
relationship between or among the Parties hereto.
9.2 APPLICABLE LAW. This Agreement shall be governed by the laws of
the State of California applicable to contracts made and to be performed
entirely within such jurisdiction and without giving effect to the choice or
conflict of laws rules or principles of the State of California or of any other
jurisdiction.
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9.3 CONSENT TO JURISDICTION. Each of the Parties irrevocably submits
to the exclusive jurisdiction of the courts of the State of California and of
any United States federal court sitting in the State of California in any action
or proceeding arising out of or relating to this Agreement, and irrevocably
agrees that all claims in respect of such action or proceeding shall be heard
and determined in any such California or United States federal court. Each Party
further agrees that service of any process, summons, notice or document by
registered mail to the address of such Party set forth in Section 9.5 below
shall be effective service of process for any action or proceeding brought
against such Party in any such court. Each Party hereby irrevocably and
unconditionally waives any objection to the laying of venue of any action or
proceeding arising out of or relating to this Agreement in any such court and
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action or proceeding brought in any such court
has been brought in any inconvenient forum. Each Party further agrees that a
final, nonappealable judgement in any such action or proceeding shall be
conclusive and may be enforced in any other jurisdictions by suit on the
judgment or in any other manner provided by law.
9.4 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and may be executed by facsimile. All counterparts shall
collectively constitute one and the same Agreement.
9.5 NOTICES. In any case where any notice or other communication is
required or permitted to be given hereunder, such notice or communication shall
be in writing and deemed to have been duly given and delivered (a) if delivered
in person, on the date of such delivery, (b) if sent by confirmed facsimile
transmission (with answer back received), on the date of such facsimile
transmission, or (c) if sent by overnight express or registered or certified
mail (with return receipt requested), on the date of receipt of such mail, and
shall be sent to the following address (or such other address as any Party may
designate from time to time in writing):
If to Maxim:
Maxim Pharmaceuticals, Inc.
8899 University Center Lane, Suite 400
San Diego, California 92122-1010
Telephone: 619-453-4040
Telefax: 619-453-5005
Attention: Finance Department
Copy to:
Arnold & Porter
555 Twelfth Street, N.W.
Washington, D.C. 20004-1202
Telephone: 202-942-5000
Telefax: 202-942-5999
Attention: Lynda Clarizio
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If to PPI
(prior to or on December 15, 1998):
Professional Pharmaceutical, Inc.
10820 Comanche N.E., Suite C
Albuquerque, New Mexico 87111
Telephone: 505-271-0992
Telefax: 505-291-0730
Attention: Bruce A. Jack, D.D.S.
(after December 15, 1998):
Professional Pharmaceutical, Inc.
3309 Juan Tabo NE
Suite B
Albuquerque, New Mexico 87111
Telephone: 505-271-0992
Telefax: 505-291-0730
Attention: Bruce A. Jack, D.D.S.
Copy to :
Bruce A. Jack, D.D.S.
6001 Moon N.E., Apt. 1323
Albuquerque, New Mexico 87111
Telephone: 505-856-7290
Telefax: 505-291-0730
If to the Inventors:
(on or prior to December 15, 1998)
Bruce Jack, D.D.S.
10820 Comanche N.E., Suite C
Albuquerque, New Mexico 87111
Telephone: 505-271-0992
Telefax: 505-291-0730
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(after December 15, 1998)
Bruce A. Jack, D.D.S.
3309 Juan Tabo NE
Suite B
Albuquerque, New Mexico 87111
Telephone: 505-271-0992
Telefax: 505-291-0730
B. Thomas White, R.Ph.
10009 Clearwater Ct. N.W.
Albuquerque, New Mexico 87114
Telephone: 505-897-2453
9.6 FORCE MAJEURE. If any circumstance beyond the reasonable control
of any Party occurs which delays or renders impossible the performance of that
Party's obligations under this Agreement on the dates herein provided, such
obligation shall be postponed for such time as such performance necessarily has
had to be suspended or delayed on account thereof, provided such Party shall
notify the other Parties in writing as soon as practicable, but in no event more
than ten days after the occurrence of such force majeure. In such event, the
Parties shall meet promptly to determine an equitable solution to the effects of
any such event, provided that such Party who fails because of force majeure to
perform its obligations hereunder shall upon the cessation of the force majeure
take all reasonable steps within its power to resume with the least possible
delay compliance with its obligations. Events of force majeure shall include,
without limitation, war, revolution, invasion, insurrection, riots, mob
violence, sabotage or other civil disorders, acts of God, limitations imposed by
exchange control regulations or foreign investment regulations or similar
regulations, laws, regulations or rules of any government or governmental
agency, and any inordinate and unanticipated delays in the regulatory review or
governmental approval process that are within the control of such government or
governmental agency.
9.7 BINDING EFFECT; ASSIGNMENT. This Agreement shall not be assigned,
in whole or in part, by any Party without the prior written consent of the other
Parties, and any attempted assignment without such consent shall be null and
void. This Agreement shall inure to the benefit of and be binding upon each of
the Parties hereto and their respective successors and permitted assigns.
9.8 ENTIRE AGREEMENT. The terms and conditions herein contained
constitute the entire agreement between the Parties relating to the subject
matter of this Agreement and shall supersede all previous communications between
or among the Parties with respect to the subject matter of this Agreement. None
of the Parties has entered into this Agreement in reliance upon any
representation, warranty, covenant or undertaking of the other Parties that is
not set out or referred to in this Agreement.
9.9 RECITALS AND SCHEDULES. The recitals set forth at the start of
this Agreement along with the Schedules attached to this Agreement and the terms
and
16
<PAGE>
conditions incorporated in such recitals and Schedules shall be deemed
integral parts of this Agreement and all references in this Agreement to this
Agreement shall encompass such recitals and Schedules and the terms and
conditions incorporated in such recitals and Schedules.
9.10 AMENDMENT. This Agreement may be varied, amended or extended only
by the written agreement of the Parties through their duly authorized officers
or representatives, specifically referring to this Agreement.
9.11 SEVERABILITY. In the event that any provision of this Agreement
is held to be illegal, invalid or unenforceable in a final, unappealable order
or judgment (each such provision, an "invalid provision"), then the Parties
promptly shall negotiate in good faith a lawful, valid and enforceable provision
that is as similar to the invalid provision as may be possible without giving
effect to the benefits and burdens accruing to the Parties hereunder and the
remaining provisions of this Agreement shall remain binding on the Parties
hereto.
9.12 HEADINGS. The descriptive headings of the several articles and
sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
9.13 NO WAIVER OF RIGHTS. No failure or delay on the part of any Party
in the exercise of any power or right hereunder shall operate as a waiver
thereof. No single or partial exercise of any right or power hereunder shall
operate as a waiver of such right or of any other right or power. The waiver by
any Party of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any other or subsequent breach hereunder.
9.14 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE. All rights and
remedies granted to the Parties under this Agreement are cumulative and in
addition to, and not in lieu of, any other rights or remedies otherwise
available to each of the Parties at law or in equity. The Parties agree that any
breach by any Party of, or failure of any Party to perform, any obligation under
this Agreement shall constitute immediate and irreparable damage to the other
Parties which cannot be fully and adequately compensated in money damages and
that, in the event of such breach or failure, each of the other Parties shall be
entitled to injunctive relief and specific performance in addition to any other
remedies to which it may be entitled at law or in equity.
9.15 CONFIDENTIALITY OF AGREEMENT. Each Party shall maintain the
confidentiality of this Agreement and all provisions of this Agreement and,
without the prior consent of the other Parties, no Party shall make any press
release or other public announcement of or otherwise disclose this Agreement or
any of its provisions to any Third Party (a) other than to its directors,
officers and employees and attorneys, accountants, investment bankers and other
professional advisers whose duties reasonably require familiarity with this
Agreement, provided that such Persons are bound to maintain the confidentiality
of this Agreement and (b) except for such disclosures as may be required by
applicable law or by regulation, in which case the disclosing Party shall
17
<PAGE>
provide each of the other Parties with prompt advance notice of such disclosure
so that each of the other Parties has the opportunity if it so desires to seek a
protective order or other appropriate remedy.
9.16 USAGE. Wherever any provision of this Agreement uses the term
"including" (or "includes"), such term shall be deemed to mean "including
without limitation" and "including but not limited to" (or "includes without
limitation" and "includes but is not limited to") regardless of whether the
words "without limitation" or "but not limited to" actually follow the term
"including" (or "includes").
18
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
MAXIM PHARMACEUTICALS, INC.
By: /S/ LARRY G. STAMBAUGH
----------------------
Larry G. Stambaugh
Chief Executive Officer
PROFESSIONAL PHARMACEUTICAL, INC.
By: /S/ BRUCE A. JACK, D.D.S.
-------------------------
Bruce A. Jack, D.D.S.
Officer
INVENTORS
By: /S/ BRUCE A. JACK, D.D.S.
-------------------------
Bruce A. Jack, D.D.S.
By: /S/ B. THOMAS WHITE
-------------------------
B. Thomas White, R.Ph.
19
<PAGE>
Schedule 1.10
PPI Patent Rights
(a) U.S. Patent Numbers:
5,294,440
5,679,337
5,716,610
(b) Any patent applications, reissues, reexaminations, renewals,
extensions, divisionals, continuations and continuations-in-part
related to the U.S. Patents listed in (a) above.
(c) Any international patent or patent applications related to the U.S.
Patents listed above in (a) or encompassed by (b).
20
<PAGE>
Schedule 1.15
Trademark
Mark: Vira-Gel
Serial Number: 75-086061
International Class: 3 -- Cosmetics and Cleaning
Goods/Services: Cosmetic preparations for the treatment of lesions,
namely cold sores.
Mark: Vira-Gel
Reg. No.: 1,677,312
International Class: 5 -- Pharmaceuticals
Goods/Services: Pharmaceutical preparations for the treatment of cold
sores.
21
<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, 1998 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 7,421,001
<SECURITIES> 19,063,274
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 28,908,217
<PP&E> 2,152,259
<DEPRECIATION> (431,299)
<TOTAL-ASSETS> 33,541,950
<CURRENT-LIABILITIES> 10,536,625
<BONDS> 1,253,419
0
0
<COMMON> 9,916
<OTHER-SE> 21,741,990
<TOTAL-LIABILITY-AND-EQUITY> 33,541,950
<SALES> 0
<TOTAL-REVENUES> 88,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,779,013
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,707
<INCOME-PRETAX> (9,448,205)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,448,205)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,448,205)
<EPS-PRIMARY> (0.95)
<EPS-DILUTED> (0.95)
</TABLE>
