As filed with the Securities and Exchange Commission on July 31, 1996
Registration No. 33-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
___________
AVAX TECHNOLOGIES, INC.
(Name of Small Business Issuer in Its Charter)
___________
Delaware 8731 13-3575874
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification
incorporation or Classification Code Number)
organization) Number)
5353 Sunset Drive
Kansas City, MO 64112
(816) 444-7778
(Address and telephone number of Small Business Issuer's principal executive
offices and principal place of business)
___________
JEFFREY M. JONAS, M.D.
President and Chief Executive Officer
5353 Sunset Drive
Kansas City, MO 64112
(816) 444-7778
(Name, address and telephone number of agent for service)
___________
Copy to:
IRA L. KOTEL
Roberts, Sheridan & Kotel
A Professional Corporation
640 Fifth Avenue, 15th floor
New York, New York 10019
(212) 262-5700
___________
Approximate date of proposed sale to the public:
From time to time after the effective date of this Registration Statement.
___________
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE><CAPTION>
Amount of
Proposed Maximum Proposed Maximum Registration Fee
Title of Each Class of Amount to Offering Price Aggregate
Securities to be Registered be Registered Per Security (1) Offering Price (1)
<S> <C> <C> <C> <C>
Common Stock, $.002 par value(2) 571,698 $3.00 $1,715,094 $591.41
Common Stock, $.002 par value(3) 12,959,900 $3.00 $38,879,700 $13,406.79
Common Stock, $.002 par value(4) 1,353,490 $3.00 $4,060,470 $ 1,400.16
Total . . . . . . . . 14,885,088 $44,655,264 $15,398.36
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a).
(2) Represents shares of Common Stock currently owned directly by Selling
Securityholders.
(3) Represents shares of Common Stock issuable upon conversion of currently
outstanding shares of Series B Preferred Stock of the Company.
(4) Represents shares of Common Stock issuable upon (i) conversion of shares of
Series B Preferred Stock of the Company issuable upon exercise of the
warrants issued to the placement agent of the Series B Offering
described herein (the "Series B Placement Warrants") and (ii) exercise
of warrants issued to the placement agent for certain bridge financing
transactions of the Company described herein (the "Bridge Placement
Warrants," and together with the Series B Placement Warrants, the
"Placement Warrants").
Pursuant to Rule 416, there are also being registered hereunder an
indeterminable number of shares of Common Stock which may be issued pursuant to
antidilutive provisions of the Series B Preferred Stock, including shares of
Series B Preferred Stock issuable upon exercise of Placement Warrants.
------------------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
AVAX TECHNOLOGIES, INC.
CROSS-REFERENCE SHEET
Showing Location in Prospectus of Information
Required by Items of Form SB-2
<TABLE><CAPTION>
Form SB-2 Registration Statement and Heading Heading or Location in Prospectus
-------------------------------------------- ---------------------------------
<S> <C>
1. Front of Registration Statement and Outside Front Front of Registration Statement
Cover of Prospectus . . . . . . . . . . . . . . . and Outside Front Cover of
Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus . . . . . . . . . . . . . . . . . . . . Inside Front Cover Page of
Prospectus; Additional Information
3. Summary Information and Risk Factors . . . . . . . Prospectus Summary; Risk Factors
4. Use of Proceeds . . . . . . . . . . . . . . . . . . Use of Proceeds
5. Determination of Offering Price . . . . . . . . . . Inapplicable
6. Dilution . . . . . . . . . . . . . . . . . . . . . Inapplicable
7. Selling Security Holders . . . . . . . . . . . . . Selling Securityholders
8. Plan of Distribution . . . . . . . . . . . . . . . Plan of Distribution
9. Legal Proceedings . . . . . . . . . . . . . . . . . Business - Legal Proceedings
10. Directors, Executive Officers, Promoters and Control
Management
Persons . . . . . . . . . . . . . . . . . . . . . .
11. Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . Principal Stockholders
12. Description of Securities . . . . . . . . . . . . . Description of Securities
13. Interest of Named Experts and Counsel . . . . . . . Legal Counsel
14. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities . . . . . . . . . . Management
15. Organization Within Last Five Years . . . . . . . . Certain Transactions
16. Description of Business . . . . . . . . . . . . . . Prospectus Summary; Management's
Discussion and Analysis of
Financial Condition and Plan of
Operations; Business
17. Management's Discussion and Analysis or Plan of Management's Discussion and
Operation . . . . . . . . . . . . . . . . . . . . . Analysis of Financial Condition
and Plan of Operations
18. Description of Property . . . . . . . . . . . . . . Business Facilities
19. Certain Relationships and Related Transactions . . Certain Transactions
20. Market for Common Equity and Related Stockholder Prospectus Summary; Description of
Matters . . . . . . . . . . . . . . . . . . . . . . Securities; Selling
Securityholders; Shares Eligible
for Future Sales; Plan of
Distribution
21. Executive Compensation . . . . . . . . . . . . . . Management--Executive Compensation
22. Financial Statements . . . . . . . . . . . . . . . Financial Statements
23. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure . . . . . . . . Inapplicable
</TABLE>
3
<PAGE>
PROSPECTUS
Subject to Completion, Dated July 31, 1996
AVAX TECHNOLOGIES, INC.
14,885,088 Shares of Common Stock
This Prospectus relates to the offer (the "Offering") by the securityholders
named herein under the caption "Selling Securityholders" (collectively, the
"Selling Securityholders") for sale to the public of the following securities of
AVAX Technologies, Inc. (the "Company"): (i) 571,698 shares of the Company's
common stock, par value $.002 per share (the "Common Stock"); (ii) 12,959,900
shares of Common Stock issuable upon conversion of currently outstanding shares
of Series B Convertible Preferred Stock, par value $.01 per share, of the
Company ("Series B Preferred Stock"); and (iii) 1,353,490 shares of Common Stock
issuable upon (a) the conversion of shares of Series B Preferred Stock of the
Company issuable upon exercise of the warrants issued to the placement agent of
the Series B Offering described herein (the "Series B Placement Warrants") and
(b) exercise of warrants issued to the placement agent for certain bridge
financing transactions of the Company described herein (the "Bridge Placement
Warrants," and together with the Series B Placement Warrants, the "Placement
Warrants"). The number of shares of Common Stock issuable upon conversion of the
Series B Preferred Stock and upon exercise of the Placement Warrants is subject
to adjustment in certain events.
The Company will not receive any proceeds from the sale of shares of Common
Stock. The Company is not expected to receive any proceeds from the exercise of
the Placement Warrants since the Placement Warrants may be exercised pursuant to
a cashless exercise provision. In the event that the Placement Warrants are
exercised for cash, the Company intends to use such net cash proceeds (after
estimated offering expenses of this Offering of approximately $300,000) for
general working capital purposes. Proceeds, if any, from the exercise for cash
of all the Placement Warrants, before deduction of estimated expenses of this
Offering, would be approximately $2,850,000. Whether, how and to what extent
any of the Placement Warrants will be exercised, and whether the Placement
Warrants are exercised for cash or not, cannot be predicted by the Company.
The Selling Securityholders have advised the Company that they may sell,
directly or through brokers, all or a portion of the securities offered hereby
in negotiated transactions or in one or more transactions in the market at the
price prevailing at the time of sale. In connection with such sales, the
Selling Securityholders and any participating broker may be deemed to be
"underwriters" of the Common Stock within the meaning of the Securities Act of
1933. It is anticipated that usual and customary brokerage fees will be paid by
the Selling Securityholders in all open market transactions. The Company will
pay all other expenses of this Offering. See "Plan of Distribution."
The Company has informed the Selling Securityholders that the anti-manipulation
provisions of Rules 10b-6 and 10b-7 under the Securities Exchange Act of 1934
may apply to the sales of their shares offered hereby. The Company also has
advised the Selling Securityholders of the requirement for delivery of this
Prospectus in connection with any sale of the shares offered hereby.
The Company is in the research and development stage, has not had any operating
revenues, and at June 30, 1996, had an accumulated deficit of approximately
$2,212,292. The Company is continuing to incur losses and expects to incur
significantly increasing additional losses for the foreseeable future.
Prior to the Offering, there has been no public market for the Common Stock and
there can be no assurance that such a market will develop or, if developed, that
it will be sustained. The Company intends to apply for listing of the Common
Stock on the National Association of Securities Dealers Automated Quotation
National Market(R) ("Nasdaq National Market") with the symbol "AVXT," however,
there can be no assurance that the Common Stock will be listed thereon. The
prices of the Common Stock which may be obtained are not necessarily related to
the Company's assets, book value, results of operations or any other established
criteria of value, and should not be regarded as any indication of future market
price of the Common Stock. See "Risk Factors," "Description of Securities" and
"Plan of Distribution."
------------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS."
THE COMMON STOCK HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------------
The date of this Prospectus is July 31, 1996
<PAGE>
AVAILABLE INFORMATION
Before the Offering, the Company was not a reporting company. The Company
intends to furnish to registered holders of Common Stock, annual reports
containing financial statements examined by an independent accounting firm and
quarterly reports for the first three quarters of each fiscal year containing
interim unaudited financial information.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2 (together with all
amendments and exhibits thereto being herein referred to as the "Registration
Statement") under the Securities Act of 1933. The Registration Statement, as
well as other reports and other information filed by the Company, can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices at 7 World Trade Center, New York, New York
10048. Copies of such material can be obtained upon written request addressed
to the Commission, Public Reference Section, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. The Commission maintains a site on the World
Wide Web at http://www.sec.gov that contains reports, proxy and other
information statements regarding registrants that file electronically with the
Commission.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary does not purport to be complete and is qualified in its
entirety by reference to the more detailed information and the financial
statements and notes thereto appearing elsewhere in this Prospectus, including,
without limitation, the information under "Risk Factors," or incorporated herein
by reference, and, accordingly, should be read in conjunction therewith.
COMPANY SUMMARY
AVAX Technologies, Inc. ("AVAX" or the "Company"), is a development stage
biopharmaceutical company which intends to acquire rights to, and to develop,
technologies and products for the treatment of cancer. The Company initially
intends to focus its efforts primarily on the development of immunotherapies for
cancer, which is a rapidly developing segment of the cancer therapeutic market.
The Company has licensed (the "TJU License") from Thomas Jefferson University
("TJU") an issued U.S. patent and certain patent applications covering a process
for the modification of a patient s own cancer cells into a cancer vaccine.
This process allows the Company to produce an autologous cell vaccine (an "AC
Vaccine") that attempts to stimulate the patient s own immune system to
eliminate the cancer. This technology has emerged from research conducted at
the Jefferson Cancer Center of TJU. The technology primarily involves the
removal of a patient's own tumor cells, conjugating them to a small molecule
known as a hapten, and reintroducing the product back into the patient with an
adjuvant. The approach is based on the premise that a patient's immune response
to a strongly immunogenic, hapten conjugated tumor antigen may be followed by
the development of an immune response to the unmodified tumor antigen, somewhat
analogous to the phenomenon of drug-induced autoimmune disease. The Company's
initial AC Vaccine, AC MelaVax(TM), is currently undergoing a
physician-sponsored human clinical trial based on an experimental protocol at
TJU Hospital as an outpatient, post-surgical, adjunct therapy for the treatment
of malignant melanoma, and is believed by the Company to be the first
therapeutic cancer vaccine to show a substantial increase in the survival rate
for patients with melanoma. In such ongoing clinical trial at the Thomas
Jefferson Medical Center, 150 malignant melanoma patients have been treated
post-surgically on an outpatient basis with AC MelaVaxTM. In 62 patients with
stage 3 melanoma for whom there has been sufficient time for long-term
follow-up, the four-year survival rate is approximately 60%. This compares
with the historical and control group survival rate of approximately 20%, and
the survival rate for treatment with high dose alpha interferon of approximately
32%. The Company believes that the results to date of the ongoing clinical
trial represent the first substantial increase in survival for malignant
melanoma patients treated by immunotherapy. In the 150 patients treated in
the study, the Company believes that only relatively minor side effects, such
as soreness and swelling at the site of the application of the AC MelaVaxTM
vaccine, have been witnessed to date.
Although TJU and Dr. David Berd, a clinical oncologist at the Jefferson Cancer
Center of TJU and inventor of the Company's AC Vaccine technology, have
conducted the ongoing clinical trial at TJU Hospital pursuant to an FDA-
approved, physician-sponsored Investigational New Drug Application ("IND"), to
date, the Company has not had any direct contact with the FDA concerning the
clinical results obtained with AC MelaVax(TM). However, it is the Company's
intention to use the results of the TJU clinical trial to support the submission
of a Company-sponsored IND to the FDA. The purpose of the IND submission will
be to seek FDA approval to enter AC MelaVax(TM) into Phase II/III or Phase III
multi-center clinical trials. Although there can be no assurance of such FDA
approval, if successful in obtaining clearance to commence such Company-
sponsored IND, it is the Company's intention to use the results of these
Company-sponsored clinical trials along with the results of the clinical trial
conducted at TJU, as the basis for the filing of a New Drug Application ("NDA")
for FDA approval to market AC MelaVax(TM). The Company also may pursue a
similar regulatory approval and commercialization strategy for AC MelaVax(TM) in
Australia and certain countries in Europe through corporate partnering
strategies, although such strategies have not yet been finalized or initiated.
Denial of any regulatory approvals or any significant delays in obtaining any of
the same, would have a material adverse effect on the Company.
AC MelaVax(TM) is a trademark of the Company. This Prospectus also includes
trademarks of other companies.
3
<PAGE>
The Company also believes that the AC Vaccine technology possibly may have
applications in the treatment of other cancers such as lung, breast, colon and
prostate cancers. Accordingly, in addition to continuing the clinical work on
the AC MelaVax(TM) for melanoma, the Company also has entered into a sponsored
research agreement with TJU relating to the development of additional
immunotherapies based on the AC Vaccine technology. If appropriate, the Company
intends to fund the preclinical and initial clinical development of these
technologies. In order to contain costs, the Company may use sponsored research
agreements and contract research organizations to help it develop its
technologies. At the appropriate time the Company may seek corporate partners to
provide the necessary resources and expertise for clinical development and to
market and distribute products. In addition, the Company may seek to explore the
acquisition and subsequent development and commercialization of additional
commercially promising immunotherapy and adjuvant technologies. No assurance
can be given that the Company will have the requisite resources or that any such
projects will be identified on terms favorable to the Company, if at all.
The Company was incorporated in the State of New York on January 12, 1990, under
the name Nehoc, Inc. On May 29, 1992, it changed its name to Appex
Technologies, Inc. On October 22, 1992, the Company merged into Walden
Laboratories, Inc. ("Walden"), a Delaware corporation, which was incorporated on
September 18, 1992. On December 27, 1995, Walden sold its former leading
product under development, an over-the-counter nutritional dietary, medicinal
and/or elixorative food supplement or drug and related patents and intellectual
property to a subsidiary of Interneuron Pharmaceuticals, Inc. The Company
changed its name from Walden Laboratories, Inc., to AVAX Technologies, Inc.,
effective March 26, 1996.
The Company's office is located at 5353 Sunset Drive, Kansas City, Missouri
64112. Its telephone number at that address is (816) 444-7778.
4
<PAGE>
OFFERING SUMMARY
Common Stock Outstanding
as of July 31, 1996: 6,222,316 shares of Common Stock, including
571,698 shares of currently outstanding shares of
Common Stock directly held by the Selling
Securityholders.1
Common Stock Offered
by Selling Securityholders: 14,885,088 shares of Common Stock.
Risk Factors: The securities offered hereby involve a high
degree of risk. See "Risk Factors."
Proposed Nasdaq AVXT.
National Market Symbol:
Use of Proceeds: The Company will not receive any proceeds from the
sale of shares of Common Stock. The Company is
not expected to receive any proceeds from the
exercise of the Placement Warrants since the
Placement Warrants may be exercised pursuant to a
cashless exercise provision. In the event that
the Placement Warrants are exercised for cash, the
Company intends to use such net cash proceeds
(after estimated offering expenses of this
Offering of approximately $300,000) for general
working capital purposes. Proceeds, if any, from
the exercise for cash of all the Placement
Warrants, before deduction of estimated expenses
of this Offering, would be approximately
$2,850,000. Whether, how and to what extent any
of the Placement Warrants will be exercised, and
whether the Placement Warrants are exercised for
cash or not, cannot be predicted by the Company.
See "Use of Proceeds," "Certain Transactions,"
"Selling Securityholders" and "Description of
Securities."
_____________________________
1 Does not include (i) 12,959,900 shares of Common Stock issuable upon
conversion of currently outstanding shares of Series B Preferred Stock,
(ii) 1,353,490 shares of Common Stock issuable upon conversion of Series
B Preferred Stock issuable upon exercise of the Placement Warrants, (iii)
60,000 shares of Common Stock issuable upon exercise of outstanding stock
options at an exercise price of $0.60 per share, (iv) 815,000 shares of
Common Stock reserved for issuance for grant of future options under the
Company's 1992 Stock Option Plan and (v) 637,745 shares of Common Stock
reserved for issuance pursuant to the letter of employment with Dr. Jeffrey
M. Jonas, the Company's President and Chief Executive Officer. See
"Executive Compensation" and "Description of Securities."
5
<PAGE>
SUMMARY OF FINANCIAL DATA
The following table presents historical financial information derived from the
financial statements of the Company.
Six Months
Ended
Year Ended December 31, June 30
----------------------- -------------------
1994 1995 1995 1996
---- ---- ---- ----
STATEMENT OF OPERATIONS DATA:
Gain from sale of product .... $ --- $ 1,951,000 $ --- $ ---
Total operating income (loss). (720,815) 1,521,243 (161,546) (450,294)
Net income (loss)............. (781,221) 1,380,751 (200,140) (495,112)
Net income (loss) per common
share ...................... (.12) (.10) (.03) (.27)
Net income (loss) attributable to
common stockholders......... (781,221) 642,282 (200,140)(1,626,856)
Weighted average number of shares
outstanding................. 6,502,042 6,746,364 6,315,020 5,953,359
December 31, 1995 June 30, 1996
--------------------- ------------------
Actual Actual
------ ------
BALANCE SHEET DATA:
Cash and cash equivalents....... $ 503 $20,968,831
Current Assets.................. 908,503 21,952,624
Total assets ................... 1,973,568 23,084,002
Loan and notes payable.......... (857,000) -------
Total current liabilities....... 1,569,717 1,209,231
Deficit accumulated during
development stage............. (1,717,180) (2,212,292)
Stockholders equity............. 22,568 20,743,698
_____________
(1) See Note 1 to Financial Statements for an explanation of the
determination of shares used in computing Net income (loss) per
share.
6
<PAGE>
RISK FACTORS
An investment in the shares of Common Stock offered hereby is highly speculative
in nature, involves a high degree of risk and should not be purchased by persons
who cannot afford a loss of their entire investment. Each prospective investor
should consider carefully the risks inherent in and affecting both the business
of the Company and the value of the Common Stock and speculative factors
including, without limitation, the following risk factors, as well as other
information contained elsewhere in this Prospectus before making an investment
in the Common Stock.
HISTORY OF OPERATING LOSSES; ACCUMULATED DEFICIT; UNCERTAINTY OF FUTURE
PROFITABILITY
The Company has incurred substantial operating losses since its inception. As
of June 30, 1996, the Company's accumulated deficit was approximately
$2,212,292. The Company expects to incur significant increasing operating losses
over the next several years, primarily due to the expansion of its research and
development programs, including preclinical studies and clinical trials for the
AC MelaVaxTM product and other products that it may acquire or develop. The
Company's ability to achieve profitability depends upon, among other things, its
ability to discover and develop products, obtain regulatory approval for its
proposed products, and enter into agreements for product development,
manufacturing and commercialization. The Company's AC MelaVaxTM product does
not currently generate revenue and the Company does not expect to achieve
revenues from this or other products for the foreseeable future. Moreover,
there can be no assurance that the Company will ever achieve significant
revenues or profitable operations from the sale of AC MelaVaxTM or any other
products that it may develop.
NEED FOR ADDITIONAL FINANCING; ISSUANCE OF SECURITIES; FUTURE DILUTION
In the future, the Company may require substantial additional financing to
continue research, undertake product development and to pursue the manufacturing
and marketing of any products that it may develop. The Company anticipates that
further funds may be raised through additional debt or equity financings
conducted by the Company, or through collaborative ventures entered into between
the Company and potential corporate partners. However, there can be no
assurance that any such offering will be consummated or that the Company will
otherwise be able to obtain additional financing or that such financing, if
available, can be obtained on terms favorable or acceptable to the Company. If
such offerings are not consummated or additional financing is not otherwise
available, the Company will be required to modify its business development plans
or reduce or cease certain or all of its operations.
While the Company may seek to enter into collaborative ventures with corporate
sponsors to fund some or all of its research and development activities, as well
as to manufacture or market any products which may be successfully developed,
the Company currently does not have any such arrangements with corporate
sponsors, and there can be no assurance that the Company will be able to enter
into such ventures on favorable or acceptable terms, if at all. In addition, no
assurance can be given that the Company will be able to complete a subsequent
public offering or private placement of its securities. Failure by the Company
to enter into such collaborative ventures or to receive additional funding to
complete its proposed product development programs either through a private
placement or a public offering could have a material adverse effect on the
Company. In the event that the Company obtains any additional funding, such
financings may have a dilutive effect on the holders of the Common Stock. See
"Risk Factors--Dependence on Third Parties for Additional Funds and for
Manufacturing, Marketing and Selling".
In addition, the Company currently has an employee stock option plan under which
its officers and directors will be eligible to receive stock options exercisable
for Common Stock at exercise prices which may be lower than the current market
price of the Common Stock. Similarly, under its letter of employment with Dr.
Jeffrey M. Jonas, the Company's President and Chief Executive Officer, the
Company has granted Dr. Jonas certain options for Common Stock at exercise
prices that may be lower than the prevailing market price of the Common Stock
from time to time. Such stock option
7
<PAGE>
grants under the employee stock option plan if any, and to Dr. Jonas, may dilute
the value of the Common Stock. See "Management" and "Description of Securities-
1992 Stock Option Plan; Other Options."
DEVELOPMENT STAGE COMPANY
Although the Company was organized in January 1990, it has only conducted
limited research and development activities and has not generated any
significant revenues to date from operations. Accordingly, the Company must be
evaluated in light of the expenses, delays, uncertainties and complications
typically encountered by newly established biopharmaceutical businesses, many of
which uncertainties and complications may be beyond the Company's control.
These include, but are not limited to, unanticipated problems relating to
product development, testing, regulatory compliance, manufacturing, marketing
and competition, and additional costs and expenses that may exceed current
estimates. There can be no assurance that the Company will successfully develop
and commercialize any products, generate any revenues or ever achieve profitable
operations. See "Business."
TECHNOLOGICAL UNCERTAINTY AND EARLY STAGE OF PRODUCT DEVELOPMENT
The technologies and products which the Company intends to develop are in early
the stages of research and development, require significant further research,
development and testing and are subject to the risks of failure inherent in the
development of products based on innovative or novel technologies. These risks
include, but are not limited to, the possibility that any or all of the
Company's proposed products will be found to be ineffective or unsafe, that the
products once developed, although effective, are uneconomical to market, that
third parties hold proprietary rights that preclude the Company from marketing
such products or that third parties market a superior or equivalent product.
The Company's agreement with TJU, its licensor for the AC Vaccine technology,
does not contain any representations by the licensor as to the safety or
efficacy of the inventions or discoveries covered thereby. The Company is
unable to predict whether the research and development activities it is funding
will result in any commercially viable products or applications. Further, due
to the extended testing required before marketing clearance can be obtained from
the United States Food and Drug Administration (the "FDA") or other similar
agencies, the Company is not able to predict with any certainty, when, if ever,
it will be able to commercialize any of its proposed products.
The market for biotechnology in general, and for cancer immunotherapies such as
the AC Vaccine technology and its possible future products, in particular, are
characterized by rapidly changing technology, evolving industry standards and
frequent new product introductions. The Company's future success will depend
upon its ability to develop and commercialize its existing product and to
develop new products and features. There can be no assurance that the Company
will successfully complete the development of its existing product or of any
future product or that the Company's current or future products will achieve
market acceptance. Any delay or failure of AC MelaVaxTM or of any future
product which the Company may develop in achieving market acceptance would
materially and adversely affect the Company's business. In addition, there can
be no assurance that products or technologies developed by others will not
materially render the Company's existing or future products or technologies non-
competitive or obsolete.
This Prospectus includes estimates by the Company of the number of patients with
a particular type of cancer or other diseases, the number of patients who were
administered a particular vaccine or drug and the number of patients who
received or might have been candidates for a particular type of treatment.
There can be no assurance that such estimates accurately reflect the true market
or the extent to which any of the Company's products, if successfully developed,
will actually be used by patients. Furthermore, even if patient use occurs,
there can be no assurance that the Company's sales of its products for such uses
will be profitable. Failure of the Company to successfully develop, obtain
regulatory approval for, introduce and market AC MelaVax(TM) and any possible
future products would have a material adverse effect on the Company.
8
<PAGE>
GOVERNMENT REGULATION; NO ASSURANCE OF PRODUCT APPROVAL
The proposed products of the Company will be subject to very stringent federal,
state and local government regulations, including, without limitation, the
Federal Food, Drug and Cosmetic Act, and their state and local counterparts.
Similar regulatory frameworks exist in other countries where the Company may
consider marketing its products. To date, while TJU has conducted its clinical
trials pursuant to an FDA-approved physician sponsored Investigational New Drug
Application ("IND"), the Company has not had any direct contact with the FDA
concerning AC MelaVax(TM). However, prior to marketing AC MelaVax(TM) or any
other possible product the Company may develop, such product must undergo an
extensive regulatory approval process. Any denials or delays in obtaining
requisite approvals would be likely to have a material adverse effect on the
Company.
The regulatory process includes preclinical and clinical testing of any product
to establish its safety and efficacy. This testing can take many years and
require the expenditure of substantial capital and other resources. Delays or
denials of marketing approval are encountered regularly due to the submission of
unacceptable or incomplete data as deemed by the FDA or other similar regulatory
agency, or due to regulatory policy for product approvals. These delays may be
encountered both domestically and abroad. There is no assurance that even after
clinical testing, regulatory approval will ever be obtained. If obtained,
regulatory approval may provide limitations on the indicated uses for which any
products may be marketed. Following regulatory approval, if any, a marketed
product and its manufacturer are subject to continual regulatory review.
Later discovery of problems with a product or manufacturer may result in
restrictions on such product or manufacturer. These restrictions may include
withdrawal of the marketing approval for the product. In addition, new
government regulations may be established that could delay or prevent regulatory
approval of the Company's products under development. Failure of the Company to
obtain and maintain regulatory approval of its proposed products, processes or
facilities would have a material adverse effect on the business, financial
condition and results of operations of the Company. In addition, many academic
institutions and companies doing research in the field of cancer immunotherapy
are using a variety of approaches and technologies. Any adverse results
obtained by such researchers in preclinical or clinical studies, even if not
directly or indirectly related to the Company's potential products or
approaches, could adversely affect the regulatory environment for gene
immunotherapy products generally, and possibly lead to delays in the approval
process for the Company's potential products. See "Business--Government
Regulation."
DEPENDENCE ON OTHERS FOR CLINICAL DEVELOPMENT OF, REGULATORY APPROVALS FOR, AND
MARKETING OF PHARMACEUTICAL PRODUCTS
The Company anticipates that it may in the future seek to enter into
collaborative agreements with pharmaceutical or other biotechnology companies
for the development of, clinical testing of, seeking of regulatory approval for,
and manufacturing, marketing and commercialization of, certain of its products.
The Company may in the future grant to its collaborative partners, if any,
rights to license and commercialize any pharmaceutical products developed under
these collaborative agreements and such rights would limit the Company's
flexibility in considering alternatives for the commercialization of such
products. Under such agreements, the Company may rely on its collaborative
partners to conduct research efforts and clinical trials on, obtain regulatory
approvals for, manufacture, market and commercialize certain of the Company's
products. Although the Company believes that its collaborative partners may
have an economic motivation to commercialize the pharmaceutical products which
they may license, the amount and timing of resources devoted to these activities
generally will be controlled by each such individual partner. There can be no
assurance that the Company will be successful in establishing any collaborative
arrangements, or that, if established, such future partners will be successful
in commercializing products or that the Company will derive any revenues from
such arrangements.
DEPENDENCE ON THIRD PARTIES FOR ADDITIONAL FUNDS AND FOR MANUFACTURING,
MARKETING AND SELLING
The Company currently does not have the resources to directly manufacture,
market or sell AC MelaVax(TM) or any products it may develop in the future.
Accordingly, the Company may be dependent on corporate partners or other
entities for, and may have only limited control over, commercial scale
manufacturing, marketing and selling of its products. The
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inability of the Company to acquire such third party manufacturing,
distribution, marketing and selling arrangements for the Company's anticipated
products will have a material adverse effect on the Company's business. There
can be no assurance that the Company will be able to enter into any arrangements
for the manufacturing, marketing and selling of its products. In the event the
Company determines to establish a manufacturing facility, it will require
substantial additional funds, the hiring and retention of significant additional
personnel and compliance with extensive regulations applicable to such a
facility. There can be no assurance that the Company will be able to
successfully establish such a facility and if established, that it will be able
to successfully manufacture products for sale at competitive prices. See
"Business--Manufacturing and Marketing."
DEPENDENCE ON LICENSE AND SPONSORED RESEARCH AGREEMENTS
The Company is dependent upon the TJU License as the basis of its proprietary
technology and is dependent upon a sponsored research agreement with TJU for its
research and development efforts. The TJU License requires the payment of an
up-front license fee, the use of due diligence in developing and bringing
products to market and to make certain milestone payments. The Company is also
obligated to make royalty payments on the sales, if any, of products resulting
from such licensed technology and, is responsible for the costs of filing and
prosecuting patent applications and maintaining issued patents. In addition,
the Company is required to invest a minimum amount per year in the AC Vaccine
technology as well as sponsored research at TJU. As the Company currently does
not have laboratory facilities, certain research and development activities are
intended to be conducted by universities or other institutions pursuant to
sponsored research agreements. The sponsored research agreement entered into by
the Company, TJU and Dr. Berd generally requires periodic payments by the
Company to TJU on a quarterly basis. If the Company does not meet its financial
obligations under either its license agreement or its sponsored research
agreement in a timely manner, the Company could lose the rights to its
proprietary technology or the right to have TJU conduct its research and
development efforts.
UNCERTAINTY REGARDING PATENTS AND PROPRIETARY RIGHTS
The biotechnology industry places considerable importance on obtaining patent
and trade secret protection for new technologies, products and processes. The
success of the Company will depend in large part on its ability, on the ability
of its current licensor, TJU, and on the ability of its potential future
licensors, if any, to obtain patents, defend such patents, maintain trade
secrets and operate without infringing upon the proprietary rights of others,
both in the United States and in foreign countries. The patent position of firms
relying upon biotechnology is highly uncertain and involves complex legal and
factual questions. To date there has emerged no consistent policy regarding the
breadth of claims allowed in biotechnology patents or the degree of protection
afforded under such patents. The Company relies on TJU's issued patent for the
AC Vaccine technology and may rely on certain United States patents and pending
United States and foreign patent applications relating to various aspects of its
present and future products and processes. The patent application and issuance
process can be expected to take several years and could entail considerable
expense to the Company, as it may be responsible for such costs under the terms
of any technology agreements. There can be no assurance that patents will issue
as a result of any applications or that the existing patents and any patents
resulting from such applications, will be sufficiently broad to afford
protection against competitors with similar technology. In addition, there can
be no assurance that such patents will not be challenged, invalidated,
circumvented, or that the rights granted thereunder will provide competitive
advantages to the Company. The commercial success of the Company will also
depend upon avoiding infringement of patents issued to competitors. A United
States patent application is maintained under conditions of confidentiality
while the application is pending, so the Company cannot determine the inventions
being claimed in pending patent applications filed by third parties. Litigation
may be necessary to defend or enforce the Company's patent and license rights or
to determine the scope and validity of others' proprietary rights. Defense and
enforcement of patent claims can be expensive and time consuming, even in those
instances in which the outcome is favorable to the Company, and can result in
the diversion of substantial resources from the Company's other activities. An
adverse outcome could subject the Company to significant liabilities to third
parties, require the Company to obtain licenses from third parties, or require
the Company to alter its products or processes, or cease altogether any related
research and development activities or product sales, any of which may have a
material adverse effect on the Company's business, results of operations and
financial condition. See "Business -- Patents and Proprietary Technology."
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To the extent that consultants, key employees or other third parties apply
technological information independently developed by them or by others to any of
the proposed projects of the Company, disputes may arise as to the proprietary
rights to such information which may not be resolved in favor of the Company.
LACK OF MANAGEMENT AND EMPLOYEES
The Company has only one full time employee, its President and Chief Executive
Officer, Jeffrey M. Jonas, M.D. The Company's other officers, directors and
scientific advisors work for the Company on a part-time basis only and for the
most part are involved with other substantially full-time activities.
DEPENDENCE UPON KEY PERSONNEL AND CONSULTANTS
The Company will be highly dependent upon its officers and directors, as well as
its Scientific Advisory Board members, consultants and collaborating scientists.
Except for its President and Chief Executive Officer, Jeffrey M. Jonas, M.D. ,
each of the Company's officers, directors, advisors and consultants devotes only
a portion of his or her time to the Company's business. The loss of certain of
these individuals, including, without limitation, Dr. Jonas, the Company's
President and Chief Executive Officer, would have a material adverse effect on
the Company. The Company does not maintain key-man life insurance policies on
any of such personnel. In addition, Dr. Jonas and the Company's Secretary and
Treasurer have only recently joined the Company. Although the Company has
entered into a letter of employment with Dr. Jonas, such letter of employment
does not contain provisions which would prevent him from resigning at any time.
See "Management".
Competition for qualified employees among pharmaceutical and biotechnology
companies is intense, and the loss of any of such persons, or an inability to
attract, retain and motivate any additional highly skilled employees required
for the expansion of the Company's activities, could have a material adverse
effect on the Company. There can be no assurance that the Company will be able
to retain its existing personnel or to attract additional qualified employees
and such failure likely would have a material adverse effect on the Company.
Currently, the Company does not have "key-man" insurance for Dr. Jonas.
LACK OF FACILITIES
The Company currently has no permanent laboratories. With the exception of a
sponsored research program currently being conducted at TJU, it is currently
anticipated that the Company's research and product development activities will
require that the Company equip and maintain a laboratory facility for use by the
Company's scientists, if and when such persons are hired by the Company.
COMPETITION
The Company's proposed cancer immunotherapy business is characterized by
intensive research efforts and intense competition. Many companies, research
institutes, hospitals and universities are working to develop products and
processes in the Company's fields of research. Most of these entities have
substantially greater financial, technical, manufacturing, marketing,
distribution and other resources than the Company. Certain of such companies
have experience in undertaking testing and clinical trials of new or improved
products similar in nature to that which the Company is developing. In
addition, certain competitors have already begun testing similar compounds or
processes and may introduce such products or processes before the Company.
Accordingly, other companies may succeed in developing products earlier than the
Company or that are more effective than those proposed to be developed by the
Company. Further, it is expected that competition in the Company's field will
intensify. There can be no assurance that the Company will be able to compete
successfully in the future. See "Business--Competition."
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RISK OF PRODUCT LIABILITY; NO INSURANCE
Should the Company develop and market any products, the marketing of such
products, through third-party arrangements or otherwise, may expose the Company
to product liability claims. The Company does not presently carry product
liability insurance. Upon clinical testing or commercialization of the
Company's proposed products, the Company's licensor requires that the Company
obtain product liability insurance. There can be no assurance that the Company
will be able to obtain such insurance or, if obtained, that such insurance can
be acquired in sufficient amounts to protect the Company against such liability
or at a reasonable cost. The Company is required to indemnify TJU against any
product liability claims incurred by them as a result of the products developed
by the Company. TJU has not made, and is not expected to make, any
representations as to the safety or efficacy of the inventions covered by the
license or as to any products which may be made or used under rights granted
therein or thereunder.
UNCERTAINTY OF PRODUCT PRICING AND REIMBURSEMENT; HEALTH CARE REFORM AND RELATED
MEASURES
The levels of revenues and profitability of pharmaceutical and/or biotechnology
products and companies may be affected by efforts of governmental and third
party payors to contain or reduce the costs of health care through various
means. For example, in certain foreign markets, pricing or profitability of
prescription pharmaceuticals is subject to government control. In the United
States there have been, and the Company expects that there will continue to be,
a number of federal and state proposals to implement similar government control.
Presently, the United States Congress is considering a number of legislative and
regulatory reforms that may effect companies engaged in the health care industry
in the United States. Pricing constraints on the Company's products, if
approved, could have a material adverse effect on the Company. Although the
Company cannot predict whether these proposals will be adopted or what effects
such proposals may have on its business, the existence and pendency of such
proposals could have a material adverse effect on the Company in general. In
addition, the Company's ability to commercialize potential pharmaceutical and/or
biotechnology products may be adversely affected to the extent that such
proposals have a material adverse effect on other companies that are prospective
collaborators with respect to any of the Company's product candidates.
In addition, in the United States and elsewhere, sales of medical products and
services are dependent in part on the availability of reimbursement to the
consumer from third party payors, such as government and private insurance
plans. Third party payors are increasingly challenging the prices charged for
medical products and services. If the Company succeeds in bringing one or more
products to the market, there can be no assurance that these products will be
considered cost effective and that reimbursement to the consumer will be
available or will be sufficient to allow the Company to sell their products on a
competitive basis. See "Risk Factors--Government Regulation; No Assurance of
Product Approval."
NO ASSURANCE OF IDENTIFICATION OF ADDITIONAL PROJECTS; CERTAIN INTERLOCKING
RELATIONSHIPS; POTENTIAL CONFLICTS OF INTEREST
The Company initially intends to be engaged primarily in the development and
commercialization of the AC Vaccine technology described in this Prospectus. See
"Business." From time to time, if and when the Company's resources allow, the
Company may explore the acquisition and subsequent development and
commercialization of additional biomedical and pharmaceutical products and
technologies. However, there can be no assurance that the Company will be able
to identify any additional products or technologies and, even if suitable
products or technologies are identified, the Company does not expect to have
sufficient resources to pursue any such products or technologies in the
foreseeable future.
Currently the Company's management and officers other than Dr. Jeffrey M. Jonas,
its President and Chief Executive Officer, devote only a portion of their time
to the business of the Company. In addition, certain of the directors and part-
time officers of the Company are full-time officers of Paramount Capital
Investments, LLC. See "Management." Paramount Capital Investments, LLC, is a
merchant bank specializing in biotechnology companies. In the regular course of
its business, Paramount Capital Investments, LLC identifies, evaluates and
pursues investment opportunities in biomedical and pharmaceutical products,
technologies and companies. Generally, Delaware corporate law requires that any
transactions between the Company and any of its affiliates be on terms that,
when taken as a whole, are substantially as favorable to the Company as those
then reasonably obtainable from a person who is not an affiliate in an arms-
length
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transaction. Nevertheless, neither Paramount Capital Investments, LLC, nor any
other person is obligated pursuant to any agreement or understanding with the
Company to make any additional products or technologies available to the
Company, and there can be no assurance, and purchasers of the Common Stock
should not expect, that any biomedical or pharmaceutical product or technology
identified by Paramount Capital Investments, LLC, or any other person in the
future will be made available to the Company. In addition, certain of the
officers, directors, consultants and advisors to the Company may from time to
time serve as officers, directors, consultants or advisors to other
biopharmaceutical or biotechnology companies. There can be no assurance that
such other companies will not in the future have interests in conflict with
those of the Company.
CONTROL BY CURRENT OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS
The Company's directors, executive officers and principal stockholders
beneficially own approximately 64.21% of the outstanding shares of Common Stock.
Accordingly, the Company's executive officers, directors, principal stockholders
and certain of their affiliates have the ability to exert substantial influence
over the election of the Company's Board of Directors and the outcome of issues
submitted to the Company's stockholders. See "Principal Stockholders."
VOLATILITY OF STOCK PRICE
The market price of the Common Stock like that of many other development-stage
public pharmaceutical or biotechnology companies, may be highly volatile.
Factors such as announcements of technological innovations or new commercial
products by the Company or its competitors, disclosure of results of preclinical
and clinical testing, adverse reactions to products, governmental regulation and
approvals, developments in patent or other proprietary rights, public or
regulatory agency concerns as to the safety of any products developed by the
Company and general conditions may have a significant or adverse effect on the
market price of the Common Stock. Also, the trading price of the Common Stock
may respond to quarterly variations in operating results, announcements of
innovations or new products by the Company or its competitors and other events
or factors, including, but not limited to, the sale or attempted sale of a large
amount of such securities into the market. In addition, market fluctuations may
adversely affect the market prices of such securities. See "Description of
Securities."
POTENTIAL ADVERSE EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE
As of June 30, 1996, 6,222,316 shares of Common Stock were issued and
outstanding of which the Company believes that 4,386,409 shares of Common Stock
are "restricted securities" and under certain circumstances may, in the future,
be sold in compliance with Rule 144 (including 987,776 shares owned by persons
who may be the affiliates of the Company, but as to which there can be no
assurance, and whose shares therefore may not be restricted). Assuming the
availability of Rule 144, including the requirement that there is adequate
current public information with respect to the Company as contemplated by Rule
144, the Company believes that of the 4,386,409 "restricted" shares of Common
Stock, 987,776 shares of Common Stock are presently eligible for sale and an
additional 4,386,409 shares of Common Stock will be eligible for sale in 1997
pursuant to Rule 144, in each case subject to certain volume limitations and
manner of sale requirements imposed by Rule 144. In general, under Rule 144,
subject to the satisfaction of certain other conditions, a person, including an
affiliate of the Company, who beneficially owned restricted shares of Common
Stock for at least two years is entitled to sell, within any three-month period,
a number of shares that does not exceed the greater of one percent of the total
number of outstanding shares of the same class, or if the Common Stock is quoted
on the Nasdaq National Market or any other national securities exchange, the
average weekly trading volume during the four calendar weeks immediately
preceding the sale. A person who presently is not and who has not been an
affiliate of the Company for at least three months immediately preceding the
sale and who has beneficially owned the shares of Common Stock for at least
three years is entitled to sell such shares under Rule 144 without regard to the
volume limitations described above.
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CONDUCTING BUSINESS ABROAD
To the extent the Company conducts business outside the United States, it
intends to do so through licenses, joint ventures or other contractual
arrangements for the development, manufacturing and marketing of its products.
No assurance can be given that the Company will be able to establish foreign
operations successfully through such a plan, that foreign patent coverage will
be available or that the manufacturing and marketing of its products through
such licenses, joint ventures other arrangements will be commercially
successful. The Company might also have greater difficulty obtaining
proprietary protection for its products and technologies outside the United
States and enforcing its rights in foreign courts.
POTENTIAL FOR PRODUCT LIABILITY EXPOSURE
The Company could be subject to product liability claims in connection with the
use of products that the Company and its licensees are currently testing or may
manufacture and sell in the future. There can be no assurance that the Company
would have sufficient resources to satisfy any liability resulting from such
claims or would be able to have its customers indemnify or insure the Company
against such claims. The Company currently carries product liability insurance
in a limited amount and there can be no assurance that this coverage will be
adequate in amount and scope to protect it against material adverse effects in
the event of a successful product liability claim.
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
There is no public market for the Common Stock, and assuming the Common Stock's
approval for initial listing on the Nasdaq National Market, there can be no
assurance that an active trading market will develop or be sustained after the
Offering. The absence of an active trading market would reduce the liquidity of
an investment in the Common Stock. The Company believes that certain brokerage
firms intend to act as market makers and otherwise effect transactions in the
Common Stock. To the extent these firms participate, they may be a dominating
influence in any market that might develop, and the degree of participation by
the firms may significantly affect the price and liquidity of the Common Stock.
These firms may discontinue such activities at any time or from time to time.
The prices at which the Common Stock may be offered in the market will be
determined by these firms and the purchasers and sellers of the Common Stock,
based in part on market factors, and may not necessarily relate to the Company's
assets, book value, results of operations or other established and quantifiable
criteria of value. The trading price of the Common Stock, including without
limitation, any Common Stock to be offered by the Selling Shareholders, could be
subject to wide fluctuations in response to quarterly variations in operating
results, announcements of technological innovations or new products by the
Company or its competitors and other events or factors. In addition, the stock
market has experienced volatility that has particularly affected the market
prices of equity securities of many biotechnology companies and that often has
been unrelated to the operating performance of such companies. These broad
market fluctuations may adversely affect the market price of the Common Stock.
See "Plan of Distribution."
POSSIBLE DELISTING FROM NASDAQ NATIONAL MARKET AND MARKET ILLIQUIDITY
The Company intends to apply to have its Common Stock listed on the Nasdaq
National Market. Assuming such listing is approved, continued inclusion of the
Common Stock on the Nasdaq National Market requires that (i) the Company
maintain at least $4,000,000 in net tangible assets assets if it has sustained
losses from continuing operations and/or net losses in three of its four most
recent fiscal years (ii) a market value of its publicly held shares of at least
$1 million (iii) the minimum bid price for the Common Stock be at least $1.00
per share or, in the alternative, the market vale of the Company's publicly held
shares must be at least $3 million and the Company have at least $4 million of
net tangible assets (iv) the public float of the Common Stock consist of at
least 200,000 shares, (v) the Common Stock have at least two active market
makers and (vi) the Common Stock be held by at least 400 holders or 300 round
lots. If the Company is unable to satisfy such maintenance requirements, the
Common Stock may be delisted from the Nasdaq National Market. In such event,
trading, if any, in the Common Stock would thereafter be conducted in the
over-the-counter market in the "pink sheets" or the NASD's "Electronic Bulletin
Board." Consequently, the liquidity of the Common Stock could be materially and
adversely impaired, not only in the number of securities that can be bought and
sold at a given price, but
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also through delays in the timing of transactions and reduction in security
analysts' and the media's coverage of the Company, which could result in lower
prices for the Common Stock than might otherwise be attained and could also
result in a larger spread between the bid and asked prices for the Common Stock.
See "Risks of Low Price Stock; Possible Effect of "Penny Stock" Rules on
Liquidity for the Common Stock."
RISKS OF LOW-PRICED STOCK; POSSIBLE EFFECT OF "PENNY STOCK" RULES ON LIQUIDITY
FOR THE COMMON STOCK
The Securities Exchange Act of 1934 (the "Exchange Act") requires additional
disclosure relating to the market for penny stocks in connection with trades in
any stock defined as a penny stock. The Commission's regulations generally
define a penny stock to be any equity security that has a market price of less
than $5.00 per share, subject to certain exceptions. Such exceptions include
any equity security listed on the Nasdaq National Market, subject to certain
trade reporting requirements, and any equity security issued by an issuer that
has (i) net tangible assets of at least $2 million, if such issuer has been in
continuous operation for three years, (ii) net tangible assets of at least $5
million, if such issuer has been in continuous operation for less than three
years, or (iii) average annual revenue of at least $6 million, if such issuer
has been in continuous operation for less than three years. There can be no
assurance that the Company will meet the requirements of the foregoing financial
exceptions. Failure to qualify under one of these exceptions, will require
delivery, prior to any transaction in a penny stock, of a disclosure schedule
prepared by the Commission relating to the penny stock market. Disclosure is
also required to be made about sales commissions payable to both the broker-
dealer and the registered representative and current quotations for the
securities. Finally, monthly statements are required to be sent disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stocks. In any event, even if the Common Stock
were exempt from such restrictions, they would remain subject to Section
15(b)(6) of the Exchange Act, which gives the Commission the authority to
prohibit any person that engages in unlawful conduct while participating in a
distribution of penny stock from associating with a broker-dealer or
participating in a distribution of penny stock, if the Commission finds that
such a restriction would be in the public interest. Accordingly, if the Common
Stock is subject to the rules on penny stocks, the market liquidity for such
securities could be materially and adversely affected.
In addition, if the Common Stock fails to meet the minimum market price, the net
tangible asset or the annual revenue tests set forth above, but are quoted on
the NASD's "Electronic Bulletin Board" (as to which there can be no assurance),
then trading in the Common Stock would be regulated pursuant to Rules 15-g-1
through 15-g-6 and 15-g-9 promulgated under the Exchange Act for non-National
Association of Securities Dealers Automotive Quotation System and non-exchange
listed securities. Under such rules, broker-dealers who recommend such
securities to persons other than established customers and "accredited
investors" must make a special written suitability determination that the penny
stock is a suitable investment for the purchaser and receive the purchaser's
written agreement to this transaction. Securities are exempt from these rules
if the market price of the Common Stock is at least $5.00 per share.
Consequently, such Exchange Act rules may affect the ability of broker-dealers
to make a market in such shares and may affect the ability of holders of Common
Stock to sell in the secondary market.
ANTITAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND
DELAWARE LAW
The Company's Articles of Incorporation, as amended, authorize the issuance of
up to 5,000,000 shares of preferred stock, par value $.01 per share, of which
300,000 shares are authorized for issuance as Series B Preferred Stock, of which
approximately 286,000 have been issued or reserved for issuance upon the
exercise of Series B Placement Warrants. The Company's Certificate of
Incorporation authorizes the issuance of "blank check" preferred stock with such
designation, rights and preferences as may be determined from time to time by
the Board of Directors. Accordingly, the Board of Directors is empowered,
without stockholder approval, to issue a new series of preferred stock with
dividend, liquidation, conversion, voting or other rights which could adversely
affect the voting power or other rights of the holders of the Common Stock. In
the event of issuance, the new series of preferred stock could be utilized,
under certain circumstances,
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as a method of discouraging, delaying or preventing a change in control of the
Company. Although the Company has no present intention to issue any additional
shares of its preferred stock, other than those already authorized for issuance
upon exercise of the Placement Warrants, there can be no assurance that the
Company will not do so in the future. See "Description of Securities."
The Company is subject to Section 203 of the General Corporation Law of the
State of Delaware which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that such stockholder
became an interested stockholder. In general, Section 203 defines an interested
stockholder as any entity or person beneficially owning 15% or more of the
outstanding voting stock of the corporation and any entity or person affiliated
with or controlling or controlled by such entity or person. The foregoing
provisions could have the effect of discouraging others from making tender
offers for the Company's shares and, as a consequence, they also may inhibit
fluctuations in the market price of the Company's shares that could result from
actual or rumored takeover attempts. Such provisions also may have the effect
of preventing changes in the management of the Company.
FORWARD LOOKING STATEMENTS
Certain of the statements set forth in this Prospectus, including, without
limitation, the Company's research and development programs, the anticipated
filing of an IND for AC MelaVax(TM), the seeking of joint development or
licensing arrangements with pharmaceutical companies, the research and
development of particular compounds and technologies for particular
indications and the period of time for which the Company's existing resources
will enable the Company to fund its operations and to meet the initial listing
requirements for the quotation of its securities on the Nasdaq National Market
and the possibility of contracting with other parties additional licenses to
develop, manufacture and market commercially viable products, are
forward-looking and based upon the Company's current belief as to the outcome,
occurrence and timing of future events or current expectations and plans. All
such statements involve significant risks and uncertainties. Many important
factors affect the Company's ability to achieve the stated outcomes and to
successfully develop and commercialize its product candidates, including,
among other things, the ability to obtain substantial additional funds, obtain
and maintain all necessary patents or licenses, to demonstrate the safety and
efficacy of product candidates at each state of development, to meet applicable
regulatory standards and receive required regulatory approvals, to meet
obligations and required milestones under its license agreements, to be capable
of producing drug candidates in commercial quantities at reasonable costs, to
compete successfully against other products and to market products in a
profitable manner. As a result, there also can be no assurance that these
statements included in the Prospectus will prove to be accurate. In light of
the significant uncertainties inherent in these statements included herein,
the inclusion of such information should not be regarded as a representation
by the Company or any other person that the objectives and plans of the
Company will be achieved.
NO DIVIDENDS
The Company has never paid cash dividends on its capital stock and does not
anticipate paying any cash dividends for the foreseeable future. See "Dividend
Policy."
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USE OF PROCEEDS
The Company will not receive any proceeds from the sale of shares of Common
Stock. The Company is not expected to receive any proceeds from the exercise of
the Placement Warrants since the Placement Warrants may be exercised pursuant to
a cashless exercise provision. In the event that the Placement Warrants are
exercised for cash, the Company intends to use such net cash proceeds (after
estimated offering expenses of this Offering of approximately $300,000) for
general working capital purposes. Proceeds, if any, from the exercise for cash
of all the Placement Warrants, before deduction of estimated expenses of this
Offering, would be approximately $2,850,000. Whether, how and to what extent
any of the Placement Warrants will be exercised, and whether the Placement
Warrants are exercised for cash or not, cannot be predicted by the Company.
DIVIDEND POLICY
The Company has not paid any cash dividends on its Common Stock since its
formation. The payment of dividends, if any, in the future, with respect to the
Common Stock, is within the discretion of the Board of Directors of the Company
and will depend on the Company's earnings, capital requirements, financial
condition and other relevant factors. The Board of Directors of the Company does
not presently intend to declare any dividends on the Common Stock in the
foreseeable future. The Company anticipates that all earnings and other
resources of the Company, if any, will be retained by the Company for investment
in its business.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of (a)
December 31, 1995 and (b)June 30, 1996:
December 31 June 30
1995 1996
----------- ----------
(Unaudited)
Stockholders' equity (deficit)
Preferred Stock:
Authorized - 5,000,000 shares (including
Series B-300,000 shares)
Series A convertible preferred stock, $.01
par value; $12,875 -----
1,287,500 shares issued and outstanding in
1995
Series B convertible preferred stock, $.01 par
value; 259,198 shares issued and outstanding in ----- $2,592
1996
Common Stock:
Authorized - 10,000,000 shares at December 31, 1995 and
50,000,000 at June 30, 1996, $.002 par value;
5,162,671 and 5,928,567 shares issued and
outstanding in 1994, 1995 and 1996 10,325 11,857
Additional paid-in capital 1,723,657 22,948,130
Subscription receivable (7,109) (6,589)
Deficit accumulated during the developmental stage (1,717,180) (2,212,292)
----------- -----------
Total stockholders' equity (deficit) 22,568 20,743,698
----------- -----------
Total liabilities and stockholder's equity deficit $ 1,973,568 $23,084,002
=========== ============
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND PLAN OF OPERATIONS
GENERAL
Since its inception, the Company has concentrated its efforts and resources in
the development and commercialization of biotechnology and pharmaceutical
products and technologies. The Company has been unprofitable since its founding
and has incurred a cumulative net loss of approximately $2,212,292 as of June
30, 1996. The Company expects to incur significantly increasing operating
losses over the next several years, primarily due to the expansion of its
research and development programs, including preclinical studies and clinical
trials for the AC MelaVaxTM product and other products that it may acquire or
develop. The Company's ability to achieve profitability depends upon, among
other things, its ability to discover and develop products, obtain regulatory
approval for its proposed products, and enter into agreements for product
development, manufacturing and commercialization. The Company's AC MelaVaxTM
product does not currently generate revenue and the Company does not expect to
achieve revenues from this or other products for the foreseeable future.
Moreover, there can be no assurance that the Company will ever achieve
significant revenues or profitable operations from the sale of AC MelaVaxTM or
any other products that it may develop.
The Company's independent auditors have included an explanatory paragraph in its
report on the Company's financial statements at December 31, 1995, as to the
uncertainty relating to its ability to continue as a going concern.
PLAN OF OPERATION
The Company is currently engaged in the development and commercialization of
biotechnology and pharmaceutical products and technologies. On November 20,
1995, the Company acquired the rights to the AC Vaccine technology pursuant to
the TJU License. The Company initially intends to focus its efforts primarily
on the development of immunotherapies for cancer pursuant to the TJU License.
The Company anticipates that during the next 12 months that it will conduct
substantial research and development of the AC Vaccine technology, including,
without limitation, Phase II/III or Phase III clinical trials on AC MelaVaxTM,
the Company's lead AC Vaccine for metastic melanoma. See "Business --
Technology Applications and Product Candidates," "Research and Development."
The Company also anticipates that it will expend resources on the research and
development of additional AC Vaccines. While there can be no assurance, the
Company intends to acquire additional products and technologies during the next
12 months, which may or may not be in the cancer immunotherapy field. Should the
Company acquire such additional products or technologies, it is anticipated that
such additional products or technologies will require substantial resources for
research, development and clinical evaluation. However, there can be no
assurance that the Company will be able to obtain the additional financing
necessary to acquire and develop such additional products and technologies. In
addition, there can be no assurance, that changes in the Company's research and
development plans or other changes which would or could alter the Company's
operating expenses will not require the Company to reallocate funds among its
planned activities and curtail certain planned expenditures. In such event, the
Company may need additional financing. There can be no assurance as to the
availability or the terms of any required additional financing, when and if
needed. In the event that the Company fails to raise any funds it requires, it
may be necessary for the Company to significantly curtail its activities or
cease operations.
The Company anticipates that over the next 12 months it will hire approximately
four new employees, including, without limitation, a chief financial officer,
and may establish lab facilities for the research and development of the AC
Vaccine technology or any other technologies which may be acquired. The timing
and cost of such facility may vary depending on need and cannot currently be
predicted with any certainty.
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LIQUIDITY AND CERTAINTY
The Company currently anticipates that its current resources will permit the
Company to meet its business objectives for approximately the next 24-36 months
and the Company does not currently expect to be required to raise additional
capital in the next 12 months. However, since the Company's working capital
requirements will depend upon numerous factors, including, without limitation,
progress of the Company's research and development programs, preclinical and
clinical testing, timing and cost of obtaining regulatory approvals, levels of
resources that the Company devotes to the development of manufacturing and
marketing capabilities, technological advances, status of competitors, and
abilities of the Company to establish collaborative arrangements with other
organizations, there can be no assurance that the Company will be able to meets
its business objectives and/or not need to raise additional capital.
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BUSINESS
GENERAL
AVAX Technologies, Inc. ("AVAX" or the "Company"), is a development stage
biopharmaceutical company which intends to acquire rights to, and to develop,
technologies and products for the treatment of cancer. The Company initially
intends to focus its efforts primarily on the development of immunotherapies for
cancer, which is a rapidly developing segment of the cancer therapeutic market.
The Company has licensed (the "TJU License") from Thomas Jefferson University
("TJU") an issued U.S. patent and certain patent applications covering a process
for the modification of a patient s own cancer cells into a cancer vaccine.
This process allows the Company to produce an autologous cell vaccine (an "AC
Vaccine") that attempts to stimulate the patient s own immune system to
eliminate the cancer. This technology has emerged from research conducted at
the Jefferson Cancer Center of TJU. The technology primarily involves the
removal of a patient's own tumor cells, conjugating them to a small molecule
known as a hapten, and reintroducing the product back into the patient with an
adjuvant. The approach is based on the premise that a patient's immune response
to a strongly immunogenic, hapten conjugated tumor antigen may be followed by
the development of an immune response to the unmodified tumor antigen, somewhat
analogous to the phenomenon of drug-induced autoimmune disease. The Company's
initial AC Vaccine, AC MelaVax(TM), is currently undergoing a
physician-sponsored human clinical trial based on an experimental protocol at
TJU Hospital as an outpatient, post-surgical, adjunct therapy for the treatment
of malignant melanoma, and is believed by the Company to be the first
therapeutic cancer vaccine to show a substantial increase in the survival rate
for patients with melanoma. In such ongoing clinical trial at the Thomas
Jefferson Medical Center, 150 malignant melanoma patients have been treated
post-surgically on an outpatient basis with AC MelaVaxTM. In 62 patients with
stage 3 melanoma for whom there has been sufficient time for long-term
follow-up, the four-year survival rate is approximately 60%. This compares
with the historical and control group survival rate of approximately 20%, and
the survival rate for treatment with high dose alpha interferon of approximately
32%. The Company believes that the results to date of the ongoing clinical
trial represent the first substantial increase in survival for malignant
melanoma patients treated by immunotherapy. In the 150 patients treated in
the study, the Company believes that only relatively minor side effects, such
as soreness and swelling at the site of the application of the AC MelaVaxTM
vaccine, have been witnessed to date.
The Company also believes that the AC Vaccine technology possibly may have
applications in the treatment of other cancers such as lung, breast, colon and
prostate cancers. Accordingly, in addition to continuing the clinical work on
the AC MelaVax(TM) for melanoma, the Company also has entered into a sponsored
research agreement with TJU relating to the development of additional
immunotherapies based on the AC Vaccine technology. If appropriate, the Company
intends to fund the preclinical and initial clinical development of these
technologies. In order to contain costs, the Company may use sponsored research
agreements and contract research organizations to help it develop its
technologies. At the appropriate time the Company may seek corporate partners to
provide the necessary resources and expertise for clinical development and to
market and distribute products. In addition, the Company may seek to explore the
acquisition and subsequent development and commercialization of additional
commercially promising immunotherapy and adjuvant technologies. No assurance
can be given that the Company will have the requisite resources or that any such
projects will be identified on terms favorable to the Company, if at all.
BACKGROUND AND SCIENTIFIC RATIONALE
Cancer is characterized by the uncontrolled growth and spread of abnormal cells
which escape the body's protective immune surveillance system, invade healthy
tissues and destroy normal tissue function and ultimately lead to a person's
death if untreated. Cancers, composed of either solid tumors or blood-borne
cancerous cells, over time tend to spread to other tissues and organs in the
body (metastasis). Cancer may be diagnosed at any stage of the disease, from
very early (best prognosis) to very late (worst prognosis). When cancer is
detected early and has not yet metastasized (spread) to
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other organs and tissues, surgical removal of the tumor is often effective.
Unfortunately, many cancers are not discovered until metastatic cancer cells
from the primary tumor have already entered the blood or lymphatic system and
established new tumors at distant sites. These cells, and the tumors they form,
are difficult to diagnose and treat with current technology.
In 1994, approximately 1,250,000 people in the United States were diagnosed as
having cancer. The incidence of cancer continues to increase. The cost to the
health care system of treating these patients is believed to exceed
approximately $104 billion. The Company is aware of estimates that deaths from
cancer will surpass cardiovascular mortality worldwide by the end of the
century.
Although some progress has been made, few effective treatments are available for
most adult solid tumors, which often metastasize and invade other organs before
they are detected. The standard treatment for solid tumors is surgery. While
in many types of cancers this treatment is effective, in cases in which not all
of the tumor was removed or the tumor has metastasized the patient's prognosis
is poor. Chemotherapy and radiation therapy are rather crude treatments. These
treatments kill cells indiscriminately, destroying normal as well as malignant
cells thus leading to toxic side-effects that limit the usefulness of these
therapies. A safe, effective treatment for residual and metastatic disease is
clearly needed. Such a treatment, if effective and safe, would increase patient
survival and therefore may be widely adopted.
Although, many different types of drugs are used to treat a variety of cancers,
no one drug has been found to be a cure for the disease. Given the need for new
effective treatments for cancer, a drug which may effectively treat cancer could
have a large market potential. Although there can be no assurance, the Company
believes that an AC Vaccine which is developed to effectively treat the
recurrence of cancer after surgery is likely to have a sizable market share
since surgery in many cases is the first treatment performed on cancer patients,
and if such a treatment were to be broadly applicable and safe, its market
potential could be significant and the health care system would likely realize
significant cost savings due to a reduction in the number of cases of recurrent
disease requiring hospitalization and ongoing clinical and home care.
Immunotherapy is an emerging cancer treatment modality that the Company believes
shows promise for utilizing a patient's own immune system to recognize and
eliminate cancer cells. There are a number of different types of
immunotherapies such as cytokines, antibodies, activated cell therapy and
vaccines currently under development by third parties. See "Business--
Competition." In all cases, immunotherapies attempt to modulate the body's
immune system to contain and eliminate cancer cells. In concept,
immunotherapies should have fewer side-effects than chemotherapies and should be
relatively well-tolerated by the patient. Thus, although there can be no
assurance of success, the Company believes immunotherapeutics have the potential
to be effective and by reason of their selectivity, relatively safe anticancer
therapeutic agents.
TECHNOLOGY APPLICATIONS AND PRODUCT CANDIDATES
The AC Vaccine Technology
The Company's proprietary technology is a patented process that allows the
Company to produce an autologous cell vaccine (an "AC Vaccine") that attempts
to stimulate the patient's own immune system to recognize, contain and eliminate
cancer cells. The technology primarily involves the removal of a patient's own
tumor cells, conjugating them to a small molecule known as a hapten dinitro-
phenyl (DNP), and reintroducing the product back into the patient with an
adjuvant, which is an immunological agent that increases the immune response.
Haptenization is the process of conjugating a small molecule to a larger
molecule. The small molecule known as a hapten, is recognized by the immune
system and elicits an immune response against the larger molecule. The approach
is based on the premise that a patient's immune response to a strongly
immunogenic, hapten conjugated tumor antigen may be followed by the development
of an immune response to the unmodified tumor antigen, somewhat analogous to the
phenomenon of drug-induced autoimmune disease. Therefore, the process of
haptenizing a patient's cancer cells may allow the unhaptenized cancer cells to
be recognized by the body's
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immune system leading to an immune response against the patient s cancer cells
and their potential elimination from the body.
In practice, the Company's initial therapy would be used as an adjunct to
surgical treatment of tumors. The surgeon would remove the patient's tumor and
send the cells to the Company where they would be processed into an AC Vaccine.
The vaccine would then be sent to the patient's oncologist, who would administer
the vaccine on an outpatient basis. The patient's response to the treatment
then will be monitored using standard protocols.
The Company is initially developing this technology for the treatment of
metastatic melanoma but believes that it possibly could have applications in the
treatment of a variety of solid tumors such as lung, breast, colon and prostate
cancers.
AC MelaVax(TM)
General. The Company's lead product, AC MelaVax(TM), is a post-surgical
treatment for malignant melanoma. Melanoma is a highly malignant tumor that can
spread so rapidly that it can be fatal within months of diagnosis. The
incidence of malignant melanoma is increasing at a faster rate than most other
cancers in the United States, Australia, northern Europe and Canada. Although
there are several causative factors, rising exposure by the general population
to UV radiation in sunlight appears to be the most significant factor behind
this increase. With the incidence growing over 6% annually, melanoma effects
over 200,000 people in the United States, with approximately 32,000 new cases
diagnosed in 1994. Surgical excision of the tumor mass remains the generally
accepted treatment to date. However, in many cases survival is restricted by
the inability of surgery to guarantee removal of all the tumor cells. It is
highly possible for the patient to remain with undetected metastasis. Due to
its limited efficacy and highly toxic side-effects, chemotherapy and radiation
have not been widely used in the treatment of these patients. Recently the FDA
approved the use of high doses of interferon for the post-surgical treatment
of melanoma patients. In clinical studies interferon alpha has demonstrated a
five-year survival rate that the Company believes to be approximately only 30%.
Generally, the first line of treatment for patients with malignant melanoma is
usually the surgical removal of the primary tumor and any of the nearby lymph
nodes into which it has metastasized. Because malignant melanoma usually does
not respond to conventional cancer treatments, these patients generally receive
no chemotherapy or radiation therapy. The five-year survival rate for these
patients is believed by the Company to be approximately 20%. The Company
believes that there is a clear need for an effective post-surgical treatment of
malignant melanoma patients, one that would contain metastasis and prevent
recurrent disease.
Clinical Trials. Dr. David Berd, the inventor of the patented technology
licensed to the Company by TJU, is a clinical oncologist at TJU's Jefferson
Cancer Center (recently renamed Kimmel Cancer Center). Dr. Berd has been
conducting a physician-sponsored clinical trial for the treatment of malignant
melanoma using AC MelaVaxTM for approximately the past seven years.
In such ongoing clinical trial at the Thomas Jefferson Medical Center, 150
malignant melanoma patients have been treated post-surgically on an outpatient
basis with AC MelaVaxTM. In 62 patients with stage 3 melanoma for whom there
has been sufficient time for long-term follow-up, the four-year survival rate is
approximately 60%. This compares with the historical and control group survival
rates of about 20%, and the survival rate for treatment with high dose alpha
interferon of approximately 32%. The Company believes that the results to date
of the ongoing clinical trial represent the first substantial increase in
survival for malignant melanoma patients, treated by immunotherapy. In the 150
patients treated in the study, the Company believes that only relatively minor
side effects, such as soreness and swelling at the site of the application of
the AC MelaVaxTM vaccine, have been witnessed to date.
Although TJU and Dr. Berd have conducted the ongoing clinical trial pursuant to
a FDA-approved, physician-sponsored Investigational New Drug Application
("IND"), to date, the Company has not had any direct contact with the FDA
concerning the clinical results obtained with AC MelaVax(TM). However, it is
the Company's intention to use the results
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of the TJU clinical trial to support the submission of a Company-sponsored IND
to the FDA. The purpose of the IND submission will be to seek FDA approval to
enter AC MelaVax(TM) into Phase II/III or Phase III multi-center clinical
trials. Although there can be no assurance of such FDA approval, if successful
in obtaining clearance to commence such Company-sponsored IND, it is the
Company's intention to use the results of these Company-sponsored clinical
trials along with the results of the clinical trial conducted at TJU, as the
basis for the filing of a New Drug Application ("NDA") for FDA approval to
market AC MelaVax(TM). The Company also may pursue a similar regulatory approval
and commercialization strategy for AC MelaVax(TM) in Australia and certain
countries in Europe through corporate partnering strategies, although such
strategies have not yet been finalized or initiated. Denial of any regulatory
approvals or any significant delays in obtaining any of the same, would have a
material adverse effect on the Company.
RESEARCH AND DEVELOPMENT
In connection with the TJU License, TJU, Dr. Berd, as TJU's principal
investigator, and the Company entered into a Clinical Study and Research
Agreement pursuant to which TJU and Dr. Berd undertook to conduct a research and
clinical study program for the further development of the AC Vaccine technology
for additional cancer targets. In turn, the Company undertook to fund such
research as follows: $220,094 for the first year of the agreement, $220,381 for
the second year of the agreement and at least $100,000 for the third year of the
agreement. Following the third year, the Company is obligated to spend a
minimum of $500,000 per year on the development of the AC Vaccine technology
until commercialized in the United States. If following the third year, the
Company files for FDA approval of a Company-sponsored NDA for the right to
market a product arising from such technology, the Company may elect to spend
less than $500,000 per year on the development of the AC Vaccine technology
during the period of time the NDA is under review by the FDA. If the Company
fails to make such payments in accordance with the terms of the Clinical Study
and Research Agreement, TJU may terminate the agreement and no further research
would be performed thereunder. See "Risk Factors--Dependence on License and
Sponsored Research Agreements."
For fiscal years 1994 and 1995, the Company spent approximately $398,622 and
$126,957, respectively, for research and development. See "Financial
Statements"
PROPRIETARY RIGHTS
Pursuant to the TJU License, the Company has licensed an issued U.S. patent and
certain patent applications covering a process for the modification of a
patient's own cancer cells into a cancer vaccine. The TJU License is a royalty-
bearing license for the rights to such patented vaccine technology, and provides
for certain payments upon the occurrence of certain milestones. The Company has
paid $10,000 to TJU as consideration for the TJU License. In addition, the
Company sold 458,243 shares of Common Stock at a price of $.002 per share to
each of TJU and Dr. Berd, representing 7.5% (15% in the aggregate) of the
Company's total outstanding voting securities at the time of issuance.
The Company is obligated to make certain milestone payments to TJU as follows:
$10,000 upon initiation of the first clinical trial that is approved by the FDA
(or comparable international agency), $10,000 upon the first filing of an NDA
with the FDA (or comparable filing with a comparable international agency), and
$25,000 upon receipt by the Company of approval from the FDA (or comparable
international agency) to market products relating to the AC Vaccine technology.
In addition, the Company is obligated to pay royalties on its net sales revenue
and a percentage of all revenues received from sublicenses relating to the AC
Vaccine technology. Failure to comply with the terms of the TJU License may
cause its termination, which would have a material adverse effect on the
Company. See "Risk Factors--Dependence on License and Sponsored Research
Agreements."
In the future, the Company may require additional licenses from other parties to
develop, manufacture and market commercially viable products effectively. The
Company's commercial success will depend in part on obtaining and maintaining
such licenses. There can be no assurance that such licenses can be obtained or
maintained on commercially reasonable terms, if at all, that the patents
underlying such licenses will be valid and enforceable or that the proprietary
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nature of the patented technology underlying such licenses will remain
proprietary. The Company presently intends to pursue aggressively the broadest
patent coverage possible for all of its intellectual property. See "Risk
Factors--Uncertainty Regarding Patents and Proprietary Rights."
COMPETITION
The Company is aware of estimates that more than 300 companies are reported to
have approximately 1,250 cancer drugs under development worldwide, of which a
substantial number are under development in the United States. Many of such
drugs or other substances under development involve chemotherapeutic agents and
cancer immunotherapies and, thus, are, or maybe, in direct competition with the
Company's AC Vaccine and its future products and such drugs may perform more
effectively or safely than the Company's product candidates. Many of the
companies engaged in anticancer research and development and in acquiring rights
to the products of such research and development, including biotechnology
companies, have substantially greater financial, technical, scientific,
manufacturing, marketing and other resources than the Company and have more
experience in developing, marketing and manufacturing therapeutics, including
performing the preclinical testing and clinical trials that are required for
obtaining FDA and other regulatory approvals. Included among the Company's
competitors are: (i) large established pharmaceutical companies with commitments
to oncology or antiviral research, development and marketing; (ii) smaller
biotechnology companies with similar strategies; and (iii) many development
stage companies licensing and/or developing oncology therapeutics. In addition,
many research institutes, hospitals and universities are working to develop
products and processes in the same field of cancer that may in the future be in
direct competition with the Company's present and future products.
Several companies or research institutions are developing cancer vaccines to
treat malignant melanoma, including several which are in Phase III clinical
trials. The principal competitive factors in the area of cancer immunotherapies
are (i) the efficacy of the product and (ii) the timing of the entry of the
product into the market. Although there is significant competition, to date,
the Company believes that none of such immunotherapies have demonstrated the
increase in survival over the same period of time that the Company's technology
has shown. Although there can be no assurance, the Company also believes that
its AC Vaccine technology may be applicable to a variety of solid tumors and
therefore may not be as limited as certain other approaches. With respect to
the timing of the entry of the product, the Company is unable to estimate, when,
if at all, its product will be approved.
MANUFACTURING AND MARKETING
The Company does not have the resources to manufacture or directly market any
products that it may develop. In connection with its research and development
activities, the Company may seek to enter into collaborative arrangements with
pharmaceutical, medical device, health care, chemical or other companies to
assist in further funding as well as in development, manufacturing and/or
marketing of its products if such activities are commercially feasible. These
partners may also be responsible for commercial scale manufacturing, which may
be subject to compliance with applicable FDA regulations. The Company
anticipates that such arrangements may involve the grant of exclusive or
semi-exclusive rights to sell specific products to specified market segments or
particular geographic territories in exchange for a royalty, joint venture,
future co-marketing or other financial interests.
To date, the Company has not entered into any collaborative commercial
manufacturing or marketing agreements for any of its proposed products. There
can be no assurance that the Company will be able to enter into any such
arrangements on favorable terms, if at all. Such collaborative marketing
arrangements, whether licenses, joint ventures or otherwise, may result in lower
revenues than would otherwise be generated if the Company conducted the
marketing of their own products. See "Risk Factors--Dependence on Third Parties
for Additional Funds and for Manufacturing, Marketing and Selling."
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GOVERNMENT REGULATION
The research, preclinical development, clinical trials, product manufacturing
and marketing which may be conducted by the Company is subject to regulation by
the FDA and similar health authorities in foreign countries. The proposed
products and technologies of the Company also may be subject to certain other
federal, state and local government regulations, including, without limitation,
the Federal Food, Drug and Cosmetic Act, and their state, local and foreign
counterparts. Although there can be no such assurance, the Company does not
believe that compliance with such laws and regulations has, nor is presently
expected to have, a material adverse effect on the business of the Company.
However, the Company cannot predict the extent of the adverse effect on its
business or the financial and other cost that might result from any government
regulations arising out of future legislative, administrative or judicial
action. See "Risk Factors--Government Regulation; No Assurance of Product
Approval."
Generally, the steps required before a pharmaceutical or therapeutic biological
agent may be marketed in the United States include: (i) preclinical laboratory
tests, in vivo preclinical studies in animals, toxicity studies and formulation
studies; (ii) the submission to the FDA of an IND application for human clinical
testing of an IND, which must become effective before human clinical trials
commence; (iii) adequate and well-controlled human clinical trials to establish
the safety and efficacy of the drug; (iv) the submission of an NDA to the FDA;
and (v) the FDA approval of the NDA prior to any commercial sale or shipment of
the drug. In addition to obtaining FDA approval for each product, each domestic
drug manufacturing establishment must be registered with, and approved by, the
FDA. Domestic manufacturing establishments are subject to biennial inspections
by the FDA and must comply with Good Manufacturing Practices ("GMP") for both
drugs and devices. To supply products for use in the United States, foreign
manufacturing establishments must comply with GMP and are subject to periodic
inspection by the FDA or by corresponding regulatory agencies in such countries
under reciprocal agreements with the FDA. As permitted by FDA regulations, the
AC MelaVax(TM) human clinical trials are being conducted by TJU under the
supervision of Dr. David Berd. If considered successful or sufficiently
positive by the Company, data from such clinical trials may be used to support
the filing of a Company sponsored IND with the FDA to permit the Company to
conduct its own Phase II and/or III clinical trial.
For clinical investigation and marketing outside the United States, the Company
also is subject to foreign regulatory requirements governing human clinical
trials and marketing approval for drugs. The requirements governing the conduct
of clinical trials, product licensing, pricing and reimbursement vary widely for
European countries both within and outside the European Community ("EC").
Outside the United States, the Company's ability to market a product is
contingent upon receiving a marketing authorization from the appropriate
regulatory authority. At present, foreign marketing authorizations are applied
for at a national level, although within the EC certain registration procedures
are available to companies wishing to market their products in more than one EC
member state. If the regulatory authority is satisfied that adequate evidence
of safety, quality and efficacy has been presented, a marketing authorization
will be granted. The system for obtaining marketing authorizations within the
EC registration system is a dual one in which certain products, such as
biotechnology and high technology products and those containing new active
substances, will have access to a central regulatory system that provides
registration throughout the entire EC. Other products will be registered by
national authorities in individual EC member states, operating on a principle of
mutual recognition. This foreign regulatory approval process includes, at
least, all of the risks associated with FDA approval set forth above. The
Company could possibly have greater difficulty in obtaining any such approvals
and also might find it more difficult to protect its intellectual property
abroad.
SOURCES AND AVAILABILITY OF RAW MATERIALS AND THE NAMES OF PRINCIPAL SUPPLIERS
The Company does not expect to encounter significant difficulties in obtaining
raw materials for AC MelaVax(TM) since it is primarily composed of a readily
available chemical reagent, DNP, and the patient's own tumor cells. Should the
supply of DNP significantly decrease, the Company may encounter problems
preparing AC MelaVax(TM).
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COMPLIANCE WITH ENVIRONMENTAL LAWS
The Company's business may be subject to regulation under federal, state, local,
and foreign laws regarding environmental protection and hazardous substance
control. The Company believes that its compliance with these laws will have no
adverse impact upon its capital expenditures, earnings or competitive position.
Federal, state and foreign agencies and legislative bodies have expressed
interest in the further environmental regulation of the biotechnology industry.
The Company is unable to estimate the extent and impact of such, if any, future
federal, state, local legislation or administrative environmental action.
EMPLOYEES
As of July 31, 1996, the Company has one full-time employee, Dr. Jeffrey M.
Jonas, its President and Chief Executive Officer. It has seven other employees,
consultants, scientific advisors, part-time officers and directors who devote
only a portion of their time to the business of the Company. The Company
believes that it maintains good relations with Dr. Jonas and its consultants,
scientific advisors, part-time officers and directors. See "Risk Factors--Lack
of Management and Employees" and "--Dependence Upon Key Personnel and
Consultants."
FACILITIES
The Company's executive offices are located at 5353 Sunset Drive, Kansas City,
Missouri 64112. The Company is currently seeking new office space in Kansas
City, Missouri. Based on quotes already obtained, the Company believes that its
cost for office space in Kansas City will be approximately $60,000 per annum for
the next three years. The Company anticipates that in the future it may own or
lease its own research facility, although no such lease or ownership interest is
under current consideration. The research and development work of the Company
is currently being conducted on a contract basis at TJU. In addition, the
Company may maintain shared office space in New York subleased from Paramount
Capital, Inc. ("Paramount"), at a cost of approximately $36,000 - $48,000 per
annum depending on the level of services required by the Company. Paramount may
be deemed an affiliate of the Company. See "Risk Factors--Lack of
Facilities,""--Dependence on Third Parties for Additional Funds and for
Manufacturing, Marketing and Selling," and "--Dependence on Others for Clinical
Development of, Regulatory Approvals for, and Marketing of Pharmaceutical
Products" and "Certain Transactions."
LEGAL PROCEEDINGS
The Company is not aware of any pending or threatened legal actions which may
have a material adverse affect on the Company's business.
26
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the names and positions of the executive officers
and directors of the Company:
Name Age Position
- ---- --- --------
Jeffrey M. Jonas, M.D. 43 Chief Executive Officer, President and
Director
Edson D. de Castro 57 Director
John K.A. Prendergast, Ph.D. 41 Director
Carl Spana, Ph.D. 33 Director
Michael S. Weiss 30 Secretary and Director
Wayne L. Rubin, C.P.A. 35 Treasurer
Jeffrey M. Jonas, M.D., has been the Chief Executive Officer, President and
Director of the Company since June 1, 1996. Prior to joining the Company, from
1994-1996, Dr. Jonas was the Vice President of Clinical Development III and the
Chief Medical Officer of Upjohn Laboratories. From 1991 to 1994, he was the
Vice President of Worldwide Pharmaceutical Regulatory Affairs, the Director of
Psychopharmacology and the Director of Clinical Development III for Upjohn
Company. Prior thereto, Dr. Jonas was in private practice as a psychiatrist in
the Boston area. Dr. Jonas has authored a book on Prozac(TM), and over 60
scientific articles and book chapters. Dr. Jonas received his M.D. from Harvard
Medical School in 1979 and a B.A. in Biology and English from Amherst College in
1975.
Mr. Edson D. de Castro has been a member of the Board of Directors of the
Company since October 1993. Since May 1995, Mr. de Castro has been Chairman of
the Board of Directors and Chief Executive Officer of Xenometrix, Inc., a
biotechnology company for which he had previously served as Chief Executive
Officer from June to November 1992 and as a Director since June 1992. From 1990
through 1995, Mr. de Castro has been consulting for companies and participating
as a member of certain Boards of Directors. Mr. de Castro was one of five co-
founders of Data General Corporation in 1968 for which, from 1968 to 1989, he
served as its President and Chief Executive Officer, and from 1989 to 1990, he
served as its Chairman of the Board of Directors. Mr. de Castro was a founder
and Executive Committee Member of the Massachusetts High Tech Council. Mr. de
Castro is a Trustee of Boston University. In addition, Mr. de Castro serves on
the Board of Directors of two other biotechnology companies, Boston Life
Sciences, Inc., and Binary Therapeutics, Inc. Mr. de Castro received his B.S.
in Electrical Engineering from the University of Lowell in 1960.
John K.A. Prendergast, Ph.D. has been a director of the Company since July 1996.
He is a co-founder and a member of the Board of Ingenex, Inc., Atlantic
Pharmaceuticals, Inc., Optex Ophthamologics, Inc., Genesis Gene Therapies, Inc.,
and Channel Thereapeutics, Inc. Dr. Prendergast is a Managing Director of
Paramount Capital Investments, LLC. Prior to joining Paramount Capital
Investments, LLC, Dr. Prendergast worked as an investment banker in the
Corporate Finance division of the firm D.H. Blair & Co., Inc., a New York
investment bank. Dr. Prendergast received his M.Sc. and Ph.D. from the
University of New South Wales, Sydney, Australia and a CSS in Administration and
Management from Harvard University.
Carl Spana, Ph.D., has been a Director of the Company since September 1995 and
was its Interim President from August 1995 to June 15, 1996. Dr. Spana is
currently a Vice President of Paramount Capital Investments, LLC. Since joining
Paramount Investments, LLC, in June 1993, Dr. Spana has been responsible for
discovering, evaluating, and commercializing new biotechnologies. Through his
work at Paramount Capital Investments, LLC, Dr. Spana has been a co-founder of
several private biotechnology firms. Prior to working at Paramount Capital
Investments, LLC, from 1991 - 1993 Dr. Spana was a Research Associate at
Bristol-Myers Squibb where he was involved in scientific research in the field
of immunology that lead to the initiation of several new drug discovery
programs. Dr. Spana currently is a member
27
<PAGE>
of the Board of Directors of Palatin Technologies Inc. Dr. Spana received his
Ph.D. in Molecular Biology from The Johns Hopkins University and a B.S. in
Biochemistry from Rutgers University.
Michael S. Weiss, Esq., has been a Director of the Company since March 1996 and
Secretary of the Company since September 1995. Since November 1993, Mr. Weiss
has been Vice President and then Senior Managing Director of Paramount Capital,
Inc., and since 1995 he has been General Counsel of Paramount Capital
Investments, LLC. From 1991-1993, Mr. Weiss was an attorney with Cravath,
Swaine & Moore. Mr. Weiss is a Director of Xytronyx, Inc., a Director of
Palatin Technologies, Inc. and Secretary of Atlantic Pharmaceuticals, Inc., each
of which is a publicly traded biotechnology company. In addition, Mr. Weiss is
a Director of several privately-held biotechnology companies. Mr. Weiss
received his J.D. from Columbia University School of Law and a B.S. in Finance
from the State University of New York at Albany.
Wayne L. Rubin, C.P.A., has been the Treasurer of the Company since September
1995. Since October 1992, Mr. Rubin has been Chief Financial Officer of
Paramount Capital, Inc., and since 1995, Chief Financial Officer of Paramount
Capital Investments, LLC. From April 1991 to October 1992, Mr. Rubin was
Controller of Value Properties. From December 1990 to April 1991, Mr. Rubin
worked as a consultant to Medigene, Inc. Prior to that time, Mr. Rubin was
Vice-President of Kenbee Management, Inc. Mr. Rubin received his B.S. in
Accounting from the State University of New York at Buffalo.
All directors hold office until the next annual meeting of stockholders of the
Company and until their successors have been elected and qualified. Officers
serve at the discretion of the Board of Directors. The Company's bylaws provide
that directors and officers shall be indemnified against liabilities arising
from their service as directors or officers to the fullest extent permitted by
the laws of the State of Delaware, which generally requires that the individual
act in good faith and in a manner he or she reasonably believes to be in or not
opposed to the Company's best interests.
Dr. Jeffery M. Jonas is the Company's only full time employee. Messrs. Weiss
and Rubin currently devote, only a portion of their time to the Company and do
not currently receive compensation from the Company. Certain of the officers
and directors of the Company currently do and may from time to time in the
future serve as officers or directors of other biopharmaceutical or biotechnical
companies. There can be no assurance that such other companies will not in the
future have interest in conflict with those of the Company. See "Risk Factors -
- - No Assurance of Identification of Additional Projects," and "--Certain
Interlocking Relationships; Potential Conflicts of Interest."
BOARD COMMITTEES
The Company's Board of Directors has a Compensation Committee. The Compensation
Committee sets the compensation for certain of the Company's personnel and
administers the Company's 1992 Stock Option Plan. The Compensation Committee
consists of Dr. Spana and Mr. Weiss.
The Company's Board of Directors also has an Audit Committee. The Audit
Committee reviews the professional services provided by the Company's
independent accountants and monitor the scope and the results of the annual
audit, reviews proposed changes in the Company's financial and accounting
standards and principles, and the Company's policies and procedures with respect
to its internal accounting, auditing and financial controls and make
recommendations to the Board of Directors on the engagement of the independent
accountants, as well as other matters that may come before it or as directed by
the Board of Directors. The Audit Committee is composed of Dr. Jonas and Mr. de
Castro.
SCIENTIFIC ADVISORY BOARDS
The Company has a Scientific Advisory Board that consists of individuals with
extensive experience in the Company's fields of interest. It is expected that
the Scientific Advisory Board members will meet as a board with management and
key scientific employees of the Company on a semi-annual basis and in smaller
groups or individually on an informal
28
<PAGE>
basis. The Company anticipates that the Scientific Advisory Board members will
assist the Company in identifying scientific and product development
opportunities, in reviewing and evaluating scientists and other employees.
Presently, the Scientific Advisory Board members consists of:
David Berd, M.D. -- Clinical Oncologist at the Jefferson Cancer
Chairman Center of TJU and Inventor of the Company's
AC Vaccine technology.
Jerry A. Weisbach, Chief Executive Officer and Chairman of the
Ph.D. Board of the Company from September 1995 to
March 1996. Former Director of Technology
Transfer and Adjunct Professor at the
Rockefeller University. Vice President of
Warner-Lambert Company from 1981 to 1987,
and President of its Pharmaceutical
Research Division, where he was responsible
for all pharmaceutical research and
development activities, from 1979 to 1987.
Drs. Berd and Weisbach are compensated pursuant to their consulting agreements
with the Company. See "Employment Agreements, Termination and Severance
Arrangements." It is expected that future scientific advisors will be
compensated on a per meeting basis and through the granting of stock options.
Members of the Scientific Advisory Board may be employed by or have consulting
agreements with entities other than the Company, some of which may conflict or
compete with the Company, or which may, limit a particular member's availability
to the Company. Certain of the institutions with which the Scientific Advisory
Board members are affiliated may have regulations or policies which are unclear
with respect to the ability of such personnel to act as part-time consultants or
in other capacities for a commercial enterprise. Regulations or policies now in
effect or adopted in the future might limit the ability of the Scientific
Advisory Board members to consult with the Company. The loss of the services of
certain of the Scientific Advisory Board members could have a material adverse
effect on the Company.
Although each of the members of the Scientific Advisory Board has the customary
contractual obligation to keep confidential and not to disclose nor use any
confidential or proprietary information of the Company's, inventions or
processes discovered by any Scientific Advisory Board member, in certain
instances or unless otherwise agreed, will not become the property of the
Company but will remain the property of such person or of such person's full-
time employers. In addition, the institutions with which the Scientific
Advisory Board members are affiliate may make available the research services of
their scientific and other skilled personnel, including the Scientific Advisory
Board members to entities other than the Company. In rendering such services,
such institutions may be obligated to assign or license to a competitor of the
Company patents and other proprietary information which may result from such
services, including research performed by an advisor or consultant for a
competitor of the Company.
BOARD COMPENSATION
Currently, directors of the Company do not receive compensation for service on
the Board of Directors or any committee thereof but are reimbursed for travel
expenses incurred in attending board and committee meetings. The Company may
retain additional board members in the future. The Company expects that in the
future it will compensate its directors on a per meeting basis and through the
granting of stock options. Certain of the directors may have consulting
agreements and/or received stock grants in consideration for services rendered
to the Company, other than services rendered as members of the Board. See
"Executive Compensation" and "Certain Transactions."
29
<PAGE>
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the compensation earned by
the persons serving as the Company's chief executive officer during 1995.
Summary Compensation Table
--------------------------
Annual Compensation
-------------------
Name and Year Salary Restricted Stock All Other
Principal Award(s) Compensation
Position
Dayne R. 1/1/95- $25,000 -0- $79,341[1]
Myers -- 4/24/95
President and 1994 $73,437.50 -0- -0-
and
Chief
Executive 1993 $65,625 -0- -0-
Officer
Jerry Starting -0- $5,193.42[2] $75,000[3]
Weisbach -- 9/13/95
Chief 1994 -0- -0- $31,250[3]
Executive
Officer 1993 -0- -0- -0-
[1] Represents amounts paid to Mr. Myers pursuant to his severance
agreement with the Company dated April 24, 1995 constituting (i)
$75,000 as severance payment, (ii) $3,894 as reimbursement for moving
expenses, and (iii) $447 for continued medical coverage. Pursuant to
such agreement he is also entitled in the future to receive 4.15%
(approximately $99,600 in value) of the aggregate consideration
received by the Company from Interneuron Pharmaceuticals, Inc. ("IPI")
on account of the sale of the NutriFem PMS product within 30 days of
receipt by the Company of each payment of such compensation as
received from IPI. See "Employment Agreements; Termination and
Severance Arrangements" and "Certain Transactions."
[2] Represents 259,671 shares of Common Stock granted and purchased at a
price of $.002 per share in September 13, 1995, which shares were
valued at December 31, 1995 at $.002 per share. Pursuant to the
exercise by the Company of its repurchase rights under the stock
purchase agreement for such granted shares, the Company repurchased
155,802 shares at a price of $.002 on March 25, 1996. See "Employment
Agreements; Termination and Severance Arrangements."
[3] Represents fees received per consulting agreement with the Company.
EMPLOYMENT AGREEMENTS; TERMINATION AND SEVERANCE ARRANGEMENTS
From April 1994 to September 1995, Dr. Jerry Weisbach was a consultant for the
Company and, pursuant to his consulting agreement with the Company, he was to be
paid $25,000 per annum. Upon his appointment as Chief Executive Officer of the
Company, Dr. Weisbach's compensation was increased to $75,000 per annum and he
was granted and sold 259,671 shares of Common Stock, which shares were valued at
December 31, 1995 at $.002 per share. Dr. Weisbach's consultancy fees and
salary were accrued until the consummation of the Series B Offering. On June
10, 1996, the Company paid Dr. Weisbach $49,663.98 in satisfaction of such
payment obligations.
30
<PAGE>
On March 24, 1996, Dr. Weisbach resigned as Chief Executive Officer of the
Company. Pursuant to the stock purchase agreement between him and the Company,
the Company repurchased 155,802 shares of Common Stock previously issued to Dr.
Weisbach at a price of $.002 per share. Effective March 25, 1996, Dr. Weisbach
entered into a Scientific Advisory Board Agreement (the "Weisbach SAB
Agreement") with the Company. Dr. Weisbach will serve as a member of the
Scientific Advisory Board for an initial term of three years. The agreement is
renewable for one year terms thereafter at the discretion of both parties.
Pursuant to the Weisbach SAB Agreement, Dr. Weisbach will receive $2,500 per
meeting but no less than $5,000 in any year and will be entitled to stock
options in the discretion of the Board of Directors. Either party may terminate
such agreement upon 30 days' prior written notice.
On May 17, 1996, the Company entered into a letter of employment (the
"Employment Letter") with Dr. Jeffrey M. Jonas, pursuant to which Dr. Jonas
became the President, Chief Executive Officer and a Director of the Company
effective as of June 1, 1996. Pursuant to the terms of the Employment Letter,
Dr. Jonas will receive an annual salary of $200,000, in addition to a signing
bonus of $12,500. Dr. Jonas will also receive a minimum annual bonus of $25,000
at the end of the first year of his employment and an additional discretionary
bonus of up to $175,000. Dr. Jonas also received options to acquire 637,745
shares of Common Stock at an exercise price of $.50. Such options will vest at
a rate of 1/16 per quarter over a four-year period, and are exercisable for a
period of seven years. The Employment Letter also provides that the Company and
Dr. Jonas intend to enter into a more formal employment agreement which will
contain, among other things, severance arrangements and non-compete provisions.
Dr. Jonas will also be eligible for additional stock options bonuses based upon
outstanding performance.
On February 22, 1996, the Company entered into a consulting agreement (the
"Spana Consulting Agreement") with Dr. Carl Spana, a Director and the then
Interim President of the Company. Pursuant to the Spana Consulting Agreement,
Dr. Spana is entitled to a consulting fee of $25,000 per annum payable on a
monthly basis, commencing upon the consummation of the Series B Offering. The
Spana Consulting Agreement is for an initial term of three years, and is
renewable for one year terms thereafter at the discretion of both parties and
may be terminated upon 30 days' notice by either party. See "Certain
Transactions." In connection with Dr. Jonas' appointment as the President and
Chief Executive Officer of the Company, Dr. Spana has resigned from his position
as Interim President.
In May 1996, the Company entered into a consulting agreement with Dr. David Berd
(the "Berd Consulting Agreement"). Pursuant to such consulting agreement, Dr.
Berd is entitled to a $36,000 per year consulting fee payable on a monthly basis
accruing from January 1, 1996, the payment of which commenced upon the
consummation of the Series B Offering. The Berd Consulting Agreement is for a
term of three years subject to early termination upon the happening of certain
events. If Dr. Berd's consulting agreement is terminated without cause, Dr.
Berd will be entitled to six months' severance pay. In addition, Dr. Berd has
agreed to serve as Chairman of the Company's Scientific Advisory Board.
From August 1991 to April 1995, Dayne R. Myers was the President and the Chief
Executive Officer of the Company and received a salary of $75,000 per annum. In
April 1995, he resigned these positions and pursuant to his severance agreement
with the Company, Mr. Myers was paid: (i) $75,000; (ii) $3,000 for reimbursable
moving expenses; and (iii) $447 for continued medical coverage. He also was
given the right to receive 4.15% (approximately $99,600 in value) of the
aggregate consideration to be received by the Company from Interneuron
Pharmaceuticals, Inc. ("IPI") on account of the sale of the NutriFem PMS product
within 30 days of receipt by the Company of each payment of such compensation is
received from IPI. See "Employment Agreements; Termination and Severance
Arrangements" and "Certain Transactions." Pursuant to the severance agreement,
Mr. Myers entered into various agreements with the Company relating to, without
limitation, (i) the returning of all shares of and options for capital stock of
the Company ever received by him, (ii) the waiver and release by him of all
claims that he may have had, if any, against the Company and (iii) his
obligation to keep confidential all of the Company's trade secrets and
proprietary information.
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<PAGE>
CERTAIN TRANSACTIONS
Pursuant to a private offering held in May and June 1996, the Company
consummated an offering of Series B Preferred Stock (the "Series B Offering")
pursuant to which the Company raised aggregate gross proceeds of approximately
$25,900,000. In connection with services rendered by Paramount Capital, Inc.,
as placement agent ("Paramount" or the "Placement Agent") for the Series B
Offering, and pursuant to a placement agency agreement entered into by the
Company and the Placement Agent, the Company paid the Placement Agent cash
commissions of approximately $2,330,000, a non-accountable expense allowance of
approximately $1,036,000 and placement warrants to acquire 25,919 shares of
Series B Preferred Stock, exercisable until June 15, 2006 at an exercise price
of $110 per share of Series B Preferred Stock. See "Description of Securities."
Pursuant to such placement agency agreement, on June 11, 1996, the Company and
the Placement Agent entered into a Financial Advisory Agreement, pursuant to
which the Placement Agent will act as the Company's financial advisor. Such
engagement provides that the Placement Agent will receive a monthly retainer of
$4,000 per month for a minimum of 24 months, plus expenses and success fees.
On October 20, 1995, the Company entered into an Engagement & Technology
Acquisition Agreement with The Castle Group, LLC ("The Castle Group"), which may
be deemed an affiliate of both the Company and the Placement Agent, pursuant to
which The Castle Group identified, negotiated and acquired for the Company the
TJU License. In consideration for the conveyance of the license, TJU and Dr.
Berd were both granted and sold 458,243 shares of Common Stock at a price of
$.002 per share. In connection therewith, The Castle Group and/or its designees
were granted and sold 916,486 shares of Common Stock of the Company at a price
of $.002 per share. Prior to the acquisition of the TJU License, the Company
had no technological assets other than that discussed below.
On December 27, 1995, the Company sold its former leading product under
development (the "Former Lead Product"), an over-the-counter nutritional
dietary, medicinal and/or elixorative food supplement or drug and related
patents and intellectual property to a subsidiary of Interneuron
Pharmaceuticals, Inc. ("Interneuron"). In consideration for the Former Lead
Product, Interneuron agreed to pay in two installments, in December 1996 and
December 1997, $2.4 million of its Common Stock ("IPI Stock") to the Company or
its designees. In the Company's Stockholder Information Statement dated June
15,1995, the IPI Stock was designated, under certain circumstances, to be paid
approximately at the time of each installment to the holders of shares of the
Company's Series A Preferred Stock which were issued and outstanding on December
27, 1995. All shares of Series A Preferred Stock were automatically converted
in accordance with their terms into shares of Common Stock effective June 11,
1996, the final closing of the Series B Offering. The IPI Stock is still
payable to those persons who were recorded holders of shares of the Company's
Series A Preferred Stock on December 27, 1995. The transactions relating to the
sale of Former Lead Product and the rights of the former holders of the shares
of Series A Preferred Stock to the IPI Stock were approved by action by written
consent of the Board of Directors of the Company and the holders of a majority
of the shares of both the Common Stock and the Series A Preferred Stock, voting
separately as a class in July 1995.
Dr. Lindsay A. Rosenwald, a substantial shareholder of the Company, is the
Chairman and sole shareholder of each of the Placement Agent and Paramount
Capital Investments, LLC. Dr. Rosenwald is also Chairman of the Board and a
principal stockholder of Interneuron. Dr. Rosenwald personally collateralized
loans to the Company from NatWest Bank N.A., pursuant to which the Company
incurred principal and interest indebtedness of approximately $55,000. Such
indebtedness was paid in full as of June 30, 1996. Dr. Rosenwald also extended
a line of credit to the Company. As of June 30, 1996, the Company paid the
outstanding principal amount and accrued interest under such line of credit,
which was approximately $246,500. In addition, in 1995 and 1996, Paramount
acted as placement agent, pursuant to a placement agency agreement, for a bridge
financing for the Company as to which Paramount was paid $90,000 in commissions
and received warrants to purchase 62,500 shares of Common Stock. Two of the
investors in these bridge financings were private investment funds managed by a
company for which Dr. Rosenwald is President. Also, Michael S. Weiss, Director
and Secretary of the Company, is a Senior Managing Director of Paramount and
General Counsel of
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<PAGE>
Paramount Capital Investments, LLC. Wayne Rubin, Treasurer of the Company, is
Chief Financial Officer of Paramount and Paramount Capital Investments, LLC.
Dr. Carl Spana and Dr. John K. A. Prendedgast, Directors of the Company, are
Vice President and Managing Director of Paramount Capital Investments, LLC,
respectively.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of July 31, 1996, certain information
regarding the ownership of the Common Stock (i) by each person known by the
Company to be the beneficial owner of more than five percent of the outstanding
shares of the Common Stock, (ii) by each of the named executive officers and
directors of the Company and (iii) by all officers and directors of the Company
as a group.
<TABLE><CAPTION>
Name and Address of Beneficial Number of Percentage of Class
Owner (1) Title of Stock Shares Beneficially Owned
<S> <C> <C> <C>
Lindsay A. Rosenwald, M.D. (2)
375 Park Avenue, Suite 1501 Common Stock 1,433,526 23.04%
New York, NY 10152
VentureTek, L.P. (3)
c/o C. David Selengut
40 Exchange Place Common Stock 853,985 13.72%
New York, NY 10006
Thomas Jefferson University
Office of Technology Transfer Common Stock 458,243 7.36%
1020 Locust Street
Philadelphia, PA 19107
David Berd, M.D.
c/o Thomas Jefferson University
Office of Technology Transfer Common Stock 458,243 7.36%
1020 Locust Street
Philadelphia, PA 19107
Jeffrey M. Jonas, M.D. (4) Common Stock 39,859 *
John Pappajohn (5) Common Stock 377,000 6.06%
2116 Financial Center
Des Moines, IA 50309 Series B Preferred 2,000 *
Carl Spana, Ph.D. Common Stock 129,835 2.09%
Edson D. de Castro (6) Common Stock 50,000 *
Michael S. Weiss Common Stock 202,835 3.26%
Wayne Rubin, C.P.A. Common Stock 49,434 *
All officers and directors as a Common Stock 471,963 7.59%
group (4 persons)
Series B Preferred -0- *
</TABLE>
34
____________________________________________________
* Represents less than 1%.
<PAGE>
(1) Beneficial ownership is determined in accordance with rules promulgated
by the Securities and Exchange Commission, and include voting and investment
power with respect to shares of Common Stock. Shares of Common Stock subject to
options or warrants currently exercisable or exercisable within 60 days of July
31, 1996, are deemed outstanding for computing the percentage ownership of the
person holding such options or warrants, but are not deemed outstanding for
purposes of computing the percentage ownership of any other person.
(2) Includes 213,040 shares of Common Stock owned by Dr. Rosenwald's wife
and trusts in favor of his minor children. Dr. Rosenwald disclaims beneficial
ownership of such shares. Excludes 625,000 shares of Common Stock issuable upon
exercise of Bridge Financing Placement Warrants, and excludes 1,290,990 shares
of Common Stock issuable upon conversion of shares of Series B Preferred Stock
issuable upon exercise of the Series B Placement Warrants both of which are not
exercisable within 60 days. Dr. Rosenwald is the Chairman and sole shareholder
of the holder of the Bridge Financing Placement Warrants and the Series B
Placement Warrant and, as such, may be deemed to be the beneficial owner of such
shares. Dr. Rosenwald disclaims beneficial ownership of such shares which are
not issued to him. See "Certain Transactions." Includes 112,500 shares of
Common Stock issued to the Aries Trust and the Aries Domestic Fund, L.P., two
private investment funds that are managed by a company of which Dr. Rosenwald is
President but excludes 5,000 shares of Series B Preferred Stock held by the two
entities. Dr. Rosenwald disclaims beneficial ownership of such shares, except
to the extent of his pecuniary interest, if any.
(3) The general partner of VentureTek, L.P., is Mr. C. David Selengut. Mr.
Selengut may be considered a beneficial owner of the shares of Common Stock
owned by VentureTek, L.P., by virtue of his authority as general partner to vote
and/or dispose of such shares. VentureTek, L.P., is a limited partnership, the
limited partners of which include Dr. Rosenwald's wife, and children, and
sisters of Dr. Rosenwald's wife and their husbands and children.
(4) Represents shares that Dr. Jonas may acquire within 60 days of July 31,
1996, upon the exercise of options granted pursuant to his letter of employment.
Excludes 597,885 shares of Common Stock which are not exercisable within 60 days
of July 31, 1996.
(5) Includes 100,000 shares of Common Stock held by a sole proprietorship
owned by Mr. Pappajohn. Also includes 100,000 shares of Common Stock held by Mr.
Pappajohn's spouse and 100,000 shares held by a sole proprietorship owned by Mr.
Pappajohn's spouse. Mr. Pappajohn disclaims beneficial ownership of the 200,000
shares of Common Stock owned by his spouse and her sole proprietorship.
(6) Includes 50,000 shares of Common Stock issuable upon exercise of options
which become exercisable within 60 days of July 31, 1996.
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<PAGE>
DESCRIPTION OF SECURITIES
The Company is authorized to issue up to 50,000,000 shares of Common Stock, par
value $.002 per share, and 5,000,000 shares of preferred stock, par value, $.01
per share, of the Company. As of July 31, 1996, 6,222,316 shares of Common
Stock and 259,198 shares of Series B Preferred Stock were issued and
outstanding.
COMMON STOCK
Each holder of Common Stock of the Company is entitled to one vote for each
share held of record. There is no right to cumulative voting of shares for the
election of directors. The shares of Common Stock are not entitled to
preemptive rights and are not subject to redemption or assessment. Each share
of Common Stock is entitled to share ratably in distributions to shareholders
and to receive ratably such dividends as may be declared by the Board of
Directors out of funds legally available therefor. Upon liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to receive, pro-rata, the assets of the Company which are legally
available for distribution to shareholders. The issued and outstanding shares
of Common Stock are validly issued, fully paid and non-assessable.
PREFERRED STOCK
The Company is authorized to issue up to 5,000,000 shares of preferred stock,
par value $.01 per share (of which 259,198 are issued and outstanding). The
preferred stock of the Company can be issued in one or more series as may be
determined from time-to-time by the Board of Directors. In establishing a
series the Board of Directors shall give to it a distinctive designation so as
to distinguish it from the shares of all other series and classes, shall fix the
number of shares in such series, and the preferences, rights and restrictions
thereof. All shares of any one series shall be alike in every particular. The
Board of Directors has the authority, without shareholder approval, to fix the
rights, preferences, privileges and restrictions of any series of preferred
stock including, without limitation: (a) the rate of distribution, (b) the
price at and the terms and conditions on which shares shall be redeemed, (c) the
amount payable upon shares for distributions of any kind, (d) the terms and
conditions on which shares may be converted if the shares of any series are
issued with the privilege of conversion and (e) voting rights except as limited
by law.
Although the Company currently does not have any plans to issue additional
shares of preferred stock or to designate a new series of preferred stock, there
can be no assurance that the Company will not do so in the future. As a result,
the Company could authorize the issuance of a series of preferred stock which
would grant to holders preferred rights to the assets of the Company upon
liquidation, the right to receive dividend coupons before dividends would be
declared to holders of Common Stock, and the right to the redemption of such
shares, together with a premium, prior to the redemption to Common Stock. The
current shareholders of the Company have no redemption rights. In addition, the
Board could issue large blocks of voting stock to fend off unwanted tender
offers or hostile takeovers without further shareholder approval.
SERIES A PREFERRED STOCK
At one time, the Company had designated and issued 1,287,500 shares of Series A
Preferred Stock, par value $.01 per share ("Series A Preferred Stock").
Pursuant to an automatic conversion provision in the Certificate of Designations
therefor, all outstanding shares of Series A Preferred Stock were converted into
an aggregate of 643,750 shares of Common Stock effective as of June 11, 1996, in
connection with the second closing of the Series B Offering. Notwithstanding
such conversion, holders of the Series A Preferred Stock at the time of such
conversion, will receive, pro rata, $2.4 million of shares of common stock of
IPI. See "Certain Transactions."
36
<PAGE>
SERIES B PREFERRED STOCK
The Board of Directors of the Company has authorized the issuance of up to
300,000, of which 259,198 are outstanding, shares of Series B Preferred Stock,
par value $.01 per share, the rights, preferences and characteristics of which
are as follows:
Dividends
The holders of Series B Preferred Stock are entitled to receive dividends as,
when and if declared by the Board of Directors of the Company out of funds
legally available therefor. No dividend or distribution, as the case may be,
will be declared or paid on any junior stock unless the dividend also is paid to
holders of the Series B Preferred Stock. The Company does not intend to pay
cash dividends on the Series B Preferred Stock or the underlying Common Stock
for the foreseeable future.
Conversion
Each share of Series B Preferred Stock may be converted, in whole or in part, at
the option of the holder at any time after the initial issuance date into Common
Stock at an initial conversion price equal to $2.00 (the "Initial Conversion
Price"). The Initial Conversion Price is subject to adjustment upon the
occurrence of certain mergers, reorganizations, consolidations,
reclassifications, stock dividends or stock splits which will result in an
increase or decrease in the number of shares of Common Stock outstanding. In
addition, the Initial Conversion Price is subject to adjustment on July 11, 1997
(the "Reset Date"), if the average daily trading price of the Common Stock for
the 30 consecutive trading days immediately preceding the Reset Date (the
"Twelve Month Trading Price") is less than 135% of the then applicable Initial
Conversion Price ("Reset Event"). Upon a Reset Event, the then applicable
Initial Conversion Price will be reduced to equal the greater of (i) the Twelve
Month Trading Price divided by 1.35 and (ii) 50% of the then applicable Initial
Conversion Price.
Mandatory Conversion
The Company has the right at any time after the Reset Date to cause the
Preferred Stock to be converted in whole or in part, on a pro rata basis, into
shares of Common Stock if the closing price of the Common Stock exceeds 150% of
the then applicable Preferred Conversion Price for at least 20 trading days in
any 30 consecutive trading day period.
Liquidation
Upon (i) a liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, (ii) a sale or other disposition of all or
substantially all of the assets of the Company or (iii) merger or consolidation
(a "Merger Transaction") in which the Company is not the surviving entity and
shares of Common Stock consisting in excess of 50% of the voting power of the
Company are exchanged (subparagraphs (i), (ii), and (iii) being collectively
referred to as a "Liquidation Event"), after payment or provision for payment of
the debts and other liabilities of the Company, the holders of the Preferred
Stock then outstanding will first be entitled to receive, pro rata (on the basis
of the number of shares of the preferred stock then outstanding), and in
preference to the holders of the Common Stock and any other series of Preferred
Stock of the Company, an amount per share equal to $135.00 plus accrued but
unpaid dividends, if any; provided, however, that in the case of a Merger
Transaction, such $135.00 per share may be paid in cash and/or securities of the
surviving entity in such Merger Transaction.
37
<PAGE>
Voting Rights
The holders of the Series B Preferred Stock have the right at all meetings of
stockholders to the number of votes equal to the number of shares of Common
Stock issuable upon conversion of the Series B Preferred Stock at the record
date for determination of the stockholders entitled to vote. So long as 50% of
the shares of Series B Preferred Stock remain outstanding, the holders of 66.67%
of the Series B Preferred Stock are entitled to approve (i) the issuance of any
securities of the Company senior to or on parity with the Series B Preferred
Stock, (ii) any alteration or change in the rights or preferences or privileges
of the Series B Preferred Stock and (iii) the declaration or payment of any
dividend on any junior stock or the repurchase of any securities of the Company.
Except as provided above or as required by applicable law, the holders of the
Series B Preferred Stock will be entitled to vote together with the holders of
the Common Stock and not as a separate class.
Lock-up Agreements
The holders of Common Stock issuable pursuant to the conversion of Series B
Preferred Stock have agreed pursuant to their subscription agreements with the
Company not to offer, pledge, sell, contract to sell, grant any option for the
sale of, or otherwise dispose of, directly or indirectly, any shares of Series B
Preferred Stock or Common Stock underlying the same, without the prior written
consent of the placement agent in the Series B Offering. Such restrictions
apply for (i) three months following the completion of the Series B Offering
with respect to 75% of the said securities, (ii) six months following such
completion with respect to 50% of the said securities and (iii) nine months
following such completion with respect to 25% of the said securities.
The holders of Common Stock issuable pursuant to the conversion of Series B
Placement Warrants are bound, pursuant to the terms of such warrants to the same
lock-up conditions as the holders of Common Stock issuable upon conversion of
Series B Preferred Stock.
1992 STOCK OPTION PLAN
A total of 875,000 shares of Common Stock has been reserved for issuance under
the Company's 1992 Stock Option Plan (the "AVAX Option Plan"). The AVAX Option
Plan was adopted by the Board of Directors in April 1992 and approved by
stockholders of the Company in April 1992. The AVAX Option Plan expires by its
own terms in 2002.
The AVAX Option Plan provides for the grant of "incentive stock options" within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, and
nonqualified stock options to employees, directors and consultants of the
Company. Incentive stock options may be granted only to employees. The AVAX
Option Plan is administered by the Board of Directors of the Company (or a
Committee thereof) which determines the terms of the options granted, including
the exercise price, the number of shares subject to the option, and the schedule
on which the option becomes exercisable.
The AVAX Option Plan requires that the exercise price of incentive stock options
must be at least equal to the fair market value of such shares on the date of
grant and that the exercise price of nonqualified stock options, after the
Common Stock becomes publicly traded, must be at least equal to the fair market
value of such shares on the date of grant. The maximum terms of options granted
under the AVAX Option Plan is 10 years. With respect to any participant who
owns stock possessing more than 10% of the voting rights of outstanding capital
stock, the exercise price of any option must be at least equal to 110% of fair
market value on the date of grant and the term may be no longer than five years.
No incentive stock option may be granted under the AVAX Option Plan to any
individual if the aggregate fair market value of the shares (determined as of
the time of the option is granted) which would become exercisable during any
calendar year, under all incentive stock options held by such individual,
exceeds $100,000, unless such excess options shall be treated as nonstatutory
stock options.
38
<PAGE>
Generally, any option held by an individual who ceases to be employed or
retained by the Company may be exercised by such individual within three months
after such individual ceases to be employed or retained by the Company or within
one year after such individual ceases to be employed or retained in the case of
disability. Generally, any option held by an individual who dies while still
employed or retained by the Company or dies within three months after the date
he or she is no longer employed or retained by the Company may be exercised by
such individual's representative within six months following the date of death.
At July 31, 1996, options to purchase 60,000 shares of Common Stock were
outstanding (of which 50,000 were vested) at a weighted average price of $0.60
per share, and no options had been exercised.
Such options do not confer upon holders thereof any voting or any other rights
of a stockholder of the Company. The shares of Common Stock issuable upon
exercise of the options and warrants in accordance with the terms thereof, will
be fully paid and nonassessable.
OTHER OPTIONS
Pursuant to Dr. Jonas' letter of employment with the Company, Dr. Jonas received
share options to acquire 637,745 shares of Common Stock at an exercise price of
$.50. Such share options will vest at a rate of 1/16 per quarter over a four-
year period and are exercisable for a period of seven years.
WARRANTS
The following summaries are qualified in their entirety by the text of the
warrants, copies of which have been filed as exhibits to the Registration
Statement.
In connection with services rendered by Paramount, as placement agent in the
Series B Offering, and pursuant to a placement agency agreement entered into by
the Company and Paramount, the Company granted Paramount and/or its designees
warrants ("Series B Placement Warrants") to acquire 25,819 newly issued shares
of Series B Preferred Stock. Each Series B Placement Warrant entitles the
registered holder thereof to purchase Series B Preferred Stock at a price of
$110 per share, at any time until June 11, 2006. The Series B Placement Warrant
may be exercised, in whole or in part and may be exercised pursuant to a
cashless exercise provision. The Series B Placement Warrants are subject to
certain lock-up restrictions. See "Lock-up Agreements.
In connection with services rendered by Paramount, as bridge financing agent in
a certain bridge financing loan availed of by the Company from August 1995 to
February 1996, the Company granted Paramount and/or its designees warrants
("Bridge Financing Warrants") to acquire 62,500 newly issued shares of Common
Stock. Each Bridge Financing Warrant entitles the registered holder thereof to
purchase Common Stock at a price of $.01 per share, at any time until five years
from the date of this Prospectus. The Bridge Financing Warrant may be
exercised, in whole or in part and may be exercised pursuant to a cashless
exercise provision.
In connection with services rendered by Ladenberg, Thalmann & Co., Inc.
("Ladenburg") and D. H. Blair Investment Banking Corp. ("D. H. Blair"), as
placement agents in the offering of Series A Preferred Stock conducted from June
1992 to September 1992, the Company granted Ladenburg and D. H. Blair and/or
their respective designees warrants ("Series A Placement Warrants") to acquire
47,981 newly issued shares of Common Stock. Each Series A Placement Warrants
entitle the registered holders, thereof to purchase Common Stock at a price of
$2.40 per share, at any time until June 26, 1997. The Series A Placement
Warrants may be exercised, in whole or in part, and may be exercised pursuant to
a cashless exercise provision.
39
<PAGE>
In connection with services rendered by Castelli Associates, Inc. and
Shear/Kershman Laboratories, Inc., the Company granted Castelli Associates, Inc.
and Shear/Kershman Laboratories, Inc. and/or their designees warrants ("Castelli
and Shear/Kershman Warrants") to acquire 15,500 newly issued shares of Common
Stock. Each Castelli and Shear/Kershman Warrant entitles the registered holder
thereof to purchase Common Stock at a price of $5.50 per share , at any time
until April 30, 1998. The Castelli and Shear/Kershman Warrants may be
exercised, in whole or in part.
Each of the foregoing warrants contain provisions that generally provide the
holders thereof certain antidilution protections in certain events (such as, but
not limited to, the occurrence of stock dividends, stock splits, mergers, sales
of all or substantially all of the Company's assets and sales of other preferred
stock at below market price) by adjustment of the applicable exercise price
and/or the number of shares issuable upon exercise of such warrants.
The Company is not required to issue fractional shares of Common Stock upon
exercise of any such warrants. In lieu thereof, an amount of cash equal to the
same fraction of the then current market value of a share of Common Stock will
be paid. No adjustment as to dividends will be made upon any exercise of any
such warrants. The holder of any such warrant will not have any rights as a
holder of Common Stock unless and until the applicable warrant is exercised.
REGISTRATION RIGHTS
The Company has agreed under certain circumstances to register the shares of
Common Stock owned by TJU, Dr. Berd, VentureTek, L.P. and, Dr. Rosenwald.
Under terms of the agreements between the Company and the holders of such
registrable securities, generally, if the Company proposes to register any of
its securities under the Securities Act, either for its own account or for the
account of other securityholders exercising registration rights, such holders
are entitled to notice of such registration and are entitled to include such
shares of Common Stock therein. Holders of the Castelli and Shear/Kershman
Warrants are entitled under certain circumstances 18 months after the Company's
initial public offering also to require the Company to file a registration
statement under the Securities Act at the Company's expense with respect to
their shares of Common Stock and the Company is required to use its reasonable
best efforts to effect such registration. Such rights are subject to certain
conditions and limitations, including the right of the underwriter of an
offering of the Common Stock to limit the number of shares included in such
registration in certain circumstances.
TRANSFER AGENT
The Transfer Agent for the shares of Common Stock is the Continental Stock
Transfer & Trust Company of New York.
40
<PAGE>
SELLING SECURITYHOLDERS
The following table sets forth (i) the name of each Selling Securityholder,
(ii) the amount of shares of Common Stock owned, whether outstanding or
issuable, by such holder before the Offering, (iii) the amount of shares of
Common Stock which may be offered by each Selling Securityholder and (iv) the
amount and percentage of shares of Common Stock to be owned by each such holder
following the completion of the Offering. The amounts of Common Stock set forth
above under the caption "Number of Shares Offered" represents the aggregate
number of shares of (A) Common Stock owned by each Selling Stockholder, (B)
Common Stock issuable upon conversion of the Series B Preferred Stock owned by
each Selling Securityholder, (C) Common Stock issuable upon conversion of the
Series B Placement Warrants and (D) Common Stock issuable upon exercise of
conversion of the Bridge Placement Warrants (assuming for (B) - (D) the initial
conversion/exercise rates under the terms of the Series B Preferred Stock, the
Series B Placement Warrants and the Bridge Placement Warrants, respectively).
<TABLE><CAPTION>
Percentage
----------
Shares Owned Amount to Shares Owned Owned after
------------ --------- ------------ -----------
Selling Securityholder (1) prior to Offering be Offered after Offering Offering
---------------------- ----------------- ---------- -------------- --------
<S> <C> <C> <C> <C>
The 1992 Houston 25,500 25,500 0 *
Partnership, L.P.
The A.M. Group L.L.C. 63,750 63,750 0 *
Todd D. Aaron, M.D. 12,750 12,750 0 *
Leonard J. Adams 51,000 51,000 0 *
Ross D. Ain 5,100 5,100 0 *
Meir Aliakim 197,115 197,115 0 *
Amram Kass P.C. Defined 25,500 25,500 0 *
Benefit Pension Plan
George Anagnos 12,750 12,750 0 *
Josephine G. Anagnos 12,750 12,750 0 *
Steven Anagnos 12,750 12,750 0 *
Ansec Corp. 102,000 102,000 0 *
Aries Domestic Fund, LP 215,500 215,500 0 *
The Aries Trust 407,000 407,000 0 *
Rajiv Bahl 12,750 12,750 0 *
BAM of NY, Inc. Defined 63,750 63,750 0 *
Benefit Pension Plan
Martin Bandier 25,500 25,500 0 *
Banque SCS Alliance 51,000 51,000 0 *
Banque Franck S.A. 51,000 51,000 0 *
Banque Unigestion 153,000 153,000 0 *
Banque Unigestion 76,500 76,500 0 *
Amnon Barness & Caren H. 12,750 12,750 0 *
Barness, JTWROS
Alan R. Batkin 25,500 25,500 0 *
Laurie and Steven Beane 12,750 12,750 0 *
Mark Berg 127,500 127,500 0 *
David J. Bershad 102,000 102,000 0 *
Biowave Investment 25,500 25,500 0 *
Partners
Bishops Merchant Group 51,000 51,000 0 *
Limited
John V. Bivona 22,950 22,950 0 *
Marcy Blender, Alan 7,650 7,650 0 *
Blender JTWOS
Elliott Broidy 51,000 51,000 0 *
Seymour Buehler 12,500 12,500 0 *
Patrick J. Callahan 12,750 12,750 0 *
M. Rafael Gonzalez 5,100 5,100 0 *
Calvillo
Carlos Plancarte Garcia 12,750 12,750 0 *
N., Leonor P. De
Morian, JTWROS
</TABLE>
41
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Gabriel M. Cerrone 102,000 102,000 0 *
Chana Sasha Foundation 51,000 51,000 0 *
Andrew and Barbara 12,750 12,750 0 *
Cichelli
Cinco de Mayo, Ltd. 25,500 25,500 0 *
Roger and Margaret Coleman 12,750 12,750 0 *
Colony Partners, A 25,500 25,500 0 *
California General
Partnership
Robert J. Conrads 25,500 25,500 0 *
Cook & CIE SA 204,000 204,000 0 *
Lilia Cordero de Adame, 25,500 25,500 0 *
Lilia M.A. Olvera,
JTWROS
Archibald Cox, Jr. 102,000 102,000 0 *
Credit Lyonnais Suisse 153,000 153,000 0 *
(SA)
David Trust 5,100 5,100 0 *
DBRN Securities Inc. 51,000 51,000 0 *
Elke R. de Ramirez 5,100 5,100 0 *
Nathan P. Diamond 12,750 12,750 0 *
Donald G. Drapkin 127,500 127,500 0 *
M. Robert Dussler 2,550 2,550 0 *
Eastside Investment 25,500 25,500 0 *
Partners
Joseph E. Edelman 15,300 15,300 0 *
Elena Edelstein and Marcus 12,750 12,750 0 *
Edelstein
Edgewater Private Equity 190,000 127,500 62,500 *
Fund, LP
EDN Equities 102,000 102,000 0 *
Ariel Elia 12,750 12,750 0 *
Howard Ellis 5,100 5,100 0 *
Etablissement Occramis 25,500 25,500 0 *
Europa International, Inc. 25,500 25,500 0 *
Joseph A. Fabiani 50,750 38,250 12,500 *
Faisal Finance 102,000 102,000 0 *
Laurence D. Fink 102,000 102,000 0 *
Steven B. Fink 12,750 12,750 0 *
Finterbank Zuerich 51,000 51,000 0 *
Firebird Overseas, Ltd. 25,500 25,500 0 *
Alan Fisher 22,950 22,950 0 *
Norman J. Fisher 25,500 25,500 0 *
Joseph H. Flom 25,500 25,500 0 *
Hans-Wolfgang Frick 51,000 51,000 0 *
James P. Frickleton and 51,000 51,000 0 *
James R. Bartimus
Michael J. Garnick 101,500 76,500 25,000 *
Marc Gelman 153,000 153,000 0 *
Joseph Giamanco 102,000 102,000 0 *
Richard Goldberg 25,500 25,500 0 *
Harold S. Goldstein 12,750 12,750 0 *
Golex Holding 102,000 102,000 0 *
Ofelia Anton Gomez 10,200 10,200 0 *
Michael J. Gordon 6,375 6,375 0 *
Robert P. Gordon 25,500 25,500 0 *
Peter Grabler 6,375 6,375 0 *
Robert J. Granovsky 25,500 25,500 0 *
Greenwood Partners 127,500 127,500 0 *
James & Nancy Grosfeld, 102,000 102,000 0 *
tenants by entireties
Peter Grossman 12,750 12,750 0 *
Stuart Gruber 51,000 51,000 0 *
Erez & Elyse Halevah 25,500 25,500 0 *
Yonah J. Hamlet, MD 19,000 19,000 0 *
Trustee FBO Yonah J.
Hamlet, MD Profit Sharing
Plan Dtd. 1/1/86
Harpel Family Partnership 127,500 127,500 0 *
Thomas O. Hecht 25,500 25,500 0 *
</TABLE>
42
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Chaim Herman and Denise Herman 5,100 5,100 0 *
Gary Herman 25,500 25,500 0 *
William J. Vanden Heuvel 12,500 12,500 0 *
Jack Hirschfield 6,375 6,375 0 *
The Holding Company 51,000 51,000 0 *
Jeffrey C. Hoos 12,750 12,750 0 *
Irving Huber and Charlotte 12,750 12,750 0 *
Huber
IASD Health Services Corp. 102,000 102,000 0 *
Mark & Rebecca Ingerman 25,500 25,500 0 *
J.F. Shea Co., Inc. as 102,000 102,000 0 *
Nominee 1996-21
Jackson Hole Investments 51,000 51,000 0 *
Acquisitions, L.P.
Peter L. Jensen 25,500 25,500 0 *
John Osterweis TTEE 12,750 12,750 0 *
Osterweis Revocable Trust
dtd 9-13-93
James D. Judd 31,750 25,500 6,250 *
Hyman R. Kahn 51,000 51,000 0 *
Patrick M. Kane 12,750 12,750 0 *
Robert S. Kapito 51,000 51,000 0 *
Peter and Donna Kash 25,500 25,500 0 *
(JTRS)
Donald R. Kendall, Jr. 15,300 15,300 0 *
Daniel Kessel, M.D. 57,250 51,000 6,250 *
Ida Kessel 19,000 12,750 6,250 *
Lawrence J. Kessel 57,250 51,000 6,250 *
Keys Foundation, Curacao, 51,000 51,000 0 *
Netherlands, Antilles
Robert Klein, M.D. 51,000 51,000 0 *
Robert Knox 25,500 25,500 0 *
Arthur or Sean Kohn 25,500 25,500 0 *
Charles Koppelman 51,000 51,000 0 *
Ira L. Kotel 17,034 17,034 0 *
Ted Koutsoubos 51,000 51,000 0 *
Martin S. Kratchman 25,500 25,500 0 *
Michael and Nicole Kubin 51,000 51,000 0 *
Vincent P. Lambriola 12,750 12,750 0 *
Larich Associates 76,500 76,500 0 *
Legong Investments N.V. 204,000 204,000 0 *
Albert Lemer 12,750 12,750 0 *
Susan Tauber Lemor 12,750 12,750 0 *
Gregory Lenchner 32,900 20,400 12,500 *
Gregory S. Lenchner and 17,850 17,850 0 *
Donna Lenchner, Jointly
Harvey Lenchner 10,200 10,200 0 *
Michael Lenchner 2,550 2,550 0 *
Henry N. Lieberman 25,500 25,500 0 *
Lifelines Care, Inc. 17,850 17,850 0 *
Frank T. Lincoln, Jr. 25,500 25,500 0 *
The Lincoln Tax 51,000 51,000 0 *
Advantaged, L.P.
Armand A. Lindenbaum 12,750 12,750 0 *
Lion Tower Corporation 25,500 25,500 0 *
Beverly O. Lobell 25,500 25,500 0 *
J. Jay Lobell 51,000 51,000 0 *
John L. Loeb, Jr. 12,750 12,750 0 *
Luxembrella - All Around 102,000 102,000 0 *
Int'l
Herbert M. Lyman 17,750 12,750 5,000 *
The M.L. Lawrence Trust 153,000 153,000 0 *
Marathon Agents Profit 12,750 12,750 0 *
Sharing
Michael P. Marcus 102,000 102,000 0 *
Alfons Melohn 153,000 153,000 0 *
Arden Merback 6,375 6,375 0 *
Josef Mermelstein 51,000 51,000 0 *
Albert Milstein 25,500 25,500 0 *
</TABLE>
43
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Mary Y.Y. Mo 12,750 12,750 0 *
Michael Y.Q. Mo 12,750 12,750 0 *
Zhong-Liang Mo 25,500 25,500 0 *
Richard Molinsky 25,500 25,500 0 *
The Monument Trust Company 51,000 51,000 0 *
Limited
Roberto Gonzalez Moreno 51,000 51,000 0 *
Alfred D. Morgan, Trust 12,750 12,750 0 *
Administrator (Trustee) /
Margaret Goldwater,
Trustee
Robert Mosberg 12,750 12,750 0 *
Eli Moshen 6,375 6,375 0 *
Mova Investments Limited 51,000 51,000 0 *
Arnold Mullen 25,500 25,500 0 *
Arthur J. Nagle 12,750 12,750 0 *
Mechie Nebenzahl 25,500 25,500 0 *
P. Sherrill Neff 12,750 12,750 0 *
New Jersey Wolfson Trust 663,000 663,000 0 *
Kevin P. Newman 6,375 6,375 0 *
Nikki Establishment For 25,500 25,500 0 *
Fashion & Marketing
Research
Old Oly, J.V. 25,500 25,500 0 *
Paul D. and Rebecca L. 12,750 12,750 0 *
Ostrovsky
Steven N. Ostrovsky 12,750 12,750 0 *
P.A.W. Offshore Fund, Ltd. 51,000 51,000 0 *
Palmetto Partners, Ltd. 76,500 76,500 0 *
John Pappajohn (3) 477,000 102,000 375,000 1.82%
Paramount Capital, Inc. (4) 1,353,490 1,353,490 0 *
Mark D. Pesonen 25,500 25,500 0 *
Maria Pierce 12,750 12,750 0 *
Porter Partners, L.P. 102,000 102,000 0 *
Charles Potter 12,750 12,750 0 *
Tis Prager 12,750 12,750 0 *
Privat Kredit Bank, Lugano 306,000 306,000 0 *
Propp & Company, Inc. 12,750 12,750 0 *
Abel Quezada Rueda, 7,650 7,650 0 *
Mercedes P. Quezada
JTWRS
Michael S. Resnick 12,750 12,750 0 *
Rick Steiner Productions, 15,300 15,300 0 *
Inc.
Todd M. Roberts 16,983 16,983 0 *
Linda Gosden Robinson 76,500 76,500 0 *
Rosemary Cass Ltd. Pension 10,200 10,200 0 *
Plan
J. Philip Rosen 25,500 25,500 0 *
Paul H. Rosen 5,100 5,100 0 *
Ervin Rosenfeld 51,000 51,000 0 *
Martine Rothblatt 12,750 12,750 0 *
Jeffrey Rothenberg DDS 15,300 15,300 0 *
David W. Ruttenberg 12,750 12,750 0 *
S&M Investments 12,750 12,750 0 *
Leeor Sabbah 153,000 153,000 0 *
M.D. Sabbah 255,000 255,000 0 *
Sagres Group Ltd. 408,000 408,000 0 *
Wayne Saker 51,000 51,000 0 *
Scott G. Sandler 38,250 38,250 0 *
Sarah Trust 5,100 5,100 0 *
Roy and Marlena Schaeffer 25,500 25,500 0 *
Howard Schain 25,500 25,500 0 *
Carl M. Schechter 12,750 12,750 0 *
Robin Schlaff 12,750 12,750 0 *
Ralph Schlosstein 51,000 51,000 0 *
Andrew W. Schonzeit 12,750 12,750 0 *
Schwendiman Global Sector 25,500 25,500 0 *
Fund L.P.
Scoggin Capital 76,500 76,500 0 *
Management, L.P.
Roberto Segovia 10,200 10,200 0 *
</TABLE>
44
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Lori Shapero 25,500 25,500 0 *
Leonard P. Shaykin 25,500 25,500 0 *
The Sheila Davis Lawrence 51,000 51,000 0 *
Revocable Trust
L. Kevin Sheridan 16,983 16,983 0 *
Martin Sirotkin 31,750 25,500 6,250 *
Bruce Slovin 127,500 127,500 0 *
South Ferry #2, L.P. 585,000 585,000 0 *
Aaron Speisman 12,750 12,750 0 *
Aaron Speisman custodian 12,750 12,750 0 *
for Jennifer Speisman
Aaron Speisman custodian 12,750 12,750 0 *
for Joshua Speisman
William M. Spencer III 51,000 51,000 0 *
Neil and Laurie Spindel 25,500 25,500 0 *
John L. Steffens 51,000 51,000 0 *
Dr. Edward L. Steinberg 12,750 12,750 0 *
Catherine Steinmann 12,750 12,750 0 *
Gabriel Steinmann 12,750 12,750 0 *
Jennifer Steinmann 12,750 12,750 0 *
Joshua Steinmann 12,750 12,750 0 *
Gary J. Strauss 25,500 25,500 0 *
Stome Partners, L.P. 510,000 510,000 0 *
Kaveh Taleghani 12,750 12,750 0 *
Hindy H. Taub 12,750 12,750 0 *
Herman Tauber 88,500 76,000 12,500 *
Myron M. Teitelbaum, M.D. 31,500 31,500 0 *
Termtec, Ltd. 25,500 25,500 0 *
Patricia & Erich Theissen 5,100 5,100 0 *
Mitchell Troyetsky 12,750 12,750 0 *
Thomas R. Ulie 25,500 25,500 0 *
Joseph A. Umbach 25,500 25,500 0 *
United Congregations 51,000 51,000 0 *
Mesora
Dan Valahu 12,750 12,750 0 *
Valor Capital Management, 25,500 25,500 0 *
L.P.
Andre Visser 51,000 51,000 0 *
Vivaldi, Ltd. 102,000 102,000 0 *
W & P Bank & Trust Company 102,000 102,000 0 *
Ltd.
Allan Warshawsky 12,750 12,750 0 *
Michael Weiner, M.D. 5,100 5,100 0 *
Mark E. Weiss 12,750 12,750 0 *
Melvyn I. Weiss 102,000 102,000 0 *
Robert J. Whetten 51,000 51,000 0 *
Whitcome Family Trust 51,000 51,000 0 *
Tim Winans 12,750 12,750 0 *
Wisdom Tree Associates, LP 76,500 76,500 0 *
Alan Wise/Teri Wise, 12,750 12,750 0 *
Jointly
Andrew B. Woldow 12,750 12,750 0 *
James D. Wolfensohn 50,000 50,000 0 *
Aaron Wolfson 51,000 51,000 0 *
Abraham Wolfson 51,000 51,000 0 *
Wolfson Descendents' 1983 255,000 255,000 0 *
Trust
Worldwide Consultants and 51,000 51,000 0 *
Finance Ltd.
Peter Young 9,333 9,333 0 *
Richard A. Young 12,750 12,750 0 *
Robert J. Young 12,750 12,750 0 *
Zapco Holdings Settlement 12,750 12,750 0 *
Uzi Zucker 25,500 25,500 0 *
TOTAL 15,421,338 14,885,088 536,250 2.61%
-----
</TABLE>
- ----------------------------------------------------------
* Represents less than 1.0 %.
45
<PAGE>
(1) Unless otherwise indicated, includes all shares of Common Stock issuable
upon conversion of the Series B Preferred Stock at the initial conversion
rate of $2.00 per share. See "Description of Securities--Series B
Preferred Stock.".
(2) Includes Common Stock issuable upon conversion of the shares of Series B
Preferred Stock issuable upon exercise of the Series B Placement Warrants.
(3) See also footnote 5 to the table set forth under "Principal Stockholders."
(4) Includes 625,000 shares of Common Stock issuable upon exercise of the
Bridge Placement Warrants and 1,290,950 shares of Common Stock issuable
upon conversion of the Series B Preferred Stock issuable upon exercise of
the Series B Placement Warrants.
Each Selling Securityholder may, but is not required to, sell all of the shares
of Common Stock shown in the column entitled "Amount of Shares to be Offered"
subject, in certain instances, to lock-up provisions. See "Description of
Securities --Lock-Up Agreements." The Selling Securityholders and any
broker-dealers that act in connection with the sale of the Common Stock as
principals may be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act and any commission received by them and any profit
on the resale of such securities as principals might be deemed to be
underwriting discounts and commissions under the Act. The Selling
Securityholders may agree to indemnify any agent, dealer or broker-dealer that
participates in transactions involving sales of such securities certain
liabilities, including liabilities arising under the Securities Act. The Company
will not receive any proceeds from the sales of the Common Stock by the Selling
Securityholders, although the Company may receive proceeds from the exercise of
the Placement Warrants. Sales of the Selling Securityholder or even the
potential shares of Common Stock by of such sales, would likely have an adverse
effect on the market price of the Common Stock.
At the time a particular offer for Common Stock is made, except as herein
contemplated, by or on behalf of the Selling Securityholder, to the extent
required, a Prospectus will be distributed by the Selling Securityholder which
will set forth the number of shares of Common Stock being offered and the terms
of the Offering, including the name or names of any underwriters, dealers or
agents, if any, the purchase price paid by any underwriter for shares purchased
from the Selling Securityholder and any discounts, commissions or concessions
allowed or reallowed or paid to dealers.
Except as noted below, none of the Selling Securityholders named in the
preceding table has had any position, office or other material relationship with
the Company or any of its affiliates within the past three years. Aries
Domestic Fund, L.P. and The Aries Trust are private investment funds managed by
Dr. Lindsay A. Rosenwald, a substantial shareholder of the Company and the sole
owner of Paramount Capital, Inc., the placement agent for the Series B Offering
("Paramount"). See "Certain Transactions." Peter Kash is a Senior Managing
Director of Paramount. Martin S. Kratchman is a Managing Director of Paramount.
46
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALES
Upon completion of the Offering, the Company will have 21,296,932 shares of
Common Stock outstanding or issuable upon the conversion of the Series B
Preferred Stock, the exercise of all outstanding options and warrants as of July
31, 1996. Of these shares, the 14,885,088 shares registered in the Offering
will be freely tradeable without restriction or further registration under the
Securities Act, except that (i) any shares purchase by "affiliates" of the
Company, as the term is defined under the Securities Act ("Affiliates"), may
generally only be sold in compliance with the limitations of Rule 144 described
below and (ii) that such registered shares may be subject to certain lock-up
provisions discussed below. In addition, the Company believes that the 987,776
shares of Common Stock may be eligible for sale without restriction or further
registration under the Securities Act, subject to certain requirements. See
"Risk Factors--Potential Adverse Effect of Shares Eligible For Future Sales".
The Company has a Stock Option Plan under which 875,000 shares of Common Stock
have been reserved for issuance, and has also reserved 637,745 shares of Common
Stock for issuance pursuant to the letter of employment with Dr. Jeffrey M.
Jonas, the Company's President and Chief Executive Officer.
SALES OF RESTRICTED SHARES
The Company believes that 4,386,409 shares of Common Stock are "restricted
securities" and under certain circumstances may, in the future, be sold in
compliance with Rule 144 (including 987,776 shares owned by persons whom the
Company believes may be affiliates of the Company, but as to which there can be
no assurance, and whose shares therefore may not be restricted). Assuming the
availability of Rule 144, the Company believes that of the 4,386,409
"restricted" shares of Common Stock, 987,776 shares of Common Stock is eligible
for sale and an additional 3,398,632 shares of Common Stock will be eligible for
sale in 1997 pursuant to Rule 144, in each case so long as there is adequate
current public information with respect to the Company as contemplated by Rule
144, as well as, certain volume limitations and manner of sale requirements
imposed by Rule 144.
In general, under Rule 144, subject to the satisfaction of certain other
conditions, a person, including an affiliate of the Company, who beneficially
owned restricted shares of Common Stock for at least two years is entitled to
sell, within any three-month period, a number of shares that does not exceed the
greater of one percent of the total number of outstanding shares of the same
class, or if the Common Stock is quoted on the Nasdaq National Market or a
national securities exchange, the average weekly trading volume during the four
calendar weeks immediately preceding the sale. A person who presently is not
and who has not been an affiliate of the Company for at least three months
immediately preceding the sale and who has beneficially owned the shares of
Common Stock for at least three years is entitled to sell such shares under Rule
144 without regard to the volume limitations described above.
Prior to the Offering, there has been no public market for the Common Stock and
no predictions can be made of the effect, if any, that the sale or availability
for sale of Restricted Shares of locked-up shares will have on the market price
of the Common Stock. Nevertheless, sales of substantial amounts of such shares
in the public market, or the perception that such sales could occur, could
adversely affect the market price of the Common Stock and could impair the
Company's future ability to raise capital through an offering of its equity
securities.
For a description of the Company's outstanding warrants and options, see
"Description of Securities--1992 Stock Option Plan," "Other Options," and
"Warrants."
47
<PAGE>
PLAN OF DISTRIBUTION
A total of 14,885,088 shares of Common Stock are being directly offered for sale
by the Selling Securityholders to the public. The Selling Securityholders may,
but are not required to, sell, directly or through brokers, the shares of Common
Stock in negotiated transactions or in one or more transactions in the market at
the price prevailing at the time of sale. (Certain of the Common Stock may be
subject to a lock-up agreement. See "Description of Securities -- Lock-Up
Agreements"). In connection with such sales, the Selling Securityholders and
any participating broker may be deemed to be "underwriters" of the shares of
Common Stock within the meaning of the Securities Act, although the offering of
these securities will not be underwritten by a broker-dealer firm. Sales in the
market may be made to broker-dealers making a market in the Common Stock or
other broker-dealers, and such broker-dealer, upon their resale of such
securities, may be deemed to be "Selling Securityholders" in this offering. The
Company will not receive any of the proceeds from the sale of the Common Stock
by the Selling Securityholders. Pursuant to the terms under which the Preferred
Stock and Placement Warrants were issued and sold, the Company has agreed to
indemnify the Selling Securityholders against such liabilities as they may incur
as a result of any untrue statement of a material fact in the Registration
Statement of which this Prospectus forms a part, or any omission herein or
therein to state a material fact necessary in order to make the statements made,
in the light of the circumstances under which they were made, not misleading.
Such indemnification includes liabilities that the Selling Securityholders may
incur under the Securities Act.
The Company will bear all costs and expenses of the registration under the
Securities Act and certain state securities laws of the Common Stock and any
discounts or commissions payable with respect to sales of such securities.
From time to time, this Prospectus will be supplemented and amended as required
by the Securities Act. During any time when a supplement or amendment is so
required, after notice from the Company, the Selling Securityholders are
required to cease sales until the Prospectus has been supplemented or amended.
The Selling Securityholders have advised the Company that they may sell,
directly or through brokers, all or a portion of the securities offered hereby
in negotiated transactions or in one or more transactions in the market at the
price prevailing at the time of sale. In connection with such sales, the
Selling Securityholders and any participating broker may be deemed to be
"underwriters" of the Common Stock within the meaning of the Securities Act of
1933. It is anticipated that usual and customary brokerage fees will be paid by
the Selling Securityholders in all open market transactions. The Company will
pay all other expenses of this Offering. See "Plan of Distribution."
The Company intends to inform the Selling Securityholders that the anti-
manipulation provisions of Rules 10b-6 and 10b-7 under the Securities Exchange
Act of 1934 may apply to the sales of their shares offered hereby. The Company
also intends to advise the Selling Securityholders of the requirement for
delivery of this Prospectus in connection with any sale of the Common Stock
offered hereby.
48
<PAGE>
EXPERTS
The financial statements of AVAX Technologies, Inc. (formerly Walden
Laboratories, Inc.), as of December 31, 1995 and for the years ended December
31, 1994 and 1995 and for the period from January 12, 1990 (incorporation ) to
December 31, 1995 appearing in this Prospectus and Registration Statement, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
LEGAL COUNSEL
Legal matters relating to the Offering will be passed upon for the Company by
Roberts, Sheridan & Kotel, a Professional Corporation, New York, New York,
counsel to the Company. Members of such firm beneficially own an aggregate of
51,000 shares of Common Stock assuming the conversion of all shares of Series B
Preferred Stock owned by them at the initial conversion rate of $2.00 per share.
All of such shares of Common Stock owned directly or issuable upon conversion of
shares of Series B Preferred Stock are included in this Registration Statement.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission, Washington,
D.C. 20549, a Registration Statement on Form SB-2 under the Securities Act with
respect to the Common Stock offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement and the exhibits and
schedules to the Registration Statement. For further information with respect to
the Company and such Common Stock offered hereby, reference is made to the
Registration Statement and the exhibits and schedules filed as a part of the
Registration Statement. Statements contained in this Prospectus concerning the
contents of any contract or any other document referred to are not necessarily
complete; reference is made in each instance to the copy of such contract or
document filed as an exhibit to the Registration Statement. Each such statement
is qualified in all respects by such reference to such exhibit. The Company has
filed with the Securities and Exchange Commission (the "Commission") a
Registration Statement on Form SB-2 (together with all amendments and exhibits
thereto being herein referred to as the "Registration Statement") under the
Securities Act of 1933. The Registration Statement, as well as other reports
and other information filed by the Company, can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
at 7 World Trade Center, New York, New York 10048. Copies of such material can
be obtained upon written request addressed to the Commission, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Commission maintains a site on the World Wide Web at http://www.sec.gov that
contains reports, proxy and other information statements regarding registrants
that file electronically with the Commission. Prior to the effective date of
the Registration Statement, the Company was not a reporting company under the
Exchange Act.
49
<PAGE>
AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.)
(a development stage company)
Index to Financial Statements
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . F-1
Balance Sheets as of December 31, 1995 and June 30, 1996 (Unaudited) F-2
Statements of Operations for the years ended December 31, 1994 and 1995;
for the six months ended June 30, 1995 and 1996 (Unaudited); and
for the period from January 12, 1990 (incorporation) to
June 30, 1996 (Unaudited) . . . . . . . . . . . . . . . . . . . . . F-3
Statements of Stockholders' Equity (Deficit) for the years ended
December 31, 1994 and 1995; for the six months ended
June 30, 1995 and 1996 (Unaudited); and for the period from
January 12, 1990 (incorporation) to December 31, 1995 and to
June 30, 1996 (Unaudited) . . . . . . . . . . . . . . . . . . . . . F-4
Statements of Cash Flows for the years ended December 31, 1994
and 1995; for the six months ended June 30, 1995 and 1996
(Unaudited); and for the period from January 12, 1990
(incorporation) to June 30, 1996 (Unaudited) . . . . . . . . . . . F-6
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . F-8
<PAGE>
Report of Independent Auditors
The Board of Directors and Stockholders
AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.)
We have audited the accompanying balance sheets of AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.) (a development stage company) as of
December 31,1995, and the related statements of operations, stockholders' equity
(deficit), and cash flows for year then ended and for the period from January
12, 1990 (incorporation) to December 31, 1995 (not presented herein). These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards required that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
Since the date of completion of our audit of the accompanying financial
statements and initial issuance of our report thereon dated March 20, 1996,
which report contained an explanatory paragraph regarding the Company's ability
to continue as a going concern, the Company, as discussed in Note 9, has
completed an issuance of its Series B preferred stock resulting in net proceeds
of approximately $22,347,000. Therefore, the conditions that raised substantial
doubt about whether the Company will continue as a going concern no longer
exist.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.) at December 31, 1995, and the results of
its operations and its cash flows for the years then ended and for the period
from January 12, 1990 (incorporation) to December 31, 1995 in conformity with
generally accepted accounting principles.
/s/Ernst & Young LLP
ERNST & YOUNG LLP
New York, New York
March 20, 1996,
except for Note 9, as to which
the date is June 11, 1996.
F-1
<PAGE>
AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.)
(a development stage company)
Balance Sheets
<TABLE>
<CAPTION>
December 31 June 30
1995 1996
---------------------------------
<S> <C> <C>
Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 503 $ 20,968,831
Current portion of common stock receivable from a related party (Note 2) 908,000 971,000
Other current assets -- 12,793
----------------------------------
Total current assets 908,503 21,952,624
Furniture and equipment, at cost 15,753 --
Less accumulated depreciation 6,789 --
---------------------------------
8,964 --
Common stock receivable from a related party, less current portion (Note 2) 1,043,000 1,130,975
Deferred costs, less accumulated amortization of $42,257 and $950 in 1995 and
1996, respectively (Note 8) 13,101 403
==================================
Total assets $ 1,973,568 $ 23,084,002
==================================
Liabilities and stockholders' equity
Current liabilities:
Loans payable (including $150,000 payable to related party) (Note 8) $ 650,000 $ --
Notes payable to related party (Note 8) 207,000 --
Accounts payable and accrued liabilities (Notes 2, 5 and 7) 274,744 238,329
Current portion of amount payable to preferred stockholders' (Note 2 ) 394,688 930,610
Current portion of amount payable to Former Officer (Note 2) 43,285 40,292
----------------------------------
Total current liabilities 1,569,717 1,209,231
Amount payable to preferred stockholders, less current portion (Note 2 ) 343,601 1,084,133
Amount payable to Former Officer, less current portion (Note 2) 37,682 46,940
Commitments and contingencies (Notes 2, 3 and 7)
Stockholders' equity (Notes 2, 3, 4, 8 and 9):
Preferred Stock:
Authorized -5,000,000 shares (including Series B-300,000 shares)
Series A convertible preferred stock, $.01 par value; 1,287,500 shares
issued and outstanding in 1995 (liquidation preference $1,836,711) 12,875 --
Series B convertible preferred stock, $.01 par value; 259,198 shares
issued and outstanding in 1996 (liquidation preference $34,991,730) -- 2,592
Common stock:
Authorized - 10,000,000 shares at December 31, 1995 and 50,000,000 at
June 30, 1996
$.002 par value; 5,162,671 and 5,928,567 shares issued and outstanding
at December 31, 1995 and June 30, 1996 10,325 11,857
Additional paid-in capital 1,723,657 22,948,130
Subscription receivable (7,109) (6,589)
Deficit accumulated during the development stage (1,717,180) (2,212,292)
----------------------------------
Total stockholders' equity 22,568 20,743,698
==================================
Total liabilities and stockholder's equity $ 1,973,568 $ 23,084,002
==================================
</TABLE>
See accompanying notes.
F-2
<PAGE>
AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.)
(a development stage company)
Statements of Operations
<TABLE>
<CAPTION>
Period from
January 12,
1990
(Incorporation)
Year ended Six months ended To
December 31 June 30 June 30,
1994 1995 1995 1996 1996)
-------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Gain from sale of the Product
(Note 2) $ -- $ 1,951,000 $ -- $ -- $ 1,951,000
Costs and expenses:
Research and development
398,622 126,957 36,749 177,378 1,790,696
Marketing and selling -- -- -- -- 543,646
General and administrative 322,193 302,800 124,797 272,916 1,857,657
-------------------------------------------------------------------------------------------------
Total operating income
(loss) (720,815) 1,521,243 (161,546) (450,294) (2,240,999)
Other income (expense):
Interest income 949 -- -- 171,238 230,907
Interest expense (30,804) (96,962) (37,338) (206,222) (348,047)
Other, net (30,551) (43,710) (1,256) (9,834) 145,847
-------------------------------------------------------------------------------------------------
Total other income
(expense) (60,406) (140,672) (38,594) (44,818) 28,707
-------------------------------------------------------------------------------------------------
Net income (loss) (781,221) 1,380,571 (200,140) (495,112) (2,212,292)
Amount payable for liquidation
preference -- (738,289) -- (1,131,744) (1,870,033)
-------------------------------------------------------------------------------------------------
Net income (loss) attributable
to common stockholders $ (781,221) $ 642,282 $ (200,140) $ (1,626,856) $ (2,212,292)
===============================================================================================
Net income (loss) per common
share $ (.12) $ .10 $ (.03) $ (.27)
============================================================================
Weighted average number of
shares outstanding 6,502,042 6,746,364 6,315,020 5,953,359
============================================================================
</TABLE>
See accompanying notes.
F-3
<PAGE>
<TABLE>
<CAPTION>
AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.)
(a development stage company)
Statements of Stockholders' Equity (Deficit)
Series A Series B
Convertible Convertible
Preferred Stock Preferred Stock Common Stock
------------------------ ------------------------- ---------------------------
Shares Amount Shares Amount Shares Amount
------------- ---------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock for services in -- $ -- -- $ -- 1,165,000 $ 2,330
January 1990
Net loss -- -- -- -- -- --
------------- ---------- ------------ ------------ ------------- -------------
------------ ------------ ------------- -------------
Balance at December 31, 1990 -- -- -- -- 1,165,000 2,330
Issuance of common stock for services in
August 1991 -- -- -- -- 460,000 920
Net loss -- -- -- -- -- --
------------- ---------- ------------ ------------ ------------- -------------
------------ ------------ ------------- -------------
Balance at December 31, 1991 -- -- -- -- 1,625,000 3,250
Conversion of note payable to related
party to common stock in June 1992 -- -- -- -- 45,826 92
Issuance of common stock for services in
May and June 1992 -- -- -- -- 528,369 1,056
Issuance of Series A convertible
preferred stock, net of issuance cost
in June, July and September 1992 1,287,500 12,875 -- -- -- --
Net loss -- -- -- -- -- --
------------- ---------- ------------ ------------ ------------- -------------
------------ ------------ ------------- -------------
Balance at December 31, 1992 1,287,500 12,875 -- -- 2,199,195 4,398
Issuance of common stock for services in
July and November 1993 -- -- -- -- 17,435 35
Net loss -- -- -- -- -- --
------------- ---------- ------------ ------------ ------------- -------------
Balances at December 31, 1993 1,287,500 12,875 -- -- 2,216,630 4,433
Issuance of common stock for services in
July 1994 -- -- -- -- 7,500 15
Net loss -- -- -- -- -- --
------------- ---------- ------------ ------------ ------------- -------------
Balances at December 31, 1994 1,287,500 12,875 -- -- 2,224,130 4,448
Common stock returned and canceled in
April and May 1995 -- -- -- -- (615,895) (1,232)
Shares issued in September and November -- -- -- -- 3,554,436 7,109
1995
Amount payable for liquidation preference -- -- -- -- -- --
Net income -- -- -- -- -- --
------------- ---------- ------------ ------------ ------------- -------------
Balances at December 31, 1995 1,287,500 12,875 -- -- 5,162,671 10,325
<CAPTION>
Deficit
Accumulated Total
Additional During the Stockholders'
Paid-In Subscription Development Equity
Capital Receivable Stage (Deficit)
------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Issuance of common stock for services in $ $ -- $ $
January 1990 920 -- 3,250
Net loss -- -- (889) (889)
------------- -------------- -------------- ---------------
------------- -------------- -------------- ---------------
Balance at December 31, 1990 920 -- (889) 2,361
Issuance of common stock for services in
August 1991 5,830 -- -- 6,750
Net loss -- -- (97,804) (97,804)
------------- -------------- -------------- ---------------
------------- -------------- -------------- ---------------
Balance at December 31, 1991 6,750 -- (98,693) (88,693)
Conversion of note payable to related
party to common stock in June 1992 160,465 -- -- 160,557
Issuance of common stock for services in
May and June 1992 6,444 -- -- 7,500
Issuance of Series A convertible
preferred stock, net of issuance cost
in June, July and September 1992 2,258,837 -- -- 2,271,712
Net loss -- -- (607,683) (607,683)
------------- -------------- -------------- ---------------
------------- -------------- -------------- ---------------
Balance at December 31, 1992 2,432,496 -- (706,376) 1,743,393
Issuance of common stock for services in
July and November 1993 24,965 -- -- 25,000
Net loss -- -- (1,610,154) (1,610,154)
------------- -------------- -------------- ---------------
Balances at December 31, 1993 2,457,461 -- (2,316,530) 158,239
Issuance of common stock for services in
July 1994 4,485 -- -- 4,500
Net loss -- -- (781,221) (781,221)
------------- -------------- -------------- ---------------
Balances at December 31, 1994 2,461,946 -- (3,097,751) (618,482)
Common stock returned and canceled in
April and May 1995 -- -- -- (1,232)
Shares issued in September and November -- (7,109) -- --
1995
Amount payable for liquidation preference (738,289) -- -- (738,289)
Net income -- -- 1,380,571 1,380,571
------------- -------------- -------------- ---------------
Balances at December 31, 1995 1,723,657 (7,109) (1,717,180) 22,568
</TABLE>
F-4
<PAGE>
AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.)
(a development stage company)
Statements of Stockholders' Equity (Deficit) (Continued)
<TABLE>
<CAPTION>
Series A Series B
Convertible Convertible
Preferred Stocks Preferred Stock Common Stock
------------------------ ------------------------- ---------------------------
Shares Amount Shares Amount Shares Amount
------------- ---------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Repurchase of common stock in March 1996
(Unaudited) -- $ -- -- $ -- (155,802) $ 312
Payment of subscription receivable -- -- -- -- -- --
(Unaudited)
Conversion of Series A preferred in June
1996 (Unaudited) (1,287,500) (12,875) -- -- 643,750 1,288
Issuance of common stock and Series B
preferred
stock in a private placement in May -- -- 258,198 2,582 258,198 516
and June 1996
Issuance of common stock and Series B
preferred -- -- 1,000 10 1,000 2
stock for services in June 1996
(Unaudited)
Exercise of warrants in June 1996 -- -- -- -- 18,750 38
(Unaudited)
Amount payable for liquidation
preference (Unaudited) -- -- -- -- -- --
Net loss (Unaudited) -- -- -- -- -- --
------------- ---------- ------------ ------------ ------------- -------------
Balance at June 30, 1996 (Unaudited) -- $ -- 259,198 $ 2,592 5,928,567 $ 11,857
============= ========== ============ ============ ============= =============
<CAPTION>
Deficit
Accumulated Total
Additional During the Stockholders'
Paid-In Subscription Development Equity
Capital Receivable Stage (Deficit)
------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Repurchase of common stock in March 1996
(Unaudited) $ -- $ (312) $ -- $ --
Payment of subscription receivable -- 208 -- 208
(Unaudited)
Conversion of Series A preferred in June
1996 (Unaudited) 11,587 -- -- --
Issuance of common stock and Series B
preferred
stock in a private placement in May 22,344,305 -- -- 22,347,403
and June 1996
Issuance of common stock and Series B
preferred (12) -- -- --
stock for services in June 1996
(Unaudited)
Exercise of warrants in June 1996 337 -- -- 375
(Unaudited)
Amount payable for liquidation
preference (Unaudited) (1,131,744) -- -- (1,131,744)
Net loss (Unaudited) -- -- (495,112) (495,112)
------------- -------------- -------------- ---------------
Balance at June 30, 1996 (Unaudited) $ 22,948,130 $ (6,589) $ (2,212,292) $ 20,743,698
============= ============== ============== ===============
</TABLE>
See accompanying notes.
F-5
<PAGE>
AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.)
(a development stage company)
Statements of Cash Flows
<TABLE>
<CAPTION>
Period from
January 12, 1990
(Incorporation) To
Year ended December 31 Six months ended June 30 June 30,
1994 1995 1995 1996 1996
------------------ ------------------- ------------------ ------------------ --------------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Operating activities
Net income (loss) $ (781,221) $ 1,380,571 $ (200,140) $ (495,112) $ (2,212,292)
Adjustments to reconcile net
income (loss) to net cash
used in operating
activities:
Depreciation and
amortization 8,447 44,942 18,764 49,506 114,902
Gain from sale of the
Product -- (1,951,000) -- -- (1,951,000)
Gain on sale of
intellectual property -- (787) -- -- (787)
Accretion of interest on
common stock receivable -- -- -- (150,975) (150,975)
Accretion of interest
on amount payable to
preferred stockholders
and Former Officer -- -- -- 150,975 150,975
Loss on sale or
abandonment of
furniture and equipment 29,231 -- -- 8,156 37,387
Issuance of common stock
for services 4,500 -- -- -- 47,000
Changes in operating assets and liabilities:
Prepaid expenses 26,120 -- -- -- --
Other assets 3,598 -- -- (12,793) (12,793)
Accounts payable and
accrued liabilities (28,154) 231,756 62,377 (36,415) 238,329
Amount payable to Former Officer
-- 80,522 -- -- 80,522
------------------ ------------------- ------------------ ------------------ --------------------
Net cash used in operating
activities (737,479) (213,996) (118,999) (486,658) (3,658,732)
Investing activities
Purchase of short-term
investments -- -- -- -- (979,582)
Sale of short-term investments -- -- -- -- 979,582
Purchases of furniture and
equipment -- -- -- -- (65,934)
Proceeds from sale of
furniture and equipment 4,600 -- -- -- 4,600
Organization costs -- -- -- -- (1,358)
------------------ ------------------- ------------------ ------------------ --------------------
Net cash provided by (used
in) investing activities 4,600 -- -- -- (62,692)
</TABLE>
F-6
<PAGE>
AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.)
(a development stage company)
Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
Period from January
12, 1990
(Incorporation) To
Year ended December 31 Six months ended June 30 June 30,
1994 1995 1995 1996 1996
------------------ ------------------- ------------------ ------------------ ---------------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Financing activities
Proceeds from notes payable
to related party $ 397,000 $ -- $ -- $ -- $ 957,557
Repayments on notes payable
to related party (190,000) -- -- (207,000) (797,000)
Proceeds from loans payable 389,000 600,000 450,000 400,000 1,389,000
Repayments of loans payable -- (339,000) (289,000) (1,050,000) (1,389,000)
Financing costs -- (54,000) (40,500) (36,000) (90,000)
Payment of subscription
receivable -- -- -- 208 208
Exercise of warrants -- -- -- 375 375
Issuance of preferred and
common stock, net of
issuance cost -- -- -- 22,347,403 24,619,115
------------------ ------------------- ------------------ ------------------ ---------------------
Net cash provided by
financing activities 596,000 207,000 120,500 21,454,986 24,690,255
------------------ ------------------- ------------------ ------------------ ---------------------
Net (decrease) increase in (136,879) (6,996) 1,501 20,968,328 20,968,831
cash
Cash and cash equivalents,
beginning of period 144,378 7,499 7,499 503 --
================== =================== ================== ================== =====================
Cash and cash equivalents,
end of period $ 7,499 $ 503 $ 9,000 $ 20,968,831 $ 20,968,831
================== =================== ================== ================== =====================
Supplemental Disclosure of
Cash Flow Information:
Interest paid $ 16,954 $ 8,338 $ 8,338 $ 157,721 $ 197,072
================== =================== ================== ================== =====================
</TABLE>
See accompanying notes
F-7
<PAGE>
AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.)
(a development stage company)
Notes to Financial Statements
(Unaudited with respect to the six months ended June 30, 1995 and 1996 and for
the period from January 12, 1990 (incorporation) to June 30, 1996)
1. Description of Business and Significant Accounting Policies
Description of Business
AVAX Technologies, Inc. (formerly Walden Laboratories, Inc.) (the "Company") is
a development stage biopharmaceutical company. The Company changed its name to
AVAX Technologies, Inc. effective March 26, 1996.
In November 1995, the Company sold its leading product under development, an
over-the-counter nutritional, dietary, medicinal and/or elixorative food
supplement or drug and all of the related patents and other intellectual
property (the "Product") (see Note 2).
In November 1995, the Company entered into a license agreement with the Thomas
Jefferson University (the "University") to develop, commercially manufacture and
sell products embodying immunotherapeutic vaccines for the treatment of
malignant melanoma and other carcinomas (the "Invention") (see Note 3).
The Company's business is subject to significant risks consistent with
biotechnology companies that are developing products for human therapeutic use.
These risks include, but are not limited to, uncertainties regarding research
and development, access to capital, obtaining and enforcing patents, receiving
regulatory approval and competition with other biotechnology and pharmaceutical
companies. The Company plans to continue to finance its operations with a
combination of equity and debt financing and, in the longer term, revenues from
product sales, if any. However, there can be no assurance that it will
successfully develop any product or, if it does, that the product will generate
any or sufficient revenues.
Interim Financial Statements
The interim financial statements at June 30, 1996 and for the six months ended
June 30, 1995 and 1996 and for the period from January 12, 1990 (incorporation)
to June 30, 1996 are unaudited; however, in the opinion of management, all
adjustments, consisting only of normal recurring accruals, necessary for a fair
presentation have been included. Results of interim periods are not necessarily
indicative of results to be expected for the entire year.
F-8
<PAGE>
AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.)
(a development stage company)
Notes to Financial Statements (continued)
(Unaudited with respect to the six months ended June 30, 1995 and 1996 and for
the period from January 12, 1990 (incorporation) to June 30, 1996)
1. Description of Business, Basis of Presentation and Significant Accounting
Policies (continued)
Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles require management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates.
Cash Equivalents
The Company considers all highly liquid financial instruments with a maturity of
three months or less when purchased to be cash equivalents. At June 30, 1996,
substantially all cash and cash equivalents were held in one financial
institution.
Depreciation
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets which range from 3 to 5 years.
Research and Development Costs
Research and development costs, including payments related to patents and
license agreements, are expensed when incurred.
Deferred Costs
Financing costs are deferred and amortized over the period of the related debt.
Organizations costs are amortized over sixty months.
F-9
<PAGE>
AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.)
(a development stage company)
Notes to Financial Statements (continued)
(Unaudited with respect to the six months ended June 30, 1995 and 1996 and for
the period from January 12, 1990 (incorporation) to June 30, 1996)
1. Description of Business, Basis of Presentation and Significant Accounting
Policies (continued)
Share Information
Prior to the first closing of a private placement on May 15, 1996 (see Note 9),
the Company effected a 1-for-2 reverse stock split of the Company's common
stock. All outstanding share amounts included in the accompanying financial
statements have been adjusted to reflect the 1-for-2 reverse stock split
disclosed in Note 9.
Net Income (Loss) Per Share
Net income (loss) per share is based upon net income (loss) divided by weighted
average number of shares of common stock outstanding during the respective
periods, retroactively adjusted to reflect the reverse stock split. The weighted
average number of common shares outstanding have been calculated in accordance
with Staff Accounting Bulletin 83 ("SAB 83") of the Securities and Exchange
Commission. SAB 83 requires that shares of common stock, warrants and options
issued one-year prior to the initial filing of a registration statement relating
to an initial public offering at amounts below the public offering price be
considered outstanding for all periods presented in the Company's registration
statement. For purposes of calculating the net income (loss) per share, the
private placement of Series B convertible preferred stock (see Note 9) has been
considered to be the equivalent of an initial public offering and the initial
public offering price was determined to be $1.96 per share by assuming that the
preferred stock issued was immediately converted into common stock. All options
and warrants issued prior to one year from the private placement were
antidilutive or immaterial and, accordingly, excluded from the calculation of
weighted average shares. Series A convertible preferred stock was included in
the calculation of the weighted average number of shares for the year ended
December 31, 1995. Such stock was antidilutive for all other periods.
Supplementary net income (loss) per share include the conversion of Series A
preferred stock and the estimated number of shares assumed to be sold by the
Company (641,327 at $1.96 per share) to repay certain debt of $1,257,000. Net
income (loss) per share would have been $.10 for the year ended
December 31, 1995 and $(.02) and $(.22) for the six months ended June 30, 1995
and 1996, respectively, if the said shares had been converted/issued at the
beginning of the respective periods.
F-10
<PAGE>
AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.)
(a development stage company)
Notes to Financial Statements (continued)
(Unaudited with respect to the six months ended June 30, 1995 and 1996 and for
the period from January 12, 1990 (incorporation) to June 30, 1996)
1. Description of Business, Basis of Presentation and Significant Accounting
Policies (continued)
Stock-Based Compensation
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). SFAS 123 is effective for fiscal years beginning
after December 31, 1995 and prescribes accounting and reporting standards for
all stock-based compensation plans, including employee stock options, restricted
stock, employee stock purchase plans and stock appreciation rights. SFAS 123
requires compensation expense to be recorded (i) using the new fair value method
or (ii) using existing accounting rules prescribed by Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and
related interpretations with pro forma disclosure of what net income and
earnings per share would have been had the Company adopted the new fair value
method. The Company intends to continue to account for its stock based
compensation plans in accordance with the provisions of APB 25.
2. Sale of the Product
The Company entered into an agreement to sell the Product for $2.4 million, to a
related party. The purchase price is payable in shares of common stock of
Interneuron Pharmaceuticals, Inc. (a public company), the parent of the
purchaser of the Product (the "Stock"). The purchase price, payable in two equal
installments in December 1996 and 1997, respectively, is fixed and the number of
shares of Stock will vary depending on the quoted market price of the Stock at
such time.
The sale of the Product was approved by the Company's common and preferred
stockholders subject to the following conditions:
F-11
<PAGE>
AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.)
(a development stage company)
Notes to Financial Statements (continued)
(Unaudited with respect to the six months ended June 30, 1995 and 1996 and for
the period from January 12, 1990 (incorporation) to June 30, 1996)
2. Sale of the Product (Continued)
- - At approximately the same time each installment is received by the Company,
95.85% of the Stock will be distributed by the Company to its preferred
stockholders of record at the time the sale of the Product closed, on a
pro-rata basis, to reduce their liquidation preference; provided, however,
that if at the time of each installment, any of the Company's indebtedness
which had been outstanding at the time of the closing of the agreement to
sell the Product (December 27, 1995) is then due and payable, the Company
will cause such indebtedness to be paid or provided for, whether by use of
available cash, refinancing, redirecting a portion of the Stock to satisfy
such indebtedness or otherwise as the Company shall determine in its best
interest.
- - The remaining 4.15% of the Stock (or a cash payment equal to the value
thereof) will be distributed to the Company's former President and Chief
Executive Officer (the "Former Officer") in partial consideration for his
resignation from the Company and the return to the Company of all common stock
of the Company and cancellation of options to purchase 250,000 shares of
common stock that was ever owned by him (see Note 8).
Other than for the Former Officer, none of the other Common Stockholders were
entitled to any of the Stock.
Because the Stock is receivable in two equal annual installments, the gain from
the sale of the Product, $1,951,000, was calculated by discounting the value of
the Stock receivable using a discount rate of 15%. The Company also recorded the
difference between 95.85% of the discounted net present value of the Stock to be
received and the Company's indebtedness, $1,131,744 at December 31, 1995, as a
payable to the preferred stockholders of $738,289 to reduce their liquidation
preference. The total amount payable to the preferred stockholders could be
$2,300,400 if all of the Company's indebtedness outstanding as of the date of
the sale of the Product is satisfied through sources other than the Stock to be
received. However, to the extent such amount of indebtedness remains outstanding
as of the date of receipt of the Stock and, the repayment of such indebtedness
is not otherwise provided for, the amount paid to the preferred stockholders
will be satisfied from the proceeds of the Stock receivable (see Note 9).
F-12
<PAGE>
AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.)
(a development stage company)
Notes to Financial Statements (continued)
(Unaudited with respect to the six months ended June 30, 1995 and 1996 and for
the period from January 12, 1990 (incorporation) to June 30, 1996)
2. Sale of the Product (Continued)
The discounted net present value of the Stock distributable to the Former
Officer, $80,967, was allocated between common stock ($445) and severance
expense ($80,522) based on the fair value of the Company's common stock ($.002
per share).
3. License and Research Agreements
In November 1995, the Company entered into an agreement with the University for
the exclusive worldwide license to develop, manufacture and sell the Invention.
The Company paid cash of $10,000 as consideration for the license agreement. In
addition, the Company sold an aggregate of 916,486 shares of common stock at
$.002 per share to the University and the scientific founder (the "Scientist").
These shares have anti-dilution rights prior to the first equity financing, as
defined in the license agreement, in excess of $1,000,000 by the Company.
Under terms of the license agreement, the Company is required to raise a minimum
of $500,000 of net operating capital by December 1996. Also under the terms of
the license agreement, (i) the Company is obligated to pay certain milestone
payments as follows: $10,000 upon initiation of the first clinical trial that is
approved by the Food and Drug Administration ("FDA") or comparable international
agency, $10,000 upon the first filing of a New Drug Application ("NDA") with the
FDA or comparable international agency, and $25,000 upon receipt by the Company
of approval from the FDA or comparable international agency to market products.
In addition, the Company is obligated to pay royalties on its worldwide net
sales revenue and a percentage of all revenues received from sublicensees.
F-13
<PAGE>
AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.)
(a development stage company)
Notes to Financial Statements (continued)
(Unaudited with respect to the six months ended June 30, 1995 and 1996 and for
the period from January 12, 1990 (incorporation) to June 30, 1996)
3. License and Research Agreements (Continued)
The Company also entered into a research agreement with the University to fund a
study to be performed by the University for the development of the technology
related to the Invention (the "Study") at approximately $220,000 per annum for
the first three years. The Company, at its discretion may reduce the funding in
the third year to no less than $100,000. Following the third year, the Company
is obligated to spend a minimum of $500,000 per year on the development of the
Invention until commercialized in the United States. If following the third
year, the Company files for United States marketing approval through a Company
sponsored NDA, the Company may elect to spend less than $500,000 per year on the
development of the Invention during the period of time the NDA is under review
by the FDA. The Research Agreement will continue until completion of the Study.
4. Equity Transactions
Common and Preferred Stock
Common stock issued for services in the years 1990 through 1994 were valued
based on the value of the services provided.
In April 1995, in accordance with the terms of his resignation and related
severance arrangements (see Note 8), the Former Officer returned 222,659 shares
of common stock and options to purchase 125,000 shares of common stock. The
common stock returned was valued at $.002 per share. The common stock and
options returned were canceled.
In May 1995, in accordance with the terms of a settlement agreement (see Note
8), with a former officer and director of the Company, the Company agreed to
release and relinquish any claim it may have on certain intellectual property,
excluding the Product, in exchange for 393,236 shares of the Company's common
stock owned by her and her family. The common stock was valued at $.002 per
share and was canceled.
On September 13, 1995, the Company issued 804,979 shares of common stock to
officers of the Company at $.002 per share.
F-14
<PAGE>
AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.)
(a development stage company)
Notes to Financial Statements (continued)
(Unaudited with respect to the six months ended June 30, 1995 and 1996 and for
the period from January 12, 1990 (incorporation) to June 30, 1996)
4. Equity Transactions (Continued)
Common and Preferred Stock (Continued)
On November 20, 1995, the Company issued an aggregate of 916,486 shares of
common stock at $.002 per share to the University and the Scientist (see Note
3). In addition, on November 20, 1995, the Company issued, in aggregate, an
additional 1,832,971 shares to a principal stockholder, a third party designated
by the principal stockholder and an officer at $.002 per share.
At December 31, 1995, the Company was authorized to issue 5,000,000 shares of
preferred of which 2,500,000 were designated as Series A preferred stock. In the
event of a liquidation, dissolution or winding up of the Company, the Series A
preferred stockholders were entitled to receive, in preference to the holders of
common stock, an amount per share of $1.43 (after deducting the amount payable
pursuant to the sale of the Product amounting to $738,289) plus any declared but
unpaid dividends (see Note 9).
In May 1996, the Company's authorized capital was increased to 50,000,000 shares
of common stock, par value $.002 and 5,000,000 (of which 300,000 relates to
Series B preferred stock ) shares of preferred stock $.01 par value.
Each share of Series B preferred stock is convertible at the option of the
holder into common stock at an initial conversion price of $2. The initial
conversion price is subject to adjustment, as defined. The Company has the right
to require mandatory conversion if the closing price of the Company's common
stock exceeds certain defined amounts. The Series B preferred stockholders are
entitled to voting rights equivalent to the number of common shares into which
their shares are convertible. The Series B preferred stockholders also are
entitled to receive, in preference to the holders of common stock, an amount per
share of $135 plus any declared but unpaid dividends
On March 24, 1996, the Company repurchased 155,802 shares of common stock
previously issued to an officer at $.002 per share. The repurchased shares were
canceled.
F-15
<PAGE>
AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.)
(a development stage company)
Notes to Financial Statements (continued)
(Unaudited with respect to the six months ended June 30, 1995 and 1996 and for
the period from January 12, 1990 (incorporation) to June 30, 1996)
4. Equity Transactions (Continued)
Stock Option Plan
In April 1992, the Board of Directors approved the 1992 Stock Option Plan (the
"Plan"), which as amended, authorizes up to 875,000 shares of common stock for
granting both incentive and nonqualified stock options to employees, directors,
consultants, and members of the scientific advisory board of the Company. The
exercise price and vesting period of the options are determined by the Board of
Directors at the date of grant. Options may be granted up to ten years after the
Plan's adoption date.
The following summarizes activity in the Plan:
Options
---------
Balances at December 31, 1993 592,750
Canceled (40,000)
---------
Balances at December 31, 1994 552,750
Canceled (492,750)
---------
Balances at December 31, 1995 60,000
========
All outstanding options were issued at an exercise price of $.60 per share. At
December 31, 1995, options to purchase 35,556 shares of common stock were vested
and exercisable and options to purchase 815,000 shares of common stock were
available for grant.
Warrants
The Company has issued warrants to purchase 47,982 (June 1992), 15,500 (May
1993), and 180,000 (January, February and August 1995) shares of the Company's
common stock at a price of $4.80, $5.50, and $.02 per share, respectively. These
warrants are exercisable at any time, and expire in 1997, 1998 and 2006,
respectively. In January and February 1996, the Company issued warrants to
purchase 195,000 shares of the Company's common stock at a price of $.02 per
share. Such warrants are exercisable at any time and expire in 2007. In
June 1996, warrants to purchase 18,750 shares of common stock at $.02 per share
were exercised.
F-16
<PAGE>
AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.)
(a development stage company)
Notes to Financial Statements (continued)
(Unaudited with respect to the six months ended June 30, 1995 and 1996 and for
the period from January 12, 1990 (incorporation) to June 30, 1996)
4. Equity Transactions (Continued)
Authorized but unissued shares of common stock were reserved for issuance at
June 30, 1996 as follows:
Convertible Series B preferred stock 12,959,900
(Note 9)
Stock option plan 875,000
Options issued to President (Note 7) 637,745
Warrants to purchase common stock 419,732
Warrants to purchase convertible Series 1,290,990
B preferred stock (Note 9)
------------
16,183,367
============
5. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consist of the following:
December 31 June 30
1995 1996
(Unaudited)
Professional fees $ 55,238 $ 166,438
Interest payable 102,474 -
Other 117,032 71,891
------- ------
$ 274,744 $ 238,329
========= =========
6. Income Taxes
At December 31, 1995, the Company has net operating loss carryforwards of
approximately $3,400,000, for federal income tax purposes that expire in varying
amounts through the year 2010, if not utilized.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax assets and liabilities for federal income tax
purposess are as follows:
F-17
<PAGE>
AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.)
(a development stage company)
Notes to Financial Statements (continued)
(Unaudited with respect to the six months ended June 30, 1995 and 1996 and for
the period from January 12, 1990 (incorporation) to June 30, 1996)
6. Income Taxes (Continued)
December 31 June 30
1995 1996
---- ----
(Unaudited)
Deferred tax assets:
Net operating losses $1,350,000 $ 1,430,000
Capitalized start-up costs 50,000 35,000
------ ------
Total deferred tax assets 1,400,000 1,465,000
Deferred tax liabilities:
Gain on sale of Product treated as
an installment sale for income tax
purposes (753,000) (753,000)
--------- ---------
Net deferred tax asset 647,000 712,000
Valuation allowance (647,000) (712,000)
--------- ---------
Net deferred tax assets $ -- $ --
======== =======
The valuation allowance at December 31, 1993 and 1994 was $850,000 and
$1,161,000, respectively.
Under Section 382 of the Tax Reform Act of 1986, the Company's net operating
loss carryforward could be subject to an annual limitation if it should be
determined that a change in ownership of more than 50% of the value of the
Company's stock occurred over a three-year period.
F-18
<PAGE>
AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.)
(a development stage company)
Notes to Financial Statements (continued)
(Unaudited with respect to the six months ended June 30, 1995 and 1996 and for
the period from January 12, 1990 (incorporation) to June 30, 1996)
6. Income Taxes (Continued)
The following summary reconciles the federal statutory rate with the actual
income tax provision (benefit):
<TABLE><CAPTION>
December 31 June 30
1994 1995 1995 1996
-------- -------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Income taxes (benefit) at statutory
rate $(266,000) $ 469,000 $ (68,000) $ (168,000)
Loss for which no benefit was
provided 266,000 -- 68,000 168,000
Reduction in the valuation allowance
primarily related to the utilization
net operating loss carryforwards
-- (469,000) -- --
------- --------- ---------- ----------
Provision for income tax (benefit) $ -- $ -- $ -- $ --
======= ========= ========== ==========
</TABLE>
7. Commitments
Leases
The Company leased office facilities on a month-to-month basis through April
1995. Rent expense amounted to approximately $34,000 and $10,000 for the years
ended December 31, 1994 and 1995, respectively ($10,000 for the six months
ended June 30, 1995).
Employment and Consulting Agreements
In May 1996, the Company entered into a letter agreement with its President and
Chief Executive Officer (the "President") pursuant to which the President will
receive an annual salary of $200,000 and a minimum annual bonus of $25,000 and
an additional discretionary bonus of up to $175,000. In addition, the President
received options to purchase 637,745 shares of common stock at $.50 per share.
Such options vest at a rate of 1/16 per quarter over four years and are
exercisable for a period of seven years.
F-19
<PAGE>
AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.)
(a development stage company)
Notes to Financial Statements (continued)
(Unaudited with respect to the six months ended June 30, 1995 and 1996 and for
the period from January 12, 1990 (incorporation) to June 30, 1996)
7. Commitments (Continued)
Employment and Consulting Agreements (Continued)
Effective in June 1996, the Company entered into consulting agreements with the
Scientist, a Director and a former officer. These agreements are for an initial
term of three years through June 1999. Annual consulting fees payable pursuant
to these agreements approximate $126,000.
8. Loans Payable and Related Party Transactions
On March 1, 1994, the Company entered into a line of credit agreement with a
major stockholder. During 1994, the Company received $397,000 and repaid
$190,000. There were no borrowings or repayments during 1995. Borrowings under
this line of credit amounted to $207,000 at December 31, 1995 and bore interest
at 2% above the prime rate. Borrowings under this line of credit were repaid in
full in June 1996.
On November 16, 1994, the Company entered into a term loan with a financial
institution and borrowed $389,000. The outstanding balance at December 31, 1995
was $50,000. The above major stockholder had assigned certain bank deposits as
collateral for this borrowing. This borrowing which bore interest at the prime
rate was repaid in June 1996.
F-20
<PAGE>
AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.)
(a development stage company)
Notes to Financial Statements (continued)
(Unaudited with respect to the six months ended June 30, 1995 and 1996 and for
the period from January 12, 1990 (incorporation) to June 30, 1996)
8. Loans Payable and Related Party Transactions (Continued)
In 1995, the Company obtained four separate bridge loans totaling $600,000
($150,000 from related parties). The lenders also were granted warrants to
purchase 150,000 shares of common stock at $.02 per share. In connection with
these loans, the Company paid financing costs totaling $54,000 and, issued
warrants to purchase 30,000 shares of common stock at $.02 per share, to the
placement agent (the "Placement Agent"), a related party. The warrants were
considered to have a de minimus value. These loans bore interest at 13% per
annum and are payable in 12 months. Loans totaling $200,000 were paid in January
and February 1996 and loans totaling $250,000 that were due in February 1996
were rolled over for another year through February 1997. However, all bridge
loans were payable in full upon the closing of an initial public offering or
private placement of the Company's stock, with gross proceeds in excess of
$2,500,000. In addition, in January and February 1996, the Company obtained
additional bridge loans totaling $400,000 ($300,000 from related parties) with
interest payable at 13% per annum and, issued additional warrants to purchase
195,000 (32,500 to the Placement Agent) shares of common stock at $.02 per share
in connection with the new bridge loans and the rollover of bridge loans. All
bridge loans were repaid in June 1996.
In April 1995, in connection with his resignation, the Former Officer also
received $75,000 (payable over a twelve-month period) and reimbursement of
certain expenses. In May 1995, the Company entered into an agreement with an
officer, director and principal stockholder of the Company upon her resignation
from the Company. Under the terms of the agreement, the Company agreed to
release and relinquish any claim the Company may have on intellectual property
created by the former director prior to or during her term of employment with
the Company, other than for the Product and, the former director returned all
shares of common stock of the Company owned by her and her family.
On June 11, 1996, the Company entered into a financial advisory agreement with
the Placement Agent, pursuant to which the Company will pay a monthly retainer
of $4,000 for a minimum of twenty four-months, plus expenses and success fees.
F-21
<PAGE>
AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.)
(a development stage company)
Notes to Financial Statements (continued)
(Unaudited with respect to the six months ended June 30, 1995 and 1996 and for
the period from January 12, 1990 (incorporation) to June 30, 1996)
9. Private Placement
Pursuant to the private placement in May and June 1996, the Company issued
258,198 shares of Series B convertible preferred stock. The preferred
stockholders also received 258,198 shares of common stock. The total
consideration was $25,819,800. The series B preferred stock is convertible into
12,959,900 shares common. In connection with the private placement, the Company
paid $3,357,000 as commission and non-accountable expenses to the placement
agent, a related party and, issued 1,000 shares of common stock and 1,000 shares
of Series B convertible preferred stock as consideration for legal services
valued at $100,000. In addition, the placement agent received warrants to
purchase 25,819.8 shares of convertible Series B preferred stock at an exercise
price of $110 per share. Such warrants are exercisable until June 15, 2006.
Other share issuance expenses amounted to $115,397.
At the second closing of the private placement on June 11, 1996, the 643,750
shares of Series A preferred stock were automatically converted to 643,750
shares of common stock. Notwithstanding such conversion, holders of the Series A
preferred stock will receive pro-rata, 95.85% of shares of common stock of IPI
valued at $2,400,000 receivable by the Company (See Note 2). Because the Company
will be able to pay its indebtedness from the proceeds of the private placement,
the amount payable to the Series A preferred stockholders was increased to
$2,014,743 (95.85% of the discounted net present value of the Stock receivable)
at June 30, 1996.
F-22
<PAGE>
No dealer, salesman or any 14,885,088 Shares of Common
other person has been Stock
authorized to give
information or to make any
representations not AVAX TECHNOLOGIES, INC.
contained in this Prospectus
and, if given or made, such
information or Common Stock
representations must not be
relied upon as having been
authorized by the Company. ____________________
This Prospectus does not PROSPECTUS
constitute an offer of any _______, 1996
securities other than those ____________________
to which it related or an
offer to sell, or a
solicitation of an offer or
solicitation would be
unlawful. Neither the
delivery of this Prospectus
nor any sales made hereunder
shall, under any
circumstances, create any
implication that the
information contained herein
is correct as of any time
subsequent to the date
hereof.
____________________
TABLE OF CONTENTS
PROSPECTUS SUMMARY . . . 3
COMPANY SUMMARY . . . . . 3
OFFERING SUMMARY . . . . 5
SUMMARY OF FINANCIAL DATA 6
RISK FACTORS . . . . . . 7
USE OF PROCEEDS . . . . . 17
DIVIDEND POLICY . . . . . 17
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL
CONDITION AND PLAN OF
OPERATIONS . . . . . . . 18
BUSINESS . . . . . . . . 20
MANAGEMENT . . . . . . . 27
CERTAIN TRANSACTIONS . . 32
PRINCIPAL STOCKHOLDERS . 34
DESCRIPTION OF SECURITIES 36
SELLING SECURITYHOLDERS . 41
SHARES ELIGIBLE FOR FUTURE
SALES . . . . . . . . . . 47
PLAN OF DISTRIBUTION . . 48
EXPERTS . . . . . . . . . 49
LEGAL COUNSEL . . . . . . 49
ADDITIONAL INFORMATION . 49
FINANCIAL STATEMENTS . . F-1
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law ("Section 145") authorizes a
court to award or a corporation's Board of Directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Article Seven of the Company's Certificate
of Incorporation provides that the Corporation shall indemnify and advance
expenses to its directors ands officers to the fullest extent permitted by
Section 145 of the Delaware General Corporation Law. Article Nine of the
Company's Certificate of Incorporation provides that the liability of its
directors is eliminated to the fullest extent permitted by Section 102(b)(7) of
the Delaware General Corporation Law. Article V, Section 1 of the Company's By-
Laws provides for mandatory indemnification of its directors to the fullest
extent authorized by the Delaware General Corporation Law. Article V, Section 2
of the Company's By-Laws provides for prepayment of expenses incurred by its
directors to the fullest extent permitted by, and only in compliance with, the
Delaware General Corporate Law. Article V, Section 6 of the Company's By-Laws
provides for permissive indemnification of its officers, employees and agents if
and to the extent authorized by the Board of Directors in compliance with the
Delaware General Corporation Law. These provisions in the Certificate of
Incorporation and the By-Laws do not eliminate the directors' fiduciary duty,
and in appropriate circumstances equitable remedies such as injunctive or other
forms of non-monetary relief will remain available under Delaware law. In
addition, each director will continue to be subject to liability for breach of
the director's duty of loyalty to the Company for acts or omissions not in good
faith or involving intentional misconduct, for knowing violations of law, for
actions leading to improper personal benefit to the director, and for payment of
dividends or approval of stock repurchases or redemptions that are unlawful
under Delaware law. The provisions also do not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws. Reference is made to the Subscription
Agreements of the Series B Offering, the Series B Placement Warrants and the
Bridge Placement Warrants, Sections 5.7, 5(a) and 6(e) respectively, regarding
indemnification contained in Exhibits 4.6, 4.12 and 4.7 respectively,
indemnifying against certain liabilities certain of the Company's stockholders
or Paramount Capital, Inc., a company wholly owned by a substantial shareholder
of the Company, Lindsay A. Rosenwald, M.D. In addition, the Company has
obtained liability insurance for its directors and officers.
II-1
<PAGE>
Item 25. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of securities being registered. The following table includes costs
and expenses relating to securities being registered for resale by certain
securityholders, all which amounts will be paid by the Company. All amounts are
estimates except the SEC registration fee and the Nasdaq filing fees.
SEC Registration fee . . . . . . . . . . . . . . . $15,398.36
Nasdaq filing fee . . . . . . . . . . . . . . . . . 10,000
Printing and engraving . . . . . . . . . . . . . . *
Legal fees and expenses of the Company . . . . . . *
Accounting fees and expenses . . . . . . . . . . . *
Blue sky fees and expenses . . . . . . . . . . . . *
Transfer agent fees and expenses . . . . . . . . . 5,000
Miscellaneous . . . . . . . . . . . . . . . . . . . *
Total . . . . . . . . . . . . . . . . . . . . . $300,000
________________________________________________________________
*To be filed by amendment.
II-2
<PAGE>
Item 26. Recent Sales of Unregistered Securities
In the last three years, the Company has issued and sold the following
securities (as adjusted to reflect a two-for one reverse stock split effected on
March 26, 1996):
1. On June 15, 1996, the Company completed a private placement of
approximately $25,900,000 of shares of Series B Preferred Stock and
Common Stock (the "Series B Offering"). The issuance of the above
referenced securities was deemed to be exempt from registration under
the Securities Act in reliance on Section 4(2) thereof and Regulation
D promulgated thereunder. The recipients of securities in each such
transaction represented their intentions to acquire the securities for
investment only and not with a view to or for sale in connection with
any distribution thereof and appropriate legends were affixed to the
share certificates issued in such transactions.
2. In connection with services rendered by Paramount Capital, Inc., as
placement agent in the offering (the "Placement Agent"), the Company
issued to the Placement Agent or its designees warrants to purchase an
aggregate of 25,819.8 shares of Series B Preferred Stock. The
issuance of the above referenced securities was deemed to be exempt
from registration under the Securities Act in reliance on Section 4(2)
thereof and Regulation D promulgated thereunder. The recipients of
securities in each such transaction represented their intentions to
acquire the securities for investment only and not with a view to or
for sale in connection with any distribution thereof and appropriate
legends were affixed to the certificates issued in such transactions.
3. On November 20, 1995, the Company entered into a License Agreement
(the "TJU License Agreement') with Thomas Jefferson University ("TJU")
pursuant to which TJU licensed to the Company certain patent and
patent applications relating to a process for the modification of a
patient's own cancer cells into a cancer vaccine (the "TJU License")
for $.002 per share. Pursuant to the TJU License Agreement, the
Company issued 458,243 shares of Common Stock to each of TJU and Dr.
David Berd. The issuances of the above referenced securities was
deemed to be exempt from registration under the Securities Act in
reliance on Section 4(2) thereof. All recipients had adequate access,
through their relationships with the Company, to information about the
Company.
4. The Castle Group, LLC ("The Castle Group") which may be deemed an
affiliate of both the Company and the Placement Agent, identified,
negotiated and acquired for the Company the TJU License. In
connection therewith, The Castle Group and/or its designees were
granted 916,486 of Common Stock of the Company at a price of $.002 per
share pursuant to an Engagement & Technology Acquisition Agreement
dated October 20, 1995 between The Castle Group and the Company. The
issuances of the above referenced securities was deemed to be exempt
from registration under the Securities Act in reliance on Section 4(2)
thereof. In addition, each of the recipients of securities in such
transaction represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection with
any distribution thereof and conform to appropriate legends were
affixed to the share certificates issued in such transactions. All
recipients had adequate access, through their relationships with the
Company, to information about the Company.
4. In 1995 and 1996, the Company pursuant to certain bridge financing
transactions issued to nine persons or entities (i) bridge notes
aggregating $1,000,000 and (ii) warrants to purchase an aggregate of
312,500 shares of Common Stock at an exercise price of $.002 per
share. In June 1996, such bridge notes were paid by the Company and
all the warrants were exercised by the holders thereof. In connection
with services rendered as the placement agent of the bridge financing,
Paramount Capital, Inc. was issued warrants to purchase 62,500 shares
of Common Stock at an exercise price of $.002 per share. The
issuances of the above referenced securities was deemed to be exempt
from registration under the
II-3
<PAGE>
Securities Act in reliance on Section 4(2) thereof. In addition, the
recipients of securities in such transaction represented their
intention to acquire the securities for investment only and not with a
view to or for sale in connection with any distribution thereof and
appropriate legends were affixed to the share certificates issued in
such transactions. All recipients had adequate access, through their
relationships with the Company, to information about the Company.
II-4
<PAGE>
Item 27. Exhibits and Financial Statement Schedules
Exhibit No. Description
----------- -----------
2.1 Asset Purchase Agreement dated December 27, 1995, by and
between the Registrant, InterNuria, Inc. and Interneuron
Pharmaceuticals, Inc.
3.1 Certificate of Incorporation of the Registrant, as
amended to date.
3.2 By-laws of the Registrant, as amended to date.
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2 Specimen of Common Stock certificate.
4.3 Specimen of Series B Convertible Preferred Stock
certificate.
4.4 Investors' Rights Agreement dated November 20, 1995, by
and between the Registrant and certain investors.
*4.5 Certificate of Elimination of the Series A Preferred
Stock
4.6 Form of Subscription Agreement, by and between the
Registrant and certain purchasers of Series B Preferred
Stock and Common Stock.
4.7 Form of Placement Warrant Relating to the Bridge
Financing.
4.8 Warrant for the Purchase of Shares of Common Stock No. 1
dated June 26, 1992, by and between the Registrant and
certain investors.
4.9 Warrant for the Purchase of Shares of Common Stock No. 2
dated June 26, 1992, by and between the Registrant and
certain investors.
4.10 Warrant for the Purchase of Shares of Common Stock No. 3
dated July 23, 1992, by and between the Registrant and
certain investors.
4.11 Warrant for the Purchase of Shares of Common Stock No. 4
dated September 2, 1992, by and between the Registrant
and certain investors.
4.12 Form of Placement Warrant Relating to Offering of Series
B Placement Warrants.
*5.1 Opinion of Roberts, Sheridan & Kotel, a Professional
Corporation.
10.1 Reference is made to Exhibit 2.1.
+ 10.2 Clinical Study and Research Agreement dated November 20,
1995, by and between the Registrant and Thomas Jefferson
University.
10.3 The Registrant's 1992 Stock Option Plan.
10.4 Letter of Employment dated May 17, 1996, between the
Registrant and Dr. Jeffrey M. Jonas.
10.5 Employment Agreement dated August 19, 1991, between the
Registrant and Dayne R. Myers, as amended.
10.6 Consulting Agreement dated February 22, 1996, between
the Registrant and Dr. Carl Spana.
II-5
<PAGE>
10.7 Scientific Advisory Board Agreement dated March 25,
1996, between the Registrant and Dr. Jerry Weisbach.
10.8 Consulting Agreement dated May 9,1996, between the
Registrant and Dr. David Berd.
10.9 Financial Advisory Agreement dated June 12, 1996, by and
between the Registrant and Paramount Capital, Inc.
+ 10.10 License Agreement dated November 20, 1995, by and
between the Registrant and Thomas Jefferson University.
11.1 Statement Concerning Computation of Per Share Earnings.
20.1 Stockholder Information Statement of the Registrant
dated June 15, 1995.
*23.1 Consent of Roberts, Sheridan & Kotel, a Professional
Corporation. Reference is made to Exhibit 5.1.
23.2 Consent of Ernst & Young LLP, Independent Auditors.
24.1 Power of Attorney. Reference is made to the Signature Page to the
Registration Statement.
27.1 Financial Data Schedule.
* To be supplied by amendment.
+ Confidential treatment requested as to certain portions of these exhibits.
Such portions have been redacted.
II-6
<PAGE>
Item 28. Undertakings
The Company hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the Securities
Act;
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the registration
statement; and notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in the volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the Delaware General Corporation Law, the Certificate of
Incorporation or the By-Laws of the Company, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act, and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer, or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The Company hereby undertakes that it will:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Company pursuant to Rule 424(b)(1), or (4) or 497(h)
under the Securities Act as part of this registration statement as of the time
it was declared effective.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of such securities at that time as the initial bona fide
offering of those securities.
II-7
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Company certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York, on this 31st
day of July, 1996.
AVAX TECHNOLOGIES, INC.
By: /s/ Michael S. Weiss
---------------------------------
Michael S. Weiss
Secretary and Director
In accordance with the requirements of the Securities Act of 1933, as amended,
the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appear below constitutes and appoints Michael S. Weiss, his attorney-in-fact,
with the power of substitution, for him in any and all capacities, to sign any
and all amendments to this Registration Statement (including post effective
amendments), and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that said attorney-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.
Signature Name & Title Date
--------- ------------ ----
/s/ Jeffery Jonas, M.D. Jeffery Jonas, M.D. July 31, 1996
President, Chief Executive
Officer and Director
/s/ Wayne L. Rubin Wayne L. Rubin July 31, 1996
Treasurer
/s/ Edson D. de Castro Edson D. de Castro July 31, 1996
Director
/s/ John K. A. John K. A. Prendergast, Ph.D. July 31, 1996
Prendergast, Ph.D. Director
/s/ Carl Spana, Ph.D. Carl Spana, Ph.D. July 31, 1996
Director
/s/ Michael S. Weiss Michael S. Weiss July 31, 1996
Secretary and Director
II-8
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
2.1 Asset Purchase Agreement dated December 27, 1995, by and
between the Registrant, InterNuria, Inc. and Interneuron
Pharmaceuticals, Inc.
3.1 Certificate of Incorporation of the Registrant, as
amended to date.
3.2 By-laws of the Registrant, as amended to date.
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2 Specimen of Common Stock certificate.
4.3 Specimen of Series B Convertible Preferred Stock
certificate.
4.4 Investors' Rights Agreement dated November 20, 1995, by
and between the Registrant and certain investors.
*4.5 Certificate of Elimination of the Series A Preferred
Stock
4.6 Form of Subscription Agreement, by and between the
Registrant and certain purchasers of Series B Preferred
Stock and Common Stock.
4.7 Form of Placement Warrant Relating to the Bridge
Financing.
4.8 Warrant for the Purchase of Shares of Common Stock No. 1
dated June 26, 1992, by and between the Registrant and
certain investors.
4.9 Warrant for the Purchase of Shares of Common Stock No. 2
dated June 26, 1992, by and between the Registrant and
certain investors.
4.10 Warrant for the Purchase of Shares of Common Stock No. 3
dated July 23, 1992, by and between the Registrant and
certain investors.
4.11 Warrant for the Purchase of Shares of Common Stock No. 4
dated September 2, 1992, by and between the Registrant
and certain investors.
4.12 Form of Placement Warrant Relating to Offering of Series
B Placement Warrants.
*5.1 Opinion of Roberts, Sheridan & Kotel, a Professional
Corporation.
10.1 Reference is made to Exhibit 2.1.
+ 10.2 Clinical Study and Research Agreement dated November 20,
1995, by and between the Registrant and Thomas Jefferson
University.
10.3 The Registrant's 1992 Stock Option Plan.
10.4 Letter of Employment dated May 17, 1996, between the
Registrant and Dr. Jeffrey M. Jonas.
10.5 Employment Agreement dated August 19, 1991, between the
Registrant and Dayne R. Myers, as amended.
10.6 Consulting Agreement dated February 22, 1996, between
the Registrant and Dr. Carl Spana.
<PAGE>
10.7 Scientific Advisory Board Agreement dated March 25,
1996, between the Registrant and Dr. Jerry Weisbach.
10.8 Consulting Agreement dated May 9,1996, between the
Registrant and Dr. David Berd.
10.9 Financial Advisory Agreement dated June 12, 1996, by and
between the Registrant and Paramount Capital, Inc.
+ 10.10 License Agreement dated November 20, 1995, by and
between the Registrant and Thomas Jefferson University.
11.1 Statement Concerning Computation of Per Share Earnings.
20.1 Stockholder Information Statement of the Registrant
dated June 15, 1995.
*23.1 Consent of Roberts, Sheridan & Kotel, a Professional
Corporation. Reference is made to Exhibit 5.1.
23.2 Consent of Ernst & Young LLP, Independent Auditors.
24.1 Power of Attorney. Reference is made to the Signature Page to the
Registration Statement.
27.1 Financial Data Schedule.
* To be supplied by amendment.
+ Confidential treatment requested as to certain portions of these exhibits.
Such portions have been redacted.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
EXHIBITS
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
___________
AVAX TECHNOLOGIES, INC.
Exhibit 2.1
Walden Laboratories, Inc.
and
InterNutria, Inc.
and
Interneuron Pharmaceuticals, Inc.
ASSET PURCHASE AGREEMENT
November 14, 1995
<PAGE>
APPENDICES
Appendix A -- List of Disinterested Holders of Common Stock of Seller
Appendix B -- List of Patent Rights of Seller
Appendix C -- List of holders of Preferred Stock of Seller
Appendix D -- List of holders of Common Stock of Seller
EXHIBITS
Exhibit A -- Registration Rights Agreement
Exhibit B -- Certificate of Amendment to the Certificate
of Incorporation of Seller
Exhibit C -- Bill of Sale
Exhibit D -- Patent Assignment Document
Exhibit E -- Stock Distribute Letter
<PAGE>
Table of Contents
Article Page
----
1. Definitions.......................................................... 1
2. Purchase and Sale of Assets.......................................... 4
3. Confidentiality...................................................... 5
4. Representations and Warranties of Seller;
Covenants of Seller.................................................. 6
5. Representations and Warranties of Purchaser
and/or IPI; Covenants of Purchaser................................... 11
6. Conditions Precedent to Closing...................................... 12
7. Termination.......................................................... 13
8. Competition.......................................................... 14
9. Arbitration.......................................................... 14
10. Assignment........................................................... 15
11. Payments, Notices and Other Communications........................... 16
12. Miscellaneous Provisions............................................. 17
<PAGE>
ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is made and entered into this 14th day of
November 1995, by and between WALDEN LABORATORIES, INC., a Delaware corporation
having an office at 375 Park Avenue, 15th Floor, New York, NY 10152 ("Seller"),
INTERNUTRIA, INC., a Delaware corporation having an office at One Ledgemont
Center, 99 Hayden Avenue, Suite 340, Lexington, MA 02173 ("Purchaser"), and
INTERNEURON PHARMACEUTICALS, INC., a Delaware corporation having an office at
One Ledgemont Center, 99 Hayden Avenue, Suite 340, Lexington, MA 02173 ("IPI").
WITNESSETH
WHEREAS, Seller is the owner of the Assets and desires to and has the right
to sell, grant, transfer, convey, assign and deliver the Assets to Purchaser in
accordance with and subject to the conditions set forth in this Agreement; and
WHEREAS, Purchaser desires to purchase, acquire and accept the Assets from
Seller in accordance with and subject to the conditions set forth in the
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
ARTICLE I - DEFINITIONS
For purposes of this Agreement, the following words and phrases shall have
the following meanings:
1.1 "Assets" shall mean the Intellectual Property Rights and PMS Product.
1.2 "Closing Date" shall mean the date on which all conditions hereunder
are satisfied, but no later than December 31, 1995.
1.3 "Common Stock" shall mean the common stock, par value $.001 per share,
of Seller.
1.4 "Database" shall mean (i) the database of an estimated 10,000 people
who participated in the seminars written and/or presented by Dr. J. Wurtman and
others entitled "Emotions, Overeating and the Brain," and (ii) any scripts,
workbooks or similar documents prepared for or related to, or subsequent
materials distributed in relation to either the Emotions, Overeating and the
Brain Seminar or the seminar written and presented by Dr. J. Wurtman and others
entitled the "Pre-Menstrual Syndrome Seminar."
1.5 "Disinterested Holders" shall mean holders of Common Stock of Seller as
listed in Appendix A.
<PAGE>
1.6 "Encumbrances" shall mean, to the extent applicable, all liens,
mortgages, security interests, charges, claims, leases, options, rights of first
refusal, easements, restrictions, rights-of-way or other similar encumbrances of
any nature whatsoever.
1.7 "Fair Market Value" shall mean the average of the closing sale price of
the Stock for the last twenty (20) trading days on which the Nasdaq National
Market is open for trading immediately prior to the date any payment of Stock
may be required pursuant to the terms of this Agreement or, if the Stock is not
traded on the Nasdaq National Market, the average of the closing bid and asked
prices as reported by Nasdaq, or if not traded on Nasdaq, as reported by the
National Quotation Bureau, Inc., for such 20 days period.
1.8 "First Installment" shall meaning set forth in Section 2.3 of this
Agreement.
1.9 "Formula" shall mean the formulation of the PMS Product and any and all
materials, documents and supplies owned by Seller and which are necessary and
desirable to manufacture and develop the PMS Product.
1.10 "Installment" shall have the meaning set forth in Section 2.3 of this
Agreement.
1.11 "Intellectual Property Rights" shall mean the Patent Rights, Know-How,
Formula and the Database.
1.12 "Know-How" shall mean any and all technical information, expertise,
knowledge and the like which relates to the PMS Product and Patent Rights
including, without limitation, all chemical, toxicological, clinical, assay
control, manufacturing data, marketing research and sales information and any
other information or designs used or useful for the development, manufacture,
packaging and/or marketing of the PMS Product.
1.13 "Myers" shall mean Dayne Myers, the former President and Chief
Executive Officer.
1.14 "Patent Rights" shall mean
(a) the United States and foreign patents and patent applications
listed in Appendix B; and
(b) the United States and foreign trademarks, service marks,
copyrights, packaging designs and tradenames, and any
registrations, applications and goodwill pertaining thereto, of
Seller relating to the PMS Product.
1.15 "PMS Product" shall mean any product intended for use as an
over-the-counter nutritional, dietary, medicinal and/or elixorative food,
supplement or drug which is used or to be used by people afflicted with or
diagnosed as having pre-menstrual syndrome or similar symptoms or conditions
which was or is under development by Seller, including, without limitation, the
NutriFem PMS Product.
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1.6 "Purchase Price" shall have the meaning set forth in Section 2.3 of
this Agreement.
1.17 "Preferred Holders" shall mean the holders of record of Preferred
Stock, as of the Closing Date, as listed in Appendix C.
1.18 "Preferred Stock" shall mean the Series A Convertible Preferred Stock
of Seller, par value $.01 per share.
1.19 "Record Date" shall mean the Closing Date.
1.20 "Registration Rights Agreement" shall mean the registration rights
agreement in the form set forth in Exhibit A, entered into on the Closing Date
by and between Seller, Purchaser and IPI.
1.21 "Sale" shall have the meaning set forth in Section 2.1 of this
Agreement.
1.22 "Second Installment" shall have the meaning set forth in Section 2.3
of this Agreement.
!.23 "Seller's Stockholders" shall mean the holders of Common Stock as of
the Record Date, as listed in Appendix D, together with the Preferred Holders.
1.24 "Stock" shall mean the Common Stock, $.001 par value of IPI.
1.25 "Dr. J. Wurtman" shall mean Dr. Judith Wurtman.
ARTICLE II - PURCHASE AND SALE OF ASSETS
2.1 Upon the terms and subject to the conditions of this Agreement and the
performance by the parties hereto of their respective obligations hereunder
Seller hereby agrees to sell, grant, transfer, convey, assign and deliver to
Purchaser, and Purchaser hereby agrees to purchase, acquire and accept from
Seller (such transactions being herein referred to as the "Sale") on the Closing
Date all of Seller's right, title and interest in and to the Assets, free and
clear of all Encumbrances.
2.2 The transfer of the Assets pursuant to Section 2.1 shall be effected by
such specific bills of sale, endorsements, assignments and other instruments of
transfer and conveyance delivered by Seller to Purchaser on the Closing Date
substantially in the form of Exhibits C and D hereto, sufficient to vest in
Purchaser good and marketable title to the Assets, free and clear of all
Encumbrances. Seller further covenants and agrees that it will, from and after
the Closing Date execute, acknowledge, and deliver such other instruments of
conveyance and transfer and take such other actions as Purchaser may reasonably
request, to sell, grant, transfer, convey, assign and deliver the Assets to
Purchaser including, without limitation, the filing of appropriate documents
transferring the assignment of the Patent Rights in form and substance
satisfactory to Seller, Purchaser and their respective counsel (the "Patent
Assignments). Seller agrees to execute a power of attorney in favor of Purchaser
with respect to the Patent Rights upon signing of this Agreement.
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2.3 (a) Upon the terms and subject to the conditions of this Agreement, in
consideration of the sale, grant, assignment, transfer, conveyance, assignment
and delivery of the Assets, Purchaser shall purchase, acquire and accept the
Assets from Seller. The aggregate purchase price is $2,400,000 (the "Purchase
Price") payable in accordance with Section 2.3(b).
(b) IPI shall pay the Purchase Price to Seller, which shall consist of a
payment to Seller (i) on the first anniversary of the Closing Date (each payment
herein referred to as an "Installment"), of such number of shares of Stock
having an aggregate Fair Market Value equal to $1,200,000 (the "First
Installment") and (ii) on the second anniversary of the Closing Date, of such
number of shares of Stock having a Fair Market Value equal to $1,200,000 (the
"Second Installment"); provided that if, at the time of payment of any
Installment, IPI has insufficient authorized Stock, then the portion of the
consideration that cannot be paid with Stock shall be paid by Purchaser in cash.
2.4 Contemporaneously with the Closing Date, Seller shall file with the
Secretary of State of the State of Delaware an amendment to its Certificate of
Incorporation, in the form attached hereto as Exhibit B (the "Certificate of
Amendment").
2.5 On the Closing Date, Seller shall deliver to Purchaser the following:
(a) The instruments of transfer required pursuant to Section 2.2;
(b) The Assets;
(c) Certificate dated the Closing Date of Seller certifying that the
representations and warranties of Seller contained in this
Agreement are true and correct in all material respects at and as
of the Closing Date, except for representations and warranties
specifically relating to a time or times other than the Closing
Date, which shall be true and correct in all material respects at
such time or times.
(d) Certificate dated the Closing Date of the Secretary of Seller as
to the resolutions of Seller's Stockholders approving the Sale;
and
(e) Certificates of the Secretary of State of the State of Delaware
certifying as to the filing of the Certificate of Amendment.
and simultaneously with such deliveries, all such steps will be taken as may be
required to put Purchaser in actual possession and operating control of the
Assets.
2.6 On the Closing Date, IPI and Purchaser shall deliver to Seller a
certificate dated the Closing Date of Purchaser and IPI certifying that the
representations and warranties of IPI and Purchaser contained in this Agreement
are true and correct in all material respect at and as of the Closing Date.
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ARTICLE III - CONFIDENTIALITY
3.1 From and after the Closing Date each party shall keep confidential and
not disclose or use, for a period of three years from the date of this
Agreement, except in compliance with provisions of this Agreement, any
information which or comes into its possession and which is related to the
Assets. The foregoing obligation shall not apply to:
(a) any information which at the time of disclosure or acquisition is
part of the public knowledge or literature, or thereafter becomes
part of the public knowledge or literature otherwise than by
unauthorized disclosure by the recipient;
(b) any disclosure of information to the United States Food and Drug
Administration or other relevant governmental authorities for the
purpose of complying with regulatory requirements with respect to
the Assets;
(c) any information which at the time of disclosure or acquisition
was in the recipient's possession as evidenced by its written
records;
(d) any information which become available to the recipient from
another source not bound to secrecy to the disclosing party with
respect to such information;
(e) disclosure by the recipient to third parties under provisions of
confidentiality similar to those contained in this Agreement for
the purposes of development or marketing of the PMS Product;
(f) disclosure to investment banker and to individuals and
organizations conducting due diligence with respect to potential
equity investments; and
[FN]
(g) any disclosure of information required by application law.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES
OF SELLER; COVENANTS OF SELLER
4.1 Seller represents and warrants that Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full power and authority to carry on its business as it is now
being conducted and to own the properties and assets it now owns. The copy of
the Certificate of Incorporation of Seller dated September 18, 1992 and amended
on October 26, 1992, heretofore delivered to Purchaser (the "Certificate of
Incorporation") is a complete and correct copy of such instrument as in effect
prior to the filing of the Certificate of Amendment.
4.2 Seller represents and warrants that Seller has full corporate power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby. All corporate acts and other proceedings required to be
taken by or on the part of Seller to authorize the execution, delivery and
consummation of this Agreement have been duly and properly taken. This Agreement
has been
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duly executed and delivered by Seller and constitutes the valid and binding
obligation of Seller enforceable against it in accordance with its terms except
as may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to creditors' rights generally or by equitable principles
(whether considered in an action at law or in equity).
4.3 Seller represents and warrants that neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated hereby
will violate any provision of the Certificate of Incorporation or By-laws of
Seller, or violate, or be in conflict with, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
cause the acceleration of the maturity of any debt or obligation pursuant to, or
result in the creation or imposition of any Encumbrance upon any property or
assets of Seller, including the Assets, under any indenture, note, agreement,
mortgage, lease or commitment to which Seller is a party or by which Seller is
bound, or to which the property of Seller is subject, or violate any statute or
law of any judgment, decree, order, regulation or rule of any court or
governmental authority.
4.4 Seller represents and warrants that as of or prior to the Closing Date:
(a) Seller has solicited written consents in lieu of a meeting of
Seller's Stockholders for the purpose of approving the Sale of
the Assets;
(b) Seller's Board of Directors has recommended approval and adoption
by Seller's Stockholders of the Sale of the Assets;
(c) Seller has obtained the requisite approval and adoption of the
Sale of the Assets by holders of:
(i) a majority of the shares of outstanding Preferred Stock;
(ii) a majority of the shares of outstanding Common Stock and
Preferred Stock in the aggregate; and
(iii) a majority of shares of the Disinterested Holders of Common
Stock and the holders of Preferred Stock in the aggregate.
4.5 Seller represents and warrants that Seller has not and does not, as of
the Closing Date other than pursuant to this Agreement, or in connection with
the transactions contemplated hereby.
(a) Permitted or allowed the Assets to be subjected to any
Encumbrance;
(b) Have actual knowledge of any fact or event which materially
adversely affects the Assets;
(c) Sold, transferred, assigned, used, disposed, or otherwise
employed, or allowed any third party other than Purchaser, IPI,
and their respective employees, agents,
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advisor and counsel to have access to, or provided copies, with
respect to Assets embodied in a tangible medium, all or any part
of the Assets;
(d) consented to the manufacture, use or sale of any of the Assets by
a third party, other than contract manufacturing of the PMS
Product used in human trials, for which no Intellectual Property
Rights were transferred to such manufacturer; or
(e) Agreed or arranged, whether in writing or otherwise, to take any
action described in this Section.
4.6 Seller represents and warrants that there is no pending, or to the best
of its knowledge after due inquiry, threatened, action, suit, inquiry,
proceeding or investigation by or before any court or governmental or other
regulatory or administrative agency or commission against or involving Seller
relating to the Assets or this Agreement or any action taken or to be taken
Seller pursuant to this Agreement or in connection with the transaction
contemplated hereby.
4.7 Seller represents and warrants that, as of the Closing Date:
(a) Seller owns and holds the entire right, title and interest in to
and under the Assets, free and clear of Encumbrances;
(b) Seller is the owner of Intellectual Property Rights pursuant to a
valid and enforceable assignment;
(c) To Seller's knowledge, the inventors under the Patent Rights have
disclosed to the United States Patent and Trademark office all
information "material to patentability", as such is defined in 37
C.F.R. ss. 1.56;
(d) Seller has no knowledge of any claims by a third party that the
activities of the Seller, including the use of the Assets or the
sale of the PMS Product by Seller would infringe rights of any
third party and there is no valid basis for any such claims; and
(e) To Seller's knowledge, Seller has maintained the pendency of all
domestic and foreign patent applications included in the Patent
Rights except for U.S. Patent Application Serial No. 08/168,492.
4.8 Seller represents and warrants that no consent, approval or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority is required on its part for the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby by Seller other than the filing of the Certificate of
Amendment and the Patent Assignment. No consent, approval or authorization of
any third party other than Seller's Stockholders, which consent has been
obtained as described in Section 4.4, is necessary to the consummation of the
transactions contemplated hereby by Seller.
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4.9 Seller represents and warrants that Seller has not entered into any
agreement pursuant to which any person or entity is entitled to receive, either
directly or indirectly, compensation from Seller for services rendered as a
finder or broker in connection with the transactions contemplated hereby.
4.10 (a) The Settlement Agreement and Mutual Release Agreement dated as of
May 27, 1995 between Seller and Dr. J. Wurtman, which includes the following
terms, remains in full force and effect and all conditions thereunder shall have
been satisfied:
(i) Dr. J. Wurtman shall have returned to Seller any and all intellectual
property developed in whole or in part by Dr. J. Wurtman while a
consultant or employee of Seller, except such intellectual property as
is included in the Intellectuual Property Rights and except for any
intellectual property not related to the Assets that Dr. J. Wurtman
has renounced in writing;
(ii) the return to Seller of all securities of Seller issued to and held by
Dr. J. Wurtman; and
(iii) mutual releases between Seller and Dr. J. Wurtman;
(b) The letter agreement dated April 24, 1995 between Seller and Myers, which
includes the following terms, shall remain in full force and effect and all
conditions thereunder shall have been satisfied;
(i) Seller's employment agreement with Myers and of any other obligations
by Seller to compensate Myers shall have been terminated, in exchange
for which Seller shall have agreed to pay to Mr. Myers compensation
not in excess of (i) $75,000 payable over a 12-month period, and (ii)
as and when the Stock is paid pursuant to this Agreement, Seller will
transfer to Myers 4.15% of the Stock that comprises the applicable
installment of the Purchase Price being paid at that time (or at
Seller's option, the value of such stock payable in cash); and
(ii) the return by Myers to Seller of all stock, together with options to
purchase stock, of Seller issued to and held by Myers.
4.11 Seller has delivered to Buyer an unaudited balance sheet of Seller as
of June 30, 1995. Such balance sheet is true, complete and correct in all
material respects and presents fairly the assets and liabilities of Seller at
the balance sheet date all in accordance with GAAP. Seller has no liabilities or
obligations that were not fully reflected or reserved against in the balance
sheet, except for approximately $150,000 of debt incurred (of which $75,000 was
used to reduce other liabilities and inabilities and obligations incurred in the
ordinary course of business since the date thereof).
4.12 Seller shall, contemporaneously with Seller's receipt of each of the
First and Second Installments:
(i) Distribute 95.85% of the Stock to the Preferred Holders on a pro rata
basis; and
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(ii) Distribute 4.15% of the Stock (or a cash payment equal to the value
thereof) to Myers;
(the Preferred Holders and Myers are referred to collectively as the
"Stock Distributees")
provided, however, that (x) if at the time of any Installment any
indebtedness of Seller outstanding on the Closing Date is then
outstanding and due and payable, Seller will cause such indebtedness
to be paid or provided for, whether by use of available cash,
refinancing or replacement proceeds, by redirecting and reducing the
percentages of the Stock payable in accordance with (i) and (ii) above
in order to satisfy such indebtedness and (y) to the extent that any
Stock Distributee would be entitled to a fractional share of Stock at
the time of either Installment, a cash payment equal to the value of
such fractional share shall be made by Purchaser to such Stock
Distributee in lieu of such fractional share.
Seller may direct Purchaser and IPI to issue the Purchase Price to the
Stock Distributees in accordance with the above allocation.
The Stock Distributees shall have the rights set forth in the Registration
Rights Agreement.
4.13 From and after the Closing Date, Purchaser shall defend, indemnify and
hold harmless, Seller, its employees, agents, officers, directors, attorneys,
advisors, agents and representatives from and against any and all claims,
liabilities, losses, actions, damages, costs and expenses (including, without
limitation, reasonable attorneys' fees) directly or indirectly, in whole or in
part suffered or incurred by, or imposed upon or asserted against any of the
foregoing (individually, a "Liability", and collectively, the "Liabilities") and
arising out of, related to or in respect of any of the Assets, excluding any
Liability which arose out of the use, manufacture, promotion, sale or other
disposition, of any Asset prior to the date of this Agreement. Seller shall
defend, indemnify and hold harmless Purchaser, its employees, agents, officers,
directors, attorneys, advisors, agents, Affiliates and representatives to the
same extent as the foregoing indemnification from Purchaser, provided that such
Liability arose out of the use, manufacture, promotion, sale or other
disposition of any Asset prior to the date of this Agreement.
Without limiting the foregoing, each indemnifying party referred to above
(an "Indemnifying Party") shall defend, indemnify and hold harmless each
indemnified party referred to above (an "Indemnifying Party"), as applicable,
for and against:
(1) any product liability or other claim of any kind related to the use by
a third party of an Asset that was manufactured, sold or otherwise disposed of
or used by the Indemnifying Party, its assignees, sublicensees, vendors or other
third parties;
(2) a claim by a third party that the design, composition, formula,
manufacture, use, sale or other disposition of any Asset infringes or violates
any patent, copyright, trademark or other intellectual property rights of any
third party; and
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(3) clinical trial or studies conducted by or on behalf of the Indemnifying
Party relating to the Assets, including, without limitation, any claim by or on
behalf of any human subject of any such clinical trial or study, any claim
arising from the procedures specified in any protocol used in any such clinical
trial or study, any claim of deviation, authorized or unauthorized, from the
protocols of any such clinical trial or study, and any claim resulting from or
arising out of the manufacture or quality control by a third party or any
substance administered in any clinical trial or study.
4.14 The Indemnified Party shall give reasonable written notice to the
Indemnifying Party of any claim or action giving rise to Liabilities subject to
the provisions of the foregoing Section 4.13. The Indemnifying Party shall have
the right to defend any such claim or action, at its sole cost and expense. The
Indemnifying Party shall not settle or compromise any such claim or action in a
manner that imposes any restrictions, liabilities or obligations on an
Indemnified Party without such person's prior written consent. If the
Indemnifying Party fails or declines to assume the defense of any such claim or
action within 30 days after notice thereof (or to admit, upon written request,
in writing its obligation to do so within five days of such notice), an
Indemnified Party may assume such defense at the expense of the Indemnifying
Party. The indemnification rights of an Indemnified Party contained herein are
in addition to all other rights which such Indemnified Party may have at law or
in equity or otherwise.
4.15 If requested by Purchaser or IPI in connection with a financing by IPI
or Purchaser, Seller agrees to make its financial and other records relating to
the period prior to the Closing Date available during normal business hours upon
reasonable prior notice to Purchaser's financial and accounting staff and
Purchaser's outside accountants in order to permit Purchaser's accountants to
perform an audit of Seller and to otherwise cooperate with Purchaser's and IPI's
reasonable requests in connection therewith. Such audit shall be at Purchaser's
and IPI's expense.
4.16 Seller represents that Section 5 of the employment agreement dated
August 19, 1991 between Myers and Sellers has not been terminated. Seller shall
use its reasonable best efforts to enforce against Myers the provisions such
Section 5.
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF
PURCHASER AND/OR IPI; COVENANTS OF PURCHASER
5.1 Each of Purchaser and IPI represents and warrants that Purchaser of
IPI, as applicable, is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the power and
authority to carry on its business as now being conducted and to own the
properties and assets it now owns. IPI represents that it owns the majority of
the outstanding capital stock of Purchaser.
5.2 Each of Purchaser and IPI represents and warrants that Purchaser or
IPI, as applicable, has full corporate power and authority to enter into this
Agreement and to carry out the transactions contemplated hereby. All corporate
acts and other proceedings required to be taken by or on the part of Purchaser
or IPI to authorize the execution, delivery and consummation of this Agreement
have been duly and properly taken. This Agreement has been duly executed and
delivered by Purchase and IPI and constitutes the valid and binding obligation
of Purchaser and IPI enforceable against it in
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accordance with its terms except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
generally or by equitable principles (whether considered in an action at law or
in equity).
5.3 Each of Purchaser and IPI represents and warrants that neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will violate any provision of the respective
Certificate of Incorporation or By-laws of Purchaser or IPI, as applicable or
violate, or be in conflict with, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
cause the acceleration of the maturity of any debt or obligation pursuant to, or
result in the creation or imposition of any Encumbrance upon any property or
assets of Purchaser or IPI, including the Assets, under any indenture, note,
agreement, mortgage, lease or commitment to which Purchaser or IPI is a party or
by which Purchaser or IPI is bound, or to which the property of Purchaser or
IPI is subject, or violate any statute or law of any judgment, decree, order,
regulation or rule of any applicable court or governmental authority.
5.4 IPI represents that the Stock that constitutes the Purchase Price
hereunder, will be, as of the date of issuance, duly authorized, validly issued,
fully paid and non-assessable.
5.5 Each of Purchaser and IPI represents and warrants that neither Purchase
nor IPI, as applicable, has entered into any agreement pursuant to which any
person or entity is entitled to receive, either directly or indirectly,
compensation from the Purchaser or IPI for services rendered as a finder or
broker in connection with the transactions contemplated hereby.
ARTICLE VI - CONDITIONS PRECEDENT TO CLOSING
6.1 Prior to or simultaneously with the execution of this Agreement, the
following events shall occur, and are conditions precedent to performance of
Purchaser's and IPI's obligations under this Agreement:
(a) the execution of the Registration Rights Agreement;
(b) Seller shall have performed and complied with all agreements,
obligations and conditions required by this Agreement to be
performed or complied with by it on or prior to the Closing Date,
including, but not limited to the following:
(i) the representations and warranties of Seller contained in
this Agreement are true and correct in all material respects
at and as of the Closing Date, except for representations
and warranties specifically relating to a time or times
other than the Closing Date, which shall be true and correct
in all material respect at such time or times;
(ii) There shall be no pending or threatened action, suit,
inquiry, proceeding or investigation by or before any court
of governmental or other regulatory or administrative agency
or commission pending or
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threatened against or involving Seller or its Assets, or
which questions or challenges the validity of this Agreement
or any action taken or to be taken by Seller pursuant to
this Agreement or in connection with the transactions
contemplated hereby; nor is there any valid basis for any
such action, proceeding or investigation. Seller is not in
violation of, or in default with respect to, any law, rule,
regulations, order, judgment, or decree; nor is Seller
required to take any action in order to avoid such violation
or default. The Seller is not subject to any judgment, order
or decree entered in any lawsuit or proceeding which may
have an adverse effect on its business practices or on its
ability to acquire any property or conduct its business in
any area.
(c) Purchaser and IPI shall have received a letter from each of the
Stock Distributees, substantially in the form of Exhibit E.
ARTICLE VII - TERMINATION
7.1 IPI may terminate the transactions contemplated herein at any time
prior to the Closing Date only if it the conditions set forth in Section 6.1 are
not satisfied in all material respects.
7.2 Without prejudice to its rights prior to the Closing Date under Section
7.1, Seller may terminate the transactions contemplated herein at any time prior
to the Closing Date if the representations and warranties of Purchaser and IPI
contained in this Agreement were incorrect in any material respect when made, or
if all of the conditions precedent to the obligations of Seller set forth in
this Agreement are not fulfilled.
7.3 If the transactions contemplated by this Agreement are terminated as
provided herein:
(a) Nothing herein shall be construed to release either party from
any obligation that matured prior to the effective date of such
termination.
(b) To the extent not otherwise required by law, each party will
return all documents, work papers and other material of any other
party relating to the transactions contemplated hereby, whether
so obtained before or after the execution hereof, to the party
finishing the same, except those documents which are in the
public domain. All information received by any party hereto with
respect to the business of any other party shall not be subject
to the use restrictions of the confidentiality provisions of
Article III hereof.
ARTICLE VII - COMPETITION
8.1 Seller shall not, for a period of three years following the Closing
Date, develop, manufacture or market, or act as a consultant or advisor to any
company with respect to the development, manufacture or marketing, of any
product or substance, including any PMS Product, rights thereto which were not
acquired from the Purchaser (or such successor in interest in respect of
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the PMS Product, including a licensee or sublicensee), whose use is or
reasonably may be deemed competitive with the PMS Product.
ARTICLE IX - ARBITRATION
9.1 Any dispute, controversy or claim that arises under, out of, or in
connection with, or relating to this Agreement, or any breach, termination or
alleged invalidity of this Agreement, shall be resolved by binding arbitration
in New York, New York in accordance with the then existing Rules of the American
Arbitration Association. The decision of the Arbitration Tribunal in any such
arbitration shall be final and not appealable, and shall be enforceable in any
court of competent jurisdiction. No punitive damages will be recoverable by
either Party in such a proceeding. The Parties agree that the service of any
notice in the course of such arbitration proceeding at their respective address
as provided for in Article XI of this Agreement shall be valid and sufficient
but such method shall be a nonexclusive means of providing the requisite notice.
9.2 The appointing authority shall be the American Arbitration Association.
9.3 Unless agreed otherwise by the Parties, in any arbitration proceeding
hereunder, there shall be three (3) arbitrators. Each Party shall appoint one
(1) arbitrator, and the two (2) arbitrators so appointed shall, by mutual
agreement, appoint the third arbitrator, who shall be the chairman of the
Arbitration Tribunal. In the event that any party fails to appoint an arbitrator
within one (1) month after the commencement of the arbitration proceeding, such
arbitrator shall, at the written request of the party requesting the
arbitration, be appointed by the then-President or presiding officer of the
American Arbitration Association in accordance with its then-existing rules of
appointment. For the purposes of this Agreement, "commencement of the
arbitration proceeding" shall mean the date on which all of the following
actions have been undertaken: (a) a written demand for the arbitration is
received by the American Arbitration Association, (b) the appropriate fee is
paid therewith, and (c) a copy of the written demand is served on the
non-arbitration requesting party. The decision of the majority of the
arbitrators shall be final and binding on the Parties, each arbitrator having
one vote.
9.4 In any arbitration proceeding, the rights of the parties shall be
determined according to the governing law set forth in Section 12.1 of this
Agreement, and the arbitrators shall apply such law without regard to the
conflicts of law principles thereof.
9.5 In the event that either Party has a substantial need for discovery in
order to prepare for the arbitration, the Parties shall attempt in good faith to
agree on a minimum plan for strictly necessary, expeditious discovery. Should
the Parties fail to reach agreement, any Party may request a joint meeting with
the Arbitration Tribunal to explain points of agreement and disagreement. The
Arbitration Tribunal shall promptly make a recommendation as to the scope of
discovery and time allowed therefore. In the event that a Party shall fail to
cooperate with discovery ordered by the Arbitration Tribunal, the Arbitration
Tribunal shall have the power to take such corrective steps as they deem
appropriate, including, without limitation, imposition of sanctions, including
striking a demand for arbitration, or specific claims or defenses.
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9.6 In the event either Party contends that there has been fraud or bad
faith by the other Party or the Arbitration Tribunal, a second arbitration shall
be held to determine whether there has been fraud or bad faith, the Arbitration
Tribunal shall vacate the decision affected by fraud or bad faith and shall
order that another arbitration be held to resolve the original dispute. The
losing party in any such arbitral proceeding shall promptly pay the costs of
such proceeding, including, without limitation, the legal fees and expenses of
the prevailing party.
ARTICLE X - ASSIGNMENT
10.1 Seller may not assign or transfer its rights and/or duties under this
Agreement, other than in connection with (a) the sale of substantially all of
its assets, (b) a merger in which it is not the surviving corporation or (c) a
merger in which it becomes a subsidiary of another corporation, without first
having obtained the written consent of Purchaser and IPI. Any such purported
assignment or transfer, without the written consent of Purchaser and IPI, shall
be null, void and of no effect. Purchaser or IPI, as applicable, may assign or
transfer its rights and/or duties under this Agreement at any time except that
IPI shall not assign or transfer its obligation to issue the Stock or to
indemnify Seller and any other indemnities without the written consent of
Seller, shall be null, void and of no effect.
ARTICLE XI - PAYMENTS, NOTICES AND OTHER COMMUNICATIONS
11.1 Any payment, notice or other communication pursuant to this Agreement
shall be sufficiently made or given on the date of mailing if sent to such party
by certified or registered first class mail, postage prepaid, or by recognized
public courier (e.g. Federal Express) address to it at its address below or as
it shall designate by written notice given to the other party.
In the case of Seller:
Walden Laboratories, Inc.
375 Park Avenue, 15th Floor
New York, New York 10152
Attention: Michael S. Weiss, Esq.
with a copy to:
Roberts, Sheridan & Kotel,
a Professional Corporation
640 Fifth Avenue
New York, NY 10019
Attention: Ira L. Kotel, Esq.
In the case of Purchaser:
InterNutria, Inc.
One Ledgemont Center
14
<PAGE>
99 Hayden Avenue, Suite 340
Lexington, MA 02173
In the case of IPI:
Interneuron Pharmaceuticals, Inc.
One Ledgemont Center
99 Hayden Avenue, Suite 340
Lexington, MA 02173
Attn: Glenn L. Cooper, M.D., President
with a copy to:
Bachner, Tally, Polevoy & Misher LLP
380 Madison Avenue
New York, New York 10017
Attn: Jill Cohen, Esq.
ARTICLE XII - MISCELLANEOUS PROVISIONS
12.1 This Agreement shall be construed, governed, interpreted and applied
in accordance with the laws of the State of New York, U.S.A. without regard to
the principles of conflicts of laws, except those questions affecting the
construction and effect of any patent shall be determined by the law of the
country in which the patent was granted.
12.2 The failure of either party to assert a right hereunder or to insist
upon compliance with any term or condition of this Agreement shall not
constitute a waiver of that right or excuse a similar subsequent failure to
perform any such term or condition by the other party.
12.3 In case any one or more of the provisions of this Agreement shall be
invalid, illegal or unenforceable in any respect, such provisions shall be
ineffective to the extent of such invalidity, illegality or unenforceability and
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected thereby.
12.4 Whether or not the transactions contemplated by this Agreement shall
be consummated, Seller agrees that all fees and expenses incurred by it in
connection with this Agreement shall be borne by it provided that the fees and
expenses of Seller's attorneys shall be payable by Purchaser at Closing in an
amount not to exceed $25,000 and each Purchaser and IPI agrees that all fees and
expenses incurred by it in connection with this Agreement shall be borne by it,
including, without limitation as to Seller or Purchaser or IPI, all fees of
counsel, actuaries and accountants. In addition Purchaser or IPI shall reimburse
or pay all of Seller's patent fees and expenses that are documented to be
incurred with respect to the Assets. The Purchaser agrees that it will pay all
transfer or other taxes which may be payable in connection with the transactions
contemplated by this Agreement.
15
<PAGE>
12.5 Subject to Article X, this Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, successors, legal representatives, and assigns.
12.6 Seller shall not make or issue, or cause to be made or issued, any
announcement or written statement concerning this Agreement or the transactions
contemplated hereby for dissemination to the general public without the prior
written consent of Purchaser and IPI. This provision shall not apply, however,
to any announcement or written statement required to be made by law or the
regulations of any federal or state governmental agency or any stock exchange or
market, except that the party required to make such announcement shall, whenever
practicable, consult with the other party concerning the timing and the content
of such announcement before such announcement is made.
12.7 This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.8 The parties hereby acknowledge that this Agreement, including the
Appendices, Exhibits and Schedules hereto; and the other documents and
certificates delivered pursuant to the terms hereof, set forth the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein, and no prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party hereto shall be
of any force or effect, nor shall this Agreement be subject to any change or
modification, except by the execution of a subsequent written instrument
subscribed to by the parties hereto.
12.9 Except as specifically set forth or referred to herein, nothing herein
expressed or implied is intended or shall be construed to confer upon or give to
any person or corporation other than the parties hereto and their successor or
assigns, any rights or remedies under or by reason of this Agreement.
12.10 All representations, warranties, covenants and agreement of the
parties contained in this Agreement or in any instrument, certificate or other
writing provided for in it, shall survive the execution of this Agreement and
not be deemed waived.
12.11 Seller represents and warrants as follows:
THE ASSETS ARE BEING SOLD, GRANTED, TRANSFERRED, CONVEYED, ASSIGNED AND
DELIVERED TO PURCHASER BY SELLER ON AN "AS IS" BASIS, AND SELLER MAKES NO
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, AS TO THE MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR USE EXCEPT AS SPECIFICALLY PROVIDED IN THIS
AGREEMENT.
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and their respective corporate seals to be affixed hereto, all as of
the day and year first above written.
WALDEN LABORATORIES, INC.
By: /s/ Carl Spana
-------------------------------
Name: Carl Spana
Title: Interim President
INTERNUTRIA, INC.
By: /s/ James L. Pomroy
-------------------------------
Name: James L. Pomroy
Title:
INTERNEURON PHARMACEUTICALS, INC.
By: /s/ Glenn L. Cooper 11/21/95
-------------------------------
Name: Glenn L. Cooper, M.D.
Title: President and CEO
17
<PAGE>
Appendix B
LIST OF PATENT RIGHTS OF SELLER
U.S. Patent Application Serial No. 08/359,695, entitled NOVEL THERAPEUTIC
CARBOHYDRATE BLENDS USEFUL FOR AIDING PREMENSTRUAL SYNDROME, filed December 20,
1994, in the names of Judith J. Wurtman, Jeff L. Shear, and Alvin Kershman, as a
continuation-in-part of U.S. Patent Application Serial No. 08/168,492, filed
December 22, 1993, now abandoned.
International Application PCT/US94/14733 filed December 21, 1994,
designating European Patent, Canada, and Japan.
19
<PAGE>
EXHIBIT C
BILL OF SALE AND ASSIGNMENT
In consideration of the sum of Ten Dollars ($10.00) and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, Walden Laboratories, Inc. ("Seller")
hereby grants, bargains, sells and delivers to InterNutria, Inc. ("Purchaser"),
all of its rights, title and interest in and to the Assets, as defined in
Section 1.1 of the Asset Purchase Agreement dated as of November , 1995, among
Purchaser, Seller, Interneuron Pharmaceuticals, Inc. (the "Agreement").
This Bill of Sale is executed and delivered pursuant to the Agreement, to
which reference is made for additional provisions with respect to the sale and
assignments covered hereby. All representations and warranties applicable to
Seller with respect to the Assets are contained in the Agreement and are subject
to the terms and conditions relating thereto set forth therein. The Assets are
being sold to Purchaser "as is" without any express or implied warranty or
merchantability or fitness for any purpose except as set forth in the Agreement.
The parties hereby agrees to execute and have executed all such further
bills of sale, assignments, instruments of transfer, and agreements as may be
reasonably necessary in order to transfer more fully and effectively the Assets.
All terms, covenants, representations, warranties and conditions herein
shall be for and inure to the benefit of and shall bind Seller, Purchaser and
their respective permitted successors and assigns.
IN WITNESS WHEREOF, this Bill of Sale has been executed and delivered as of
the ________ day of November, 1995.
Attest: WALDEN LABORATORIES, INC.
By:_________________________________ By:_________________________________
Name:
Title:
ACCEPTED:
Attest: INTERNUTRIA, INC.
By:_________________________________ By:_________________________________
Name:
Title:
<PAGE>
Exhibit D
PATENT COOPERATION TREATY
APPOINTMENT OF AGENT
In re Application of:
INTERNUTRIA, INC.
International Patent Application
Filed: 21 December 1994
Under no.: PCT/US94/14733
For: NOVEL THERAPEUTIC CARBOHYDRATE BLENDS USEFUL FOR AIDING
PREMENSTRUAL SYNDROME
The undersigned hereby appoints:
Allan M. Lowe, Reg. No. 19,641; Robert L. Price, Reg. No. 22,685; Robert E.
LeBlanc, Reg. No. 17,219; Stephen A. Becker, Reg. No. 26,527; Israel
Gopstein, Reg. No. 27,333; Benjamin J. Hauptman, Reg. No. 29,310; Donald C.
Casey, Reg. No. 24,022; Kenneth E. Krosin, Reg. No. 25,735; Gilberto M.
Villacorta, Reg. No. 34,038; Chittaranjan N. Nirmel, Reg. No. 30,048; Gene
Z. Rubinson, Reg. No. 33,351; Frank P. Presta, Reg. No. 19,828; Michael S.
Gzybowski, Reg. No. 32,816; Robert G. Lev, Reg. No. 30,280; Keith E.
George, Reg. No. 34,111; Edward J. Wise, Reg. No. 34,523; Christopher W.
Brody, Reg. No. 33,613; Demetra J. Mills, Reg. No. 34,506; Daniel Y.J. Kim,
Reg. No. 36,186; Alexander Yamplosky, Reg. No. 36,324; Alfred A. Stadnicki,
Reg. No. 30,226; David L. Stewart, Reg. No. 37,578; Timothy R. DeWitt, Reg.
No. 35,857; Arthur J. Steiner, Reg. No. 26,106; William H. Beha, Reg. No.
38,038; Irah H. Donner, Reg. No. 35,120; Eric J. Kraus, Reg. No. 36,190;
Irving R. Pellman, Reg. No. 38,737; Leon R. Turkevich, Reg. No. 34,035;
John A. Hankins, Reg. No. 32,029; Linda T. Jaron, Reg. No. 33,914; Robert
M. Bauer, Reg. No. 34,487; Mark G. Toohey, Reg. No. 35,392; and Michael E.
McCabe, Jr., Reg. No. 37,182, all of
LOWE, PRICE, LEBLANC & BECKER
99 Canal Center Plaza
Suite 300
Alexandria, Virginia 22314
US
as agents to act on our behalf and to transact all business before the competent
international authorities in connection with the above-identified patent
application.
INTERNUTRIA, INC.
- -----------------------------------------
Name:
Title:
Date:
<PAGE>
ASSIGNMENT
WHEREAS WALDEN LABORATORIES, INC. ("Walden") of 375 Park Avenue, 15th
Floor, New York, NY 10152, the current assignee, as evidenced by the assignment
attached hereto, of a certain new and useful invention as set forth in an
application for United States Letters Patent, entitled NOVEL THERAPEUTIC
CARBOHYDRATE BLENDS USEFUL FOR AIDING PREMENSTRUAL SYNDROME, for which an
application for United States Letters Patent was filed on December 20, 1994, and
identified by United States Serial No. 08/359,695;
AND WHEREAS, INTERNUTRIA, INC., a corporation of the State of Delaware and
having an address of One Ledgemont Center, 99 Hayden Avenue, Suite 340,
Lexington, MA 02173 is desirous of acquiring the entire right, title and
interest in and to said invention and in and to any and all Letters Patent of
the United States and foreign countries which may be obtained therefor;
NOW, THEREFORE, for good and valuable consideration, Walden does hereby
sell, assign, transfer and set over unto INTERNUTRIA, INC., its legal
representatives, successors, and assigns, the entire right, title and interest
in and to said invention as set forth in the above-mentioned application
including any continuations, continuations-in-part, divisions, reissues,
re-examinations or extensions thereof, and in and to any and all patents of the
United States and foreign countries which may be issued for said invention;
UPON SAID CONSIDERATIONS, Walden hereby agrees with the said assignee that
Walden will not execute any writing or do any act whatsoever conflicting with
these presents, and that Walden will, at any time upon request, without further
or additional consideration but at the expense of said assignee, execute such
additional assignments and other writings and do such additional acts as said
assignee may deem necessary or desirable to perfect the assignee's enjoyment of
this grant, and render all necessary assistance in making application for and
obtaining original, divisional, continuations, continuations-in-part,
reexamined, reissued, or extended Letters Patent of the United States or of any
and all foreign countries on said invention, and in enforcing any rights or
choses in action accruing as a result of such applications or patents, by giving
testimony in any proceedings or transactions involving such applications or
patents, and by executing preliminary statements and other affidavits, it being
understood that the foregoing covenant and agreement shall bind, and inure to
the benefit of the assigns and legal representatives of assignor and assignee;
AND Walden requests the Commissioner of Patents and Trademarks to issue any
Letters Patent of the United States which may be issued for said invention to
said INTERNUTRIA, INC., its legal representatives, successors or assigns, as the
sole owner of the entire right, title and interest in and to said patent and the
invention covered thereby.
- ----------------------- --------------------------------------------
Date By: WALDEN LABORATORIES, INC.
Name:
Title:
STATE OF ______________)
) SS:
COUNTY OF ____________ )
On this ____________ day of ___________________, 19___, before me
personally appeared ____________________________, to me known to be the person
named in and who executed the above instrument, and acknowledged to me that
he/she executed the same for the uses and purposes therein set forth.
--------------------------------------------
S E A L Notary Public
My commission expires ______________________
<PAGE>
RECORDATION FORM COVER SHEET
PATENTS ONLY Attorney Docket Number
7635-010
TO THE HONORABLE COMMISSIONER OF PATENTS AND TRADEMARKS
Box Assignments
Washington, DC 20231
Please record the attached original documents or copy thereof.
1. Name of conveying party(ies):
Judith J. WURTMAN, Jeff L. SHEAR,
Alvin KERSHMAN
Additional name(s) of conveying party(ies) attached?
|_| Yes |X| No
- --------------------------------------------------------------------------------
2. Name and address of receiving party(ies):
Name: Walden Laboratories, Inc.
Address: 375 Park Avenue
New York, New York 10152
- ---------------------------------------
Country (if other than USA): _________________
- --------------------------------------------------------------------------------
3. Nature of conveyance:
|X| Assignment |_| Merger
|_| Security Agreement |_| Change of Name
Other ______________________________
Execution Date: August 28, 1995; August 31, 1995; and
September 1, 1995
- --------------------------------------------------------------------------------
4. Application number(s) or patent number(s):
If this document is being filed together with a new application, the execution
date of the application is:____
A. Patent Application No.(s) 08/359,695 B. Patent No.(s)
Additional numbers attached? |_| Yes |X| No
- --------------------------------------------------------------------------------
5. Name and address of party to whom correspondence
concerning document should be mailed:
PENNIE & EDMONDS
1667 K Street, N.W.
Washington, D.C. 20006
- --------------------------------------------------------------------------------
6. Number of applications
and patents involved: ONE
- --------------------------------------------------------------------------------
7. Total fee (37 CFR 3.4)..................$40.00
Please charge to the deposit account listed in
Section 8.
- --------------------------------------------------------------------------------
8. Deposit account number:
16-1150
(A copy of this page is attached)
- --------------------------------------------------------------------------------
DO NOT USE THIS SPACE
9. Statement and signature.
To the best of my knowledge and belief, the foregoing information is true and
correct and any attached copy is a true copy of the original document.
Wilma F. Triebwasser 32,498 /s/ Wilma F. Triebwasser September 11, 1995
- -------------------------------- ------------------------ ------------------
Name of Person Signing Reg. No. Signature Date
For: Brian M. Poissant, Reg.
No. 28,642
Total number of pages including cover sheet: THREE
<PAGE>
JOINT
ASSIGNMENT
WHEREAS, WE, Judith J. WURTMAN, Jeff L. SHEAR and Alvin KERSHMAN,
ASSIGNORS, citizens of U.S.A., residing at 300 Boyleston Street, Unit 1205,
Boston Massachusetts 02116; 12117 Ladue Hgts., St. Louis, Missouri 63141; and
12712 Coeur DuMonde Court, St. Louis, Missouri 63146, respectively, are the
inventors of the invention in NOVEL THERAPEUTIC CARBOHYDRATE BLENDS USEFUL FOR
AIDING PREMENSTRUAL SYNDROME for which we have executed an application for a
Patent of the United States
|_| which is executed |_| even date herewith or |_|_________________(date)
|X| which is identified by Pennie & Edmonds docket no. 7635-010
|X| which was filed on December 20, 1994, Serial No. 08/359,695
and WHEREAS, WALDEN LABORATORIES, INC., ASSIGNEE is desirous of obtaining the
entire right, title and interest in, to and under the said invention and the
said application:
NOW, THEREFORE, in consideration of the sum of One Dollar ($1.00) to us in
hand paid, and other good and valuable consideration, the receipt of which is
hereby acknowledged, we, the said ASSIGNORS, have sold, assigned, transferred
and set over, and by these presents do hereby sell, assign, transfer and set
over, unto the said ASSIGNEE, its successors, legal representatives and assigns,
the entire right, title and interest in, to and under the said invention, and
the said United States application and all divisions, renewals and continuations
thereof, and all Patents of the United States which may be granted thereon and
all reissues and extensions thereof; and all applications for industrial
property protection, including, without limitation, all applications for
patents, utility models, and designs which may hereafter be filed for said
invention in any country or countries foreign to the United States, together
with the right to file such applications and the right to claim for the same the
priority rights derived from said United States application under the Patent
Laws of the United States, the International Convention for the Protection of
Industrial Property, or any other international agreement or the domestic laws
of the country in which any such application is filed, as may be applicable; and
all forms of industrial property protection, including, without limitation,
patents, utility models, inventors' certificates and designs which may be
granted for said invention in any country or countries foreign to the United
States and all extensions, renewals and reissues thereof;
AND WE HEREBY authorize and request the Commissioner of Patents and
Trademarks of the United States, and any Official of any country or countries
foreign to the United States, whose duty it is to issue patents or other
evidence or forms of industrial property protection on applications as
aforesaid, to issue the same to the said ASSIGNEE, its successors, legal
representatives and assigns, in accordance with the terms of this instrument.
AND WE HEREBY covenant and agree that we have full right to convey the
entire interest assigned, and that we have not executed, and will not execute,
any agreement in conflict herewith.
AND WE HEREBY further covenant and agree that we will communicate to the
said ASSIGNEE, its successors, legal representatives and assigns, any facts
known to us respecting said invention, and testify in any legal proceeding, sign
all lawful papers, execute all divisional, continuing, reissue and foreign
applications, make all rightful oaths, and generally do everything possible to
aid the said ASSIGNEE, its successors, legal representatives and assigns, to
obtain and enforce proper protection for said invention in all countries.
IN TESTIMONY WHEREOF, We hereunto set our hands and seals the day and year
set opposite our respective signatures.
Date 8/28/95 , 1995 /s/ Judith J. Wurtman L.S.
---------------------- -----------------------------------------
Judith J. Wurtman
Date 8/31/95 , 1995 /s/ Jeff L. Shear L.S.
---------------------- -----------------------------------------
Jeff L. Shear
Date 9/1/95 , 1995 /s/ Alvin Kershman L.S.
---------------------- -----------------------------------------
Alvin Kershman
State of MA )
) SS.:
County of Suffolk )
On this 28th day of August, 1995, before me, a Notary Public in and for the
State and County aforesaid, personally appeared Judith Wurtman, to me known and
known to me to be the person of that name, who signed and sealed the foregoing
instrument, and he acknowledged the same to be his free act and deed.
/s/ [Illegible]
-----------------------------------------
Notary Public
State of MO )
) SS.:
County of St. Louis )
On this 31st day of August, 1995, before me, a Notary Public in and for the
State and County aforesaid, personally appeared Jeff Shear, to me known and
known to me to be the person of that name, who signed and sealed the foregoing
instrument, and he acknowledged the same to be his free act and deed.
/s/
-----------------------------------------
Notary Public
State of MO )
) SS.:
County of St. Louis )
On this 1st day of September, 1995, before me, a Notary Public in and for
the State and County aforesaid, personally appeared Al Kershman, to me known and
known to me to be the person of that name, who signed and sealed the foregoing
instrument, and he acknowledged the same to be his free act and deed.
/s/
-----------------------------------------
Notary Public
<PAGE>
ASSIGNMENT
WHEREAS WALDEN LABORATORIES, INC. ("Walden") of 375 Park Avenue, 15th
Floor, New York, NY 10152, the current assignee, as evidenced by the Assignment
recorded April 11, 1994, with the United States Patent and Trademark Office on
Reel 693, Frames 0882-0884, of a certain new and useful invention as set forth
in an application for United States Letters Patent, entitled NOVEL THERAPEUTIC
CARBOHYDRATE BLENDS USEFUL FOR AIDING PREMENSTRUAL SYNDROME, filed on December
22, 1993, and identified by United States Serial No. 08/168,492;
AND WHEREAS, INTERNUTRIA, INC., a corporation of the State of Delaware and
having an address of One Ledgemont Center, 99 Hayden Avenue, Suite 340,
Lexington, MA 02173 is desirous of acquiring the entire right, title and
interest in and to said invention and in and to any and all Letters Patent of
the United States and foreign countries which may be obtained therefor;
NOW, THEREFORE, for good and valuable consideration, Walden does hereby
sell, assign, transfer and set over unto INTERNUTRIA, INC., its legal
representatives, successors, and assigns, the entire right, title and interest
in and to said invention as set forth in the above-mentioned application
including any continuations, continuations-in-part, divisions, reissues,
re-examinations or extensions thereof, and in and to any and all patents of the
United States and foreign countries which may be issued for said invention;
UPON SAID CONSIDERATIONS, Walden hereby agrees with the said assignee that
Walden will not execute any writing or do any act whatsoever conflicting with
these presents, and that Walden will, at any time upon request, without further
or additional consideration but at the expense of said assignee, execute such
additional assignments and other writings and do such additional acts as said
assignee may deem necessary or desirable to perfect the assignee's enjoyment of
this grant, and render all necessary assistance in making application for and
obtaining original, divisional, continuations, continuations-in-part,
reexamined, reissued, or extended Letters Patent of the United States or of any
and all foreign countries on said invention, and in enforcing any rights or
choses in action accruing as a result of such applications or patents, by giving
testimony in any proceedings or transactions involving such applications or
patents, and by executing preliminary statements and other affidavits, it being
understood that the foregoing covenant and agreement shall bind, and inure to
the benefit of the assigns and legal representatives of assignor and assignee;
AND Walden requests the Commissioner of Patents and Trademarks to issue any
Letters Patent of the United States which may be issued for said invention to
said INTERNUTRIA, INC., its legal representatives, successors or assigns, as the
sole owner of the entire right, title and interest in and to said patent and the
invention covered thereby.
- ----------------------- --------------------------------------------
Date By: WALDEN LABORATORIES, INC.
Name:
Title:
STATE OF ______________)
) SS:
COUNTY OF _____________)
On this ____________ day of ___________________, 19___, before me
personally appeared ____________________________, to me known to be the person
named in and who executed the above instrument, and acknowledged to me that
he/she executed the same for the uses and purposes therein set forth.
--------------------------------------------
S E A L Notary Public
My commission expires ______________________
<PAGE>
BILL OF SALE AND ASSIGNMENT
In consideration of the sum of Ten Dollars ($10.00) and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, Walden Laboratories, Inc. ("Seller")
hereby grants, bargains, sells and delivers to InterNutria, Inc. ("Purchaser"),
all of its rights, title and interest in and to the Assets, as defined in
Section 1.1 of the Asset Purchase Agreement dated as of December 27, 1995, among
Purchaser, Seller and Interneuron Pharmaceuticals, Inc. (the "Agreement").
This Bill of Sale is executed and delivered pursuant to the Agreement, to
which reference is made for additional provisions with respect to the sale and
assignments covered hereby. All representations and warranties applicable to
Seller with respect to the Assets are contained in the Agreement and are
subject to the terms and conditions relating thereto set forth therein. The
Assets are being sold to Purchaser "as is" without any express or implied
warranty or merchantability or fitness for any purpose except as set forth in
the Agreement.
The parties hereby agrees to execute and have executed all such further
bills of sale, assignments, instruments of transfer, and agreements as may be
reasonably necessary in order to transfer more fully and effectively the Assets.
All terms, covenants, representations, warranties and conditions herein
shall be for and inure to the benefit of and shall bind Seller, Purchaser and
their respective permitted successors and assigns.
IN WITNESS WHEREOF, this Bill of Sale has been executed and delivered as of
the _______ day of November, 1995.
Attest: WALDEN LABORATORIES, INC.
By: [Illegible] By: /s/ Carl Spana
- ----------------------------------- -----------------------------------
Name: Carl Spana
Title: President
ACCEPTED:
Attest: INTERNUTRIA, INC.
By: [Illegible] By: /s/ James Pomroy
- ----------------------------------- -----------------------------------
Name: James Pomroy
Title: Chairman
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
WALDEN LABORATORIES, INC.
The undersigned, being over the age of eighteen (18), in order to form a
corporation for the purposes hereinafter stated, under and pursuant to the
provisions of the General Corporation Law of the State of Delaware, does hereby
certify as follows:
FIRST: The name of the corporation is Walden Laboratories, Inc.
SECOND: The registered office of the Corporation is to be located at 32
Loockerman Square, Suite L-100 in the City of Dover, in the County of Kent, in
the State of Delaware. The name of its registered agent at that address is The
Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
FOURTH: (A)(1) The aggregate number of shares which the Corporation shall
have authority to issue is Twenty Five Million (25,000,000), of which Five
Million (5,000,000)
<PAGE>
shares, having a par value of $.01 per share, shall be designated "Preferred
Stock" and Twenty Million (20,000,000) shares, having a par value of $.001 per
share, shall be designated "Common Stock."
(2) Authority is hereby expressly granted to the Board of Directors from
time to time to issue the Preferred Stock as Preferred Stock of any series and,
in connection with the creation of each such series, to fix by the resolution or
resolutions providing for the issue thereof, the number of shares of such series
and the designations, powers, preferences, rights, qualifications, limitations
and restrictions of such series, to the full extent now or hereafter permitted
by the laws of the State of Delaware.
FIFTH: The name and address of the incorporator is Sherri Rosen and her
mailing address is c/o Bachner, Tally, Polevoy & Misher, 380 Madison Avenue, New
York, New York 10017.
SIXTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) The number of directors of the Corporation shall be such as from time
to time shall be fixed by, or in the
-2-
<PAGE>
manner provided, in the by-laws. Election of directors need not be by ballot,
unless the by-laws so provide.
(2) The stockholders of the Board of Directors of the Corporation shall
have the power, without the assent or vote of the stockholders:
(a) to make, alter, amend, change, add to or repeal the By-Laws of the
Corporation; to fix and vary the amount to be reserved for any proper
purpose; to authorize and cause to be executed mortgages and liens upon all
or any part of the property of the Corporation; to determine the use and
disposition of any surplus or net profits; and to fix the times for the
declaration and payment of dividends; and
(b) to determine from time to time whether, and to what extent, and at
what times and places, and under what conditions and regulations, the
accounts and books of the Corporation (other than the stock ledger) or any
of them, shall be open to the inspection of the stockholders.
(3) The directors in their discretion may submit any contract or act for
approval or ratification at any annual meeting of the stockholders or at any
meeting of the stockholders called for the purpose of considering any such act
or contract, and any contract or act that shall be approved or be ratified by
the vote of the holders of a majority of the stock of the Corporation which is
represented in person or by proxy at such meeting and entitled to vote thereat
(provided that a lawful quorum of stockholders be there represented in person or
by proxy) shall be as valid and a binding upon the Corporation and upon all the
stockholders as though it had been
-3-
<PAGE>
approved or ratified by every stockholder of the Corporation, whether or not the
contract or act would otherwise be open to legal attack because of directors'
interest, or for any other reason.
(4) In addition to the powers and authorities hereinfore or by statute
expressly conferred upon them, the directors are hereby empowered to exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation; subject, nevertheless, to the provisions of the statutes of
Delaware, of this certificate, and to any by-laws from time to time made by the
stockholders; provided however, that no by-laws so made shall invalidate any
prior act of the directors which would have been valid if such by-laws had not
been made.
SEVENTH: The Corporation shall indemnify and advance expenses to the
fullest extent permitted by Section 145 of the General Corporation Law of
Delaware, as amended from time to time, each person who is or was a director or
officer of the Corporation and the heirs, executors and administrators of such a
person.
EIGHTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or
-4-
<PAGE>
any class of them, any court of equitable jurisdiction within the State of
Delaware, may, on application in a summary way of the Corporation or of any
creditor or stockholder thereof or on the application of any receiver or
receivers appointed for the Corporation under the provisions of Section 291 of
Title 8 of the Delaware Code or on the application of trustees in dissolution or
of any receiver or receivers appointed for the Corporation under the provisions
of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors
or class of creditors, and/or of the stockholders or a class of stockholders of
the Corporation, as the case may be, to be summoned in such manner as the said
court directs. If a majority in number representing three-fourths in value of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of the Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of the Corporation, as the case
may be, and also on the Corporation.
NINTH: The personal liability of directors of the Corporation is hereby
eliminated to the fullest extent
-5-
<PAGE>
permitted by Section 102(b)(7) of the General Corporation Law of the State of
Delaware as the same may be amended and supplemented.
TENTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation in the manner now
or hereafter prescribed by law, and all rights and powers conferred herein on
stockholders, directors and officers are subject to this reserved power.
IN WITNESS THEREOF, I have hereunto signed my name and affirm that the
statements made herein are true under the penalties of perjury, this 18th day of
September, 1992.
/s/ Sherri Rosen
------------------------------------
Sherri Rosen
Bachner, Tally, Polevoy & Misher
380 Madison Avenue
New York, New York 10017
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<PAGE>
PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
DESIGNATION OF "WALDEN LABORATORIES, INC.", FILED IN THIS OFFICE ON THE
TWENTY-SIXTH DAY OF OCTOBER, A.D. 1992, AT 9 O'CLOCK A.M.
/s/ Edward J. Freel
------------------------------------
Edward J. Freel, Secretary of State
[Seal]
AUTHENTICATION: 7942204
DATE: 05-10-96
<PAGE>
CERTIFICATE OF DESIGNATION OF POWERS, DESIGNATIONS,
PREFERENCES AND RELATIVE PARTICIPATING, OPTIONAL
OR OTHER RIGHTS, OF SERIES A CONVERTIBLE
PREFERRED STOCK OF WALDEN LABORATORIES, INC.
a Delaware Corporation
(Pursuant to Section 151(g) of the General
Corporation Law of the State of Delaware)
------------------------
Walden Laboratories, a corporation organized and existing under the laws of
the State of Delaware, DOES HEREBY CERTIFY THAT:
FIRST: Walden Laboratories, Inc. (the "Corporation"), was incorporated in
the State of Delaware on September 18, 1992.
SECOND: Pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Corporation under the provisions of Section
151 of the General Corporation Law of the State of Delaware, on September 18,
1992, all of the Directors of the Corporation duly adopted, by written consent
pursuant to the provisions of Section 141(f) of the Delaware General Corporation
Law, the following resolution with the same force and effect as if same had been
adopted at a meeting of the Board of Directors duly called therefor, which
resolution is still in full force and effect and is not in conflict with any
provisions of the Certificate of Incorporation or By-Laws of the Corporation:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by Section 151 of the General Corporation Law
of the State of Delaware and in accordance with the provisions of its
Certificate of Incorporation, a class of preferred stock of the Corporation
to be known as Series A Convertible Preferred Stock, par value $.01 per
share (the "Series A Preferred Stock") is hereby created and provided for,
to be limited in amount to Two Million Five Hundred Thousand (2,500,000)
shares and the Board of Directors hereby fixes, states and expresses the
terms, designation, relative rights, preferences and limitations of such
class, which shall be filed with the Secretary of State of the State of
Delaware, in the particulars required by, but not specifically set forth,
in said Certificate of Incorporation, or any amendment thereto, as follows:
<PAGE>
(B) Series A Convertible Preferred Stock. A series of Preferred Stock is
hereby created to be limited in amount to 2,500,000 shares of the
authorized but unissued Preferred Stock of the Corporation. The
designations, powers, preferences, rights, qualifications, limitations, and
restrictions of this series, are as follows:
(1) Designation of Series. The designation of the series of preferred
stock created hereby shall be Series A Convertible Preferred Stock, par
value $.01 per share (the "Series A Preferred Stock"). The shares of the
Series A Preferred Stock shall be fully paid and non-assessable. The number
of shares of Series A Preferred Stock may be decreased (but not below the
number of shares then outstanding) or increased by a certificate executed,
acknowledged, filed, and recorded in accordance with the General
Corporation Law of the State of Delaware setting forth a statement that a
specified decrease or increase thereof, as the case may be, had been
authorized and directed by a resolution or resolutions adopted by the Board
of Directors pursuant to authority expressly vested in it by the provisions
of the Certificate of Incorporation of the Corporation.
(2) Dividend Provisions. The holders of the shares of Series A
Preferred Stock shall be entitled to receive dividends when and as declared
by the Board of Directors; provided, however, that no dividends shall be
declared or paid on the Common Stock during any fiscal year unless the
Board of Directors during such fiscal year shall have declared and made
payment of a dividend on the Series A Preferred Stock, which dividend shall
be greater than or equal to the dividend declared and paid on the Common
Stock.
(3) Conversion. The holders of the Series A Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Subject to subsection 3(c), each share of Series
A Preferred Stock shall be convertible, at the option of the holder
thereof, at any time after the date of issuance of such share, at the
office of this Corporation or any transfer agent for the Series A
Preferred Stock, into such number of fully paid and nonassessable
shares of Common Stock as is determined by dividing the Original
Series A Issue Price, which is $2.00 per share, by the
-2-
<PAGE>
Conversion Price at the time in effect for such share (the "Conversion
Price"). The initial Conversion Price per share for shares of Series A
Preferred Stock shall be $2.00; provided, however, that the Conversion
Price shall be subject to adjustment as set forth in subsection 3(c).
(b) Mechanics of Conversion. Before any holder of Series A Preferred
Stock shall be entitled to convert the same into shares of Common
Stock, it shall surrender the certificate or certificates therefor,
duly endorsed, at the office of this Corporation or of any transfer
agent for Series A Preferred Stock, and shall give written notice by
mail, postage prepaid, to this Corporation at its principal corporate
office, of the election to convert the same and shall state therein
the name or names in which the certificate or certificates for shares
of Common Stock are to be issued. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such
holder of the Series A Preferred Stock, or to the nominee or nominees
of such holder, a certificate or certificates for the number of shares
of Common Stock to which such holder shall be entitled as aforesaid.
Such conversion shall be deemed to have been made immediately prior to
the close of business on the date of such surrender of the shares of
the Series A Preferred Stock to be converted, and the person or
persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder
or holders of such shares of Common Stock as of such date.
(c) Conversion Price Adjustments of Preferred Stock. The Conversion
Price of the Series A Preferred Stock shall be subject to adjustment
from time to time as follows:
(i) In the event the Corporation should at any time or from time
to time after the issue date of the Series A Preferred Stock
effect a split or subdivision of the outstanding shares of Common
Stock or the determination of holders of Common Stock entitled to
receive a dividend or other distribution payable in additional
shares of Common Stock or other securities or rights convertible
into, or entitling the holder
-3-
<PAGE>
thereof to receive directly or indirectly, additional shares of
Common Stock (hereinafter referred to as "Common Stock
Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock
issuable upon conversion or exercise thereof), then, as of such
record date (or the date of such dividend distribution, split or
subdivision if no record date is fixed), the Conversion Price
shall be appropriately decreased to an amount equal to the
Conversion Price in effect on the record date (or the date of
such dividend, distribution, split or subdivision) multiplied by
a fraction, the numerator of which shall be the number of shares
outstanding before the dividend, subdivision, distribution or
split and the denominator of which shall be the number of shares
outstanding after the dividend, subdivision or split.
(ii) If the number of shares of Common Stock outstanding at any
time after the issue date of the Series A Preferred Stock is
decreased by a combination of the outstanding shares of Common
Stock, then, following the record date of such combination, the
Conversion Price for such Preferred Stock shall be appropriately
increased to an amount equal to the Conversion Price in effect on
the record date (or the date of such combination) multiplied by a
fraction, the numerator of which shall be the number of shares
outstanding before the combination and, the denominator of which
shall be the number of shares outstanding after the combination.
(iii) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of
at least .05% in the Conversion Price; provided, however, that
any adjustments which by reason of this subparagraph (iii) are
not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under
subparagraph (c) of this Section (3)
-4-
<PAGE>
shall be made to the nearest cent or to the nearest one hundredth
of a share, as the case may be.
(iv) No fractional shares or scrip representing fractional shares
of Common Stock shall be issued upon conversion of Series A
Preferred Stock. Instead of any fractional share of Common Stock
which would otherwise be issuable upon conversion of Series A
Preferred Stock (or specified portions thereof), the Corporation
shall pay in cash to the holders of such Series A Preferred Stock
in respect of such fraction of a share, an amount equal to the
same fraction of the fair market value per share of Common Stock
as determined by the Board of Directors in its sole discretion.
(d) Mergers and Consolidations. In the case of any consolidation or
any merger of the Corporation with or into another Corporation (other
than a consolidation or merger in which the Corporation is the
continuing corporation), the corporation resulting from such
consolidation or surviving such merger shall make suitable provision
so that the Series A Preferred Stock shall thereafter be convertible
into the kind and amount of shares of stock, other securities, or
property receivable upon such consolidation or merger by a holder of
the number of shares of Common Stock into which such Series A
Preferred Stock might have been converted immediately prior to such
consolidation or merger. The provisions of this subsection shall apply
to successive consolidations and mergers.
(e) Recapitalization. In the case of a recapitalization of the
Corporation affecting its outstanding shares of Common Stock, each
share of Series A Preferred Stock shall thereafter be convertible into
the kind and amount of shares of stock, other securities, or property
receivable upon such recapitalization by a holder of the number of
shares of Common Stock into which such Series A Preferred Stock might
have been converted immediately prior to such recapitalization.
(f) Automatic Conversion. In the event of either (i) an initial public
offering ("IPO") of the
-5-
<PAGE>
Corporation's equity securities or (ii) the achievement by the Company
of a net worth (which for the purpose hereof shall mean the amount by
which the Company's assets exceed liabilities) equal to or greater
than $10,000,000 (the "Net Worth"), each share of Series A Preferred
Stock shall be automatically converted at the closing of the IPO or
achievement of the Net Worth, without any action by the holder
thereof, into shares of duly authorized, fully paid and non-assessable
shares of Common Stock at the Conversion Rate, subject to adjustment
as provided in subparagraph (c) of this Section (3), plus cash in lieu
of fractional shares.
(g) No Impairment. This Corporation will not by amendment of its
Certificate of Incorporation of through any reorganization,
recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation,
but will at all times in good faith assist in the carrying out of all
the provisions of this Section 3 and in the taking of all such action
as may be necessary or appropriate in order to protect the Conversion
Rights of the holders of the Series A Preferred Stock against
impairment.
(h) Certificates as to Adjustment. Upon the occurrence of each
adjustment or readjustment of the Conversion Price of Series A
Preferred Stock pursuant to this Section 3, the Corporation, at its
expense, shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to each
holder of Series A Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Corporation shall, upon
the written request at any time of any holder of Series A Preferred
Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (a) such adjustment and readjustment, (b)
the Conversion Price at the time in effect, and (c) the number of
shares of Common Stock and the amount, if any, of other property which
at the time would be received upon the conversion of a share of the
Series A Preferred Stock.
-6-
<PAGE>
(i) Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of Series A Preferred Stock,
such number of its shares of Common Stock as shall from time to time
to be sufficient to effect the conversion of all outstanding shares of
the Series A Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series
A Preferred Stock, in addition to the other remedies as shall be
available to the holder of such Series A Preferred Stock, the
Corporation will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient
for such purposes.
(4) Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of this
Corporation, either voluntary or involuntary, the holders of Series A
Preferred Stock shall be entitled to receive, and prior and in
preference to any distribution of any of the assets of this
Corporation to the holders of Common Stock, if any, by reason of their
ownership thereof, an amount per share equal to the sum of $2.00 for
each outstanding share of Series A Preferred Stock and all accrued but
unpaid dividends per share since the date of issuance of any Series A
Preferred Stock, and no more; provided, however, that the holders of
the Series A Preferred Stock shall be given prior written notice of
any such liquidation, dissolution or winding up of the Corporation of
at least ten business days during which such holders may exercise the
conversion rights under Section 3 hereof. If such notice of the Series
A Preferred Stock shall be entitled to receive the amount that such
holders would have received had their shares been converted
immediately prior to liquidation, dissolution or winding up of the
amount payable under the first sentence of this subsection.
-7-
<PAGE>
(b) A consolidation or merger of this Corporation with or into any
other corporation or corporations, or a sale, conveyance or
disposition of all or substantially all of the assets of this
Corporation or the effectuation by the Corporation of a transaction or
series of related transactions in which more than 50% of the voting
power of the Corporation is disposed of, shall not be deemed to be a
liquidation, dissolution or winding up within the meaning of this
Section 2, but shall instead be treated pursuant to subsection 3(e)
hereof.
(5) Preferred Stock--General Voting Rights. The holder of each share
of Series A Preferred Stock shall be entitled to vote on all matters and
shall be entitled to the number of votes equal to the largest number of
full shares of Common Stock into which such shares of Series A Preferred
Stock could be converted, pursuant to the provisions of Section 3 hereof,
at the record date for the determination of the shareholders entitled to
vote on such matters or, if no such record date is established, at the date
such vote is taken or any written consent of shareholders is solicited.
Except as required by law or as set forth in Section (6) below, the holders
of shares of Series A Preferred Stock and Common Stock shall vote together
and not as separate classes.
(6) Protective Provisions. So long as shares of Series A Preferred
Stock are outstanding, this Corporation shall not without first obtaining
the approval (by vote or written consent, as provided by law) of the
holders of at least a majority of the then outstanding shares of Series A
Preferred Stock voting seperately as a class:
(a) alter or change the rights, preference or privileges of the shares
of such Series A Preferred Stock so as to affect adversely the shares;
or
(b) increase the authorized number of shares of Series A Preferred
Stock.
(7) Notices. Any notice required by these provisions to be given to
the holders of shares of Series A Preferred Stock shall be deemed given if
sent U.S. certified mail, return receipt requested and postage prepaid, or
by overnight courier and addressed to each holder of record at its address
appearing on
-8-
<PAGE>
the books of the Corporation. The date of any such notice shall be deemed
to be the date on which it is received.
IN WITNESS WHEREOF, the undersigned have executed this Certificate in the
name and on behalf of Walden Laboratories, Inc. on the 22nd day of October, 1992
and the statements contained herein are affirmed as true under penalties of
perjury.
WALDEN LABORATORIES, INC.
By: /s/ Dayne R. Myers
-----------------------
Dayne R. Myers
President
ATTEST:
By: /s/ Judith Wurtman
-----------------------
Judith Wurtman, Ph.D.
Secretary
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<PAGE>
PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF OWNERSHIP,
WHICH MERGES:
"APPEX TECHNOLOGIES, INC.", A NEW YORK CORPORATION, WITH AND INTO "WALDEN
LABORATORIES, INC." UNDER THE NAME OF "WALDEN LABORATORIES, INC.", A CORPORATION
ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE, AS RECEIVED AND
FILED IN THIS OFFICE THE TWENTY-SIXTH DAY OF OCTOBER, A.D. 1992, AT 9:01 O'CLOCK
A.M.
/s/ Edward J. Freel
------------------------------------
Edward J. Freel, Secretary of State
[Seal]
AUTHENTICATION: 7942205
DATE: 05-10-96
<PAGE>
CERTIFICATE OF OWNERSHIP AND MERGER
of
APPEX TECHNOLOGIES, INC.
(a New York corporation)
into
WALDEN LABORATORIES, INC.
(a Delaware corporation)
It is hereby certified that:
1. APPEX Technologies, Inc. (hereinafter called the "Corporation") is a
corporation of the State of New York, the laws of which permit a merger of a
corporation of that jurisdiction with a corporation of another jurisdiction.
2. The corporation hereby merges itself into WALDEN LABORATORIES, INC., a
corporation of the State of Delaware.
3. The following is a copy of the resolutions adopted on the 18th day of
September, 1992, by the Board of Directors of the Corporation to merge the
Corporation into WALDEN LABORATORIES, INC.:
RESOLVED, that the Corporation reincorporate in the State of Delaware
by merging itself, as one-hundred percent owner and sole shareholder, into
its wholly-owned subsidiary, WALDEN LABORATORIES, INC. pursuant to the laws
of the State of New York and the State of Delaware as hereinafter provided,
so that the separate existence of the Corporation shall cease as soon as
the merger shall become effective, and thereupon the Corporation and WALDEN
LABORATORIES, INC. will become a single corporation, which shall continue
to exist under, and be governed by, the laws of the State of Delaware; and
it is further
RESOLVED, that an Agreement and Plan of Merger setting forth the terms
and conditions of the proposed merger be submitted to the shareholders of
the Corporation for their approval; and it is further
RESOLVED that the terms and conditions of the proposed merger are as
follows:
(a) From and after the effective time of the merger, all of the
estate, property, rights,
<PAGE>
privileges, powers, and franchises of the Corporation shall become vested
in and be held by WALDEN LABORATORIES, INC. as fully and entirely and
without change or diminution as the same were before held and enjoyed by
the Corporation, and WALDEN LABORATORIES, INC. shall assume all of the
obligations of the Corporation.
(b) No pro rata issuance of the shares of stock of WALDEN
LABORATORIES, INC. which are owned by the Corporation immediately prior to
the effective time of the merge shall be made, and such shares shall be
surrendered and extinguished.
(c) Each share of Common Stock, $.001 par value, and each share of
Preferred Stock, $.01 par value, of the Corporation which shall be issued
and outstanding immediately prior to the effective time of the merger shall
be converted on a one for one basis into the issued and outstanding shares
of Common Stock, $.001 par value or Preferred Stock, $.01 par value, as the
case may be, of WALDEN LABORATORIES, INC., and, from and after the
effective time of the merger, the holder of all of said issued and
outstanding shares of Common Stock or Preferred Stock of the Corporation
shall automatically be and become the holder of shares of WALDEN
LABORATORIES, INC. upon the basis above specified, whether or not
certificates representing said shares are then issued and delivered. Each
share of Common Stock or Preferred Stock of the Corporation which shall be
issued and held by it as treasury shares immediately prior to the effective
time of the merger shall be converted into the shares of WALDEN
LABORATORIES, INC. and shall be held in the treasury of WALDEN
LABORATORIES, INC. until sooner disposed of. In addition, any and all
options to purchase Common Stock of the Corporation shall, upon the
effective date of the merger, be converted into options to purchase Common
Stock of WALDEN LABORATORIES, INC.
(d) After the effective time of the merger, each holder of record of
any outstanding certificate or certificates theretofore representing Common
Stock or Preferred Stock of the Corporation may surrender the same to
WALDEN LABORATORIES, INC. and such holder shall be entitled upon such
surrender to receive in exchange therefor a certificate of certificates
representing the appropriate number of shares of Common Stock or Preferred
Stock, as the case may be, of WALDEN LABORATORIES, INC. Until so
surrendered, each outstanding certificate, which prior to the
-2-
<PAGE>
effective time of the merger represented one or more shares of Common Stock
or Preferred Stock of the Corporation, shall be deemed for all corporate
purposes to evidence ownership of an appropriate number of shares of Common
Stock or Preferred Stock, as the case may be, of WALDEN LABORATORIES, INC.
(e) Authority is hereby expressly granted to the Board of Directors
from time to time to issue the Preferred Stock as Preferred Stock of any
series and, in connection with the creation of each such series, to fix by
the resolution or resolutions providing for the issue of shares thereof,
the number of shares of such series and the designations, powers,
preferences, rights, qualifications, limitations and restrictions of such
series, to the full extent now or hereafter permitted by the laws of the
State of Delaware.
(f) From and after the effective time of the merger, the Certificate
of Incorporation and By-laws of WALDEN LABORATORIES, INC. shall continue to
be the Certificate of Incorporation and By-laws of WALDEN LABORATORIES,
INC. as in effect immediately prior to such effective time.
(g) The members of the Board of Directors and officers of the
Corporation shall be the members of the Board of Directors and the
corresponding officers of WALDEN LABORATORIES, INC. immediately before and
after the effective time of the merger.
(h) From and after the effective time of the merger, the assets and
liabilities of the Corporation and of WALDEN LABORATORIES, INC. shall be
entered on the books of WALDEN LABORATORIES, INC. at the amounts at which
they shall be carried at such time on the respective books of the
Corporation and of WALDEN LABORATORIES, INC., subject to such
inter-corporate adjustments or eliminations, if any, as may be required to
give effect to the merger; and, subject to such action as may be taken by
the Board of Directors of WALDEN LABORATORIES, INC., in accordance with
generally accepted accounting principles, the capital and surplus of the
Corporation shall be equal to the capital and surplus of the Corporation
and of WALDEN LABORATORIES, INC.
RESOLVED that the effective time of the Certificate of Ownership and
Merger setting forth a copy of these resolutions shall be the date of
filing the Certificates of Ownership and Merger with the
-3-
<PAGE>
Secretary of State of Delaware, and that, insofar as the General
Corporation Law of the State of Delaware shall govern the same, said time
shall be the effective merger time; and it is further
RESOLVED that the proper officers of the Corporation be and they
hereby are authorized and directed to make and execute a Certificate of
Ownership and Merger setting forth a copy of these resolutions to merge the
Corporation into WALDEN LABORATORIES, INC. on the date of adoption thereof,
and the cause the same to be filed and recorded as provided by law, and to
do all acts and things whatsoever, within the States of New York and
Delaware and in any other appropriate jurisdiction, necessary or proper to
effect this merger.
4. The proposed merger herein certified has been adopted, approved,
certified, executed, and acknowledged by the Corporation in accordance with the
laws under which it is organized.
Signed and attested to on October 22, 1992.
Attested to:
/s/ Judith Wurtman /s/ Dayne R. Myers
- ------------------------------ ----------------------------
Judith Wurtman, Ph.D. Dayne R. Myers
Secretary President
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
BE IT REMEMBERED, that, on October 22, 1992, before me, a Notary Public
duly authorized by law to take acknowledgment of deeds, personally came Dayne R.
Myers, Chairman of the Board of APPEX Technologies, Inc, and Judith Wurtman,
Ph.D., Secretary of APPEX Technologies, Inc., who duly signed the foregoing
instrument before me and acknowledged that such instrument as executed is the
act and deed of said corporation, that their signing is their act and deed, and
that the facts stated therein are true.
GIVEN under my hand on October 22, 1992.
/s/ Sherri Rosen
------------------------------------
Notary Public
SHERRI ROSEN
Notary Public, State of New York
No. [ILLEGIBLE]
Qualified in Queens County
Certificate Filed in New York County
Term Expires December 31, 1992
-4-
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
CERTIFICATE OF INCORPORATION
OF WALDEN LABORATORIES, INC.
Pursuant to Section 242 of the
General Corporation Law of the
State of Delaware
WALDEN LABORATORIES, INC., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY THAT:
1. The name of the Corporation is WALDEN LABORATORIES, INC.
2. The original Certificate of Incorporation of the Corporation was filed
under the name Walden Laboratories, Inc., with the Secretary of State of the
State of Delaware on September 18, 1992, and amended on October 26, 1992.
3. The Certificate of Incorporation of the Corporation, as heretofore
amended, is hereby amended as follows:
Section 4 of the Certificate of Designation of Powers, Designations,
Preferences and Relative Participating, Optional or Other Rights, of Series A
Convertible Preferred Stock of the Corporation is hereby amended to read as
follows in its entirety:
"In the event of any liquidation, dissolution or winding up of this
Company, either voluntary or involuntary, the holders of Series A Preferred
Stock shall be entitled to receive, and prior and in preference to any
distribution of any of the assets of this Company to the holders of Common
Stock, if any, by reason of their ownership thereof, an amount per share equal
to the sum of $2.00 for each outstanding share of Series A Preferred Stock and
all accrued but unpaid dividends per share since the date of issuance of any
Series A Preferred Stock, and no more; provided, however, that (A) at the time
of the first installment distribution of shares of common stock of Interneuron
Pharmaceuticals, Inc. ("IPI") (or cash in lieu thereof), to the holders of the
Series A Preferred Stock in connection with the transactions contemplated by the
Asset Purchase Agreement dated November 12, 1995 (the "Asset Purchase
Agreement"), by and among
<PAGE>
to the immediately preceding clause (A), shall be further reduced to $.2304;
provided further, however, (1) that if at the time of each such installment, any
of the Company's indebtedness outstanding on the Closing Date (as defined in the
Asset Purchase Agreement) is then due and payable, then to the extent the
Company causes such indebtedness to be paid or provided for by redirecting a
portion of the common stock of IPI to satisfy such indebtedness, the amount paid
to the holders of Series A Preferred Stock, and the related reductions in the
liquidation preference pursuant to clauses (A) and (B) above, shall be
appropriately reduced; and (2) the holders of the Series A Preferred Stock shall
be given prior written notice of any such liquidation, dissolution or winding up
of the Company of at least 10 business days during which such holders may
exercise the conversion rights under Section 3 hereof. If such notice is not
given or is not feasible, the holders of the Series A Preferred Stock shall be
entitled to receive the amount that such holders would have received had their
shares been converted immediately prior to liquidation, dissolution or winding
up of the Company, is such amount is greater than the amount payable under the
first sentence of this subsection.".
4. This Certificate of Amendment and the amendments provided for herein
shall become effective at, and not until, 10:00 a.m. (Delaware time) on December
22, 1995.
5. The foregoing amendment was duly adopted in accordance with Section 242
of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Walden Laboratories, Inc. has caused this Certificate
of Amendment to be signed this December 21, 1995.
by
/s/ Lindsay A. Rosenwald
------------------------------------
Name: Lindsay A. Rosenwald
Title: Chairman
Attest:
by
/s/ Michael S. Weiss
- ------------------------------------
Name: Michael S. Weiss
Title: Secretary
<PAGE>
PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF RENEWAL OF
"WALDEN LABORATORIES, INC." , FILED IN THIS OFFICE ON THE TWENTY-SIXTH DAY OF
MARCH, A.D. 1996, AT 1:30 O'CLOCK P.M.
/s/ Edward J. Freel
------------------------------------
Edward J. Freel, Secretary of State
[Seal]
AUTHENTICATION: 7942207
DATE: 05-10-96
<PAGE>
CERTIFICATE
FOR RENEWAL AND REVIVAL OF CERTIFICATE OF INCORPORATION
Walden Laboratories, Inc., a corporation organized under the laws of Delaware,
the Certificate of Incorporation of which was filed in the office of the
Secretary of State on the 18th day of September, 1992 and thereafter forfeited
pursuant to Section 136(c) of the General Corporation Law of Delaware for
non-payment of taxes, now desiring to procure a revival of its Certificate of
Incorporation, hereby certified as follows:
1. The name of the corporation is Walden Laboratories, Inc.
2. Its registered office in the State of Delaware is located at Corporation
Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle and
the name of its registered agent at such address is THE CORPORATION TRUST
COMPANY.
3. The date when revival of the Certificate of Incorporation of this
corporation is to commence is the 29th day of February 1996, the same being
prior to the date of the forfeiture of the Certificate of Incorporation. Revival
of the Certificate of Incorporation is to be perpetual.
4. This corporation was duly organized under the laws of Delaware and
carried on the business authorized by its Certificate of Incorporation until the
1st day of March, 1996, at which time is Certificate of Incorporation became
forfeited for non-payment of taxes and this Certificate for Renewal and Revival
is filed by authority of the duly elected directors of the corporation in
accordance with the laws of Delaware.
<PAGE>
IN WITNESS WHEREOF, said Walden Laboratories, Inc., in compliance with
Section 313 of the General Corporation Law of Delaware has caused this
Certificate to be signed by Michael S. Weiss, its acting Secretary, this 26th
day of March, 1996.
WALDEN LABORATORIES, INC.
By /s/ Michael S. Weiss
-----------------------
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
CERTIFICATE OF INCORPORATION
OF WALDEN LABORATORIES, INC.
Pursuant to Section 242 of the
General Corporation Law of the
State of Delaware
WALDEN LABORATORIES, INC., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY THAT:
1. The name of the Corporation is WALDEN LABORATORIES, INC.
2. The original Certificate of Incorporation of the Corporation was filed
under the name Walden Laboratories, Inc., with the Secretary of State of the
State of Delaware on September 18, 1992, and amended on October 26, 1992 and
December 21, 1995.
3. ARTICLE FIRST of the Certificate of Incorporation as heretofore amended
is hereby amended to read as follows in its entirety:
"FIRST. The name of the corporation is AVAX Technologies, Inc."
4. The foregoing amendment was duly adopted in accordance with Section 242
of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Walden Laboratories, Inc. has caused this Certificate
of Amendment to be signed this March 25, 1996.
WALDEN LABORATORIES, INC.
by
/s/ Carl Spana
------------------------------------
Name: Carl Spana
Title: President
Attest:
by
/s/ Michael S. Weiss
- ------------------------------------
Name: Michael S. Weiss
Title: Secretary
<PAGE>
CERTIFICATE OF CORRECTION FILED
TO CORRECT A CERTAIN ERROR IN
THE CERTIFICATE OF AMENDMENT TO
THE CERTIFICATE OF INCORPORATION OF
AVAX TECHNOLOGIES, INC.
FILED IN THE OFFICE OF THE SECRETARY OF STATE
OF DELAWARE ON DECEMBER 21, 1995
Avax Technologies, Inc. (f/k/a Walden Laboratories, Inc.) (the "Company"),
a corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware ("GCL"), hereby certifies that:
1. The name of the corporation is AVAX Technologies, Inc.
2. That a Certificate of Amendment to the Certificate of Incorporation of
the Company was filed with the Secretary of State of Delaware on December 21,
1995 and that said Certificate required correction as permitted by Section 103
of the GCL.
3. The defect of the said Certificate to be corrected is as follows:
the 12th through the 16th lines of the section to be amended, Section 4,
were inadvertently omitted.
4. Article 3, containing Section 4 of the Certificate is corrected to read
as follows:
3. The Certificate of Incorporation of the Corporation, as heretofore
amended, is hereby amended as follows:
Section 4 of the Certificate of Designation of Powers, Designations,
Preferences and Relative Participating, Optional or Other Rights, of Series A
Convertible Preferred Stock of the Corporation is hereby amended to read as
follows in its entirety:
"In the event of any liquidation, dissolution or winding up of this
Company, either voluntary or involuntary, the holders of Series A Preferred
Stock shall be entitled to receive, and prior and in preference to any
distribution of any of the assets of this Company to the holders of Common
Stock, if any, by reason of their ownership thereof, an amount per share equal
to the sum of $2.00 for each outstanding share of Series A Preferred Stock and
all accrued but unpaid dividends per share since the date of issuance of any
Series A Preferred Stock, and no more; provided, however, that (A) at the time
of the first installment distribution of shares of common stock of Interneuron
Pharmaceuticals, Inc. ("IPI") (or cash in lieu thereof), to the holders of the
Series A Preferred Stock in connection with the transactions contemplated by the
Asset Purchase Agreement dated November 14, 1995 (the "Asset Purchase
Agreement"), by and among the Company, IPI and InterNutria, Inc., a subsidiary
of IPI (such transactions, the "Sale"), the $2.00 amount referred to above shall
be reduced to $1.1523, and (B) at the time of the
<PAGE>
2
second installment distribution of shares of common stock of IPI (or cash in
lieu thereof) to the holders of the Series A Preferred Stock in connection with
the Sale, the $2.00 amount referred to above, which shall previously have been
reduced to $1.1523 pursuant to the immediately preceding clause (A), shall be
further reduced to $.2304; provided further, however, (1) that if at the time of
each such installment, any of the Company's indebtedness outstanding on the
Closing Date (as defined in the Asset Purchase Agreement) is then due and
payable, then to the extent the Company causes such indebtedness to be paid or
provided for by redirecting a portion of the common stock of IPI to satisfy such
indebtedness, the amount paid to the holders of Series A Preferred Stock, and
the related reductions in the liquidation preference pursuant to clauses (A) and
(B) above, shall be appropriately reduced; and (2) the holders of the Series A
Preferred Stock shall be given prior written notice of any such liquidation,
dissolution or winding up of the Company of at least 10 business days during
which such holders may exercise the conversion rights under Section 3 hereof. If
such notice is not given or is not feasible, the holders of the Series A
Preferred Stock shall be entitled to receive the amount that such holders would
have received had their shares been converted immediately prior to liquidation,
dissolution or winding up of the Company, if such amount is greater than the
amount payable under the first sentence of this subsection."
IN WITNESS WHEREOF, the Company has caused this Certificate to be signed by
Carl Spana, its interim President attested by Michael S. Weiss, its Secretary,
this 14th day of May 1996.
By
/s/ Carl Spana
------------------------------------
Name: Carl Spana
Title: Interim President
ATTEST:
By
/s/ Michael S. Weiss
- ------------------------------------
Name: Michael S. Weiss
Title: Secretary
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
CERTIFICATE OF INCORPORATION
OF AVAX TECHNOLOGIES, INC.
Pursuant to Section 242 of the
General Corporation Law of the
State of Delaware
AVAX TECHNOLOGIES, INC., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY THAT:
1. The name of the Corporation is AVAX TECHNOLOGIES, INC.
2. The original Certificate of Incorporation of the Corporation was filed
under the name Walden Laboratories, Inc., with the Secretary of State of the
State of Delaware on September 18, 1992, and amended on October 26, 1992,
December 21, 1995 and March 26, 1996.
3. The Certificate of Incorporation of the Corporation, as heretofore
amended, is hereby amended as follows:
Article 4(A)(1) is hereby amended to read in its entirety as follows:
"FOURTH: (A)(1) The aggregate number of shares which the Corporation
shall have authority to issue is Fifty Five Million (55,000,000), of which
Five Million (5,000,000) shares, having a par value of $.01 per share,
shall be designated "Preferred Stock" and Fifty Million (50,000,000)
shares, having a par value of $.002 per share, shall be designated "Common
Stock.
Upon the foregoing amendment becoming effective, each share of common
stock, par value $0.001 per share ("Common Stock"), of the Corporation,
outstanding immediately prior to the effectiveness of this Certificate of
Amendment shall be reclassified as, and become, one half (1/2) of a share
of Common Stock of the Corporation and the number of shares of Common Stock
of the Corporation represented by each stock certificate representing
Common Stock of the Corporation outstanding immediately prior to the
effectiveness of this Certificate of Amendment shall be proportionately
adjusted by dividing each such number by 2, with each share thereupon
having a par value of $.002."
<PAGE>
4. The foregoing amendment was duly adopted in accordance with Section 228
of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, AVAX Technologies, Inc. has caused this Certificate of
Amendment to be signed this May 9, 1996.
by
/s/ Carl Spana
-------------------------
Name: Carl Spana
Title: President
Attest:
by
/s/ Michael S. Weiss
- ------------------------------------
Name: Michael S. Weiss
Title: Secretary
<PAGE>
CERTIFICATE OF DESIGNATIONS
of
SERIES B CONVERTIBLE PREFERRED STOCK
of
AVAX TECHNOLOGIES, INC.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
AVAX TECHNOLOGIES, INC., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), does hereby certify that,
pursuant to the authority conferred on the Board of Directors of the Corporation
by the Certificate of Incorporation of the Corporation and in accordance with
Section 151 of the General Corporation Law of the State of Delaware, the Board
of Directors of the Corporation adopted the following resolution establishing a
series of 250,000 shares of Preferred Stock of the Corporation designated as
"Series B Convertible Preferred Stock":
RESOLVED, that pursuant to the authority conferred on the Board of
Directors of this Corporation by the Certificate of Incorporation, as
amended, a series of Preferred Stock, par value $.01 per share, of the
Corporation is hereby established and created, and that the designation and
number of shares thereof and the voting and other powers, preferences and
relative, participating, optional or other rights of the shares of such
series and the qualifications, limitations and restrictions thereof are as
follows:
Series B Convertible Preferred Stock
1. Designation and Amount. There shall be a series of Preferred Stock
designated as "Series B Convertible Preferred Stock" and the number of shares
constituting such series shall be 250,000. Such series is referred to herein as
the "Series B Convertible Preferred Stock". Such number of shares may be
increased or decreased by resolution of the Board of Directors of the
Corporation; provided, however, that no decrease shall reduce the number of
shares of Series B Convertible Preferred Stock to less than the number of shares
then issued and outstanding.
2. Dividends. Subject to the prior and superior rights of the holders of
any shares of any series of Preferred Stock ranking prior and superior to the
shares of Series B Convertible Preferred Stock with respect to dividends and
distributions, the holders of shares of Series B Convertible Preferred Stock,
shall be entitled to receive dividends and distributions, when, as and if
declared by the Board of Directors out of funds legally available for such
purpose. If the Corporation declares a dividend or distribution on the common
stock, par value $.001 per share (the "Common Stock"), of the Corporation, the
holders of shares of Series B Convertible Preferred Stock shall be entitled to
receive for each share of Series B Convertible Preferred Stock a dividend or
distribution in the amount of the dividend or distribution that would be
received by a holder of the Common Stock into which such share of Series B
<PAGE>
Convertible Preferred Stock is convertible on the record date for such dividend
or distribution. If the Corporation declares a dividend or distribution on any
other class or series of preferred stock, the holders of shares of Series B
Convertible Preferred Stock shall be entitled to receive a dividend or
distribution in an amount per share in proportion to the dividend or
distribution declared on a share of such other class or series based upon the
liquidation preference of a share of the Series B Convertible Preferred Stock
relative to that of a share of such other class or series, unless the holders of
at least 66-2/3% of the outstanding shares of Series B Convertible Preferred
Stock consent otherwise. In any such case, the Corporation shall declare a
dividend or distribution on the Series B Convertible Preferred Stock at the same
time that it declares a dividend or distribution on the Common Stock or such
other class or series of preferred stock and shall establish the same record
date for the dividend or distribution on the Series B Convertible Preferred
Stock as is established for such dividend or distribution on the Common Stock or
such other class or series of preferred stock. Each such dividend or
distribution will be payable to holders of record of the Series B Convertible
Preferred Stock as they appeared on the records of the Corporation at the close
of business on the record date declared for such dividend or distribution, as
shall be fixed by the Board of Directors. If the corporation declares or pays a
dividend or distribution on the Series B Convertible Preferred Stock as a result
of the declaration or payment of a dividend or distribution on the Common Stock
or any other class or series of preferred stock as described above, the holders
of the Series B Convertible Preferred Stock shall not be entitled to any
additional dividend or distribution solely because such first dividend or
distribution also required the declaration or payment of a dividend or
distribution on any other class or series of preferred stock. Any reference to
"distribution" contained in this Section 2 shall not be deemed to include any
distribution made in connection with any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary.
3. Liquidation Preference. In the event of (i) a liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, (ii) s sale
or other disposition of all or substantially all of the assets of the
Corporation or (iii) any consolidation, merger, combination, reorganization or
other transaction in which the Corporation is not the surviving entity or the
shares of Common Stock constituting in excess of 50% of the voting power of the
Corporation are exchanged for or changed into other stock or securities, cash
and/or any other property (a "Merger Transaction") (subparagraphs (i), (ii) and
(iii) being collectively referred to as a "Liquidation Event"), after payment or
provision for payment of debts and other liabilities of the Corporation, the
holders of the Series B Convertible Preferred Stock then outstanding shall be
entitled to be paid out of the assets of the Corporation available for
distribution to its shareholders, whether such assets are capital, surplus, or
earnings, before any payment or declaration and setting apart for payment of any
amount shall be made in respect of the stock junior to the Series B Convertible
Preferred Stock, an amount equal to $135.00 per share plus an amount equal to
all declared and unpaid dividends thereon; provided, however, in the case of
Section 3(iii) above, such $135.00 per share may be paid in cash and/or
securities (valued at the closing price (as defined in Section 5) of such
security) of the entity surviving such Merger Transaction. If upon any
Liquidation Event, whether voluntary or involuntary, the assets to be
distributed to the holders of the Series B Convertible Preferred Stock shall be
insufficient to permit the payment to such shareholders of the full preferential
amounts aforesaid, then all of the assets of the Corporation to be distributed
shall be so distributed ratably to the holders of the Series B Convertible
Preferred Stock on the basis of the number of shares of Series B Convertible
Preferred Stock held. A consolidation or merger of the Corporation with or into
another corporation, other than in a transaction described in Section 3(iii)
above, shall not be considered a liquidation, dissolution or winding up of the
Corporation or a sale or other disposition of all or substantially all of the
assets of the Corporation and accordingly the Corporation shall make appropriate
provision to ensure that the terms of this Certificate of Designations survive
such transaction. All shares of Series B Convertible Preferred Stock shall rank
as to payment upon the occurrence of any of the events described in Sections
3(i), (ii) and (iii) above senior
2
<PAGE>
to the Common Stock as provided herein and, unless the terms of such series
shall provide otherwise, senior to all other series of the Corporation's
preferred stock, including the Series A Convertible Preferred Stock.
Notwithstanding the foregoing, the holders of the Series B Convertible Preferred
Stock shall not be entitled to any of the shares of Common Stock of Interneuron
Pharmaceuticals, Inc. payable to the holders of Series A Convertible Preferred
Stock, par value $.01 per share ("Series A Convertible Preferred Stock"), of the
Corporation pursuant to Section 4(a) of the Certificate of Designations for the
Series A Convertible Preferred Stock.
4. Conversion.
(a) Right of Conversion. The shares of Series B Convertible Preferred Stock
shall be convertible, in whole or in part, at the option of the holder thereof
and upon notice to the Corporation as set forth in paragraph (b) below, into
fully paid and nonassessable shares of Common Stock and such other securities
and property as hereinafter provided. The shares of Series B Convertible
Preferred Stock shall be convertible initially at the rate of 50 shares of
Common Stock for each full share of Series B Convertible Preferred Stock and
shall be subject to adjustment as provided herein. For purposes of this
resolution, the "conversion rate" applicable to a share of Series B Convertible
Preferred Stock shall be the number of shares of Common Stock and number or
amount of any other securities and property as hereinafter provided into which a
share a Series B Convertible Preferred Stock is then convertible and shall be
determined by dividing $100.00 by the then existing conversion price. The
initial conversion price shall be $2.00 (the "conversion price").
Subject to adjustment pursuant to the provisions of paragraph (c) below,
the conversion price in effect immediately prior to the date that is 12 months
after the Final Closing Date (as such term is defined in the Confidential
Private Placement Memorandum dated March 26, 1996) of the issuance and sale of
the Series B Convertible Preferred Stock (the "Reset Date") shall be adjusted
and reset effective as of the Reset Date if the average closing bid price of the
Common Stock for the 30 consecutive trading days immediately preceding the Reset
Date (the "12-Month Trading Price") is less than 135% of the then applicable
conversion price (a "Reset Event"). Upon the occurrence of a Reset Event, the
conversion price shall be reduced to be equal to the greater of (A) the 12-Month
Trading Price divided by 1.35 and (B) 50% of the then applicable conversion
price. If there is any change in the conversion price as a result of the
preceding sentence, then the conversion rate shall be changed accordingly, and
shall be determined by dividing the new conversion price into $100.00. The
Corporation shall prepare a certificate signed by the principal financial
officer of the Corporation setting forth the conversion rate as of the Reset
Date, showing in reasonable detail the facts upon which such conversion rate is
based, and such certificate shall forthwith be filed with the transfer agent of
the Series B Convertible Preferred Stock. Notwithstanding the provisions of
subparagraph (vi) of paragraph (c) below, a notice stating that the conversion
rate has been adjusted pursuant to this paragraph, or that no adjustment is
necessary, and setting forth the conversion rate in effect as of the Reset Date
shall be mailed as promptly as practicable after the Reset Date by the
Corporation to all record holders of the Series B Convertible Preferred Stock at
their last addresses as they shall appear in the stock transfer books of the
Corporation.
The "closing bid price" for each trading day shall be the reported closing
bid price on the NASDAQ Small-Cap Market or the NASDAQ National Market System
(collectively referred to as, "NASDAQ") or, if the Common Stock is not quoted on
NASDAQ, on the principal national securities exchange on which common stock is
listed or admitted to trading (based on the aggregate dollar value of all
securities listed or admitted to trading) or, if not listed or admitted to
trading on any national securities exchange or quoted on NASDAQ, the closing bid
price in the over-the-counter market as furnished by any NASD member firm
selected from time to time by the Corporation for that purpose,
3
<PAGE>
or, if such prices are not available, the fair market value set by, or in a
manner established by, the Board of Directors of the Corporation in good faith.
"Trading day" shall mean a day on which the national securities exchange or
NASDAQ used to determine the closing bid price is open for the transaction of
business or the reporting of trades or, if the closing bid price is not so
determined, a day on which NASDAQ is open for the transaction of business.
(b) Conversion Procedures. Any holder of shares of Series B Convertible
Preferred Stock desiring to convert such shares into Common Stock shall
surrender the certificate or certificates evidencing such shares of Series B
Convertible Preferred Stock at the office of the transfer agent for the Series B
Convertible Preferred Stock, which certificate or certificates, if the
Corporation shall so require, shall be duly endorsed to the Corporation or in
blank, or accompanied by proper instruments of transfer to the Corporation or in
blank, accompanied by irrevocable written notice to the Corporation that the
holder elects so to convert such shares of Series B Convertible Preferred Stock
and specifying the name or names (with address) in which a certificate or
certificates evidencing shares of Common Stock are to be issued. The Corporation
need not deem a notice of conversion to be received unless the holder complies
with all the provisions hereof. The Corporation will instruct the transfer agent
(which may be the Corporation) to make a notation of the date that a notice of
conversion is received, which date shall be deemed to be the date of receipt for
purposes hereof.
The Corporation shall, as soon as practicable after such deposit of
certificates evidencing shares of Series B Convertible Preferred Stock
accompanied by the written notice and compliance with any other conditions
herein contained, deliver at such office of such transfer agent to the person
for whose account such shares of Series B Convertible Preferred Stock were so
surrendered, or to the nominee or nominees of such person, certificates
evidencing the number of full shares of Common Stock to which such person shall
be entitled as aforesaid, together with a cash adjustment of any fraction of a
share as hereinafter provided. Subject to the following provisions of this
paragraph, such conversion shall be deemed to have been made as of the date of
such surrender of the shares of Series B Convertible Preferred Stock to be
converted, and the person or persons entitled to receive the Common Stock
deliverable upon conversion of such Series B Convertible Preferred Stock shall
be treated for all purposes as the record holder or holders of such Common Stock
on such date; provided, however, that the Corporation shall not be required to
convert any shares of Series B Convertible Preferred Stock while the stock
transfer books of the Corporation are closed for any purpose, but the surrender
of Series B Convertible Preferred Stock for conversion during any period while
such books as if the surrender had been made on the date of such reopening, and
the conversion shall be at the conversion rate in effect on such date. No
adjustments in respect of any dividends on shares surrendered for conversion or
any dividend on the Common Stock issued upon conversion shall be made upon the
conversion of any shares of Series B Convertible Preferred Stock.
All notices of conversion shall be irrevocable; provided, however, that if
the Corporation has sent notice of an event pursuant to Section 4(g), a holder
of Series B Convertible Preferred Stock may, at its election, provide in its
notice of conversion that the conversion of its shares of Series B Convertible
Preferred Stock shall be contingent upon the occurrence of the record date or
effectiveness of such event (as specified by such holder), provided that such
notice of conversion is received by the Corporation prior to such record date or
effective date, as the case may be.
(c) Certain Adjustments of Conversion Rate. In addition to adjustment
pursuant to paragraph (a) above, the conversion rate (and the corresponding
conversion price) shall be subject to adjustment from time to time as follows:
4
<PAGE>
(i) In case the Corporation shall (A) pay a dividend in Common Stock
or make a distribution in Common Stock, (B) subdivide its outstanding
Common Stock, (C) combine its outstanding Common Stock into a smaller
number of shares of Common Stock or (D) issued by reclassification of its
Common Stock other securities of the Corporation, then in each such case
the conversion rate in effect immediately prior thereto shall be adjusted
so that the holder of any shares of Series B Convertible Preferred Stock
thereafter surrendered for conversion shall be entitled to receive the kind
and number of shares of Common Stock or other securities of the Corporation
which such holder would have owned or would have been entitled to receive
immediately after the happening of any of the events described above had
such shares of Series B Convertible Preferred Stock been converted
immediately prior to the happening of such event or any record date with
respect thereto. Any adjustment made pursuant to this subparagraph (i)
shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
(ii) In case the Corporation shall issue rights, options, warrants or
convertible securities to all or substantially all holders of its Common
Stock, without any charge to such holders, entitling them to subscribe for
or purchase Common Stock at a price per share which is lower at the record
date mentioned below than the closing bid rice (as defined in Section 4)
for the trading day immediately prior to such record date (the "Current
Market Price"), then the conversion rate shall be determined by multiplying
the conversion rate theretofore in effect by a fraction, of which the
numerator shall be the number of shares of Common Stock outstanding
immediately prior to the issuance of such rights, options, warrants or
convertible securities plus the number of additional shares of Common Stock
offered for subscription or purchase, and of which the denominator shall be
the number of shares of Common Stock outstanding immediately prior to the
issuance of such rights, options, warrants or convertible securities plus
the number of shares which the aggregate offering price of the total number
of shares offered would purchase at such Current Market Price. Such
adjustment shall be made whenever such rights, options, warrants or
convertible securities are issued, and shall become effective immediately
and retroactive to the record date for the determination of stockholders
entitled to receive such rights, options, warrants or convertible
securities.
(iii) In case the Corporation shall distribute to all or substantially
all holders of its Common Stock evidences of its indebtedness or assets
(excluding cash dividends or distributions out of earnings) or rights,
options, warrants or convertible securities containing the right to
subscribe for or purchase Common Stock (excluding those referred to in
subparagraph (ii) above), then in each case the conversion rate shall be
determined by multiplying the conversion rate theretofore in effect by a
fraction, of which the numerator shall be the then fair value as determined
in good faith by the Corporation's Board of Directors on the date of such
distribution, and of which the denominator shall be such fair value on such
date minus the then fair value (as so determined) of the portion of the
assets or evidences of indebtedness so distributed or of such subscription
rights, options, warrants or convertible securities applicable to one
share. Such adjustment shall be made whenever any such distribution is made
and shall become effective on the date of distribution retroactive to the
record date for the determination of stockholders entitled to receive such
distribution.
(iv) Upon the expiration of any rights, options, warrants or
conversion privileges, if such shall not have been exercised, the
conversion rate shall, upon such expiration, be readjusted and shall
thereafter be such as it would have been had it been originally adjusted
(or had the original adjustment not been required, as the case may be) on
the basis of (A) the fact that
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Common Stock, if any, actually issued or sold upon the exercise of such
rights, options, warrants or conversion privileges, and (B) the fact that
such shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Corporation upon such exercise plus
the consideration, if any, actually received by the Corporation for the
issuance, sale or grant of all such rights, options, warrants or conversion
privileges whether or not exercised.
(v) No adjustment in the conversion rate shall be required unless such
adjustment would require an increase or decrease of at least 1% in such
rate; provided, however, that the Corporation may make any such adjustment
at its election; and provided, further, that any adjustments which by
reason of this subparagraph (v) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 4 shall be made to the nearest cent or to
the nearest one-hundredth of a share, as the case may be.
(vi) Whenever the conversion rate is adjusted as provided in any
provision of this Section 4:
(A) the Corporation shall compute (or may retain a firm of
independent public accountants of recognized national banking (which
may be any such firm regularly employed by the Corporation) to
compute) the adjusted conversion rate in accordance with this Section
4 and shall prepare a certificate signed by the principal financial
officer of the Corporation (or cause any such independent public
accountants to execute a certificate) setting forth the adjusted
conversion rate and showing in reasonable detail the facts upon which
such adjustment is based, and such certificate shall forthwith be
filed with the transfer agent of the Series B Convertible Preferred
Stock; and
(B) a notice stating that the conversion rate has been adjusted
and setting forth the adjusted conversion rate shall forthwith be
required, and as soon as practicable after it is required, such
notices shall be mailed by the Corporation to all record holders of
Series B Convertible Preferred Stock at their last addresses as they
shall appear in the stock transfer books of the Corporation.
(vii) In the event that at any time, as a result of any adjustment
made pursuant to this Section 4, the holder of any shares of Series B
Convertible Preferred Stock thereafter surrendered for conversion shall
become entitled to receive any shares of the Corporation other than shares
of Common Stock or to receive any other securities, the number of such
other shares or securities so receivable upon conversion of any share of
Series B Convertible Preferred Stock shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable
to the provisions contained in this Section 4 with respect to the Common
Stock.
(d) No Fractional Shares. No fractional shares or scrip representing
fractional shares of Common Stock shall be issued upon conversion of Series B
Convertible Preferred Stock. If more than one certificate evidencing shares of
Series B Convertible Preferred Stock shall be surrendered for conversion at one
time by the same holder, the number of full shares issuable upon conversion
thereof shall be computed on the basis of the aggregate number of shares of
Series B Convertible Preferred Stock so surrendered. Instead of any fractional
share of Common Stock which would otherwise be issuable upon conversion of any
shares of Series B Convertible Preferred Stock, the Corporation shall pay a cash
adjustment in respect of such fractional interest in an amount equal to the same
fraction of the market
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price per share of Common Stock (which shall be the closing price as defined in
Section 5) at the close of business on the day of conversion.
(e) Reservation of Shares; Transfer Taxes; Etc. The Corporation shall at
all times reserve and keep available, out of its authorized and unissued stock,
solely for the purposed of effecting the conversion of the Series B Convertible
Preferred Stock, such number of shares of its Common Stock free of preemptive
rights as shall from time to time be sufficient to effect the conversion of all
shares of Series B Convertible Preferred Stock from time to time be sufficient
to effect the conversion of all shares of Series B Convertible Preferred Stock
from time to time outstanding at the then existing conversion price. The
Corporation shall use its best efforts from time to time, in accordance with the
laws of the State of Delaware, to increase the authorized number of shares of
Common Stock if at any time the number of shares of Common Stock not outstanding
shall not be sufficient to permit the conversion of all the then-outstanding
shares of Series B Convertible Preferred Stock.
The Corporation shall pay any and all issue or other taxes that may be
payable in respect of any issue or delivery of shares of Common Stock on
conversion of the Series B Convertible Preferred Stock. The Corporation shall
not, however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue or delivery of Common Stock (or other securities
or assets) in a name other than that in which the shares of Series B Convertible
Preferred Stock so converted were registered, and no such issue or delivery
shall be made unless and until the person requesting such issue has paid to the
Corporation the amount of such tax or has established, to the satisfaction of
the Corporation, that such tax has been paid.
Notwithstanding anything to the contrary herein, before taking any action
that would cause an adjustment reducing the conversion rate or before any such
adjustment is made as a result of a Reset Event, in either event, such that the
effective conversion price (for all purposes an amount equal to $100.00 divided
by the conversion rate as in effect at such time) would be below the then par
value of the Common Stock, the Corporation shall take any corporate action which
may, in the opinion of its counsel, be necessary in order that the Corporation
may validly and legally issue fully paid and nonassessable shares of Common
Stock at the conversion rate as so adjusted.
(f) Prior Notice of Certain Events. In case:
(i) the Corporation shall declare any dividend (or any other
distribution) on its Common Stock; or
(ii) the Corporation shall authorize the granting to all the holders
of Common Stock as a class of rights or warrants to subscribe for or
purchase any shares of stock of any class or of any other rights or
warrants; or
(iii) of any reclassification of Common Stock (other than a
subdivision or combination of the outstanding Common Stock, or a change in
par value, or from par value to no par value, or from no par value to par
value), or of any compulsory share exchange whereby the Common Stock is
converted into other securities, cash or other property; or
(iv) of a Liquidation Event;
then the Corporation shall cause to be filed with the transfer agent for the
Series B Convertible Preferred Stock, and shall cause to be mailed to the
holders of record of the Series B Convertible Preferred Stock, at their last
addresses as they shall appear upon the stock transfer books of the Corporation,
at least 20
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days prior to the applicable date hereinafter specified, a notice stating (x)
the date on which a record (if any) is to be taken for the purpose of such
dividend, distribution or granting of rights or warrants or, if a record is not
to be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distribution, rights or warrants are to be determined
and a description of the cash, securities or other property to be received by
such holders upon such dividend, distribution or granting of rights or warrants
or (y) the date on which such Liquidation Event or reclassification or share
exchange is expected to become effective, the date as of which it is expected
that holders of Common Stock of record shall be entitled to exchange their
shares of Common Stock for securities or other property deliverable upon such
exchange, dissolution, liquidation or winding up and the consideration,
including securities or other property, to be received by such holders upon such
event.
(g) Other Changes in Conversion Rate. The Corporation from time to time may
increase the conversion rate by any amount for any period of time if the period
is at least 20 days and if the increase is irrevocable during the period.
Whenever the conversion rate is so increased, the Corporation shall mail to
holders of record of the Series B Convertible Preferred Stock a notice of the
increase at least 10 days before the date the increased conversion rate takes
effect, and such notice shall state the increased conversion rate and the period
it will be in effect.
The Corporation may make such increases in the conversion rate, in addition
to those required or allowed by this Section 4, as shall be determined by it, as
evidenced by a resolution of the Board of Directors, to be advisable in order to
avoid or diminish any income tax to holders of Common Stock resulting from any
dividend or distribution of stock or issuance of rights or warrants to purchase
or subscribe for stock or from any event treated as such for income tax
purposes.
(h) Ambiguities/Errors. The Board of Directors of the Corporation shall
have the power to resolve any ambiguity or correct any error in the provisions
relating to the convertibility of the Series B Convertible Preferred Stock, and
its actions in so doing shall be final and conclusive.
5. Mandatory Conversion at Option of Corporation. At any time on or after
the Reset Date, the Corporation, at its option, may cause the Series B
Convertible Preferred Stock to be converted in whole, or in part, on a pro rata
basis, into fully paid and nonassessable shares of Common Stock and such other
securities and property as herein provided if the closing price of Common Stock
shall have exceeded 150% of the then applicable conversion price for at least 20
trading days in any 30 consecutive trading day period. Any shares of Series B
Convertible Preferred Stock so converted shall be treated as having been
surrendered by the holder thereof for conversion pursuant to Section 4 on the
date of such mandatory conversion (unless previously converted at the option of
the holder).
Not more than 60 days nor less than 10 days prior to the date of any such
mandatory conversion, notice by first class mail, postage prepaid, shall be
given to the holders of record of the Series B Convertible Preferred Stock to be
converted, addressed to such holders at their last addresses as shown on the
stock transfer books of the Corporation. Each such notice shall specify the date
fixed for conversion, the place or places for surrender of shares of Series B
Convertible Preferred Stock, and the then effective conversion rate pursuant to
Section 4.
The "closing price" for each trading day shall be the reported last sales
price regular way or, in case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices regular way, in either case
on NASDAQ or, if the Common Stock is not quoted on NASDAQ, on the principal
national securities exchange on which the Common Stock is listed or admitted to
trading (based on the aggregate dollar value of all securities listed or
admitted to trading) or, if not
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<PAGE>
listed or admitted to trading on any national securities exchange or quoted on
NASDAQ, the average of the closing bid and asked prices in the over-the-counter
market as furnished by any NASD member firm selected from time to time by the
Corporation, for that purpose, or, if such prices are not available, the fair
market value set by, or in a manner established by, the Board of Directors of
the Corporation in good faith. "Trading day" shall have the meaning given in
Section 4(a).
Any notice which is mailed as herein provided shall be conclusively
presumed to have been duly given by the Corporation on the date deposited in the
mail, whether or not the holder of the Series B Convertible Preferred Stock
receives such notice; and failure properly to give such notice by mail, or any
defect in such notice, to the holders of the shares to be converted shall not
affect the validity of the proceedings for the conversion of any other shares of
Series B Convertible Preferred Stock. On or after the date fixed for conversion
as stated in such notice, each holder of shares called to be converted shall
surrender the certificate evidencing such shares to the Corporation at the place
designated in such notice for conversion. Notwithstanding that the certificates
evidencing any shares properly called for conversion shall not have been
surrendered, the shares shall no longer be deemed outstanding and all rights
whatsoever with respect to the shares so called for conversion (except the right
of the holders to convert such shares upon surrender of their certificates
therefor) shall terminate.
6. Voting Rights.
(a) General. Except as otherwise provided herein, in the Certificate of
Incorporation, as amended, or the Bylaws of the Corporation, the holders of
shares of Series B Convertible Preferred Stock, the holders of shares of Common
Stock and the holders of any other class or series of shares entitled to vote
with the Common Stock shall vote together as one class on all matters submitted
to a vote of stockholders of the Corporation. In any such vote, each share of
Series B Convertible Preferred Stock shall entitle the holder thereof to cast
the number of votes equal to the number of votes which could be cast in such
vote by a holder of the Common Stock into which such share of Series B
Convertible Preferred Stock is convertible on the record date for such vote, or
if no record date has been established, on the date such vote is taken. Any
shares of Series B Convertible Preferred Stock held by the Corporation or any
entity controlled by the Corporation shall not have voting rights hereunder and
shall not be counted in determining the presence of a quorum.
(b) Class Voting Rights. In addition to any vote specified in paragraph (a)
of this Section 6, so long as 50% of the shares of Series B Convertible
Preferred Stock (including those shares of Series B Convertible Preferred Stock
issued or issuable upon the exercise of the placement agent warrants issued in
connection with the offer and sale of the Series B Convertible Preferred Stock)
shall be outstanding, the Corporation shall not, without the affirmative vote or
consent of the holders of at least 66-2/3% of all outstanding Series B
Convertible Preferred Stock voting separately as a class, (i) amend, alter or
repeal any provision of the Certificate of Incorporation, as amended, or the
Bylaws of the Corporation so as to affect adversely the relative rights,
preferences, qualifications, limitations or restrictions of the Series B
Convertible Preferred Stock, (ii) declare any dividend or distribution on the
Common Stock or any other class or series of preferred stock or authorize the
repurchase of any securities of the Corporation, except distributions of Common
Stock of Interneuron Pharmaceuticals, Inc. payable to the holders of the Series
A Convertible Preferred Stock of the Corporation pursuant to Section 4(a) of the
Certificate of Designations for the Series A Convertible Preferred Stock or
(iii) authorize or issue, or increase the authorized amount of, any additional
class or series of stock, or any security convertible into stock of such class
or series, (A) ranking prior to, or on a parity with, the Series B Convertible
Preferred Stock upon liquidation, dissolution or winding up of the Corporation
or a sale of all or substantially all of the assets of the Corporation or (B)
providing for the payment of any dividends
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<PAGE>
or distributions. A class vote on the part of the Series B Convertible Preferred
Stock shall, without limitation, specifically not be deemed to be required
(except as otherwise required by law or resolution of the Corporation's Board of
Directors) in connection with: (a) the authorization, issuance or increase in
the authorized amount of Common Stock or of any shares of any other class or
series of stock ranking junior to the Series B Convertible Preferred Stock in
respect of distributions upon liquidation, dissolution or winding up of the
Corporation; (b) the authorization, issuance or increase in the amount of the
Series B Convertible Preferred Stock or any bonds, mortgages, debentures or
other obligations of the Corporation (other than bonds, mortgages, debentures or
other obligations convertible into or exchangeable for or having option rights
to purchase any shares of stock of the Corporation the authorization issuance or
increase in amount of which would require the consent of the holders of the
Series B Preferred Stock); or (c) any consolidation or merger of the Corporation
with or into another corporation, a sale or transfer of all or part of the
Corporation's assets for cash, securities or other property, or a compulsory
share exchange.
7. Outstanding Shares. For purposes of this Certificate of Designations,
all shares of Series B Convertible Preferred Stock shall be deemed outstanding
except (i) from the date, or the deemed date, of surrender of certificates
evidencing shares of Series B Convertible Preferred Stock, all shares of Series
B Convertible Preferred Stock converted into Common Stock, (ii) from the date of
registration of transfer, all shares of Series B Convertible Preferred Stock
held of record by the Corporation or any subsidiary of the Corporation and (iii)
any and all shares of Series B Convertible Preferred Stock held in escrow prior
to delivery of such stock by the Corporation to the initial beneficial owners
thereof.
8. Status of Acquired Shares. Shares of Series B Convertible Preferred
Stock received upon conversion pursuant to Section 4 or Section 5 or otherwise
acquired by the Corporation will be restored to the status of authorized but
unissued shares of Preferred Stock, without designation as to class, and may
thereafter be issued, but not as shares of Series B Convertible Preferred Stock.
9. Preemptive Rights. The Series B Convertible Preferred Stock is not
entitled to any preemptive or subscription rights in respect of any securities
of the Corporation.
10. Severability of Provisions. Whenever possible, each provision hereof
shall be interpreted in a manner as to be effective and valid under applicable
law, but if any provision hereof is held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating or otherwise adversely affecting
the remaining provisions hereof. If a court of competent jurisdiction should
determine that a provision hereof would be valid or enforceable if a period of
time were extended or shortened or a particular percentage were increased or
decreased, then such court may make such change as shall be necessary to render
the provision in question effective and valid under applicable law.
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IN WITNESS WHEREOF, AVAX Technologies, Inc. has caused this certificate to
be signed on its behalf by Carl Spana, Ph.D., its Interim President, this
fourteenth day of May, 1996.
AVAX TECHNOLOGIES, INC.
By: /s/ Carl Spana
-----------------------------
Name: Carl Spana, Ph. D.
Title: Interim President
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AMENDED CERTIFICATE OF DESIGNATIONS
OF SERIES B CONVERTIBLE PREFERRED STOCK
OF AVAX TECHNOLOGIES, INC.
AVAX Technologies, Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY, that the
Certificate of Designations of Series B Preferred Stock, of the Corporation
filed with the Secretary of State of the State of Delaware is amended as
follows:
1. The introductory paragraph is hereby amended (i) by deleting the
number "250,000" appearing on the fifth line thereof and substituting the
number "300,000";
2. Section 1 is hereby amended by deleting the number "250,000"
appearing on the third line thereof and substituting therefor the number
"300,000."
The foregoing amendments were duly adopted pursuant to the authority vested
in the Board of Directors of the Company (the "Board") by the Certificate of
Incorporation of the Corporation, as amended, and Section 151 of the General
Corporation Law of the State of Delaware and in accordance with resolutions duly
adopted by, authorized and directed by the Board.
IN WITNESS WHEREOF, AVAX Technologies, Inc. has caused this certificate to
be signed by an authorized officer of the Corporation this 5th day of June,
1996.
AVAX TECHNOLOGIES, INC.
By: /s/ Michael S. Weiss
------------------------------
Name: Michael S. Weiss
Title: Secretary
Exhibit 3.2
BY-LAWS OF
WALDEN LABORATORIES, INC.
(A Delaware Corporation)
ARTICLE I
Meetings of Stockholders
Section 1. Annual Meeting. The annual meeting of the stockholders of Walden
Laboratories, Inc. (hereinafter called the "Corporation") for the election of
directors and for the transaction of such other business as may come before the
meeting shall be held in the fifth month following the close of the
Corporation's fiscal year, at such date and time as shall be designated by the
Board or Chairman of the Board or the President, or at such other date and time
as the Board shall designate.
Section 2. Special Meeting. Special meetings of the stockholders, unless
otherwise prescribed by statute, may be called at any time by the Board or the
Chairman of the Board or the Chief Executive Officer or the President. The Board
of Directors shall call a special meeting of the stockholders when requested in
writing by stockholders holding not less than 20% of the outstanding stock of
the Corporation; such written request shall state the object of the meeting
proposed to be held.
Section 3. Notice of Meetings. Notice of the place, date and time of the
holding of each annual and special meeting of the stockholders and, in the case
of a special meeting, the purpose or purposes thereof shall be given personally
or by mail in a postage prepaid envelope to each stockholder entitled to vote at
such meeting, not less than 10 nor more than 60 days before the date of such
meeting, and, if mailed, it shall be directed to such stockholder at his address
as it appears on the records of the Corporation, unless he shall have filed with
the Secretary of the Corporation a written request that notices to him be mailed
to some other address, in which case it shall be directed to him at some other
address. If mailed, such notice shall be deemed to be delivered when deposited
in United States mail so addressed with postage thereon prepaid. Notice of any
meeting of stockholders shall not be required to be given to any stockholder who
shall attend such meeting in person or by proxy and shall not, at the beginning
of such meeting, object to the transaction of any business because the meeting
is not lawfully called or convened, or who shall, either before or after the
meeting, submit a signed waiver of notice, in person or by proxy. Unless the
Board shall fix after the adjournment a new record date for an adjourned
meeting, notice of such adjourned meeting need not be given if the time and
place to which the meeting shall be adjourned were announced at the meeting at
which the adjournment is taken. At the adjourned meeting the Corporation may
transact any business which might have been transacted at the original meeting.
If the adjournment is for more than thirty days, or if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
<PAGE>
2
Section 4. Place of Meetings. Meetings of the stockholders may be held at
such place, within or without the State of Delaware, as the Board or other
officer calling the same shall specify in the notice of such meeting, or in a
duly executed waiver of notice thereof.
Section 5. Quorum. At all meetings of the stockholders the holders of a
majority of the votes of the shares of stock of the Corporation issued and
outstanding and entitled to vote shall be present in person or by proxy to
constitute a quorum for the transaction of any business, except when
stockholders are required to vote by class, in which event a majority of the
issued and outstanding shares of the appropriate class shall be present in
person or by proxy, or except as otherwise provided by statute or in the
Certificate of Incorporation. In the absence of a quorum, the holders of a
majority of the votes of the shares of stock present in person or by proxy and
entitled to vote, or if no stockholder entitled to vote is present, then any
officer of the Corporation may adjourn the meeting from time to time. At any
such adjourned meeting at which a quorum may be present any business may be
transacted which might have been transacted at the meeting as originally called.
Section 6. Organization. At each meeting of the stockholders the Chairman
of the Board, or in his absence or inability to act, the Chief Executive
Officer, or in the absence or inability to act of the Chairman of the Board and
the Chief Executive Officer, the President, or in the absence or inability to
act of the Chairman of the Board, the Chief Executive Officer and the President,
a Vice President, or in the absence of all the foregoing, any person chosen by a
majority of those stockholders present, shall act as chairman of the meeting.
The Secretary, or, in his absence or inability to act, the Assistant Secretary
or any person appointed by the chairman of the meeting, shall act as secretary
of the meeting and keep the minutes thereof
Section 7. Order of Business. The order of business at all meetings of the
stockholders shall be as determined by the chairman of the meeting.
Section 8. Voting. Except as otherwise provided by statute, the Certificate
of Incorporation, or any certificate duly filed in the office of the Secretary
of the State of Delaware, each holder of record of shares of stock of the
Corporation having voting power shall be entitled at each meeting of the
stockholders to one vote for every share of such stock standing in his name in
the record of stockholders of the Corporation on the date fixed by the Board as
the record date for the determination of the stockholders who shall be entitled
to notice of and to vote at such meeting; or if such record date shall not have
been so fixed, then at the close of business on the day next preceding the day
on which the meeting is held; or each stockholder entitled to vote at any
meeting of stockholders may authorize another person or persons to act for him
by a proxy signed by such stockholder or his attorney-in-fact. Any such proxy
shall be delivered to the secretary of such meeting at or prior to the time
designated in the order of business for so delivering such proxies. No proxy
shall be valid after the expiration of three years from the date thereof,
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the stockholder executing it, except in those cases where an
irrevocable proxy is permitted by law. Except as otherwise provided by statute,
these By-Laws, or the Certificate of
<PAGE>
3
Incorporation, any corporate action to be taken by vote of the stockholders
shall be authorized by a majority of the total votes, or when stockholders are
required to vote by class by a majority of the votes of the appropriate class,
cast at a meeting of stockholders by the holders of shares present in person or
represented by proxy and entitled to vote on such action. Unless required by
statute, or determined by the chairman of the meeting to be advisable, the vote
on any question need not be by written ballot. On a vote by written ballot, each
ballot shall be signed by the stockholder voting, or by his proxy, if there be
such proxy, and shall state the number of shares voted.
Section 9. List of Stockholders. The officer who has charge of the stock
ledger of the Corporation, or the transfer agent of the Corporation's stock, if
there be one then acting, shall prepare and make, at least 10 days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the meeting, either at a place within the city where the
meeting is to be held, at the place where the meeting is to be held, or at the
office of the transfer agent. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof; and may be
inspected by any stockholder who is present.
Section 10. Inspectors. The Board may, in advance of any meeting of
stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting may, and on the
request of any stockholder entitled to vote thereat shall, appoint inspectors.
Each inspector, before entering upon the discharge of his duties, shall take and
sign an oath faithfully to execute the duties of inspector at such meeting with
strict impartiality and according to the best of his ability. The inspectors
shall determine the number of shares outstanding and the voting power of each,
the number of shares represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots or consents,
hear and determine all challenges and questions arising in connection with the
right to vote, count and tabulate all votes, ballots or consents, determine the
result, and do such acts as are proper to conduct the election or vote with
fairness to all stockholders. On request of the chairman of the meeting or any
stockholder entitled to vote thereat, the inspectors shall make a report in
writing of any challenge, request or matter determined by them and shall execute
a certificate of any fact found by them. No director or candidate for the office
of director shall act as inspector of an election of directors. Inspectors need
not be stockholders.
<PAGE>
4
Section 11. Consent of Stockholders in Lieu of Meeting. Unless otherwise
provided in the Certificate of Incorporation, any action required by Subchapter
VII of the General Corporation Law of the State of Delaware, to be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent or consents in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted and shall be delivered to the corporation by
delivery to its registered office in the State of Delaware, its principal place
of business, or an officer or agent of the corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
made to a corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested.
ARTICLE II
Board of Directors
Section 1. General Powers. The business and affairs of the Corporation
shall be managed by the Board. The Board may exercise all such authority and
powers of the Corporation and do all such lawful acts and things as are not by
statute or the Certificate of Incorporation or by these By-Laws directed or
required to be exercised or done by the stockholders.
Section 2. Number, Qualifications, Election and Term of Office. The number
of directors of the Corporation shall be fixed from time to time by the vote of
a majority of the entire Board then in office and the number thereof may
thereafter by like vote be increased or decreased to such greater or lesser
number (not less than three) as may be so provided, subject to the provisions of
Section 11 of this Article II. All of the directors shall be of full age and
need not be stockholders. Except as otherwise provided by statute or these
By-Laws, the directors shall be elected at the annual meeting of the
stockholders for the election of directors at which a quorum is present, and the
persons receiving a plurality of the votes cast at such meeting shall be
elected. Each director shall hold office until the next annual meeting of the
stockholders and until his successor shall have been duly elected and qualified,
or until his death, or until he shall have resigned, or have been removed, as
hereinafter provided in these By-Laws, or as otherwise provided by statute or
the Certificate of Incorporation.
Section 3. Place of Meetings. Meetings of the Board may be held at such
place, within or without the State of Delaware, as the Board may from time to
time determine or as shall be specified in the notice or waiver of notice of
such meeting.
<PAGE>
5
Section 4. Annual Meeting. The Board shall meet for the purpose of
organization, the election of officers and the transaction of other business, as
soon as practicable after each annual meeting of the stockholders, on the same
day and at the same place where such annual meeting shall be held. Notice of
such meeting need not be given. Such meeting may be held at any other time or
place (within or without the State of Delaware) which shall be specified in a
notice thereof given as hereinafter provided in Section 7 of this Article II.
Section 5. Regular Meetings. Regular meetings of the Board shall be held at
such time and place as the Board may from time to time determine. If any day
fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting which would otherwise be held on that
day shall be held at the same hour on the next succeeding business day. Notice
of regular meetings of the Board need not be given except as otherwise required
by statute or these By-Laws.
Section 6. Special Meetings. Special meetings of the Board may be called by
two or more directors of the Corporation or by the Chairman of the Board, the
Chief Executive Officer or the President.
Section 7. Notice of Meetings. Notice of each special meeting of the Board
(and of each regular meeting for which notice shall be required) shall be given
by the Secretary as hereinafter provided in this Section 7, in which notice
shall be stated the time and place (within or without the State of Delaware) of
the meeting. Notice of each such meeting shall be delivered to each director
either personally or by telephone, telegraph, cable or wireless, at least
twenty- four hours before the time at which such meeting is to be held or by
first-class mail, postage prepaid, addressed to him at his residence, or usual
place of business, at least three days before the day on which such meeting is
to be held. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail. Notice of any such meeting need not be
given to any director who shall, either before or after the meeting, submit a
signed waiver of notice or who shall attend such meeting without protesting,
prior to or at its commencement, the lack of notice to him. Except as otherwise
specifically required by these By-Laws, a notice or waiver of notice of any
regular or special meeting need not state the purposes of such meeting.
Section 8. Quorum and Manner of Acting. A majority of the entire Board
shall be present in person at any meeting of the Board in order to constitute a
quorum for the transaction of business at such meeting, and, except as otherwise
expressly required by statute or the Certificate of Incorporation, the act of a
majority of the directors present at any meeting at which a quorum is present
shall be the act of the Board. Any one or more members of the Board or any
committee thereof may participate in a meeting of the Board or such committee by
means of a conference telephone or similar communications equipment allowing all
participants in the meeting to hear each other at the same time and
participation by such means shall constitute presence in person at a meeting. In
the absence of a quorum at any meeting of the Board, a majority of the directors
present thereat, or if no director be present, the Secretary, may adjourn such
meeting to another time and place, or such meeting, unless it be the annual
meeting of the
<PAGE>
6
Board, need not be held. At any adjourned meeting at which a quorum is present,
any business may be transacted which might have been transacted at the meeting
as originally called. Except as provided in Article III of these By-Laws, the
directors shall act only as a Board and the individual directors shall have no
power as such.
Section 9. Organization. At each meeting of the Board, the Chairman of the
Board (or, in his absence or inability to act, the Chief Executive Officer, or
in the absence or inability to act of the Chairman of the Board and the Chief
Executive Officer, the President, or, in the absence or inability to act of each
of the foregoing, another director chosen by a majority of the directors
present) shall act as chairman of the meeting and preside thereat. The Secretary
(or, in his absence or inability to act, any person appointed by the chairman)
shall act as secretary of the meeting and keep the minutes thereof.
Section 10. Resignations. Any director of the Corporation may resign at any
time by giving written notice of his resignation to the Board or Chairman of the
Board or the President or the Secretary. Any such resignation shall take effect
at the time specified therein or, if the time when it shall become effective
shall not be specified therein, immediately upon its receipt; and unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 11. Vacancies. Vacancies, including newly created directorships,
may be filled by a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each director so chosen shall hold office as provided in this
Section for the filling of other vacancies.
Section 12. Removal of Directors. Except as otherwise provided in the
Certificate of Incorporation or in these By-Laws, any director may be removed,
either with or without cause, at any time, by the affirmative vote of a majority
of the votes of the issued and outstanding shares of stock entitled to vote for
the election of the stockholders called and held for that purpose, or by a
majority vote of the Board of Directors at a meeting called for such purpose,
and the vacancy in the Board caused by any such removal may be filled by such
stockholders or directors, as the case may be, at such meeting, and if the
stockholders shall fail to fill such vacancy, such vacancy shall be filled in
the manner provided by these By-Laws.
Section 13. Compensation. The Board shall have authority to fix the
compensation, including fees and reimbursement of expenses, of directors for
services to the Corporation in any capacity, provided no such payment shall
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
<PAGE>
7
Section 14. Action by the Board. To the extent permitted under the laws of
the State of Delaware, any action required or permitted to be taken at any
meeting of the Board or of any committee thereof may be taken without a meeting
if all members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of the
proceedings of the Board or committee.
ARTICLE III
Executive and Other Committees
Section 1. Executive and Other Committees. The Board may, by resolution
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of two or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
Committee. Any such committee, to the extent provided in the resolution, shall
have and may exercise the powers of the Board in the management of the business
and affairs of the Corporation, and may authorize the seal of the Corporation to
be affixed to all papers which may require it; provided, however, that in the
absence or disqualification of any member of such committee or committees, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board to act at the meeting in the place of any such
absent or disqualified member. Each committee shall keep minutes of its
proceedings and shall report such minutes to the Board when required. All such
proceedings shall be subject to revision or alteration by the Board; provided,
however, that third parties shall not be prejudiced by such revision or
alteration.
Section 2. General. A majority of any committee may determine its action
and fix the time and place of its meetings, unless the Board shall otherwise
provide. Notice of such meetings shall be given to each member of the committee
in the manner provided for in Article II, Section 7. The Board shall have the
power at any time to fill vacancies in, to change the membership of, or to
dissolve any such committee. Nothing herein shall be deemed to prevent the Board
from appointing one or more committees consisting in whole or in part of persons
who are directors of the Corporation; provided, however, that no such committee
shall have or may exercise any authority of the Board, except as permitted by
Section 1 of this Article III.
<PAGE>
8
ARTICLE IV
Officers
Section 1. Number and Qualifications. The officers of the Corporation shall
include the Chairman of the Board, the Chief Executive Officer, the President,
one or more Vice Presidents (one or more of whom may be designated Executive
Vice President or Senior Vice President), the Treasurer, and the Secretary. Any
two or more offices may be held by the same person. Such officers shall be
elected from time to time by the Board, each to hold office until the meeting of
the Board following the next annual meeting of the stockholders, or until his
successor shall have been duly elected and shall have qualified, or until his
death, or until he shall have resigned, or have been removed, as hereinafter
provided in these By-Laws. The Board may from time to time elect a Vice Chairman
of the Board, and the Board may from time to time elect, or the Chairman of the
Board, the Chief Executive Officer or the President may appoint, such other
officers (including one or more Assistant Vice Presidents, Assistant
Secretaries, and Assistant Treasurers), as may be necessary or desirable for the
business of the Corporation. Such other officers and agents shall have such
duties and shall hold their offices for such terms as may be prescribed by the
Board or by the appointing authority.
Section 2. Resignation. Any officer of the Corporation may resign at any
time by giving written notice of his resignation to the Board, the Chairman of
the Board, the Chief Executive Officer, the President or the Secretary. Any such
resignation shall take effect at the time specified therein or, if the time when
it shall become effective shall not be specified therein, immediately upon its
receipt; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 3. Removal. Any officer or agent of the Corporation may be removed,
either with or without cause, at any time, by the vote of the majority of the
entire Board at any meeting of the Board or, except in the case of an officer or
agent elected or appointed by the Board, by the Chairman of the Board or the
Chief Executive Officer or the President. Such removal shall be without
prejudice to the contractual rights, if any, of the person so removed.
Section 4. Vacancies. A vacancy in any office, whether arising from death,
resignation, removal or any other cause, may be filled for the unexpired portion
of the term of the office which shall be vacant, in the manner prescribed in
these By-Laws for the regular election or appointment to such office.
Section 5(a). The Chairman of the Board. The Chairman of the Board, if one
be elected, shall, if present, preside at each meeting of the stockholders and
of the Board and shall be an ex officio member of all committees of the Board.
He shall perform all duties incident to the office of Chairman of the Board and
such other duties as may from time to time be assigned to him by the Board.
<PAGE>
9
(b) The Vice Chairman of the Board. The Vice Chairman of the Board, if
one be elected, shall have such powers and perform all such duties as from
time to time may be assigned to him by the Board or the Chairman of the
Board and, unless otherwise provided by the Board, shall in the case of the
absence or inability to act of the Chairman of the Board, perform the
duties of the Chairman of the Board and when so acting shall have all the
powers of; and be subject to all the restrictions upon, the Chairman of the
Board.
Section 6. The Chief Executive Officer. The Chief Executive Officer shall
be the chief operating and executive officer of the Corporation and shall have
general active supervision and direction over the business and affairs of the
Corporation and over its several officers, subject, however, to the direction of
the Chairman of the Board and the control of the Board. If no Chairman of the
Board is elected, or at the request of the Chairman of the Board, or in the case
of his absence or inability to act, unless there be a Vice Chairman of the Board
so designated to act, the Chief Executive Officer shall perform the duties of
the Chairman of the Board and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the Chairman of the Board. He shall
perform all duties incident to the office of the Chief Executive Officer and
such other duties as from time to time may be assigned to him by the Board or
the Chairman of the Board.
Section 7. The President. Subject to the responsibilities and direction of
the Chief Executive Officer, the President shall be the operating and executive
officer of the Corporation, shall assist the Chief Executive Officer in his role
as the chief operating and executive officer of the Corporation and shall have
general active supervision and direction over the business and affairs of the
Corporation and over its several officers, subject, however, to the direction of
the Chairman of the Board, the Chief Executive Officer and the control of the
Board. If no Chairman of the Board is elected, or at the request of the Chairman
of the Board, or in the case of his absence or inability to act, unless there be
a Vice Chairman of the Board or Chief Executive Officer so designated to act,
the President shall perform the duties of the Chairman of the Board and when so
acting shall have all the powers of, and be subject to all the restrictions
upon, the Chairman of the Board. He shall perform all duties incident to the
office of President and such other duties as from time to time may be assigned
to him by the Board or the Chairman of the Board or the Chief Executive Officer.
Section 8. Vice Presidents. Each Executive Vice President, each Senior Vice
President and each Vice President shall have such powers and perform all such
duties as from time to time may be assigned to him by the Board, the Chairman of
the Board, the Chief Executive Officer or the President. Each such Vice
President shall, in the order of their seniority, have the power and may perform
the duties of the Chairman of the Board, the Chief Executive Officer and the
President.
Section 9. The Treasurer. The Treasurer shall be the chief financial
officer of the Corporation and shall exercise general supervision over the
receipt, custody and disbursement of
<PAGE>
10
Corporate funds. He shall have such further powers and duties as may be
conferred upon him from time to time by the Chief Executive Officer, the
President or the Board of Directors. He shall perform the duties of controller
if no one is elected to that office.
Section 10. The Secretary. The Secretary shall
(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board, the committees of the
Board and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all stock certificates of the Corporation
(unless the seal be a facsimile, as hereinafter provided) and affix and
attest the seal to all other documents to be executed on behalf of the
Corporation under its seal;
(d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly
kept and filed; and
(e) in general, perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him
by the Board, the Chairman of the Board, the Chief Executive Officer or the
President.
Section 11. Officer's Bonds or Other Security. If required by the Board,
any officer of the Corporation shall give a bond or other security for the
faithful performance of his duties, in such amount and with such surety or
sureties as the Board may require.
Section 12. Compensation. The compensation of the officers of the
Corporation for their services as such officers shall be fixed from time to time
by the Board, provided, however, that the Board may delegate to the Chairman of
the Board, the Chief Executive Officer or the President the power to fix the
compensation of officers and agents appointed by the Chairman of the Board or
the President, as the case may be. An officer of the Corporation shall not be
prevented from receiving compensation by reason of the fact that he is also a
director of the Corporation, but any such officer who shall also be a director
shall not have any vote in the determination of the amount of compensation paid
to him.
<PAGE>
11
ARTICLE V
Indemnification
The Corporation shall, to the fullest extent permitted by the laws of the
State of Delaware, indemnify any and all persons whom it shall have power to
indemnify against any and all of the costs, expenses, liabilities or other
matters incurred by them by reason of having been officers or directors of the
Corporation, any subsidiary of the Corporation or of any other corporation for
which he acted as officer or director at the request of the Corporation.
ARTICLE VI
Contracts, Checks, Drafts, Bank Account, etc.
Section 1. Execution of Contracts. Except as otherwise required by statute,
the Certificate of Incorporation or these By-Laws, any contracts or other
instruments may be executed and delivered in the name and on behalf of the
Corporation by such officer or officers (including any assistant officer) of the
Corporation as the Board may from time to time direct. Such authority may be
general or confined to specific instances as the Board may determine. Unless
authorized by the Board or expressly permitted by these By-Laws, an officer or
agent or employee shall not have any power or authority to bind the Corporation
by any contract or engagement or to pledge its credit or to render it
pecuniarily liable for any purpose or any amount.
Section 2. Loans. Unless the Board shall otherwise determine either (a) the
Chairman of the Board, the Chief Executive Officer, the Vice Chairman of the
Board or the President, singly, or (b) a Vice President, together with the
Treasurer, may effect loans and advances at any time for the Corporation or
guarantee any loans and advances to any subsidiary of the Corporation, from any
bank, trust company or other institution, or from any firm, corporation or
individual, and for such loans and advances may make, execute and deliver
promissory notes, bonds or other certificates or evidences of indebtedness of
the Corporation, or guarantee of indebtedness of subsidiaries of the
Corporation, but no officer or officers shall mortgage, pledge, hypothecate or
transfer any securities or other property of the Corporation, except when
authorized by the Board.
Section 3. Check. Drafts. etc. All checks, drafts, bills of exchange or
other orders for the payment of money out of the funds of the Corporation, and
all notes or other evidences of indebtedness of the Corporation, shall be signed
in the name and on behalf of the Corporation by such persons and in such manner
as shall from time to time be authorized by the Board.
Section 4. Deposits. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or
<PAGE>
12
other depositories as the Board may from time to time designate or as may be
designated by any officer or officers of the Corporation to whom such power of
designation may from time to time be delegated by the Board. For the purpose of
deposit and for the purpose of collection for the account of the Corporation,
checks, drafts and other orders for the payment of money which are payable to
the order of the Corporation may be endorsed, assigned and delivered by any
officer or agent of the Corporation, or in such manner as the Board may
determine by resolution.
Section 5. General and Special Bank Accounts. The Board may from time to
time authorize the opening and keeping of general and special bank accounts with
such banks, trust companies or other depositories as the Board may designate or
as may be designated by any officer or officers of the Corporation to whom such
power of designation may from time to time be delegated by the Board. The Board
may make such special rules and regulations with respect to such bank accounts,
not inconsistent with the provisions of these By-Laws, as it may deem expedient.
Section 6. Proxies in Respect of Securities of Other Corporations. Unless
otherwise provided by resolution adopted by the Board of Directors, the Chief
Executive Officer or the Chairman of the Board or the President may from time to
time appoint an attorney or attorneys or agent or agents, of the Corporation, in
the name and on behalf of the Corporation to cast the votes which the
Corporation may be entitled to cast as the holder of stock or other securities
in any other corporation, any of whose stock or other securities may be held by
the Corporation, at meetings of the holders of the stock or other securities of
such other corporation, or to consent in writing, in the name of the Corporation
as such holder, to any action by such other corporation, and may instruct the
person or persons so appointed as to the manner of casting such votes or giving
such consent, and may execute or cause to be executed in the name and on behalf
of the Corporation and under its corporate seal, or otherwise, all such written
proxies or other instruments as he may deem necessary or proper in the premises.
ARTICLE VII
Shares, Etc.
Section 1. Stock Certificates. Each holder of shares of stock of the
Corporation shall be entitled to have a certificate, in such form as shall be
approved by the Board, certifying the number of shares of the Corporation owned
by him. The certificates representing shares of stock shall be signed in the
name of the Corporation by the Chairman of the Board or the Chief Executive
Officer or the President or a Vice President and by the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer and sealed with
the seal of the Corporation (which seal may be a facsimile, engraved or
printed); provided, however, that where any such certificate is countersigned by
a transfer agent other than the Corporation or its employee, or is registered by
a registrar other than the Corporation or one of its employees, the signature of
the officers of the Corporation upon such certificates may be facsimiles,
engraved or printed. In case
<PAGE>
13
any officer who shall have signed or whose facsimile signature has been placed
upon such certificates shall have ceased to be such officer before such
certificates shall be issued, they may nevertheless be issued by the Corporation
with the same effect as if such officer were still in office at the date of
their issue.
Section 2. Books of Account and Record of Shareholders. The books and
records of the Corporation may be kept at such places within or without the
State of Delaware as the Board of Directors may from time to time determine. The
stock record books and the blank stock certificate books shall be kept by the
Secretary or by any other officer or agent designated by the Board of Directors.
Section 3. Transfer of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only upon
authorization by the registered holder thereof; or by his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary or
with a transfer agent or transfer clerk, and on surrender of the certificate or
certificates for such shares properly endorsed or accompanied by a duly executed
stock transfer power and the payment of all taxes thereon. Except as otherwise
provided by law, the Corporation shall be entitled to recognize the exclusive
right of a person in whose name any share or shares stand on the record of
stockholders as the owner of such share or shares for all purposes, including,
without limitation, the rights to receive dividends or other distributions, and
to vote as such owner, and the Corporation may hold any such stockholder of
record liable for calls and assessments and the Corporation shall not be bound
to recognize any equitable or legal claim to or interest in any such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof Whenever any transfers of shares shall be made for
collateral security and not absolutely, and both the transferor and transferee
request the Corporation to do so, such fact shall be stated in the entry of the
transfer.
Section 4. Regulations. The Board may make such additional rules and
regulations, not inconsistent with these By-Laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation. It may appoint, or authorize any officer or officers
to appoint, one or more transfer agents or one or more transfer clerks and one
or more registrars and may require all certificates for shares of stock to bear
the signature or signatures of any of them.
Section 5. Lost, Destroyed or Mutilated Certificates. The holder of any
certificate representing shares of stock of the Corporation shall immediately
notify the Corporation of any loss, destruction or mutilation of such
certificate, and the Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it which the owner thereof shall
allege to have been lost, stolen, or destroyed or which shall have been
mutilated, and the Board may, in its discretion, require such owner or his legal
representative to give the Corporation a bond in such sum, limited or unlimited,
and in such form and with such surety or sureties as the Board in its absolute
discretion shall determine, to indemnify the Corporation against any claim that
may be made against it on account of the alleged loss, theft, or destruction of
any such
<PAGE>
14
certificate, or the issuance of a new certificate. Anything herein to the
contrary notwithstanding, the Board, in its absolute discretion, may refuse to
issue any such new certificate, except pursuant to legal proceedings under the
laws of the State of Delaware.
Section 6. Fixing of Record Date. In order that the Corporation may
determine the stockholders entitled to notice of, or to vote at, any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board may fix, in advance, a
record date, which shall not be more than 60 nor less than 10 days before the
date of such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of; or to vote at, a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board may fix a new record date for the adjourned meeting.
ARTICLE VIII
Offices
Section 1. Principal or Registered Office. The principal registered office
of the Corporation shall be at such place as may be specified in the Certificate
of Incorporation of the Corporation or other certificate filed pursuant to law,
or if none be so specified, at such place as may from time to time be fixed by
the Board.
Section 2. Other Offices. The Corporation also may have an office or
offices other than said principal or registered office, at such place or places
either within or without the State of Delaware.
ARTICLE IX
Fiscal Year
The fiscal year of the Corporation shall be determined by the Board.
<PAGE>
15
ARTICLE X
Seal
The Board shall provide a corporate seal which shall contain the name of
the Corporation, the words "Corporate Seal" and the year and State of Delaware.
ARTICLE XI
Amendments
Section 1. Shareholders. These By-Laws may be amended or repealed, or new
By-Laws may be adopted, at any annual or special meeting of the stockholders,
by a majority of the total votes of the stockholders or when stockholders are
required to vote by class by a majority of the appropriate class, in person or
represented by proxy and entitled to vote on such action; provided, however,
that the notice of such meeting shall have been given as provided in these
By-Laws, which notice shall mention that amendment or repeal of these By-Laws,
or the adoption of new By-Laws, is one of the purposes of such meeting.
Section 2. Board of Directors. These By-Laws may also be amended or
repealed or new By-Laws may be adopted, by the Board at any meeting thereof;
provided, however, that notice of such meeting shall have been given as provided
in these By-Laws, which notice shall mention that amendment or repeal of the
By-Laws, or the adoption of new By-Laws, is one of the purposes of such
meetings. By-Laws adopted by the Board may be amended or repealed by the
stockholders as provided in Section 1 of this Article XI.
ARTICLE XII
Miscellaneous
Section 1. Interested Directors. No contract or other transaction between
the Corporation and any other corporation shall be affected and invalidated by
the fact that any one or more of the Directors of the Corporation is or are
interested in or is a Director or officer or are Directors or officers of such
other corporation, and any Director or Directors, individually or jointly, may
be a party or parties to or may be interested in any contract or transaction of
the Corporation or in which the Corporation is interested; and no contract, act
or transaction of the Corporation with any person or persons, firm or
corporation shall be affected or invalidated by the fact that any Director or
Directors of the Corporation is a party or are parties to or interested in such
contract, act or transaction, or in any way connected with such person or
persons, firms or associations, and each and every person who may become a
Director of the Corporation is
<PAGE>
16
hereby relieved from any liability that might otherwise exist from contracting
with the Corporation for the benefit of himself, any firm, association or
corporation in which he may be in any way interested.
Section 2. Ratification. Any transaction questioned in any stockholders'
derivative suit on the grounds of lack of authority, defective or irregular
execution, adverse interest of director, officer or stockholder, nondisclosure,
miscomputation, or the application of improper principles or practices of
accounting, may be ratified before or after judgment, by the Board of Directors
or by the stockholders in case less than a quorum of Directors are qualified,
and, if so ratified, shall have the same force and effect as if the questioned
transaction had been originally duly authorized, and said ratification shall be
binding upon the Corporation and its stockholders, and shall constitute a bar to
any claim or execution of any judgment in respect of such questioned
transaction.
Exhibit 4.2
COMMON STOCK COMMON STOCK
NUMBER SHARES
AV AVAX TECHNOLOGIES, INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE CUSIP 053495 10 7
SEE REVERSE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES THAT
is the owner of
CERTIFICATE OF STOCK
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE $.002 PER
SHARE OF
==========================AVAX TECHNOLOGIES, INC.==========================
(the "Company") transferable on the books of the Company by the holder hereof in
person or by duly authorized attorney upon surrender of this Certificate
properly endorsed. This Certificate and the shares represented hereby are issued
and shall be held subject to all of the provisions of the Certificate of
Incorporation of the Company and all amendments thereto to all of which the
holder by the acceptance hereof assents. This Certificate is not valid unless
countersigned and registered by the Transfer Agent and Registrar.
WITNESS the facimile seal of the Company and the facsimile signatures of
its duly authorized officers.
DATED
6-17-96
AVAX TECHNOLOGIES, INC.
CORPORATE SEAL
1992
DELAWARE
[Seal]
/s/ MICHAEL S. WEISS /s/ JEFFREY M. JONAS
SECRETARY PRESIDENT AND CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
(JERSEY CITY, NJ)
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED OFFICER
<PAGE>
The Company will furnish to any shareholder upon request and without charge
a full statement of the designation, relative rights, preferences and
limitations of the shares of each class authorized to be issued and the
designation, relative rights, preferences and limitations of each series of
preferred shares which the Company is authorized to issue so far as the same
have been fixed, and the authority of the Board of Directors of the Company to
designate and fix the relative rights, preferences and limitations of other
series.
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - ______ Custodian _____
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with right of Act ________________
survivorship and not as tenants (State)
in common
Additional abbreviations may also be used though not in the above list.
For Value Received, ______________________ hereby sell, assign and transfer
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________Shares
of Common Stock represented by the within Certificate, and do hereby irrevocably
constitute and appoint
________________________________________________________________________Attorney
to transfer the said shares of Common Stock on the books of the Company with
full power of substitution in the premises.
Dated _____________________________________
_________________________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed:
_______________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
Exhibit 4.3
NUMBER SHARES
AVP AVAX TECHNOLOGIES, INC.
SEE REVERSE FOR
CERTAIN DEFINITIONS
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE CUSIP 053495 20 6
This
Certifies
that
is the
owner of
CERTIFICATE OF STOCK
FULLY PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE OF $.01 EACH OF THE SERIES
B CONVERTIBLE PREFERRED STOCK OF
==========================AVAX TECHNOLOGIES, INC.==========================
(the "Company") transferable on the books of the Company by the holder hereof in
person or by duly authorized attorney upon surrender of this Certificate
properly endorsed. This Certificate and the shares represented hereby are issued
and shall be held subject to all of the provisions of the Certificate of
Incorporation of the Company and all amendments thereto to all of which the
holder by the acceptance hereof assents. This Certificate is not valid unless
countersigned and registered by the Transfer Agent and Registrar.
WITNESS the facimile seal of the Company and the facsimile signatures of
its duly authorized officers.
DATED
6-17-96
AVAX TECHNOLOGIES, INC.
CORPORATE SEAL
1992
DELAWARE
[Seal]
/s/ MICHAEL S. WEISS /s/ JEFFREY M. JONAS
SECRETARY PRESIDENT AND CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
(JERSEY CITY, NJ)
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED OFFICER
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED FOR SALE,
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE ENCUMBERED OR
DISPOSED OF (A "TRANSFER") UNLESS SUCH TRANSFER COMPLIES WITH THE PROVISIONS OF
A SUBSCRIPTION AGREEMENT BETWEEN THE REGISTERED HOLDER AND THE CORPORATION (THE
"AGREEMENT") (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE CORPORATION
AND WHICH WILL BE FURNISHED BY THE CORPORATION TO THE HOLDER HEREOF UPON WRITTEN
REQUEST AND WITHOUT CHARGE). THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
UNDER ANY STATE SECURITIES OR "BLUE SKY" LAWS. ACCORDINGLY, NO TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT IN ACCORDANCE WITH
THE AGREEMENT AND (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR
AMENDMENT THERETO UNDER THE ACT OR (B) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE ACT AND UNDER ANY APPLICABLE STATE SECURITIES OR "BLUE
SKY" LAWS.
The Company will furnish to any shareholder upon request and without charge
a full statement of the designation, relative rights, preferences and
limitations of the shares of each class authorized to be issued and the
designation, relative rights, preferences and limitations of each series of
preferred shares which the Company is authorized to issue so far as the same
have been fixed, and the authority of the Board of Directors of the Company to
designate and fix the relative rights, preferences and limitations of other
series.
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - ______ Custodian _____
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with right of Act ________________
survivorship and not as tenants (State)
in common
Additional abbreviations may also be used though not in the above list.
For Value Received, ______________________ hereby sell, assign and transfer
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
________________________________________________________________________Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated _____________________________________
_________________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACT OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed:
_______________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
Exhibit 4.4
WALDEN LABORATORIES, INC.
INVESTORS' RIGHTS AGREEMENT
NOVEMBER 20, 1995
INVESTORS' RIGHTS AGREEMENT
THIS INVESTORS' RIGHTS AGREEMENT (this "Agreement") is made as of the 20th
day of November, 1995, by and between Walden Laboratories, Inc., a Delaware
corporation (the "Company"), and Lindsay A. Rosenwald, M.D. and VentureTek, L.P.
(collectively, the "Investors").
RECITALS
WHEREAS, the Company and the Investors are parties to the Subscription
Agreement of even date herewith (the "Subscription Agreement") relating to the
purchase by the Investors of the common stock, par value $.001 per share, of the
Company (the "Common Stock");
WHEREAS, in order to induce the Company to enter into the Subscription
Agreement and to induce the Investors to invest funds in the Company pursuant to
the Subscription Agreement, the Investors and the Company hereby agree that this
Agreement shall govern the rights of the Investors to cause the Company to
register the shares of Common Stock issued to the Investors and certain other
matters as set forth herein;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. The Company covenants and agrees as follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1993, as amended.
(b) The term "Holder" means any person owning or having the right to
acquire Registrable Secu-
1
<PAGE>
rities or any assignee thereof in accordance with Section 2.2 hereof.
(c) The term "1934 Act" shall mean the Securities Exchange Act of 1934, as
amended.
(d) The terms "register", "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or order of
effectiveness of such registration statement or document.
(e) The term "Registrable Securities" means (i) the Common Stock issued
upon conversion of the Notes, (ii) any shares of Common Stock held by the
Investors, whether owned now or hereafter acquired and (iii) any Common Stock of
the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other distribution with respect to, or in exchange for in
replacement of the shares referenced in (i) and (ii) above and in this
subparagraph (iii), excluding in all cases any Registrable Securities sold by a
person in a transaction in which his rights under this Section 1 are not
assigned or are assigned in violation of this Agreement.
(f) The number of shares of "Registrable Securities then outstanding" shall
be determined by the number of shares of Common Stock outstanding which are, and
the number of shares of Common Stock issuable pursuant to then exercisable or
convertible securities which are, Registrable Securities.
(g) The term "SEC" shall mean the Securities and Exchange Commission.
1.2 Request for Registration.
(a) If, at any time following the closing date of the Initial Public
Offering of the Common Stock of the Company (the "IPO"), the Company shall
receive a written request from any Holder of the Registrable Securities
requesting that the Company file a registration statement on Form S-3 under the
Act covering the registration of the Registrable Securities, provided that the
2
<PAGE>
anticipated aggregate offering price, net of underwriting discounts and
commissions, will exceed $250,000 (an "S-3 Registration") then, in each case,
provided that the Company is eligible to file a registration statement on Form
S-3 under the Act, subject to the limitations set forth in this Agreement
(including the limitations of subsection 1.2(b)), (x) within twenty (20) days of
the receipt thereof, give written notice of such request to all Holders (the
"Notice of Request for Registration") and (y) as soon as practicable, use its
best efforts to effect such registration under the Act covering all Registrable
Securities which the Holders request to be registered by notice to the Company
within twenty (20) days of the mailing of the Notice of Request for Registration
by the Company in accordance with this subsection 1.2(a) and Section 2.6.
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as part of their request made pursuant to subsection 1.2(a) and the Company
shall include such information in the written notice referred to in subsection
1.2(a). The underwriter will be selected by the Initiating Holders. In such
event, the right of any Holder to include his Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 1.4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of this
Section 1.2 to the contrary, if the underwriter advises the Initiating Holders
in writing that marketing factors require a limitation of the number of shares
to be underwritten, then the Initiating Holders shall so advise all Holders
shall so advise all Holders of Registrable Securities which would otherwise be
underwritten pursuant hereto, and the number of shares of Registrable Securities
that may be included in the underwriting shall be allocated among all Holders
thereof, including
3
<PAGE>
the Initiating Holders, in proportion (as nearly as practicable) to the amount
of Registrable Securities of the Company owned by each Holder or, in the event
holders of other securities of the Company request inclusion in such
registration, pro rata as to all holders of securities of the Company requesting
inclusion in such registration.
(c) Notwithstanding the foregoing, the Company shall not be obligated to
effect any registration pursuant to this Section 1.2 if at the time of any
request to register Registrable Securities pursuant to this Section 1.2, the
Company is engaged, or has fixed plans to engage within ninety (90) days of the
time of the request, in a registered public offering or is engaged, or has fixed
plans to engage within ninety (90) days of time of the request, in any other
activity that, in the good faith determination of the Board of Directors of the
Company, would be adversely affected by the requested registration to the
material detriment of the Company, then the Company may at its option direct
that such request be delayed for a period not in excess of one hundred twenty
(120) days from the effective date of such offering, or the date of commencement
of such other material activity, as the case may be, such rights to delay a
request to be exercised by the Company not more than once in any twelve month
period.
(d) In addition, the Company shall not be obligated to effect, or to take
any action to effect, any registration pursuant to this Section 1.2:
(i) in the case of an S-3 Registration, during a calendar year in which
the Company has effected two S-3 Registrations in such year and each
registration has been declared or ordered effective; or
(ii) within one hundred and twenty (120) days after the effective date of
any registration statement effected by the Company whether for its own
account or for the account of others.
4
<PAGE>
1.3 "Piggy-back" Registration Rights. If (but without any obligation to do
so), at any time after the IPO, the Company proposes to register (including for
this purpose a registration effected by the Company for stockholders other than
the Holders) any of its stock or other equity securities under the Act in
connection with the public offering of such securities solely for cash (other
than a registration relating solely to the sale of securities to participants in
a Company stock plan, a registration on any form which does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of the Registrable Securities or a
registration in which the only Common Stock being registered is Common Stock
issuable upon conversion of debt securities which are also being registered),
the Company shall, at such time, promptly give each Holder written notice of
such registration. Upon the written request of each Holder given within ten (10)
days after mailing of such notice by the Company in accordance with Section 2.6,
the Company shall, subject to the limitations set forth in this Agreement
(including the limitations of Section 1.2(b) and the provisions of Section 1.8),
include in the Company's registration statement under the Act all of the
Registrable Securities that each such Holder has requested to be registered;
provided, however, that nothing in this Section 1.3 shall prevent the Company
from at any time abandoning or delaying any such registration without obligation
to any Holder.
1.4 Obligations of the Company. Whenever required under this Section 1 to
effect the registration of any Registrable Securities or to include Registrable
Securities in a Company registration statement, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with respect to
such Registrable Securities and use its reasonable best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for a period of up to one hundred twenty (120)
days or until the distribution contemplated in the Registration Statement has
been completed; provided, however, that such 120-day period shall be extended
for a period of time equal to the
5
<PAGE>
period the Holder refrains from selling any securities included in such
registration at the request of an underwriter of Common Stock (or other
securities) of the Company, and provided further that if applicable rules under
the Act governing the obligation to file a post-effective amendment permits, in
lieu of filing a post-effective amendment which (x) includes any prospectus
required by Section 10(a)(3) of the Act or (y) reflects facts or events
representing a material or fundamental change in the information set forth in
the registration statement, the Company may incorporate by reference information
required to be included in (x) and (y) above to the extent such information is
contained in periodic reports filed pursuant to Section 13 or 15(d) of the 1934
Act in the registration statement.
(b) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its reasonable best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Act.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each
6
<PAGE>
Holder participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Cause all such Registrable Securities registered pursuant hereunder to
be listed on each securities exchange on which similar securities issued by the
Company are then listed.
(h) Provide a transfer agent and registrar for all Registrable Securities
registered pursuant hereunder and CUSIP number for all such Registrable
Securities, in each case not later than the effective date of such registration.
1.5 Furnish Information.
(a) It shall be a condition precedent to the obligation of the Company to
take any action pursuant to this Section 1 with respect to the Registrable
Securities of any selling Holder that such Holder shall furnish to the Company
such information regarding the Holder, the Registrable Securities held by the
Holder, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities.
(b) The Company shall have no obligation with respect to any registration
requested pursuant to Section 1.2 if, due to the operation of subsection 1.5(a),
the number of shares or the anticipated aggregate offering price of the
Registrable Securities to be included in the registration does not equal or
exceed the number of shares or the anticipated aggregate offering price required
to originally trigger the Company's
7
<PAGE>
obligation to initiate such registration as specified in subsection 1.2(a).
1.6 Expenses of S-3 Registrations. All expenses other than underwriting
discounts and commissions incurred in connection with registrations, filings or
qualifications pursuant to Section 1.2, including (without limitation) all
registration, filing and qualification fees, printers' and accounting fees and
fees and disbursements of counsel for the Company shall be borne by the Company;
provided, however, that the Company shall not bear the cost of any professional
fees or costs of accounting, financial or legal advisors to any of the Holders;
provided, further, that the Company shall not be required to pay for any
expenses of any registration proceeding begun pursuant to Section 1.2 if the
registration request is subsequently withdrawn at the request of the Holders of
a majority of the Registrable Securities to be registered in which case all
Participating Holders shall bear such expenses, unless the Holders of a
majority of the Registrable Securities agree to forfeit their right to one S-3
Registration, as the case may be, pursuant to Section 1.2. Notwithstanding the
foregoing, each Holder shall pay all registration expenses which such Holder is
required to pay under applicable law.
1.7 Expenses of Company Registration. The Company shall bear and pay all
expenses incurred in connection with any registration, filing or qualification
of Registrable Securities with respect to the registrations pursuant to Section
1.3 for each Holder, including (without limitation) all registration, filing,
and qualification fees, printers and accounting fees relating or apportionable
thereto, but excluding underwriting discounts and commissions relating to
Registrable Securities; provided, however, that the Company shall not bear the
cost of any professional fees or costs of accounting, financial or legal
advisors to any of the Holders. Notwithstanding the foregoing, each Holder shall
pay all registration expenses which such Holder is required to pay under
applicable law.
1.8 Underwriting Requirements. In connection with any offering involving an
underwriting of shares of the Company's capital stock, the Company shall not be
required under Section 1.3 to include any of the
8
<PAGE>
Holders' securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
it (or by other persons entitled to select the underwriters), and then only in
such quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling stockholders according to
the total amount of securities entitled to be included therein owned by each
selling stockholder or in such other proportions as shall mutually be agreed to
by such selling stockholders). For purposes of the preceding parenthetical
concerning apportionment, for any selling stockholder that is a holder of
Registrable Securities and that is a partnership or corporation, the partners,
retired partners and stockholders of such holder, or the estates and family
members of any such partners and retired partners and any trusts for the benefit
of any of the foregoing persons shall be deemed to be a single "selling
stockholder", and any pro-rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling stockholder", as defined in this sentence.
1.9 Delay of Registration. No Holder shall have any right to obtain or seek
an injunction restraining or otherwise delaying any such registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Section 1.
1.10 Indemnification. In the event any Registrable Securities are included
in a registration statement under this Section 1:
9
<PAGE>
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Holder, any underwriter (as defined in the Act) for such Holder
and each person, if any, who controls such Holder or underwriter within the
meaning of the Act or the 1934 Act, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be statement therein, or necessary to make the
statements therein not misleading, or (iii) any violation or alleged violation
by the Company of the Act, the 1934 Act, or any rule or regulation promulgated
under the Act, or the 1934 Act, and the Company will pay to each such Holder,
underwriter or controlling person, as incurred, any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 1.10(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability, or action to the extent that
it arises out of or is based upon a Violation which occurs in reliance upon and
in conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will indemnify and
hold harmless the Company, each of its directors, each of its officers who has
signed the registration statement, each person, if any, who controls the Company
within the meaning of the Act, any underwriter, any other Holder selling
securities in such registration statement and any controlling
10
<PAGE>
person or any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, or the 1934 Act, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereto) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will pay, as incurred, any legal or
other expenses reasonably incurred by any person intended to be indemnified
pursuant to this subsection 1.10(b), in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subjection 1.10(b) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the Holder,
which consent shall not be unreasonably withheld; provided, that, in no event
shall any indemnity under this subsection 1.10(b) exceed the gross proceeds from
the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section 1.10
of notice of the commencement of any action (including any governmental action),
such indemnified party shall, if a claim in respect thereof is to be made
against any indemnifying party under this Section 1.10, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly notified, to assume the defense thereof with counsel selected by the
indemnifying party and approved by the indemnified party (whose approval shall
not be unreasonably withheld); provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and
11
<PAGE>
any other party represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 1.10, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
1.10.
(d) If the indemnification provided for in this Section 1.10 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage, or expense referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations. The
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the statements or omissions that resulted
in such loss, liability, claim, damage, or expense as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with the underwritten public offering are in conflict with
the foregoing provisions, the provisions in the underwriting agreement shall
control.
(f) The obligations of the Company and Holders under this Section 1.10
shall survive the completion of any offering of Registrable Securities in a
12
<PAGE>
registration statement under this Section 1, and otherwise.
1.11 Reports Under Securities Exchange act of 1934. With a view to making
available to the Holders the benefits of Rule 144 promulgated under the Act and
any other rule or regulation of the SEC that may at any time permit a Holder to
sell securities of the Company to the public without registration or pursuant to
a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the registration statement filed in connection with
an IPO by the Company;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the Act and the 1934 Act; and
(c) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of SEC Rule 144 (at any time
after ninety (90) days after the effective date of the registration statement
filed by the Company in connection with an IPO), the Act and the 1934 Act (at
any time after it has become subject to such reporting requirements), (ii) a
copy of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably requested in availing any Holder of any rule or regulation
of the SEC which permits the selling of any such securities without registration
or pursuant to such form.
1.12 Lock-Up Provision. In connection with the IPO, the Investor hereby
agrees to be subject to lock-up for 180 days or such longer period following the
IPO as required by the underwriter or underwriters of the IPO. In connection
with any subsequent public offering of the Company's securities, the Investor
hereby agrees to be subject to a lock-up for 120 days or such longer period
following such public offering as required by the underwriter or underwriters of
such public offering. During such periods, the Investor
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agrees not to directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of (other than to donees who agree to be similarly
bound) any securities of the Company held by it at any time during such period
except Common Stock included in such registration without the prior written
consent of such underwriter or underwriters. This Section 1.12 shall be binding
upon any transferee of the Securities.
In order to enforce the foregoing covenant, the Company may impose
stock-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
Notwithstanding the foregoing, the obligation described in this Section
1.12 shall not apply to a registration relating solely to employee benefit plans
on Form S-1 or Form S-8 or similar forms which may be promulgated in the future,
or a registration relating solely to a Commission Rule 145 transaction on Form
S-4 or similar forms which may be promulgated in the future.
1.13 Termination of Registration Rights. In addition, the right of any
Holder to request registration pursuant to Section 1.2 or inclusion in any
registration pursuant to Section 1.3 shall terminate on the closing of the IPO
if all shares of Registrable Securities held or entitled to be held upon
conversion by such Holder may immediately be sold under Rule 144 or Rule 701
during any 90-day period, or on such date after the IPO as all shares of
Registrable Securities held or entitled to be held upon conversion by such
Holder may immediately be sold under Rule 144 or Rule 701 during any 90-day
period; provided, however, that the provisions of this Section 1.13 shall not
apply to any Holder who owns more than two percent (2%) of the Company's
outstanding stock until such time as such Holder owns less than two percent (2%)
of the outstanding stock of the Company.
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2. Miscellaneous.
2.1 Successors and Assigns. Except as otherwise provided in Section 2.2
below and elsewhere herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors and
assigns of the parties (including transferees of any shares of Registrable
Securities). Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations, or liabilities under
or by reason of this Agreement, except as expressly provided in this Agreement.
2.2 Transfer of Rights.
(a) The rights granted to the Investors pursuant to Section 1 may not be
transferred or assigned, except that such rights are assignable to anyone who
acquires at least such number of shares of Common Stock as equals the lesser of
(i) eighty percent (80%) of the aggregate number of shares of Common Stock held
by such Holder and (ii) 50,000 shares of Common Stock; provided, however, that
the Company is given written notice by the transferee at the time of any such
permitted transfer stating the name and address of the transferee and
identifying the shares of Common Stock with respect to which such rights are
being assigned.
(b) Notwithstanding anything to the contrary herein, if the Investor is a
partnership, it may transfer rights granted pursuant to Section 1 to any of its
partners to whom shares of Common Stock are transferred. In the event of such
transfer, such partner shall deemed to be the Holder of such shares of Common
Stock and may, subject to paragraph (a) above, again transfer such right to any
other person or entity which acquired such shares from such partner.
2.3 Governing Law. This Agreement shall be governed by and construed under
the laws of the State of New York as applied to agreements among Delaware
residents entered into and to be performed entirely within New York without
regard to principles of conflicts of law.
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2.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2.5 Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
2.6 Notices. Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed effectively
given upon personal delivery to the party to be notified, upon confirmed
delivery by a recognized courier or messenger service or upon deposit with the
United States Post Office, by registered or certified mail, postage prepaid and
addressed to the party to be notified at the address indicated for such party on
the signature page hereof, or at such other address as such party may designate
by ten (10) days' advance written notice to the other parties.
2.7 Expenses. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
2.8 Amendments and Waivers. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and the holders of a majority of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any Rall
such Registrable Securities, and the Company.
2.9 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provisions were so excluded and
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shall be enforceable in accordance with its terms. The parties hereto shall
endeavor to replace any such unenforceable provision or provisions with a valid
and enforceable provision or provisions which shall have substantially the same
economic effect as the unenforceable provision or provisions.
2.10 Aggregation of Stock. All shares of Registrable Securities held or
acquired by affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
2.11 Entire Agreement; Amendment; Waiver. This Agreement (including the
Exhibits hereto, if any) constitutes the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
WALDEN LABORATORIES, INC.
By: /s/ Carl Spana
------------------------------------
Carl Spana, Ph.D
Interim President
Walden Laboratories, Inc.
375 Park Avenue, Suite 1501
New York, NY 10152
INVESTORS:
LINDSAY A. ROSENWALD, M.D.
By: /s/ Lindsay A. Rosenwald
------------------------------------
Lindsay A. Rosenwald
c/o The Castle Group, Ltd.
375 Park Avenue, Suite 1501
New York, NY 10152
VENTURETEK, L.P.
By: /s/ David Selengut
------------------------------------
David Selengut, General Partner
c/o Singer Bienenstock, Zaransky, Ogele
& Selengut
40 Exchange Place, 20th Floor
New York, NY 10005
18
Exhibit 4.6
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT (this "Agreement") made as of the date set forth on
the signature page hereof between AVAX Technologies, Inc., a Delaware
corporation (the "Company") and the undersigned (the "Subscriber").
W I T N E S S E T H:
WHEREAS, the Company desires to issue a minimum (the "Minimum Offering") of
$1,000,000 of units (the "Units") and a maximum (the "Maximum Offering") of
$9,000,000 of Units, with an over-allotment option in favor of the Placement
Agent to offer for sale an additional $9,000,000 of Units, in a private
placement offering (the "Offering"), each Unit consisting of 1,000 shares of
Premium Preferred Stock, par value $.01 per share, of the Company, with a stated
value of $100.00 per share (the "Preferred Stock"), convertible into shares of
common stock, par value $.001 per share, of the Company (the "Common Stock")
(the Preferred Stock and the shares of Common Stock issuable upon conversion of
the Preferred Stock (the "Conversion Shares") are hereinafter sometimes referred
to collectively as the "Securities");
WHEREAS, the Subscriber desires to purchase that number of Units set forth
on the signature page hereof on the terms and conditions hereinafter set forth;
WHEREAS, the Company has engaged Paramount Capital, Inc. (the "Placement
Agent") as Placement Agent for the Offering on a "best-efforts," "all-or-none"
basis as to the Minimum Offering and thereafter on a "best efforts" basis as to
the Maximum Offering.
NOW, THEREFORE, in consideration of the premises and the mutual
representations and covenants hereinafter set forth, the parties hereto do
hereby agree as follows:
I. SUBSCRIPTION FOR UNITS AND REPRESENTATIONS BY SUBSCRIBER
1.1 Subject to the terms and conditions hereinafter set forth, the
Subscriber hereby subscribes for and agrees to purchase from the Company such
number of Units or fractions thereof as is set forth upon the signature page
hereof at a price equal to $100,000 per Unit and the Company agrees to sell such
Units to the Subscriber for said purchase price. The purchase price is payable
by personal or business check, wire transfer of immediately available funds or
money order made payable to "American Stock Transfer & Trust Company, Escrow
Agent, F/B/O AVAX Technologies, Inc." contemporaneously with the execution and
delivery of this Agreement by the Subscriber. The Units will be delivered by the
Company to the
<PAGE>
Subscriber within ten (10) days of the Closing of the Offering applicable to the
Subscriber as set forth in Article III hereof.
1.2 The Subscriber recognizes that the purchase of Units involves a high
degree of risk in that (i) the Company remains a development stage business with
limited operating history and requires substantial funds in addition to the
proceeds of the Offering; (ii) an investment in the Company is highly
speculative, and only investors who can afford the loss of their entire
investment should consider investing in the Company and the Units; (iii) the
Subscriber may not be able to liquidate his investment; (iv) transferability of
the Units and the Securities is extremely limited; and (v) in the event of a
disposition, the Subscriber could sustain the loss of his or its entire
investment. Such risks are more fully set forth in the Memorandum (as defined
below) furnished by the Company to the Subscriber.
1.3 The Subscriber represents that the Subscriber is an "accredited
investor" as such term is defined in Rule 501 of Regulation D promulgated under
the Securities Act of 1933, as amended (the "Act"), as indicated by his
responses to the questions contained in Article VIII hereof, and that the
Subscriber is able to bear the economic risk of an investment in the Units.
1.4 The Subscriber hereby acknowledges and represents that (i) the
Subscriber has prior investment experience, including investment in non-listed
and unregistered securities, or the Subscriber has employed the services of an
investment advisor, attorney and/or accountant to read all of the documents
furnished or made available by the Company both to the Subscriber and to all
other prospective investors in the Units and to evaluate the merits and risks of
such an investment on the Subscriber's behalf; (ii) the Subscriber recognizes
the highly speculative nature of this investment; and (iii) the Subscriber is
able to bear the economic risk which the Subscriber hereby assumes.
1.5 The Subscriber hereby acknowledges receipt and careful review of the
Confidential Private Placement Memorandum dated March 27, 1996, as supplemented
and amended, and the attachments and exhibits thereto, all of which constitute
an integral part thereof (the "Memorandum") and hereby represents that the
Subscriber has been furnished by the Company during the course of this
transaction with all information regarding the Company which the Subscriber has
requested or desired to know, has been afforded the opportunity to ask questions
of and receive answers from duly authorized officers or other representatives of
the Company concerning the terms and conditions of the Offering and has received
any additional information which Subscriber has requested.
1.6(a) The Subscriber has relied solely upon the information provided by
the Company in the Memorandum in making the decision to invest in the Units. To
the extent necessary, the Subscriber has retained, at the expense of the
Subscriber, and relied upon appropriate professional advice regarding the
investment, tax and legal merits and consequences of this Agreement and its
purchase of the Units hereunder. The Subscriber acknowledges and agrees that the
Placement Agent has not supplied any information for inclusion in the Memorandum
other than information furnished in writing to the Company by the Placement
2
<PAGE>
Agent specifically for inclusion in the Memorandum relating to the Placement
Agent, that the Placement Agent has no responsibility for the accuracy or
completeness of the Memorandum and that the Subscriber has not relied upon the
independent investigation or verification, if any, which may have been
undertaken by the Placement Agent.
(b) The Subscriber covenants that (i) the Subscriber was contacted
regarding the sale of the Units by the Placement Agent, (or an authorized agent
or representative thereof) with whom the Subscriber had a prior substantial
pre-existing relationship and (ii) no Units were offered or sold to it by means
of any form of general solicitation or general advertising, and in connection
therewith the Subscriber: did not (A) receive or review any advertisement,
article, notice or other communication published in a newspaper or magazine or
similar media or broadcast over television or radio whether closed circuit, or
generally available; or (B) attend any seminar meeting or industry investor
conference whose attendees were invited by any general solicitation or general
advertising.
1.7 The Subscriber hereby acknowledges that the Offering has not been
reviewed by the United States Securities and Exchange Commission (the "SEC")
because of the Company's representations that this Offering is intended to be
exempt from the registration requirements of Section 5 of the Act pursuant to
Sections 4(2) and 3(b) of the Act. The Subscriber agrees that the Subscriber
will not sell or otherwise transfer the Units or the Securities unless they are
registered under the Act or unless an exemption from such registration is
available.
1.8 The Subscriber understands that the Securities have not been registered
under the Act by reason of a claimed exemption under the provisions of the Act
which depends, in part, upon the Subscriber's investment intention. In this
connection, the Subscriber hereby represents that the Subscriber is purchasing
the Securities for the Subscriber's own account for investment and not with a
view toward the resale or distribution to others. The Subscriber, if an entity,
was not formed for the purpose of purchasing the Units. The Subscriber
understands that Rule 144 promulgated under the Act requires, among other
conditions, a two-year holding period prior to the resale (in limited amounts)
of securities acquired in a non-public offering without having to satisfy the
registration requirements under the Act.
1.9 The Subscriber understands and hereby acknowledges that the Company is
under no obligation to register the Units or any of the Securities under the Act
or any state securities or "blue sky" laws other than as set forth in Article V.
The Subscriber consents that the Company may, if it desires, permit the transfer
of the Securities under or issuable upon exercise thereof out of the
Subscriber's name only when the Subscriber's request for transfer is accompanied
by an opinion of counsel reasonably satisfactory to the Company that neither the
sale nor the proposed transfer results in a violation of the Act or any
applicable state "blue sky" laws (collectively, "Securities Laws"). The
Subscriber agrees to hold the Company and its directors, officers, agents
(including the Placement Agent) and controlling persons and their respective
heirs, representatives, successors and assigns harmless and to indemnify them
against all liabilities, costs and expenses incurred by them as a result of any
misrepresentation made by
3
<PAGE>
the Subscriber contained in this Agreement (including the Confidential Investor
Questionnaire contained in Article VIII herein) or any sale or distribution by
the Subscriber in violation of the Securities Laws.
1.10 The Subscriber consents to the placement of a legend on any
certificate or other document evidencing the Securities that such Securities
have not been registered under the Act or any state securities or "blue sky"
laws and setting forth or referred to the restrictions on transferability and
sale thereof contained in this Agreement. The Subscriber is aware that the
Company will make a notation in its appropriate records with respect to the
restrictions on the transferability of such Securities.
1.11 The Subscriber understands that the Company will review this Agreement
and is hereby given authority by the Subscriber to call Subscriber's bank or
place of employment or otherwise review the financial standing of the
Subscriber; and it is further agreed that the Company reserves the unrestricted
right, without further documentation or agreement on the part of the Subscriber,
to reject or limit any subscription, to accept subscriptions for fractional
Units and to close the Offering to the Subscriber at any time.
1.12 The Subscriber hereby represents that the address of the Subscriber
furnished by the Subscriber on the signature page hereof is the Subscriber's
principal residence if the Subscriber is an individual or its principal business
address if it is a corporation or other entity.
1.13 The Subscriber represents that he or it has full power and authority
(corporate, statutory and otherwise) to execute and deliver this Agreement and
to purchase the Units. This Agreement constitutes the legal, valid and binding
obligation of the Subscriber, enforceable against the Subscriber in accordance
with its terms.
1.14 If the Subscriber is a corporation, company, trust, employee benefit
plan, individual retirement account, Keogh Plan, or other tax-exempt entity, it
is authorized and qualified to become an investor in the Company and the person
signing this Agreement on behalf of such entity has been duly authorized by such
entity to do so.
1.15 The Subscriber acknowledges that if he is a Registered Representative
of an NASD member firm, he must give such firm the notice required by the Rules
of Fair Practice promulgated by the NASD, receipt of which must be acknowledged
by such firm in Section 8.4 below.
1.16 The Subscriber acknowledges that at such time, if ever, as the
Securities are registered, sales of the such Securities will be subject to state
securities laws, including those of the State of New Jersey which requires any
securities sold in New Jersey to be sold through a registered broker-dealer or
in reliance upon an exemption from registration.
4
<PAGE>
1.17 The Subscriber hereby agrees that from the date hereof and continuing
for a period (the "Lock-Up Period") of: (a) three (3) months from the Final
Closing Date with respect to seventy-five percent (75%) of the Conversion
Shares; (b) six (6) months from the Final Closing Date with respect to fifty
percent (50%) of the Conversion Shares; and (d) nine (9) months from the Final
Closing Date with respect to the remaining twenty-five percent (25%) of the
Conversion Shares, Subscriber will not, without the prior written consent of
Placement Agent, offer, pledge, sell, contract to sell, grant any option for the
sale of, or otherwise dispose of, directly or indirectly, any Conversion Shares.
For the avoidance of doubt, there shall be no Lock-Up Period with respect to
twenty-five percent (25%) of the Conversion Shares. In addition, the Subscriber
agrees that while it holds any Securities, the Subscriber will not directly or
indirectly, through related parties, affiliates or otherwise sell "short" or
"short against the box" (as those terms are generally understood) any equity
security of the Company; provided, however, that it shall not be a violation of
this Section 1.17, if the Subscriber places a sell order for Registrable
Securities (as defined herein) prior to the conversion of the Conversion Shares,
relies on the Company to deliver such Registrable Securities in accordance with
Section 5.4(h) and completes the sale of such Registrable Securities before the
Company delivers the Registrable Securities to the Subscriber.
II. REPRESENTATIONS BY AND COVENANTS OF THE COMPANY
Except as set forth on the Schedule of Exceptions attached hereto as
Exhibit A, the Company hereby represents and warrants to the Subscriber that:
2.1 Organization, Good Standing and Qualifications. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has full corporate power and authority to conduct
its business as described in the Memorandum.
2.2 Capitalization and Voting Rights. Except as disclosed in Schedule 2.2,
the authorized, issued and outstanding capital stock of the Company is as set
forth in the Memorandum under "Capitalization"; all issued and outstanding
shares of the Company are validly issued, fully paid and nonassessable. The
Securities have been duly and validly authorized and, when issued and paid for
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable. Except as set forth in the Memorandum, there are no outstanding
options, warrants, agreements, convertible securities, preemptive rights or
other rights to subscribe for or to purchase any shares of capital stock of the
Company. Except as set forth in the Memorandum and in this Agreement and as
otherwise required by law, there are no restrictions upon the voting or transfer
of the Securities pursuant to the Company's Certificate of Incorporation, Bylaws
or other governing documents or any agreement or other instruments to which the
Company is a party or by which the Company is bound.
5
<PAGE>
2.3 Authorization; Enforceability. This Agreement has been duly and validly
authorized by the Company and is enforceable against the Company in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law). The Company has full power and lawful authority to authorize, issue and
sell the Units to be sold by it hereunder on the terms and conditions set forth
herein.
2.4 Certificate of Designating of Preferred Stock. The Preferred Stock has
the rights, preferences and privileges substantially as set forth in the Form of
Certificate of Designations attached as Exhibit A to the Memorandum and the Form
of Certificate of Designations.
2.5 No Conflict; Governmental Consents.
(i) The execution and delivery by the Company of this Agreement and
the consummation of the transactions contemplated hereby will not result in
the violation of any law, statute, rule, regulation, order, writ,
injunction, judgment or decree of any court or governmental authority to or
by which the Company is bound, or of any provision of the Certificate of
Incorporation or Bylaws of the Company, and will not conflict with, or
result in a breach or violation of, any of the terms or provisions of, or
constitute (with due notice or lapse of time or both) a default under, any
lease, loan agreement, mortgage, security agreement, trust indenture or
other agreement or instrument to which the Company is a party or by which
it is bound or to which any of its properties or assets is subject, nor
result in the creation or imposition of any lien upon any of the properties
or assets of the Company.
(ii) No consent, approval, authorization or other order of any
governmental authority is required to be obtained by the Company in
connection with the authorization, execution and delivery of this Agreement
or with the authorization, issue and sale of the Units or the Securities,
except such filings as may be required to be made with, the SEC, any state
or foreign blue sky or securities regulatory authority, and possibly Nasdaq
(as defined below).
2.6 Licenses. Except as set forth in the Memorandum, the Company has
sufficient licenses, permits and other governmental authorizations currently
required for the conduct of its business or ownership of properties and is in
all material respects complying therewith.
6
<PAGE>
2.7 Litigation. Except as set forth in the Memorandum, the Company knows of
no pending or threatened legal or governmental proceedings against the Company
which could materially adversely affect the business, property, financial
condition or operations of the Company.
2.8 Memorandum; Disclosure. No information set forth in the Memorandum
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained therein, in light of
the circumstances under which they were made, not misleading.
2.9 Investment Company. Giving effect to the expected use of proceeds as
set forth in the Memorandum, the Company is not an "investment company" within
the meaning of such term under the Investment Company Act of 1940 and the rules
and regulations of the SEC thereunder.
2.10 Open Market Purchases. The Company shall not, directly or indirectly,
through related parties or otherwise, purchase any equity securities of the
Company (other than off-market privately negotiated purchases) during the thirty
(30) trading days prior to the Reset Date or any date of mandatory conversion
(as more fully described in the Certificate of Designations).
III. TERMS OF SUBSCRIPTION
3.1 The Company shall issue a minimum of ten (10) Units and a maximum of
ninety (90) Units. The Placement Agent, at its sole option, may offer for sale
by the Company up to an additional ninety (90) Units to cover over-allotments.
3.2 The Offering Period shall begin March 27, 1996. Upon receipt of the
Minimum Offering amount, the Placement Agent may conduct a closing (the "Initial
Closing Date") and may conduct subsequent closings (each a "Closing") on an
interim basis until the Maximum Offering amount (including any over-allotment
amount) has been reached (the "Final Closing Date"). The Offering Period shall
terminate at 11:59 p.m. New York City time on or about May 26, 1996, subject to
an extension, at the sole option of the Placement Agent, for an additional sixty
(60) days. The Units will be offered on a "best-efforts," "all-or-none" basis as
to the Minimum Offering and thereafter on a "best efforts" basis as the Maximum
Offering. The purchase price is payable by personal or business check, wire
transfer of immediately available funds or money order made payable to "American
Stock Transfer & Trust Company, Escrow Agent, AVAX Technologies, Inc."
3.3 Placement of the Units will be made by the Placement Agent, who will
receive (i) a placement fee in the amount of 9% of the purchase price of the
Units placed and (ii) a non-accountable expense allowance equal to 4% of the
purchase price of the Units placed. The Placement Agent shall also receive
warrants (the "Placement Agent Warrants") to purchase a number of newly issued
shares of Preferred Stock equal to 10% of the Preferred Stock sold
7
<PAGE>
in the Offering, exercisable for a period of ten (10) years from the Final
Closing Date at an exercise price equal to 110% of the price per share of
Preferred Stock paid by investors in the Offering. The Placement Agent Warrants
will contain a cashless exercise feature and the right to be registered on the
Shelf Registration Statement (described in Section 5.2).
3.4 Pending the sale of the Units, all funds paid hereunder shall be
deposited by the Company in escrow with the American Stock Transfer & Trust
Company, 40 Wall Street, New York, New York, 10005. If the Company shall not
have obtained subscriptions (including this subscription) for purchases of
$1,000,000 of Units on or before the Final Closing Date, then this subscription
shall be void and all funds paid hereunder by the Subscriber shall be promptly
returned to the Subscriber, without interest, in accordance with Section 3.6
hereof.
3.5 The Subscriber hereby authorizes and directs the Company to deliver the
Securities to be issued to the Subscriber pursuant to this Agreement directly to
the Subscriber's account maintained by the Placement Agent or, if no such
account exists, to the residential or business address indicated on the
signature page hereto.
3.6 The Subscriber hereby authorizes and directs the Company to return any
funds for unaccepted subscriptions to the same account from which the funds were
drawn, including any customer account maintained with the Placement Agent.
IV. CONDITIONS TO OBLIGATIONS OF THE SUBSCRIBERS
4.1 The Subscribers' obligations to purchase the Units at the Closing is
subject to the fulfillment on or prior to the date of such Closing of the
following conditions, which conditions may be waived at the option of each
Subscriber to the extent permitted by law:
(a) Representations and Warranties Correct. The representations and
warranties made by the Company in Article III hereof shall be true and
correct in all material respects when made, and shall be true and correct
in all material respects on the date of such Closing with the same force
and effect as if they had been made on and as of said date.
(b) Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to such purchase
shall have been performed or complied with in all material respects.
(c) No Legal Order Pending. There shall not then be in effect any
legal or other order enjoining or restraining the transactions contemplated
by this Agreement.
(d) No Law Prohibiting or Restricting Such Sale. There shall not be in
effect any law, rule or regulation prohibiting or restricting such sale or
requiring any consent or approval of any person which shall not have been
obtained to issue the Units (except as otherwise provided in this
Agreement).
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(e) Minimum Subscriptions. With respect to the Initial Closing, the
Company shall have received binding subscriptions for at least $1,000,000.
(f) Legal Opinion. Upon each Closing, counsel to the Company shall
have delivered to the Placement Agent for the benefit of the Placement
Agent and the Subscribers, purchasing on such date, a legal opinion with
respect to such legal matters relating to this Agreement and the Memorandum
as the Placement Agent may reasonably require.
V. REGISTRATION RIGHTS
5.1 As used in this Agreement, the following terms shall have the following
meanings:
(a) "Affiliate" shall mean, with respect to any person, any other
person controlling, controlled by or under direct or indirect common
control with such person (for the purposes of this definition "control,"
when used with respect to any specified person, shall mean the power to
direct management and policies of such person, directly or indirectly,
whether through ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" shall have meanings
correlative to the foregoing).
(b) "Business Day" shall mean a day Monday through Friday on which
banks are generally open for business in New York.
(c) "Holders" shall mean the Subscribers and any person holding
Registrable Securities to whom the rights under Section 5 have been
transferred in accordance with Section 5.10 hereof.
(d) "Person" shall mean any person, individual, corporation,
partnership, trust or other nongovernmental entity or any governmental
agency, court, authority or other body (whether foreign, federal, state,
local or otherwise).
(e) The terms "register," "registered" and "registration" refer to the
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
(f) "Registrable Securities" shall mean (A) the Conversion Shares and
(B) any shares of Common Stock issued as (or issuable upon the conversion
of any warrant, right or other security which is issued as) a dividend or
other distribution with respect to or in replacement of the Conversion
Shares; provided, however, that securities shall only be treated as
Registrable Securities if and only for so long as they (I) have not been
disposed of pursuant to a registration statement declared effective by the
SEC, (II) have not been sold in a transaction exempt from the registration
and prospectus delivery requirements of the Securities Act so that all
transfer restrictions and restrictive legends with respect thereto are
removed upon the
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consummation of such sale or (III) are held by a Holder or a permitted
transferee pursuant to Section 5.10.
(g) "Registration Expenses" shall mean all expenses incurred by the
Company in complying with Section 5.2 hereof, including, without
limitation, all registration, qualification and filing fees, printing
expenses, escrow fees, fees and expenses of counsel for the Company, blue
sky fees and expenses (for a reasonable number of states) and the expense
of any special audits incident to or required by such registration (but
excluding the fees of legal counsel for any Holder).
(h) "Registration Statement" shall have the meaning ascribed to such
term in Section 5.2.
(i) "Registration Period" shall have the meaning ascribed to such term
in Section 5.4.
(j) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and
all fees and expenses of legal counsel for any Holder.
5.2 The Company will, as soon as practicable, but not later than sixty (60)
days after the Final Closing Date, (i) file a shelf registration statement (the
"Shelf Registration Statement") with respect to the Registrable Securities with
the SEC (the "Filing Date") and (ii) use its reasonable efforts to effect the
registration, qualifications or compliances (including, without limitation, the
execution of any required undertaking to file post-effective amendments,
appropriate qualifications under applicable blue sky or other state securities
laws and appropriate compliance with applicable securities laws, requirements or
regulations) as may be so reasonably requested and as would permit or facilitate
the sale and distribution of all Registrable Securities. Notwithstanding the
foregoing, the Company will not be obligated to enter into any underwriting
agreement for the sale of any of the Securities.
5.3 All Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 5.2 shall be borne by the
Company. All Selling Expenses relating to the sale of securities registered by
or on behalf of Holders shall be borne by such Holders pro rata on the basis of
the number of securities so registered.
5.4 In the case of the registration, qualification or compliance effected
by the Company pursuant to this Agreement, the Company will, upon reasonable
request, inform each Holder as to the status of such registrants, qualification
and compliance. At its expense the Company will:
(a) use its reasonable best efforts to keep such registration, and any
qualification or compliance under state securities laws which the Company
determines to obtain, continuously effective until the Holders have
completed the distribution described in the
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Registration Statement relating thereto. The period of time during which
the Company is required hereunder to keep the Registration Statement
effective is referred to herein as "the Registration Period."
Notwithstanding the foregoing at the Company's election, the Company may
cease to keep such registration, qualification or compliance effective with
respect to any Registrable Securities, and the registration rights of a
Holder shall expire, at such time as the Holder may sell under Rule 144
under the Securities Act (or other exemption from registration acceptable
to the Company) in a three-month period all Registrable Securities then
held by such Holder; and
(b) advise the Holders:
(i) when the Registration Statement or any amendment thereto has
been filed with the Commission and when the registration statement or
any post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the prospectus included
therein or for additional information.
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for such purpose;
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Shares included
therein for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose; and
(v) of the happening of any event that requires the making of any
changes in the Registration Statement or the prospectus so that, as of
such date, the statements therein are not misleading and do not omit
to state a material fact required to be stated therein or necessary to
make the statements therein (in the case of the prospectus, in the
light of the circumstances under which they were made) not misleading;
(c) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of any Registration Statement at the earliest
possible time;
(d) furnish to each Holder, without charge, at least one copy of such
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, and, if the Holder so requests in
writing, all exhibits (including those incorporated by reference) in the
form filed with the Commission;
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(e) during the Registration Period, deliver to each Holder, without
charge, as many copies of the prospectus included in such Registration
Statement and any amendment or supplement thereto as such Holder may
reasonably request; and the Company consents to the use, consistent with
the provisions hereof, of the prospectus or any amendment or supplement
thereto by each of the selling Holders of Registrable Securities in
connection with the offering and sale of the Registrable Securities covered
by the prospectus or any amendment or supplement thereto. In addition, upon
the reasonable request of the Subscriber and subject in all cases to
confidentiality protections reasonably acceptable to the Company, the
Company will meet with a Subscriber or a representative thereof at the
Company's headquarters to discuss all information relevant for disclosure
in the Registration Statement covering the Registrable Securities, and will
otherwise cooperate with any Subscriber conducting an investigation for the
purpose of reducing or eliminating such Subscriber's exposure to liability
under the Securities Act, including the reasonable production of
information at the Company's headquarters;
(f) during the Registration Period, deliver to each Holder, without
charge, (i) as soon as practicable (but in the case of the annual report of
the Company to its stockholders, within 120 days after the end of each
fiscal year of the Company one copy of: (A) its annual report to its
stockholders (which annual report shall contain financial statements
audited in accordance with generally accepted accounting principles in the
United States of America by a firm of certified public accountants of
recognized standing); (B) if not included in substance in its annual report
to stockholders, its annual report on Form 10-K (or similar form); (C) each
of its quarterly reports to its stockholders, and, if not included in
substance in its quarterly reports to stockholders, its quarterly report on
Form 10-Q (or similar form), and (D) a copy of the full Registration
Statement (the foregoing, in each case, excluding exhibits); and (ii) upon
reasonable request, all exhibits excluded by the parenthetical to the
immediately preceding clause (D), and all other information that is
generally available to the public;
(g) prior to any public offering of Registrable Securities pursuant to
any Registration Statement, register or qualify for offer and sale under
the securities or blue sky laws of such jurisdictions as any such Holders
reasonably request in writing, provided that the Company shall not for any
such purpose by required to qualify generally to transact business as a
foreign corporation in any jurisdiction where it is not so qualified or to
consent to general service of process in any such jurisdiction, and do any
and all other acts or things necessary or advisable to enable the offer and
sale in such jurisdictions of the Registrable Securities covered by such
Registration Statement;
(h) cooperate with the Holders and use its reasonable best efforts to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold pursuant to any Registration Statement
free of any restrictive legends to the extent not required at such time and
in such denomination and registered in such names as Holders may request
within three business days of any such request by the Holder in connection
with the sales of Registrable Securities pursuant to such Registration
Statement;
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(i) upon the occurrence of any event contemplated by Section 5.4(b)(v)
above, the Company shall promptly prepare a post-effective amendment to the
Registration Statement or a supplement to the related prospectus, or file
any other required document so that, as thereafter delivered to purchasers
of the Registrable Securities included therein, the prospectus will not
include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(j) use its reasonable efforts to comply with all applicable rules and
regulations of the Commission, and will make generally available to the
Holders not later than 45 days (or 90 days if the fiscal quarter is the
fourth fiscal quarter) after the end of its fiscal quarter in which the
first anniversary date of the effective date of the Registration Statement
occurs, an earnings statement satisfying the provisions of Section 11(a) of
the Act; and
5.5 As soon as reasonably practicable following the Final Closing Date, the
Company shall use its reasonable efforts to apply for the listing of the Common
Stock (including the Conversion Shares, as well as those underlying the
Placement Agent Warrants) on the automated quotation system of the Nasdaq
SmallCap Market ("Nasdaq") if the Company meets the initial listing criteria for
Nasdaq.
5.6 The Holders shall have no right to take any action to restrain, enjoin
or otherwise delay any registration pursuant to Section 5.2 hereof as a result
of any controversy that may arise with respect to the interpretation or
implementation of this Agreement.
5.7
(a) To the extent permitted by law, the Company will indemnify each Holder,
each underwriter of the Registrable Securities, if any, and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to which any registration, qualification or compliance has been
effected pursuant to this Agreement, against all claims, losses, damages and
liabilities (or action in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened (subject to
Section 5.7(c) below), arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement, prospectus or offering circular, or any amendment or supplement
thereof, incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in light of the circumstances in which they were made, and will
reimburse each Holder, each underwriter of the Shares and each person
controlling such Holder, for reasonable legal and any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action as incurred, provided that the Company will not be
liable in any such case to the extent that any untrue statement or omission or
allegation thereof is made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Holder and stated
to be specifically for use in preparation of such registration statement,
prospectus or offering circular; provided that the Company will not be liable in
any such case
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where the claim, loss, damage or liability arises out of or is related to the
failure of the Holder to comply with the covenants and agreements contained in
this Agreement respecting sales of Registrable Securities, and except that the
foregoing indemnity agreement is subject to the condition that, insofar as it
relates to any such untrue statement or alleged untrue statement or omission or
alleged omission made in the preliminary prospectus but eliminated or remedied
in the amended prospectus on file with the SEC at the time the registration
statement becomes effective or in the amended prospectus filed with the SEC
pursuant to Rule 424(b) or in the prospectus subject to completion and term
sheet under Rule 434 of the Securities Act, which together meet the requirements
of Section 10(a) of the Securities Act (the "Final Prospectus"), such indemnity
agreement shall not inure to the benefit of any such Holder, any such
underwriter or any such controlling person, if a copy of the Final Prospectus
was not furnished to the person or entity asserting the loss, liability, claim
or damage at or prior the time such furnishing is required by the Securities
Act.
(b) Each Holder will severally, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter of the Shares and each person who
controls the Company within the meaning of Section 15 of the Securities Act,
against all claims, losses, damages and liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened (subject to Section 5.7(c) below), arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement, prospectus or offering
circular, or any amendment or supplement thereof, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in light of the
circumstances in which they were made, and will reimburse the Company, such
directors and officers, each underwriter of the Shares and each person
controlling the Company for reasonable legal and any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action as incurred, in each case to the extent, but only to
the extent, that such untrue statement or omission or allegation thereof is made
in reliance upon and in conformity with written information furnished to the
Company by or on behalf of the Holder and stated to be specifically for use in
preparation of such registration statement, prospectus or offering circular;
provided that the indemnity shall not apply to the extent that such claim, loss,
damage or liability results from the fact that a current copy of the prospectus
that was made available to the Holder was not sent or given to the person
asserting any such claim, loss, damage or liability at or prior to the written
confirmation of the sale of the Registrable Securities confirmed to such person
if such current copy of the prospectus would have cured the defect giving rise
to such loss, claim, damage or liability. Notwithstanding the foregoing, in no
event shall a Holder be liable for any such claims, losses, damages or
liabilities in excess of the proceeds received by such Holder in the offering,
except in the event of fraud by such Holder.
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(c) Each party entitled to indemnification under this Section 5.7 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
Indemnified Party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement, unless such failure
is materially prejudicial to the Indemnifying Party in defending such claim or
litigation. An Indemnifying Party shall not be liable for any settlement of an
action or claim effected without its written consent (which consent will not be
unreasonably withheld).
(d) If the indemnification provided for in this Section 5.7 is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
thereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions which resulted in such loss, liability, claim,
damage or expense as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
5.8
(a) Each Holder agrees that, upon receipt of any notice from the Company of
the happening of any event requiring the preparation of a supplement or
amendment to a prospectus relating to Registrable Securities so that, as
thereafter delivered to the Holders, such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, each
Holder will forthwith discontinue disposition of Registrable Securities pursuant
to the registration statement contemplated by Section 5.2 until its receipt of
copies of the supplemented or amended prospectus from the Company and, if so
directed by the Company, each Holder shall deliver to the Company all copies,
other than permanent file copies then in such Holder's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice.
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(b) Each Holder agrees to suspend, upon request of the Company, any
disposition of Registrable Securities pursuant to the registration statement and
prospectus contemplated by Section 5.2 during (A) any period not to exceed two
30-day periods within any one 12-month period the Company requires in connection
with a primary underwritten offering of equity securities and (B) any period,
not to exceed one 60-day period per circumstance or development, when the
Company determines in good faith that offers and sales pursuant thereto should
not be made by reason of the presence of material undisclosed circumstances or
developments with respect to which the disclosure that would be required in such
a prospectus is premature, would have an adverse effect on the Company or is
otherwise inadvisable.
(c) As a condition to the inclusion of its Registrable Securities, each
Holder shall furnish to the Company such information regarding such Holder and
the distribution proposed by such Holder as the Company may request in writing
or as shall be required in connection with any registration, qualification or
compliance referred to in this Article V.
(d) Each Holder hereby covenants with the Company (1) not to make any sale
of the Registrable Securities without effectively causing the prospectus
delivery requirements under the Securities Act to be satisfied, and (2) if such
Registrable Securities are to be sold by any method or in any transaction other
than on Nasdaq (or other national securities exchange), in the over-the-counter
market, in privately negotiated transactions, or in a combination of such
methods, to notify the Company at least five business days prior to the date on
which the Holder first offers to sell any such Shares.
(e) Each Holder acknowledges and agrees that the Registrable Securities
sold pursuant to the registration statement described in this Section are not
transferable on the books of the Company unless the stock certificate submitted
to the transfer agent evidencing such Shares is accompanied by a certificate
reasonably satisfactory to the Company to the effect that (A) the Registrable
Securities have been sold in accordance with such registration statement and (B)
the requirement of delivering a current prospectus has been satisfied.
(f) Each Holder agrees not to take any action with respect to any
distribution deemed to be made pursuant to such registration statement, that
constitutes a violation of Rule 10(b)-6 under the Exchange Act or any other
applicable rule, regulation or law.
(g) At the end of the period during which the Company is obligated to keep
the registration statement current and effective as described above, the Holders
of Registrable Securities included in the registration statement shall
discontinue sales of shares pursuant to such registration statement upon receipt
of notice from the Company of its intention to remove from registration the
shares covered by such registration statement which remain unsold, and such
Holders shall notify the Company of the number of shares registered which remain
unsold immediately upon receipt of such notice from the Company.
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5.9 With a view to making available to the Holders the benefits of certain
rules and regulations of the SEC which at any time permit the sale of the
Registrable Securities to the public without registration commencing the
effective date of the Registration Statement, the Company agrees to use its
reasonable best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times
following the effectiveness of its initial registration statement under the
Exchange Act;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the Exchange Act following the effectiveness of
its initial registration statement under the Exchange Act; and
(c) so long as a Holder owns any unregistered Registrable Securities,
furnish to such Holder upon any reasonable request a written statement by the
Company as to its compliance with Rule 144 under the Securities Act, and of the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents of the Company as such Holder may
reasonably request in availing itself of any rule or regulation of the SEC
allowing a Holder to sell any such securities without registration.
5.10 The rights to cause the Company to register Registrable Securities
granted to the Holders by the Company under Section 5.2 may be assigned in full
by a Holder, provided, that: (i) such transfer may otherwise be effected in
accordance with applicable securities laws; (ii) such transfer involves not less
than the lesser of all of such Holder's Securities or the equivalent of
one-quarter of one Unit; (iii) such Holder gives prior written notice to the
Company; and (iv) such transferee agrees to comply with the terms and provisions
of this Agreement, including, without limitation, the restrictions in Section
1.17, and such transfer is otherwise in compliance with this Agreement. Except
as specifically permitted by this Section 5.10, the rights of a Holder with
respect to Registrable Securities as set out herein shall not be transferable to
any other Person, and any attempted transfer shall cause all rights of such
Holder therein to be forfeited.
5.11 With the written consent of the Company and the Holders holding at
least a majority of the Registrable Securities that are then outstanding, any
provision of this Article V may be waived (either generally or in a particular
instance, either retroactively or prospectively and either for a specified
period of time or indefinitely) or amended. Upon the effectuation of each such
waiver or amendment, the Company shall promptly give written notice thereof to
the Holders, if any, who have not previously received notice thereof or
consented thereto in writing.
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VI. MISCELLANEOUS
6.1 Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by (a) telecopy or facsimile at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received); or (b) registered or certified mail,
return receipt requested, or delivered by hand against written receipt therefor,
addressed to AVAX Technologies, Inc., 375 Park Avenue, Suite 1501, New York, New
York, 10152, Attn: Carl Spana, Ph.D., Interim President, telecopy: (212) 832-
4389, and to the Subscriber at his address indicated on the signature page of
this Agreement. Notices shall be deemed to have been given or delivered on the
date of mailing, except notices of change of address, which shall be deemed to
have been given or delivered when received.
6.2 This Agreement shall not be changed, modified or amended except by a
writing signed by the parties to be charged, and this Agreement may not be
discharged except by performance in accordance with its terms or by a writing
signed by the party to be charged.
6.3 Subject to the provisions of Section 5.10, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and to their
respective heirs, legal representatives, successors and assigns. This Agreement
sets forth the entire agreement and understanding between the parties as to the
subject matter hereof and merges and supersedes all prior discussions,
agreements and understandings of any and every nature among them.
6.4 Upon the execution and delivery of this Agreement by the Subscriber,
this Agreement shall become a binding obligation of the Subscriber with respect
to the purchase of Units as herein provided; subject, however, to the right
hereby reserved to the Company to enter into the same agreements with other
subscribers and to add and/or delete other persons as subscribers.
6.5 NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY
OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
6.6 In order to discourage frivolous claims the parties agree that unless a
claimant in any proceeding arising out of this Agreement succeeds in
establishing his claim and recovering a judgment against another party
(regardless of whether such claimant succeeds against one of the other parties
to the action), then the other party shall be entitled to recover from such
claimant all of its/their reasonable legal costs and expenses relating to such
proceeding and/or incurred in preparation therefor.
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6.7 The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect. If any
provision of this Agreement shall be declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part, such provision shall be interpreted so as to remain enforceable to the
maximum extent permissible consistent with applicable law and the remaining
conditions and provisions or portions thereof shall nevertheless remain in full
force and effect and enforceable to the extent they are valid, legal and
enforceable, and no provisions shall be deemed dependent upon any other covenant
or provision unless so expressed herein.
6.8 It is agreed that a waiver by either party of a breach of any provision
of this Agreement shall not operate, or be construed, as a waiver of any
subsequent breach by that same party.
6.9 The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.
6.10 This Agreement may be executed in two or more counterparts each of
which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
6.11 (a) The Subscribers severally agree not to issue any public statement
with respect to the Subscribers' investment or proposed investment in the
Company or the terms of any agreement or covenant between them and the Company
without the Company's prior written consent, except such disclosures as may be
required under applicable law or under any applicable order, rule or regulation.
(b) The Company agrees not to disclose the names, addresses or any other
information about the Subscribers, except as required by law; provided, that the
Company may use the name (but not the address) of the Subscriber in the Shelf
Registration Statement.
6.12 (a) Each Subscriber severally represents and warrants that it has not
engaged, consented to or authorized any broker, finder or intermediary to act on
its behalf, directly or indirectly, as a broker, finder or intermediary in
connection with the transactions contemplated by this Agreement. Each Subscriber
hereby severally agrees to indemnify and hold harmless the Company from and
against all fees, commissions or other payments owing to any such person or firm
acting on behalf of such Subscriber hereunder.
(b) The Company has engaged, consented to and authorized the Placement
Agent in connection with the transactions contemplated by this Agreement. The
Company hereby agrees to pay the Placement Agent a commission and to reimburse
expenses in accordance with the Placement Agency Agreement dated March 25, 1996,
and the Company agrees to indemnify and hold harmless the Subscribers from and
against all fees, commissions
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or other payments owing by the Company to any other person or firm acting on
behalf of the Company hereunder.
6.13 Nothing in this Agreement shall create or be deemed to create any
rights in any person or entity not a party to this Agreement, except (a) for the
holders of Registrable Securities and (b) for the Placement Agent pursuant to
Sections 1.6(a) and 6.12(b) hereof.
VII. NOTICE TO, AND REPRESENTATIONS AND COVENANTS OF CERTAIN STATE RESIDENTS
7.1 Connecticut Residents: The undersigned acknowledges that the Securities
have not been registered under the Connecticut Uniform Securities Act, as
amended, and are subject to restrictions on transferability and sale of
securities as set forth herein. The undersigned hereby agrees that such
Securities will not be transferred or sold without registration under the
Connecticut Uniform Securities Act, as amended, or exemption therefrom.
7.2 Maine Residents: These Securities are being sold pursuant to an
exemption from registration with the bank superintendent of the State of Maine
under Section 10502(2)(r) of Title 32 of the Maine revised statutes. These
Securities may be deemed restricted securities and as such the holder may not be
able to resell the Securities unless pursuant to registration under state or
federal securities laws or unless an exemption under such laws exists.
7.3 Missouri Residents: The undersigned acknowledges that the Securities
have not been registered under the Missouri Uniform Securities Act, as amended,
and are subject to restrictions on transferability and the sale of securities as
forth herein. The undersigned hereby acknowledges that such Securities may be
disposed of only through a licensed broker-dealer. It is a felony to sell
securities in violation of the Missouri Uniform Securities Act.
7.4 Pennsylvania Residents: The undersigned hereby acknowledges that the
Issuer is relying upon the exemption from registration of securities set forth
in Section 203(d) of the Pennsylvania Securities Act of 1972, as amended (the
"Pennsylvania Act") in connection with the sale of the securities to the
undersigned.
In accordance with the requirements of Section 203(d) of the Pennsylvania
Act, the undersigned hereby agrees not to sell the securities within twelve
months from the date of purchase except pursuant to Section 204.01 of the Blue
Sky Regulations of the Pennsylvania Act. Additionally, the undersigned is aware
of the right of withdrawal under Section 207(m) of the Pennsylvania Act
described in the cover pages of the Memorandum.
7.5 Texas Residents: The undersigned hereby acknowledges that the
Securities cannot be sold unless they are subsequently registered under the
Securities Act of 1933, as amended, and the Texas Securities Act, or an
exemption from registration is available. The undersigned further acknowledges
that because the Securities are not readily transferable, they must bear the
entire risk of the investment for an indefinite period of time.
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VIII. CONFIDENTIAL INVESTOR QUESTIONNAIRE.
8.1 The Subscriber represents and warrants that he, she or it comes within
one category marked below, and that for any category marked, he or she has
truthfully set forth, where applicable, the factual basis or reason the
Subscriber comes within that category. ALL INFORMATION IN RESPONSE TO THIS
SECTION WILL BE KEPT STRICTLY CONFIDENTIAL. The undersigned agrees to furnish
any additional information which the Company deems necessary in order to verify
the answers set forth below.
Category A ____ The undersigned is an individual (not a partnership,
corporation, etc.) whose individual net worth, or joint
net worth with his or her spouse, presently exceeds
$1,000,000.
Explanation. In calculating net worth you
may include equity in personal property and
real estate, including your principal
residence, cash, short-term investments,
stock and securities. Equity in personal
property and real estate should be based on
the fair market value of such property less
debt secured by such property.
Category B ____ The undersigned is an individual (not a partnership,
corporation, etc.) who had an income in excess of
$200,000 in each of the two most recent years, or joint
income with his or her spouse in excess of $300,000 in
each of those years (in each case including foreign
income, tax exempt income and full amount of capital
gains and loses but excluding any income or other
family members and any unrealized capital appreciation)
and has a reasonable expectation of reaching the same
income level in the current year.
Category C ____ The undersigned is a director or executive officer of
the Company which is issuing and selling the Units.
Category D ____ The undersigned is a bank; a savings and loan
association, insurance company, registered investment
company; registered business development company;
licensed small business investment company ("SBIC"); or
employee benefit plan within the meaning of Title 1 of
ERISA and (a) the investment decision is made by a plan
fiduciary which is either a bank, savings and loan
association, insurance company or registered investment
advisor, or (b) the plan has total assets in excess of
$5,000,000 or is a self directed
21
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plan with investment decisions made solely
by persons that are accredited investors.
______________________________
______________________________
(describe entity)
Category E ____ The undersigned is a private business development
company as defined in Section 202(a)(22) of the
Investment Advisors Act of 1940.
______________________________
______________________________
(describe entity)
Category F ____ The undersigned is a corporation, partnership,
Massachusetts business trust, or non-profit
organization within the meaning of Section 501(c)(3) of
the Internal Revenue Code, in each case not formed for
the specific purpose of acquiring the Units and with
total assets in excess of $5,000,000.
______________________________
______________________________
(describe entity)
Category G ____ The undersigned is a trust with total assets in excess
of $5,000,000 not formed for the specific purpose of
acquiring the Units, where the purchase is directed by
a "sophisticated person" as defined in Regulation
506(b)(2)(ii).
Category H ____ The undersigned is an entity all the equity owners of
which are "accredited investors" within one or more of
the above categories. If relying upon this Category
alone, each equity owner must complete a separate copy
of this Agreement.
______________________________
______________________________
(describe entity)
22
<PAGE>
Category I ____ The undersigned is not within any of the categories
above and is therefore not an accredited investor.
The undersigned is informed of the significance to you of the foregoing
representations, and they are made with the intention that you will rely on
them.
8.2 SUITABILITY (please answer each question)
(a) For an individual Subscriber, please describe your current employment,
including the Company by which you are employed and its principal business:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(b) For an individual Subscriber, please describe any college or graduate
degrees held by you:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(c) For all Subscribers, please list the types of prior investments:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(d) For all Subscribers, please state whether you have participated in
other private placements before:
YES_______ NO______
(e) For all Subscribers, please indicate frequency of such prior
participation in private placements of:
Public Private Public or Private
Companies Companies Biotechnology Companies
--------- --------- -----------------------
Frequently _________ _________ _______________________
Occasionally _________ _________ _______________________
Never _________ _________ _______________________
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<PAGE>
(f) For individual Subscribers, do you expect your current level of income
to significantly decrease in the foreseeable future:
YES_______ NO______
(g) For individual Subscribers, do you expect your total net worth to
significantly decrease in the foreseeable future:
YES_______ NO______
(h) For trust, corporate, partnership and other institutional Subscribers,
do you expect your total assets to significantly decrease in the foreseeable
future:
YES_______ NO______
(i) For all Subscribers, do you have any other investments or contingent
liabilities which you reasonably anticipate could cause you to need sudden cash
requirements in excess of cash readily available to you:
YES_______ NO______
(j) For all Subscribers, are you familiar with the risk aspects and the
non-liquidity of investments such as the securities for which you seek to
subscribe?
YES_______ NO______
(k) For all Subscribers, do you understand that there is no guarantee of
financial return on this investment and that you run the risk of losing your
entire investment?
YES_______ NO______
24
<PAGE>
8.3 MANNER IN WHICH TITLE TO BE HELD (circle one)
(a) Individual Ownership
(b) Community Property
(c) Joint Tenant with Right of Survivorship (both parties must sign)
(d) Partnership*
(e) Tenants in Common
(f) Corporation*
(g) Trust*
(h) Other
*If Units are being subscribed for by an entity, the attached
Certificate of Signatory must also be completed.
25
<PAGE>
8.4 NASD Affiliation
Are you affiliated or associated with an NASD member firm (please check one):
YES_______ NO______
If Yes, please describe:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
*If Subscriber is a Registered Representative with an NASD member firm, have the
following acknowledgment signed by the appropriate party:
The undersigned NASD member firm acknowledges receipt of the notice required by
Article 3, Sections 28(a) and (b) of the Rules of Fair Practice.
______________________________
Name of NASD Member Firm
By:___________________________
Authorized Officer
Date:_________________________
26
<PAGE>
8.5 REPRESENTATIONS AND WARRANTIES
The Undersigned hereby represents and warrants to the Company as follows:
The Undersigned has been informed of the significance to the Company of the
foregoing representations and answers contained in this Agreement.
The answers to the foregoing questions are true, complete and correct and
have been provided under the assumption that the Company will rely upon them for
all purposes, including but not limited to the purpose of determining whether
the offering in which the Undersigned proposes to participate is exempt from
registration under federal and state securities laws.
The Undersigned will notify the Company immediately, at any time on or
prior to the Final Closing Date, in the event that the representations and
warranties in this Agreement shall cease to be true, accurate and complete.
The Undersigned is able to bear the economic risk of the investment and, at
the present time, can afford a complete loss of such investment.
27
<PAGE>
Signature Page
NUMBER OF UNITS ________ X 100,000 = ____________ (the "Purchase Price")
______________________________ ______________________________
Signature Signature (if purchasing jointly)
______________________________ ______________________________
Name Typed or Printed Name Typed or Printed
______________________________ ______________________________
Address Address
______________________________ ______________________________
City, State and Zip Code City, State and Zip Code
______________________________ ______________________________
Telephone-Business Telephone-Business
______________________________ ______________________________
Telephone-Residence Telephone-Residence
______________________________ ______________________________
Facsimile-Business Facsimile-Business
______________________________ ______________________________
Facsimile-Residence Facsimile-Residence
______________________________ ______________________________
Tax ID # or Social Security # Tax ID # or Social Security #
Name in which securities should be issued: ________________________
Dated: ____________________, 1996
This Subscription Agreement is agreed to and accepted as of ___________, 1996.
AVAX TECHNOLOGIES, INC.
By: __________________________
Name: Carl Spana, Ph.D.
Title: Interim President
28
<PAGE>
CERTIFICATE OF SIGNATORY
(To be Completed if Units are
being subscribed for by an entity)
I, ______________________, am the _________________________ of
_______________________________ (the "Entity").
I certify that I am empowered and duly authorized by the Entity to
execute and carry out the terms of the Subscription Agreement and to purchase
and hold the Units, and certify further that the Subscription Agreement has been
duly and validly executed on behalf of the Entity and constitutes a legal and
binding obligation of the Entity.
IN WITNESS WHEREOF, I have set my hand this _____ day of __________,
1996.
________________________
(Signature)
29
<PAGE>
EXHIBIT A
SCHEDULE OF EXCEPTIONS
Section 2.2
o As of March 25, 1996, the Company has Stock Subscription Receivables of $7,109
and hence, not all capital stock was fully paid and nonassessable.
o Pursuant to a License Agreement dated November 20, 1995 between Thomas
Jefferson University ("TJU") and the Company, in the event that the Company
elects to finance the Company prior to an initial public offering or at any time
prior to the Company's shares being publicly traded by issuing additional shares
of the Company or securities convertible to shares of the Company, TJU and Dr.
Berd shall each have the right, exercised by notice to the Company no later than
thirty (30) days after receipt of such prior notice from the Company, to
participate in this Company financing under the same terms offered to other
investors in the Company at such financing to maintain their percentage
ownership in the Company at a level of up to seven and one-half percent (7.5%)
each.
Exhibit 4.7
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY BE REOFFERED AND SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.
WALDEN LABORATORIES, INC.
Warrant for the Purchase of Shares of
Common Stock
No.__ ______ Shares
FOR VALUE RECEIVED, WALDEN LABORATORIES, INC., a Delaware corporation (the
"Company"), hereby certifies that [_], or his permitted assigns, is entitled to
purchase from the Company, at any time or from time to time commencing on [_]
and prior to 5:00 P.M., New York City time, on the earlier of: (a) ten years
from [_] and (b) five years from (x) the closing date of an initial public
offering of the Common Stock by the Company or (y) the first date on which the
Common Stock of the Company (or securities received in exchange for Common Stock
of the Company) trade on a national securities exchange or on the National
Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ")
(the "Termination Date"), ([_]) fully paid and non-assessable shares of the
Common Stock, $.001 par value per share, of the Company for an aggregate
purchase price of $[_] (computed on the basis of $.01 per share, as determined
by the Board of Directors). (Hereinafter, (i) said Common Stock, together with
any other equity securities which may be issued by the Company with respect
thereto or in substitution therefor, is referred to as the "Common Stock", (ii)
the shares of the Common Stock purchasable hereunder or under any other Warrant
(as hereinafter defined) are referred to as the "Warrant Shares", (iii) the
aggregate purchase price payable for the Warrant Shares hereunder is referred to
as the "Aggregate
<PAGE>
Warrant Price", (iv) the price payable for each of the Warrant Shares hereunder
is referred to as the "Per Share Warrant Price", (v) this Warrant, all similar
Warrants issued on the date hereof and all warrants hereafter issued in exchange
or substitution for this Warrant or such similar Warrants are referred to as the
"Warrants" and (vi) the holder of this Warrant is referred to as the "Holder"
and the holder of this Warrant and all other Warrants or Warrant Shares issued
upon the exercise of any Warrant are referred to as the "Holders"). The
Aggregate Warrant Price is subject to adjustment as hereinafter provided; in the
event of any such adjustment, the number of Warrant Shares shall be adjusted by
dividing the Aggregate Warrant Price by the Per Share Warrant Price in effect
immediately after such adjustment.
1. Exercise of Warrant.
(a) This Warrant may be exercised, in whole at any time or in part from
time to time, commencing on February 28, 1995 and prior to the Termination Date,
by the holder:
(i) by the surrender of this Warrant (with the subscription form at
the end hereof duly executed) at the address set forth in Subsection 9(a)
hereof, together with proper payment of the Aggregate Warrant Price, or the
proportionate part thereof if this Warrant is exercised in part, with
payment for Warrant Shares made by certified or official bank check payable
to the order of the Company; or
(ii) by the surrender of this Warrant (with the cashless exercise form
at the end hereof duly executed) (a "Cashless Exercise") at the address set
forth in Subsection 9(a) hereof. Such presentation and surrender shall be
deemed a waiver of the holder's obligation to pay the Aggregate Warrant
Price, or the proportionate part thereof if this Warrant is exercised in
part. In the event of a Cashless Exercise, the Holder shall exchange its
Warrant for that number of Warrant Shares subject to such Cashless Exercise
multiplied by a fraction, the numerator of which shall be the difference
between the then current market price per share of Common Stock and the Per
Share Warrant Price, and the denominator of which shall be the then current
market price per share of Common Stock. For purposes of any computation
under this Section 1(a)(ii), the then current market price per share of the
Common Stock at any date (the "Market Price") shall be deemed to be the
last sale price of the Common Stock on the business day prior to
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<PAGE>
the date of the Cashless Exercise or, in the case no such reported sales
take place on such day, the average of the last reported bid and asked
prices of the Common Stock on such day, in either case on the principal
national securities exchange on which the Common Stock is admitted to
trading or listed, or if not listed or admitted to trading on any such
exchange, the representative closing bid price of the Common Stock as
reported by NASDAQ, or other similar organization if NASDAQ is no longer
reporting such information, or if not so available, the fair market price
of the Common Stock as determined in good faith by the Board of Directors.
(b) If this Warrant is exercised in part, this Warrant must be exercised
for a number of whole shares of the Common Stock and the Holder is entitled to
receive a new Warrant covering the Warrant Shares which have not been exercised
and setting forth the proportionate part of the Aggregate Warrant Price
applicable to such Warrant Shares. Upon surrender of this Warrant, the Company
will (i) issue a certificate or certificates in the name of the Holder for the
largest number of whole shares of the Common Stock to which the Holder shall be
entitled and, if this Warrant is exercised in whole, in lieu of any fractional
share of the Common Stock to which the Holder shall be entitled, pay to the
Holder cash in an amount equal to the fair value of such fractional share
(determined in such reasonable manner as the Board of Directors of the Company
shall determine), and (ii) deliver the other securities and properties
receivable upon the exercise of this Warrant, or the proportionate part thereof
if this Warrant is exercised in part, pursuant to the provisions of this
Warrant.
2. Reservation of Warrant Shares; Listing. The Company agrees that, prior
to the expiration of this Warrant, the Company will at all times (a) have
authorized and in reserve, and will keep available, solely for issuance or
delivery upon the exercise of this Warrant, the shares of the Common Stock and
other securities and properties as from time to time shall be receivable upon
the exercise of this Warrant, free and clear of all restrictions on sale or
transfer and free and clear of all preemptive rights and rights of first
refusal; and (b) if the Company hereafter lists its Common Stock on any national
securities exchange, keep the shares of Common Stock receivable upon exercise of
this Warrant authorized for listing on such exchange upon notice of issuance.
-3-
<PAGE>
3. Protection Against Dilution.
(a) If, at any time or from time to time after the date of this Warrant,
the Company shall issue or distribute to the holders of shares of Common Stock
evidence of its indebtedness, any other securities of the Company or any cash,
property or other assets (excluding a subdivision, combination or
reclassification, or dividend or distribution payable in shares of Common Stock,
referred to in Subsection 3(b), and also excluding cash dividends or cash
distributions paid out of net profits legally available therefor in the full
amount thereof, together with the value of other dividends and distributions
made substantially concurrently therewith or pursuant to a plan which includes
payment thereof, is equivalent to not more than 5% of the Company's net worth)
(any such non-excluded event being herein called a "Special Dividend"), the Per
Share Warrant Price shall be adjusted by multiplying the Per Share Warrant Price
then in effect by a fraction, the numerator of which shall be the then current
Market Price of the Common Stock less the fair market value (as determined in
good faith by the Company's Board of Directors) of the evidence of indebtedness,
cash, securities or property, or other assets issued or distributed in such
Special Dividend applicable to one share of Common Stock and the denominator of
which shall be the then current Market Price of the Common Stock. An adjustment
made pursuant to this Subsection 3(a) shall become effective immediately after
the record date of any such Special Dividend.
(b) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its capital stock in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of shares
or (iv) issue by reclassification of its Common Stock any shares of capital
stock of the Company, the Per Share Warrant Price shall be adjusted to be equal
to a fraction, the numerator of which shall be the Aggregate Warrant Price and
the denominator of which shall be the number of shares of Common Stock or other
capital stock of the Company which he would have owned immediately following
such action had such Warrant been exercised immediately following such action
and such Warrant been exercised immediately prior thereto. An adjustment made
pursuant to this Subsection 3(b) shall become effective immediately after the
record date in the case of a dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision, combination
or reclassification.
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<PAGE>
(c) Except as provided in Subsections 3(a) and 3(d), in case the Company
shall hereafter issue or sell any Common Stock, any securities convertible into
Common Stock or any rights, options or warrants to purchase Common Stock or
securities convertible into Common Stock, in each case for a price per share or
entitling the holders thereof to purchase Common Stock at a price per share
(determined by dividing (i) the total amount, if any, received or receivable by
the Company in consideration of the issuance or sale of such securities plus the
total consideration, if any, payable to the Company upon exercise or conversion
thereof (the "Total Consideration") by (ii) the number of additional shares of
Common Stock issuable upon exercise or conversion of such securities) less than
the then current Per Share Warrant Price in effect on the date of such issuance
or sale, the Per Share Warrant Price shall be adjusted as of the date of such
issuance or sale so that the same shall equal the price determined by dividing
(i) the sum of (A) the number of shares of Common Stock outstanding on the date
of such issuance or sale multiplied by the Per Share Warrant Price plus (B) the
Total Consideration by (ii) the number of shares of Common Stock outstanding on
the date of such issuance or sale plus the maximum number of additional shares
of Common Stock issuable upon exercise or conversion of such securities.
(d) No adjustment in the Per Share Warrant Price shall be required in the
case of the issuance by the Company of Common Stock pursuant to the exercise of
any Warrant.
(e) In the case of any capital reorganization or reclassification, or any
consolidation or merger to which the Company is a party other than a merger or
consolidation in which the Company is the continuing corporation, or in case of
any sale or conveyance to another entity of the property of the Company as an
entirety or substantially as a entirety, or in the case of any statutory
exchange of securities with another corporation (including any exchange effected
in connection with a merger of a third corporation into the Company), the Holder
of this Warrant shall have the right thereafter to receive on the exercise of
this Warrant the kind and amount of securities, cash or other property which the
Holder would have owned or have been entitled to receive immediately after such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance had this Warrant been exercised immediately prior to the
effective date of such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance and in any such case, if necessary,
appropriate adjustment shall be made in the application of the provisions set
forth
-5-
<PAGE>
in this Section 3 with respect to the rights and interests thereafter of the
Holder of this Warrant to the end that the provisions set forth in this Section
3 shall thereafter correspondingly be made applicable, as nearly as may
reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the exercise of this Warrant. The above
provisions of this Subsection 3(e) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, statutory
exchanges, sales or conveyances. The issuer of any shares of stock or other
securities or property thereafter deliverable on the exercise of this Warrant
shall be responsible for all of the agreements and obligations of the Company
hereunder. Notice of any such reorganization, reclassification, consolidation,
merger, statutory exchange, sale or conveyance and or said provisions so
proposed to be made, shall be mailed to the Holders of the Warrants not less
than 30 days prior to such event. A sale of all or substantially all of the
assets of the Company for a consideration consisting primarily of securities
shall be deemed a consolidation or merger for the foregoing purposes.
(f) In case any event shall occur as to which the other provisions of this
Section 3 are not strictly applicable but as to which the failure to make any
adjustment would not fairly protect the purchase rights represented by this
Warrant in accordance with the essential intent and principles hereof then, in
each such case, the Holders of Warrants representing the right to purchase a
majority of the Warrant Shares subject to all outstanding Warrants may appoint a
firm of independent public accountants of recognized national standing
reasonably acceptable to the Company, which shall give their opinion as to the
adjustment, if any, on a basis consistent with the essential intent and
principles established herein, necessary to preserve the purchase rights
represented by the Warrants. Upon receipt of such opinion, the Company will
promptly mail a copy thereof to the Holder of this Warrant and shall make the
adjustments described therein. The fees and expenses of such independent public
accountants shall be borne by the Company.
(g) No adjustment in the Per Share Warrant Price shall be required unless
such adjustment would require an increase or decrease of at least $0.05 per
share of Common Stock, provided, however, that any adjustments which by reason
of this Subsection 3(g) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment; provided, further, however,
that adjustments shall be required and made in accordance with the provisions of
this Section 3 (other than this Subsection 3(g)) not later than
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<PAGE>
such time as may be required in order to preserve the tax-free nature of a
distribution to the Holder of this Warrant or Common Stock issuable upon the
exercise hereof. All calculations under this Section 3 shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be. Anything
in this Section 3 to the contrary notwithstanding, the Company shall be entitled
to make such reductions in the Per Share Warrant Price, in addition to those
required by this Section 3, as it in its discretion shall deem to be advisable
in order that any stock dividend, subdivision of shares or distribution of
rights to purchase stock or securities convertible or exchangeable for stock
hereafter made by the Company to its stockholders shall not be taxable.
(h) Whenever the Per Share Warrant Price is adjusted as provided in this
Section 3 and upon any modification of the rights of a Holder of Warrants in
accordance with this Section 3, the Company shall promptly obtain, at its
expense, a certificate of a firm of independent public accountants of recognized
standing selected by the Board of Directors (who may be the regular auditors of
the Company) setting forth the Per Share Warrant Price and the number of Warrant
Shares after such adjustment or the effect of such modification, a brief
statement of the facts requiring such adjustment or modification and the manner
of computing the same and cause copies of such certificate to be mailed to the
Holders of the Warrants.
(i) If the Board of Directors of the Company shall declare any dividend or
other distribution with respect to the Common Stock other than a cash
distribution out of earned surplus, the Company shall mail notice thereof to the
Holders of the Warrants not less than 15 days prior to the record date fixed for
determining stockholders entitled to participate in such dividend or other
distribution.
(j) If, as a result of an adjustment made pursuant to this Section 3, the
Holder of any Warrant thereafter surrendered for exercise shall become entitled
to receive shares or shares of Common Stock and other capital stock of the
Company, the Board of Directors (whose determination shall be conclusive and
shall be described in a written notice to the Holder of any Warrant promptly
after such adjustment) shall determine the allocation of the adjusted Per Share
Warrant Price between or among shares of such classes of capital stock or shares
of Common Stock and other capital stock.
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<PAGE>
4. Fully Paid Stock; Taxes. The Company agrees that the shares of the
Common Stock represented by each and every certificate of Warrant Shares
delivered on the exercise of this Warrant be validly issued and outstanding,
fully paid and nonassessable, and not subject to preemptive rights or rights of
first refusal, and the Company will take all such actions as may be necessary to
assure that the par value or stated value, if any, per share of the Common Stock
is at all times equal to or less than the then Per Share Warrant Price. The
Company further covenants and agrees that it will pay, when due and payable, any
and all Federal and state stamp, original issue or similar taxes which may be
payable in respect of the issue of any Warrant Share or any certificate thereof.
5. Registration Under Securities Act of 1933.
(a) The Company agrees that if, at any time during the period commencing
one year after (x) the closing date of an initial public offering of the Common
Stock by the Company registered under the Securities Act of 1933, as amended
(the "Act") or (y) the first date on which the Common Stock of the Company (or
securities received in exchange for Common Stock of the Company) trade on a
national securities exchange or on NASDAQ and ending on the Termination Date
(the "Registration Period"), the Holder and/or the Holders of any other Warrants
and Warrant Shares which have not previously been registered under the Act or
which are not freely transferable without registration under the Act due to the
lapse of time or otherwise and who or which shall hold greater than 50% of the
Warrant Shares issued or is issuable upon the exercise of the Warrants, shall
request that the Company file, a registration statement under the Act covering
not less than 50% of the shares of the Warrant Shares issued or issuable upon
the exercise of the Warrants, the Company will (i) promptly notify each Holder
of the Warrants and each holder of Warrant Shares that such registration
statement will be filed and that the Warrant Shares which are then held, and/or
may be acquired upon exercise of the Warrants by the Holder and such holders
will be included in such registration statement at the Holder's and such
holders' request, (ii) cause such registration statement to cover all of such
Common Stock which it has been so requested to include, (iii) use its best
efforts to cause such registration statement to become effective as soon as
practicable and (iv) take all other action necessary under any Federal or state
law or regulation of any governmental authority to permit all such Common Stock
which it has been so requested to include in such registration
-8-
<PAGE>
statement to be sold or otherwise disposed of, and will maintain such compliance
with each such Federal and state law and regulation of any governmental
authority for the period necessary for such Holders to effect the proposed sale
or other disposition. The Company shall be required to effect a registration or
qualification pursuant to this Subsection 5(a) on one occasion only.
(b) The Company agrees that, if at any time and from time to time during
the Registration Period, the Board of Directors of the Company shall authorize
the filing of a registration statement under the Act (other than the initial
public offering of the Company's Common Stock and otherwise than pursuant to
Subsection 5(a) hereof, or other than a registration statement on Form S-8, S-4
or other form which does not include substantially the same information as would
be required in a form for the general registration of securities) in connection
with the proposed offer of any of its securities by it or any of its
stockholders, the Company will (i) promptly notify each Holder of the Warrants
and each holder of Warrant Shares that such registration statement will be filed
and that the Warrant Shares which are then held, and/or may be acquired upon
exercise of the Warrants by the Holder and such holders will be included in such
registration statement at the Holder's and such holders' request, (ii) cause
such registration statement to cover all of such Common Stock which it has been
so requested to include, (iii) use its best efforts to cause such registration
statement to become effective as soon as practicable and (iv) take all other
action necessary under any Federal or state law or regulation of any
governmental authority to permit all such Common Stock which it has been so
requested to include in such registration statement to be sold or otherwise
disposed of, and will maintain such compliance with each such Federal and state
law and regulation of any governmental authority for the period necessary for
the Holder and such Holders to effect the proposed sale or other disposition.
(c) Whenever the Company is required pursuant to the provisions of this
Section 5 to include in a registration statement Warrant Shares, the Company
shall (i) furnish each Holder of any such Warrant Shares and each underwriter of
such Common Stock with such copies of the prospectus, including the preliminary
prospectus, conforming to the Act (and such other documents as each such Holder
or each such underwriter may reasonably request) in order to facilitate the sale
or distribution of such Common Stock, (ii) use its best efforts to register or
qualify such Common Stock under the blue sky laws (to the extent applicable) of
such jurisdiction or laws
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<PAGE>
(to the extent applicable) of such jurisdiction or jurisdictions as the Holders
of any Common Stock and each underwriter of such Common Stock being sold by such
Holders shall reasonably request and (iii) take such other actions as may be
reasonably necessary or advisable to enable such Holders and such underwriters
to consummate the sale or distribution in such jurisdiction or jurisdictions in
which such Holders shall have reasonably requested that such Common Stock be
sold; provided, however that the foregoing "piggyback" registration right shall
be subject to the cutback in the sole discretion of the underwriter for the
Company.
(d) The Company shall pay all expenses incurred in connection with any
registration statement or other action pursuant to the provisions of this
Section 5, other than underwriting discounts and applicable transfer taxes
relating to the Warrant Shares.
(e) The Company will indemnify the holders of Warrant Shares which are
included in each registration statement referred to in Subsections 5(a) and
5(b), and the underwriters of such Common Stock, substantially to the same
extent as is customary for indemnification and contribution provisions in favor
of underwriters and selling shareholders of similar offerings, and such Holders
will indemnify the Company (and the underwriters, if applicable) with respect to
information furnished by them in writing to the Company for inclusion therein
substantially to the same extent as the underwriters indemnify the Company.
(f) If the Company shall at any time have completed a public offering of
shares of its Common Stock, it shall thereafter take such steps as may be
necessary to register its Common Stock, as the case may be, under Section 12(g)
of the Securities Exchange Act of 1934, as amended, to maintain such status, and
to file with the Securities and Exchange Commission all current reports and the
information as may be necessary to enable the Holder to effect sales of its
shares in reliance upon Rule 144 promulgated under the Act.
6. Limited Transferability. This Warrant may not be sold, transferred,
assigned or hypothecated by the Holder (a) except in compliance with the
provisions of the Act and the applicable state securities "blue sky" laws and
(b) until the first anniversary hereof except (i) to any successor firm or
corporation of Paramount Capital, Inc., (ii) to any of the officers or employees
of Paramount Capital, Inc., or of any such successor firm or (iii) in the case
of an individual, pursuant to such individual's last will and testament or the
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<PAGE>
laws of descent and distribution, and is so transferable only upon the books of
the Company which it shall cause to be maintained for such purpose. The Company
may treat the registered Holder of this Warrant as he or it appears on the
Company's books at any time as the Holder for all purposes. The Company shall
permit any Holder of a Warrant or his duly authorized attorney, upon written
request during ordinary business hours, to inspect and copy or make extracts
from its books showing the registered holders of Warrants. All warrants issued
upon the transfer or assignment of this Warrant will be dated the same date as
this Warrant, and all rights of the holder thereof shall be identical to those
of the Holder.
7. Loss, etc., of Warrant. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancelation of this Warrant, if mutilated, the Company
shall execute and deliver to the Holder a new Warrant of like date, tenor and
denomination.
8. Warrant Holder Not Shareholder. Except as otherwise provided herein,
this Warrant does not confer upon the Holder any right to vote or to consent to
or receive notice as a stockholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a stockholder, prior
to the exercise hereof.
9. Communication. No notice or other communication under this Warrant shall
be effective unless, but any notice or other communication shall be effective
and shall be deemed to have been given if, the same is in writing and is mailed
by first-class mail, postage prepaid, addressed to:
(a) the Company at 375 Park Avenue, Suite 1501, New York, NY 10152 or
other address as the Company has designated in writing to the Holder, or
(b) the Holder at c/o Paramount Capital, Inc., 375 Park Avenue, Suite
1501, New York, NY 10152 or other such address as the Holder has designated
in writing to the Company.
10. Headings. The headings of this Warrant have been inserted as a matter
of convenience and shall not affect the construction hereof.
-11-
<PAGE>
11. Applicable Law. This Warrant shall be governed by and construed in
accordance with the law of the State of New York without giving effect to the
principles of conflicts of law thereof.
-12-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
President and its corporate seal to be hereunto affixed and attested by its
Secretary this _______ day of ________, 199[ ].
WALDEN LABORATORIES, INC.
By:_________________________
President
ATTEST:
________________________
Secretary
[Corporate Seal]
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<PAGE>
SUBSCRIPTION
The undersigned, _____________________, pursuant to the provisions of the
foregoing Warrant, hereby agrees to subscribe for and purchase _______________
shares of the Common Stock, par value $.001 per share, of Walden Laboratories,
Inc. covered by said Warrant, and makes payment therefor in full at the price
per share provided by said Warrant.
Dated: _______________ Signature:_____________________________
Address:_______________________________
CASHLESS EXERCISE
The undersigned _____________________, pursuant to the provisions of the
foregoing Warrant, hereby elects to exchange its Warrant for ___________ shares
of Common Stock, par value $.001 per share, of Walden Laboratories, Inc.
pursuant to the Cashless Exercise provisions of the Warrant.
Dated: ____________________ Signature:_____________________________
Address:_______________________________
ASSIGNMENT
FOR VALUE RECEIVED ______________ hereby sells, assigns and transfers unto
________________________ the foregoing Warrant and all rights evidenced thereby,
and does irrevocably constitute and appoint _______________, attorney, to
transfer said Warrant on the books of Walden Laboratories, Inc.
Dated: ____________________ Signature:_____________________________
Address:_______________________________
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<PAGE>
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _______________ hereby assigns and transfers unto
____________ the right to purchase _________ shares of the Common Stock, par
value $.001 per share, of Walden Laboratories, Inc. covered by the foregoing
Warrant, and a proportionate part of said Warrant and the rights evidenced
thereby, and does irrevocably constitute and appoint _____________, attorney, to
transfer that part of said Warrant on the books of Walden Laboratories, Inc.
Dated:_____________ Signature:_______________________
Address:_________________________
-15-
Exhibit 4.8
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY BE REOFFERED AND SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.
APPEX TECHNOLOGIES, INC.
Warrant for the Purchase of Shares of Common Stock
No. 1 72,047 Shares
FOR VALUE RECEIVED, APPEX TECHNOLOGIES, INC., a New York corporation (the
"Company"), hereby certifies that Ladenburg, Thalmann & Co. Inc. or its
permitted assigns, is entitled to purchase from the Company, at any time or from
time to time commencing on June 26, 1993 and prior to 5:00 P.M., New York City
time, on June 26, 1997, seventy-two thousand forty-seven (72,047) fully paid and
non-assessable shares of the Common Stock, $.001 par value per share, of the
Company for an aggregate purchase price of $172,912 (computed on the basis of
$2.40 per share). (Hereinafter, (i) said common stock, together with any other
equity securities which may be issued by the Company with respect thereto or in
substitution therefor, is referred to as the "Common Stock," (ii) the shares of
the Common Stock purchasable hereunder or under any other Warrant (as
hereinafter defined) are referred to as the "Warrant Shares," (iii) the
aggregate purchase price payable for the Warrant Shares hereunder is referred to
as the "Aggregate Warrant Price," (iv) the price payable for each of the Warrant
Shares hereunder is referred to as the "Per Share Warrant Price," (v) this
Warrant, all similar Warrants issued on the date hereof and all warrants
hereafter issued in exchange or substitution for this Warrant or such similar
Warrants are referred to as the "Warrants" and (vi) the holder of this Warrant
is referred to as the "Holder" and the holder of this Warrant and all other
Warrants or Warrant Shares issued upon the exercise of any Warrant are referred
to as the "Holders.") The Aggregate Warrant Price is not subject to adjustment.
The Per Share Warrant Price is subject to adjustment as hereinafter provided; in
the event of any such adjustment, the number of Warrant Shares shall be adjusted
by dividing the Aggregate Warrant Price by the Per Share Warrant Price in effect
immediately after such adjustment.
1. Exercise of Warrant. (a) This Warrant may be exercised, in whole at any
time or in part from time to time, commencing on June 26, 1993 and prior to 5:00
P.M., New York City time, on June 26, 1997, by the Holder:
(i) by the surrender of this Warrant (with the subscription form at
the end hereof duly executed) at the address set forth in Subsection 9(a)
hereof, together with proper payment of the Aggregate Warrant Price, or the
proportionate part thereof if this Warrant is exercised in part, with
payment for Warrant Shares made by certified or official bank check payable
to the order of the Company; or
<PAGE>
(ii) by the surrender of this Warrant (with the cashless exercise form
at the end hereof duly executed) (a "Cashless Exercise") at the address set
forth in Subsection 9(a) hereof. Such presentation and surrender shall be
deemed a waiver of the Holder's obligation to pay the Aggregate Warrant
Price, or the proportionate part thereof if this Warrant is exercised in
part. In the event of a Cashless Exercise, the Holder shall exchange its
Warrant for that number of shares of Common Stock determined by multiplying
the number of Warrant Shares subject to such Cashless Exercise by a
fraction, the numerator of which shall be the difference between the then
current market price per share of the Common Stock and the Per Share
Warrant Price, and the denominator of which shall be the then current
market price per share of the Common Stock. For purposes of any computation
under this Section 1(a)(ii), the then current market price per share of
Common Stock at any date (the "Market Price") shall be deemed to be last
sale price of the Common Stock on the business day prior to the date of the
Cashless Exercise or, in case no such reported sales take place on such
day, the average of the last reported bid and asked prices of the Common
Stock on such day, in either case on the principle national securities
exchange on which the Common Stock is admitted to trading or listed, or if
not listed or admitted to trading on any such exchange, the representative
closing bid price of the Common Stock as reported by the National
Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ"), or other similar organization if NASDAQ is no longer reporting
such information, or if not so available, the fair market price of the
Common Stock as determined by the Board of Directors.
(b) If this Warrant is exercised in part, this Warrant must be exercised
for a number of whole shares of the Common Stock, and the Holder is entitled to
receive a new Warrant covering the Warrant which have not been exercised and
setting forth the proportionate part of the Aggregate Warrant Price applicable
to such Warrant Shares. Upon such surrender of this Warrant, the Company will
(i) issue a certificate or certificates in the name of the Holder for the
largest number of whole shares of the Common Stock to which the Holder shall be
entitled and, if this Warrant is exercised in whole, in lieu of any fractional
share of the Common Stock to which the Holder shall be entitled, pay to the
Holder cash in an amount equal to the fair value of such fractional share
(determined in such reasonable manner as the Board of Directors of the Company
shall determine), and (ii) deliver the other securities and properties
receivable upon the exercise of this Warrant, or the proportionate part thereof
if this Warrant is exercised in part, pursuant to the provisions of this
Warrant.
2. Reservation of Warrant Shares; Listing. The Company agrees that, prior
to the expiration of this Warrant, the Company will at all times (a) have
authorized and in reserve, and will keep available, solely for issuance or
delivery upon the exercise of this Warrant, the shares of the Common Stock and
other securities and properties as from tine to time shall be receivable upon
the exercise of this Warrant,
<PAGE>
free and clear of all restrictions on sale or transfer and free and clear of all
preemptive rights and rights of first refusal; and (b) if the Company hereafter
lists its Common Stock on any national securities exchange, keep the shares of
the Common Stock receivable upon the exercise of this Warrant authorized for
listing on such exchange upon notice of issuance.
3. Protection Against Dilution. (a) If, at any time or from time to time
after the date of this Warrant, the Company shall issue or distribute to the
holders of shares of Common Stock evidences of its indebtedness, any other
securities of the Company or any cash, property or other assets (excluding a
subdivision, combination or reclassification, or dividend or distribution
payable in shares of Common Stock, referred to in Subsection 3(b), and also
excluding cash dividends or cash distribution paid out of net profits legally
available therefor if the full amount thereof, together with the value of other
dividends and distributions made substantially concurrently therewith or
pursuant to a plan which includes payment thereof, is equivalent to not more
than 5% of the Company's net worth) (any such nonexcluded event being herein
called a "Special Dividend"), the Per Share Warrant Price shall be adjusted by
multiplying the Per Share Warrant Price then in effect by a fraction, the
numerator of which shall be the then current Market Price less the fair market
value (as determined by the Company's Board of Directors) of the evidences of
indebtedness, cash, securities or property, or other assets issued or
distributed in such Special Dividend applicable to one share of Common Stock and
the denominator of which shall be such then current market price per share of
Common Stock. An adjustment made pursuant to this Subsection 3(a) shall become
effective immediately after the record date of any such Special Dividend.
(b) In the case the Company shall hereafter (i) pay a dividend or make a
distribution on its capital stock in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of shares
or (iv) issue by reclassification of its Common Stock any shares of capital
stock of the Company, the Per Share Warrant Price shall be adjusted so that the
Holder upon the exercise hereof shall be entitled to receive the number of
shares of Common Stock or other capital stock of the Company which he would have
owned immediately following such action had such Warrant been exercised
immediately prior thereto. An adjustment made pursuant to this Subsection 3(b)
shall become effective immediately after the record date in the case of a
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or reclassification.
(c) Except as provided in Subsection 3(e), in case the Company shall
hereafter issue or sell any shares of Common Stock for a consideration per share
less than the Per Share Warrant Price on the date of such issuance or sale, the
Per Share Warrant Price shall be adjusted as of the date of such issuance or
sale so that the same shall equal the price determined by dividing (i) the sum
of (A) the number of shares of Common Stock outstanding immediately prior to
such issuance or sale
3
<PAGE>
multiplied by the Per Share Warrant Price plus (B) the consideration received by
the Company upon such issuance or sale by (ii) the total number of shares of
Common Stock outstanding after such issuance or sale.
(d) Except as provided in Subsections 3(a) and 3(e), in case the Company
shall hereafter issue or sell any rights, options, warrants or securities
convertible into Common Stock entitling the holders thereof to purchase Common
Stock or to convert such securities into Common Stock at a price per share
(determined by dividing (i) the total amount, if any, received or receivable by
the Company in consideration of the issuance or sale of such rights, options,
warrants or convertible securities plus the total consideration, if any, payable
to the Company upon exercise or conversion thereof (the "Total Consideration")
by (ii) the number of additional shares of Common Stock issuable upon exercise
or conversion of such securities) less than the then current Per Share Warrant
Price in effect on the date of such issuance or sale, the Per Share Warrant
Price shall be adjusted as of the date of such issuance or sale so that the same
shall equal the price determined by dividing (i) the sum of (A) the number of
shares of Common Stock outstanding on the date of such issuance or sale
multiplied by the Per Share Warrant Price plus (B) the Total Consideration by
(ii) the number of shares of Common Stock outstanding on the date of such
issuance or sale plus maximum number of additional shares of Common Stock
issuable upon exercise or conversion of such securities.
(e) No adjustment in the Per Share Warrant Price shall be required in the
case of (i) the issuance by the Company of options to purchase in the aggregate
up to 700,000 shares of Common Stock pursuant to the Company's Stock Option Plan
in effect on the date hereof and the issuance by the Company of an aggregate of
700,000 shares upon the exercise of such options, and (ii) the issuance by the
Company of Common Stock pursuant to the exercise of any Warrant.
(f) In the case of any capital reorganization or reclassification, or any
consolidation or merger to which the Company is a party other than a merger or
consolidation in which the Company is the continuing corporation, or in the case
of any sale or conveyance to another entity of the property of the Company as an
entirety or substantially as an entirety, or in the case of any statutory
exchange of securities with another corporation (including any exchange effected
in connection with a merger of a third corporation into the Company), the Holder
of this Warrant shall have the right thereafter to receive on the exercise of
this Warrant the kind and amount of securities, cash or other property which the
Holder would have owned or have been entitled to receive immediately after such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance had this Warrant been exercised immediately prior to the
effective date of such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance and in any such case, if necessary,
appropriate adjustment shall be made in the application of the provisions set
forth in this Section 3 with respect to the rights and interests thereafter of
the Holder of this Warrant to the end that the provisions set forth in this
Section 3 shall thereafter correspondingly
4
<PAGE>
be made applicable, as nearly as may reasonably be, in relation to any shares of
stock or other securities or property thereafter deliverable on the exercise of
this Warrant. The above provisions of this Subsection 3(f) shall similarly apply
to successive reorganizations, reclassifications, consolidations, mergers,
statutory exchanges, sales or conveyances. The issuer of any shares of stock or
other securities or property thereafter deliverable on the exercise of this
Warrant shall be responsible for all of the agreements and obligations of the
Company hereunder. Notice of any such reorganization, reclassification,
consolidation, merger, statutory exchange, sale or conveyance and of said
provisions so proposed to be made, shall be mailed to the Holders of the
Warrants not less than 30 days prior to such event. A sale of all or
substantially all of the assets of the Company for a consideration consisting
primarily of securities shall be deemed a consolidation or merger for the
foregoing purposes.
(g) In case any event shall occur as to which the other provisions of this
Section 3 are not strictly applicable but as to which the failure to make any
adjustment would not fairly protect the purchase rights represented by this
Warrant in accordance with the essential intent and principles hereof then, in
each such case, the Holders of Warrants representing the right to purchase a
majority of the Warrant Shares subject to all outstanding Warrants may appoint a
firm of independent public accountants of recognized national standing
reasonably acceptable to the Company, which shall give their opinion as to the
adjustment, if any, on a basis consistent with the essential intent and
principles established herein, necessary to preserve the purchase rights
represented by the Warrants. Upon receipt of such opinion, the Company will
promptly mail a copy thereof to the Holder of this Warrant and shall make the
adjustments described therein. The fees and expenses of such independent public
accountants shall be borne by such Holders.
(h) No adjustments in the Per Share Warrant Price shall be required unless
such adjustment would require an increase or decrease of at least $0.05 per
share of Common Stock; provided, however, that any adjustments which by reason
of this Subsection 3(h) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment; provided further, however, that
adjustments shall be required and made in accordance with the provisions of this
Section 3 (other than this Subsection 3(h)) not later than such time as may be
required in order to preserve the tax-free nature of a distribution to the
Holder of this Warrant or Common Stock issuable upon exercise hereof. All
calculations under this Section 3 shall be made to the nearest cent or to the
nearest 1/100th of a share, as the case may be. Anything in this Section 3 to
the contrary notwithstanding, the Company shall be entitled to make such
reductions in the Per Share Warrant Price, in addition to those required by this
Section 3 as it in its discretion shall deem to be advisable in order that any
stock dividend, subdivision of shares or distribution of rights to purchase
stock or securities convertible or exchangeable for stock hereafter made by the
Company to its stockholders shall not be taxable.
5
<PAGE>
(i) Whenever the Per Share Warrant Price is adjusted as provided in this
Section 3 and upon any modification of the rights of a Holder of Warrants in
accordance with this Section 3, the Company shall promptly mail to the Holders
of the Warrants a certificate of the Company's chief financial officer setting
forth the Per Share Warrant Price and the number of Warrant Shares after such
adjustment or the effect of such modification, a brief statement of the facts
requiring such adjustment or modification and the manner of computing the same,
and, at the request of the Holder of any Warrant, obtain, at the Company's
expense, a certificate of a firm of independent public accountants of recognized
standing selected by the Board of Directors (who may be the regular auditors of
the Company) to such effect and cause copies of such certificate to be mailed to
the Holders of the Warrants.
(j) If the Board of Directors of the Company shall declare any dividend or
other distribution with respect to the Common Stock other than a cash
distribution out of earned surplus, the Company shall mail notice thereof to the
Holders of the Warrants not less than 15 days prior to the record date fixed for
determining stockholders entitled to participate in such dividend or other
distribution.
(k) If, as a result of an adjustment made pursuant to this Section 3, the
Holder of any Warrant thereafter surrendered for exercise shall become entitled
to receive shares of two or more classes of capital stock or shares of Common
Stock and other capital stock of the Company, the Board of Directors (whose
determination shall be conclusive and shall be described in a written notice to
the Holder of any Warrant promptly after such adjustment) shall determine the
allocation of the adjusted Per Share Warrant Price between or among shares or
such classes of capital stock or shares of Common Stock and other capital stock.
4. Fully Paid Stock; Taxes. The Company agrees that the shares of the
Common Stock represented by each and every certificate for Warrant Shares
delivered on the exercise of this Warrant shall, at the time of such delivery,
be validly issued and outstanding, fully paid and nonassessable, and not subject
to preemptive rights or rights of first refusal, and the Company will take all
such actions as may be necessary to assure that the par value or stated value,
if any, per share of the Common Stock is at all times equal to or less than the
then Per Share Warrant Price. The Company further covenants and agrees that it
will pay, when due and payable, any and all Federal and state stamp, original
issue or similar taxes which may be payable in respect of the issue of any
Warrant Share or certificate therefor.
5. Registration Under Securities Act of 1933.
(a) The Company agrees that, if at any time during the period commencing
180 days after the initial public offering of the Company's Common Stock (but
not earlier than June 26, 1993) and ending on June 26, 1999, the Holder and/or
the Holders of any other Warrants and/or Warrant Shares who or which shall hold
not less than 50% of the Warrants and/or Warrant Shares outstanding at such time
and not
6
<PAGE>
previously sold pursuant to this Section 5 shall request that the Company file,
under the Securities Act of 1933 (the "Act"), a registration statement under the
Act covering not less than 50% of the Warrant Shares issued and issuable upon
the exercise of the Warrants and not so previously sold, the Company will (i)
promptly notify each Holder of the Warrants and each holder of Warrant Shares
not so previously sold that such registration statement will be filed and that
the Warrant Shares which are then held, and/or may be acquired upon exercise of
the Warrants by the Holder and such Holders will be included in such
registration statement at the Holder's and such Holders' request, (ii) cause
such registration statement to cover all Warrant Shares which it has been so
requested to include, (iii) use its best efforts to cause such registration
statement to become effective as soon as practicable and (iv) take all other
action necessary under any Federal or state law or regulation of any
governmental authority to permit all Warrant Shares which it has been so
requested to include in such registration statement to be sold or otherwise
disposed of, and will maintain such compliance with each such Federal and state
law and regulation of any governmental authority for the period necessary for
such Holders to effect the proposed sale or other disposition; provided,
however, that the Company shall not be obligated to maintain such compliance for
longer than 180 days. The Company shall be required to effect a registration or
qualification pursuant to this Subsection 5(a) on one occasion only.
(b) The Company agrees that if, at any time and from time to time during
the period commencing one year after the closing of the initial public offering
of the Company's Common Stock and ending on June 26, 1999, the Board of
Directors of the Company shall authorize the filing of a registration statement
under the Act (otherwise than pursuant to Subsection 5(a) hereof, or other than
a registration statement on Form S-8, Form S-4 or other form which does not
include substantially the same information as would be required in a form for
the general registration of securities) in connection with the proposed offer of
any of its securities by it or any of its stockholders, the Company will (i)
promptly notify the holder and each of the Holders, if any, of other Warrants
and/or Warrant Shares not previously sold pursuant to this Section 5 that such
registration statement will be filed and that the Warrant Shares which are then
held, and/or which may be acquired upon the exercise of the Warrants, by the
Holder and such Holders, will, at the Holder's and such Holders' request, be
included in such registration statement, (ii) upon the written request of a
Holder made within 20 days after the giving of such notice by the Company,
include in the securities covered by such registration statement all such
Warrant Shares which it has been so requested to include (provided, that in the
case of an underwritten public offering if in good faith judgment of the
managing underwriter the inclusion of the shares of Holders requesting
registration hereunder would reduce the shares to be offered by the Company or
interfere with the successful marketing of the shares offered by the Company,
the number of shares otherwise to be included shall be reduced pro rata by
number of shares among the Holders requesting such registration or excluded in
their entirely if so required by the underwriter), (iii) use its best efforts to
cause such registration statement to become effective as soon as practicable and
(iv) take all other action necessary under any Federal or state law or
regulation of any governmental
7
<PAGE>
authority to permit all Warrant Shares which it has been so requested to include
in such registration statement to be sold or otherwise disposed of, and will
maintain such compliance with each such Federal and state law and regulation of
any governmental authority for the period necessary for the Holder and such
Holders to effect the proposed sale or other disposition; provided, however,
that the Company shall not be obligated to maintain such compliance for longer
than 180 days.
(c) Whenever the Company is required pursuant to the provisions of this
Section 5 to include Warrant Shares in a registration statement, the Company
shall (i) furnish each Holder of any such Warrant Shares and each underwriter of
such Warrant Shares with such copies of the prospectus, including the
preliminary prospectus, conforming to the Act (and such other documents as each
such Holder or each such underwriter may reasonably request) in order to
facilitate the sale or distribution of the Warrant Shares, (ii) use its best
efforts to register or qualify such Warrant Shares under the blue sky laws (to
the extent applicable) of such jurisdiction or laws (to the extent applicable)
of such jurisdiction or jurisdictions as the Holders of any such Warrant Shares
and each underwriter of Warrant Shares being sold by such Holders shall
reasonably request and (iii) take such other actions as may be reasonably
necessary or advisable to enable such Holders and such underwriters to
consummate the sale or distribution in such jurisdiction or jurisdictions in
which such Holders shall have reasonably requested that the Warrant Shares be
sold.
(d) The Company shall pay all expenses incurred in connection with any
registration statement or other action pursuant to the provisions of this
Section 5, other than underwriting discounts and applicable transfer taxes
relating to the Warrant Shares and the legal fees of the Holders.
(e) The Company will indemnify the Holders of Warrant Shares which are
included in each registration statement referred to in Subsections 5(a) and
5(b), and the underwriters of such Warrant Shares, substantially to the same
extent as is customary for indemnification and contribution provisions in favor
of underwriters and selling shareholders of similar offerings, and such Holders
will furnish the Company with such information as the Company may reasonably
request for inclusion in such registration statement and will indemnify the
Company (and the underwriters, if applicable) with respect to such information
furnished by them in writing to the Company substantially to the same extent as
the underwriters indemnify the Company with respect to information furnished by
such underwriters.
(f) If the Company shall at any time have completed a public offering of
shares of its Common Stock, it shall thereafter take such steps as may be
necessary to file with the Securities and Exchange Commission all current
reports and other information as may be necessary to enable the Holder to effect
sales of its shares in reliance upon Rule 144 promulgated under the Act.
8
<PAGE>
6. Limited Transferability. This Warrant may not be sold, transferred,
assigned or hypothecated by the Holder (a) except in compliance with the
provisions of the Act, and (b) until the first anniversary hereof except (i) to
any successor firm or corporation of Ladenburg, Thalmann & Co. Inc., (ii) to any
of the officers of Ladenburg, Thalmann & Co. Inc., or of any such successor firm
or (iii) in the case of an individual, pursuant to such individual's last will
and testament or the laws of descent and distribution, and is so transferable
only upon the books of the Company which it shall cause to be maintained for the
purpose. The Company may treat the registered Holder of this Warrant as he or it
appears on the Company's books at any time as the Holder for all purposes. The
Company shall permit any Holder of a Warrant or his duly authorized attorney,
upon written request during ordinary business hours, to inspect and copy or make
extracts from its books showing the registered holders of Warrants. All warrants
issued upon the transfer or assignment of this Warrant will be dated the same
date as this Warrant, and all rights of the Holder thereof shall be identical to
those of the Holder.
7. Loss, etc. of Warrant. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver to the Holder a new Warrant of like date, tenor and
denomination.
8. Warrant Holder Not Shareholder. Except as otherwise provided herein,
this Warrant does not confer upon the Holder any right to vote or consent to or
receive notice as a stockholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a stockholder, prior
to the exercise hereof.
9. Communication. No notice or other communication under this Warrant shall
be effective unless, but any notice or other communication shall be effective
shall be deemed to have been given if, the same is in writing and is mailed by
first-class mail, postage prepaid, addressed to:
(a) the Company at 375 Park Avenue - Suite 1501, New York, New York
10022 or such other address as the Company has designated in writing to the
Holder, or
(b) the Holder at 540 Madison Avenue, New York, New York 10022 or such
other address as the Holder has designated in writing to the Company.
9
<PAGE>
10. Headings. The headings of this Warrant have been inserted as a matter
of convenience and shall not affect the construction hereof.
11. Applicable Law. This Warrant shall be governed by and construed in
accordance with the law of the State of New York without giving effect to the
principles of conflicts of law thereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
President and corporate seal to be hereunto affixed and attested by its
Secretary this 26th day of June, 1992.
APPEX TECHNOLOGIES, INC.
By: /s/ Dayne R. Myers
-----------------------------------
President
ATTEST:
/s/ Judith Wurtman
- ------------------------------
Secretary
[Corporate Seal]
10
<PAGE>
SUBSCRIPTION
The undersigned, _____________________, pursuant to the provisions of the
foregoing Warrant, hereby agrees to subscribe for and purchase ____________
shares of the Common Stock of Appex Technologies, Inc. covered by said Warrant,
and makes payment thereof in full at the price per share provided by said
Warrant.
Dated: _______________ Signature:_____________________________
Address:_______________________________
CASHLESS EXERCISE
The undersigned, _____________________, pursuant to the provisions of the
foregoing Warrant, hereby elects to Exchange its Warrant for ___________ shares
of Common Stock of Appex Technologies, Inc. pursuant to the Cashless Exercise
provisions of the Warrant.
Dated: ____________________ Signature:_____________________________
Address:_______________________________
ASSIGNMENT
FOR VALUE RECEIVED ______________ hereby sells, assigns and transfers unto
________________________ the foregoing Warrant and all rights evidenced thereby,
and does irrevocably constitute and appoint _______________, attorney, to
transfer said Warrant on the books of Appex Technologies, Inc.
Dated: ____________________ Signature:_____________________________
Address:_______________________________
11
<PAGE>
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED ________________ hereby assigns and transfers unto
________________ the right to purchase __________ shares of the Common Stock of
Appex Technologies, Inc. covered by the foregoing Warrant, and a proportionate
part of said Warrant and the rights evidenced thereby, and does irrevocably
constitute and appoint __________, attorney, to transfer that part of said
Warrant on the books of Appex Technologies, Inc.
Dated: ____________________ Signature:_____________________________
Address:_______________________________
12
Exhibit 4.9
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, As
AMENDED, AND MAY BE REOFFERED AND SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.
APPEX TECHNOLOGIES, INC.
Warrant for the Purchase of Shares of Common Stock
No. 2 6,416 Shares
FOR VALUE RECEIVED, APPEX TECHNOLOGIES, INC., a New York corporation (the
"Company"), hereby certifies that D. H. Blair Investment Banking Corp. or its
permitted assigns, is entitled to purchase from the Company, at any time or from
time to time commencing on June 26, 1993 and prior to 5:00 P.M., New York City
time, on June 26, 1997, six thousand four hundred sixteen (6,416) fully paid and
non-assessable shares of the Common Stock, $.001 par value per share, of the
Company for an aggregate purchase price of $15,398.40 (computed on the basis of
$2.40 per share) (Hereinafter, (i) said common stock, together with any other
equity securities which may be issued by the Company with respect thereto or in
substitution therefor, is referred to as the "Common Stock," (ii) the shares of
the Common Stock purchasable hereunder or under any other Warrant (as
hereinafter defined) are referred to as the "Warrant Shares," (iii) the
aggregate purchase price payable for the Warrant Shares hereunder is referred to
as the "Aggregate Warrant Price," (iv) the price payable for each of the Warrant
Shares hereunder is referred to as the "Per Share Warrant Price," (V) this
Warrant, all similar Warrants issued on the date hereof and all warrants
hereafter issued in exchange or substitution for this Warrant or such similar
Warrants are referred to as the "Warrants" and (vi) the holder of this Warrant
is referred to as the "Holder" and the holder of this Warrant and all other
Warrants or Warrant Shares issued upon the exercise of any Warrant are referred
to as the "Holders.") The Aggregate Warrant Price is not subject to adjustment.
The Per Share Warrant Price is subject to adjustment as hereinafter provided; in
the event of any such adjustment, the number of Warrant Shares shall be adjusted
by dividing the Aggregate Warrant Price by the Per Share Warrant Price in effect
immediately after such adjustment.
1. Exercise of Warrant. (a) This Warrant may be exercised, in whole at any
time or in part from time to time, commencing on June 26, 1993 and prior to 5:00
P.M., New York City time, on June 26, 1997, by the Holder:
(i) by the surrender of this Warrant (with the subscription form at
the end hereof duly executed) at the address set forth in Subsection 9(a)
hereof, together with proper payment of the Aggregate Warrant Price, or the
proportionate part thereof if this Warrant is exercised in part, with
payment for Warrant Shares made by certified or official bank check payable
to the order of the Company; or
<PAGE>
(ii) by the surrender of this Warrant (with the cashless exercise form
at the end hereof duly executed) (a "Cashless Exercise") at the address set
forth in Subsection 9(a) hereof. Such presentation and surrender shall be
deemed a waiver of the Holder's obligation to pay the Aggregate Warrant
Price, or the proportionate part thereof if this Warrant is exercised in
part. In the event of a Cashless Exercise, the Holder shall exchange its
Warrant for that number of shares of Common Stock determined by multiplying
the number of Warrant Shares subject to such Cashless Exercise by a
fraction, the numerator of which shall be the difference between the then
current market price per share of the Common Stock and the Per Share
Warrant Price, and the denominator of which shall be the then current
market price per share of the Common Stock. For purposes of any computation
under this Section 1(a)(ii), the then current market price per share of
Common Stock at any date (the "Market Price") shall be deemed to be the
last sale price of the Common Stock on the business day prior to the date
of the Cashless Exercise or, in case no such reported sales take place on
such day, the average of the last reported bid and asked prices of the
Common Stock on such day, in either case on the principal national
securities exchange on which the Common Stock is admitted to trading or
listed, or if not listed or admitted to trading on any such exchange, the
representative closing bid price of the Common Stock as reported by the
National Association of Securities Dealers, Inc. Automated Quotations
System ("NASDAQ"), or other similar organization if NASDAQ is no longer
reporting such information, or if not so available, the fair market price
of the Common Stock as determined by the Board of Directors,
(b) If this Warrant is exercised in part, this Warrant must be exercised
for a number of whole shares of the Common Stock, and the Holder is entitled to
receive a new Warrant covering the Warrant Shares which have not been exercised
and setting forth the proportionate part of the Aggregate Warrant Price
applicable to such Warrant Shares. Upon such surrender of this Warrant, the
Company will (i) issue a certificate or certificates in the name of the Holder
for the largest number of whole shares of the Common Stock to which the Holder
shall be entitled and, if this Warrant is exercised in whole, in lieu of any
fractional share of the Common Stock to which the Holder shall be entitled, pay
to the Holder cash in an amount equal to the fair value of such fractional share
(determined in such reasonable manner as the Board of Directors of the Company
shall determine), and (ii) deliver the other securities and properties
receivable upon the exercise of this Warrant, or the proportionate part thereof
if this Warrant is exercised in part, pursuant to the provisions of this
Warrant.
2. Reservation of Warrant Shares; Listing. The Company agrees that, prior
to the expiration of this Warrant, the Company will at all times (a) have
authorized and in reserve, and will keep available, solely for issuance or
delivery upon the exercise of this Warrant, the shares of the Common Stock and
other securities and properties as from time to time shall be receivable upon
the exercise of this Warrant,
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<PAGE>
free and clear of all restrictions on sale or transfer and free and clear of all
preemptive rights and rights of first refusal; and (b) if the Company hereafter
lists its Common Stock on any national securities exchange, keep the shares of
the Common Stock receivable upon the exercise of this Warrant authorized for
listing on such exchange upon notice of issuance.
3. Protection Against Dilution. (a) If, at any time or from time to time
after the date of this Warrant, the Company shall issue or distribute to the
holders of shares of Common Stock evidences of its indebtedness, any other
securities of the Company or any cash, property or other assets (excluding a
subdivision, combination or reclassification, or dividend or distribution
payable in shares of Common Stock, referred to in Subsection 3(b), and also
excluding cash dividends or cash distributions paid out of net profits legally
available therefor if the full amount thereof, together with the value of other
dividends and distributions made substantially concurrently therewith or
pursuant to a plan which includes payment thereof, is equivalent to not more
than 5% of the Company's net worth) (any such nonexcluded event being herein
called a "Special Dividend"), the Per Share Warrant Price shall be adjusted by
multiplying the Per Share Warrant Price then in effect by a fraction, the
numerator of which shall be the then current Market Price less the fair market
value (as determined by the Company's Board of Directors) of the evidences of
indebtedness, cash, securities or property, or other assets issued or
distributed in such Special Dividend applicable to one share of Common Stock and
the denominator of which shall be such then current market price per share of
Common Stock. An adjustment made pursuant to this Subsection 3(a) shall become
effective immediately after the record date of any such Special Dividend.
(b) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its capital stock in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of shares
or (iv) issue by reclassification of its Common Stock any shares of capital
stock of the Company, the Per Share Warrant Price shall be adjusted so that the
Holder upon the exercise hereof shall be entitled to receive the number of
shares of Common Stock or other capital stock of the Company which he would have
owned immediately following such action had such Warrant been exercised
immediately prior thereto. An adjustment made pursuant to this Subsection 3(b)
shall become effective immediately after the record date in the case of a
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or reclassification.
(c) Except as provided in Subsection 3(e), in case the Company shall
hereafter issue or sell any shares of Common Stock for a consideration per share
less than the Per Share Warrant Price on the date of such issuance or sale, the
Per Share Warrant Price shall be adjusted as of the date of such issuance or
sale so that the same shall equal the price determined by dividing (i) the sum
of (A) the number of shares of Common Stock outstanding immediately prior to
such issuance or sale
-3-
<PAGE>
multiplied by the Per Share Warrant Price plus (B) the consideration received by
the Company upon such issuance or sale by (ii) the total number of shares of
Common Stock outstanding after such issuance or sale.
(d) Except as provided in Subsections 3(a) and 3(e), in case the Company
shall hereafter issue or sell any rights, options, warrants or securities
convertible into Common Stock entitling the holders thereof to purchase Common
Stock or to convert such securities into Common Stock at a price per share
(determined by dividing (i) the total amount, if any, received or receivable by
the Company in consideration of the issuance or sale of such rights, options,
warrants or convertible securities plus the total consideration, if any, payable
to the Company upon exercise or conversion thereof (the "Total Consideration")
by (ii) the number of additional shares of Common Stock issuable upon exercise
or conversion of such securities) less than the then current Per Share Warrant
Price in effect on the date of such issuance or sale, the Per Share Warrant
Price shall be adjusted as of the date of such issuance or sale so that the same
shall equal the price determined by dividing (i) the sum of (A) the number of
shares of Common Stock outstanding on the date of such issuance or sale
multiplied by the Per Share Warrant Price plus (B) the Total Consideration by
(ii) the number of shares of Common Stock outstanding on the date of such
issuance or sale plus the maximum number of additional shares of Common Stock
issuable upon exercise or conversion of such securities.
(e) No adjustment in the Per Share Warrant Price shall be required in the
case of (i) the issuance by the Company of options to purchase in the aggregate
up to 700,000 shares of Common Stock pursuant to the Company's Stock Option Plan
in effect on the date hereof and the issuance by the Company of an aggregate of
700,000 shares upon the exercise of such options; and (ii) the issuance by the
Company of Common Stock pursuant to the exercise of any Warrant.
(f) In case of any capital reorganization or reclassification, or any
consolidation or merger to which the Company is a party other than a merger or
consolidation in which the Company is the continuing corporation, or in case of
any sale or conveyance to another entity of the property of the Company as an
entirety or substantially as an entirety, or in the case of any statutory
exchange of securities with another corporation (including any exchange effected
in connection with a merger of a third corporation into the Company), the Holder
of this Warrant shall have the right thereafter to receive on the exercise of
this Warrant the kind and amount of securities, cash or other property which the
Holder would have owned or have been entitled to receive immediately after such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance had this Warrant been exercised immediately prior to the
effective date of such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance and in any such case, if necessary,
appropriate adjustment shall be made in the application of the provisions set
forth in this Section 3 with respect to the rights and interests thereafter of
the Holder of this Warrant to the end that the provisions set forth in this
Section 3 shall thereafter correspondingly
-4-
<PAGE>
be made applicable, as nearly as may reasonably be, in relation to any shares of
stock or other securities or property thereafter deliverable on the exercise of
this Warrant. The above provisions of this Subsection 3(f) shall similarly apply
to successive reorganizations, reclassifications, consolidations, mergers,
statutory exchanges, sales or conveyances. The issuer of any shares of stock or
other securities or property thereafter deliverable on the exercise of this
Warrant shall be responsible for all of the agreements and obligations of the
Company hereunder. Notice of any such reorganization, reclassification,
consolidation, merger, statutory exchange, sale or conveyance and of said
provisions so proposed to be made, shall be mailed to the Holders of the
Warrants not less than 30 days prior to such event. A sale of all or
substantially all of the assets of the Company for a consideration consisting
primarily of securities shall be deemed a consolidation or merger for the
foregoing purposes.
(g) In case any event shall occur as to which the other provisions of this
Section 3 are not strictly applicable but as to which the failure to make any
adjustment would not fairly protect the purchase rights represented by this
Warrant in accordance with the essential intent and principles hereof then, in
each such case, the Holders of Warrants representing the right to purchase a
majority of the Warrant Shares subject to all outstanding Warrants may appoint a
firm of independent public accountants of recognized national standing
reasonably acceptable to the Company, which shall give their opinion as to the
adjustment, if any, on a basis consistent with the essential intent and
principles established herein, necessary to preserve the purchase rights
represented by the Warrants. Upon receipt of such opinion, the Company will
promptly mail a copy thereof to the Holder of this Warrant and shall make the
adjustments described therein. The fees and expenses of such independent public
accountants shall be borne by such Holders.
(h) No adjustment in the Per Share Warrant Price shall be required unless
such adjustment would require an increase or decrease of at least $0.05 per
share of Common Stock; provided, however, that any adjustments which by reason
of this Subsection 3(h) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment; provided further, however, that
adjustments shall be required and made in accordance with the provisions of this
Section 3 (other than this Subsection 3(h)) not later than such time as may be
required in order to preserve the tax-free nature of a distribution to the
Holder of this Warrant or Common Stock issuable upon exercise hereof. All
calculations under this Section 3 shall be made to the nearest cent or to the
nearest 1/100th of a share, as the case may be. Anything in this Section 3 to
the contrary notwithstanding, the Company shall be entitled to make such
reductions in the Per Share Warrant Price, in addition to those required by this
Section 3, as it in its discretion shall deem to be advisable in order that any
stock dividend, subdivision of shares or distribution of rights to purchase
stock or securities convertible or exchangeable for stock hereafter made by the
Company to its stockholders shall not be taxable.
-5-
<PAGE>
(i) Whenever the Per Share Warrant Price is adjusted as provided in this
Section 3 and upon any modification of the rights of a Holder of Warrants in
accordance with this Section 3, the Company shall promptly mail to the Holders
of the Warrants a certificate of the Company's chief financial officer setting
forth the Per Share Warrant Price and the number of Warrant Shares after such
adjustment or the effect of such modification, a brief statement of the facts
requiring such adjustment or modification and the manner of computing the same,
and, at the request of the Holder of any Warrant, obtain, at the Company's
expense, a certificate of a firm of independent public accountants of recognized
standing selected by the Board of Directors (who may be the regular auditors of
the Company) to such effect and cause copies of such certificate to be mailed to
the Holders of the Warrants.
(j) If the Board of Directors of the Company shall declare any dividend or
other distribution with respect to the Common Stock other than a cash
distribution out of earned surplus, the Company shall mail notice thereof to the
Holders of the Warrants not less than 15 days prior to the record date fixed for
determining stockholders entitled to participate in such dividend or other
distribution.
(k) If, as a result of an adjustment made pursuant to this Section 3, the
Holder of any Warrant thereafter surrendered for exercise shall become entitled
to receive shares of two or more classes of capital stock or shares of Common
Stock and other capital stock of the Company, the Board of Directors (whose
determination shall be conclusive and shall be described in a written notice to
the Holder of any Warrant promptly after such adjustment) shall determine the
allocation of the adjusted Per Share Warrant Price between or among shares or
such classes of capital stock or shares of Common Stock and other capital stock.
4. Fully Paid Stock; Taxes. The Company agrees that the shares of the
Common Stock represented by each and every certificate for Warrant Shares
delivered on the exercise of this Warrant shall, at the time of such delivery,
be validly issued and outstanding, fully paid and nonassessable, and not subject
to preemptive rights or rights of first refusal, and the Company will take all
such actions as may be necessary to assure that the par value or stated value,
if any, per share of the Common Stock is at all times equal to or less than the
then Per Share Warrant Price. The Company further covenants and agrees that it
will pay, when due and payable, any and all Federal and state stamp, original
issue or similar taxes which may be payable in respect of the issue of any
Warrant Share or certificate therefor.
5. Registration Under Securities Act of 1933.
(a) The Company agrees that it at any time during the period commencing 180
days after the initial public offering of the Company's Common Stock (but no
earlier than June 26, 1993) and ending on June 26, 1999, the Holder and/or the
Holders of any other Warrants and/or Warrant Shares who or which shall hold not
less than 50% of the Warrants and/or Warrant Shares outstanding at such time and
not
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<PAGE>
previously sold pursuant to this Section 5 shall request that the Company file,
under the Securities Act of 1933 (the "Act"), a registration statement under the
Act covering not less than 50% of the Warrant Shares issued and issuable upon
the exercise of the Warrants and not so previously sold, the Company will (i)
promptly notify each Holder of the Warrants and each holder of Warrant Shares
not so previously sold that such registration statement will be filed and that
the Warrant Shares which are then held, and/or may be acquired upon exercise of
the Warrants by the Holder and such Holders will be included in such
registration statement at the Holder's and such Holders' request, (ii) cause
such registration statement to cover all Warrant Shares which it has been so
requested to include, (iii) use its best efforts to cause such registration
statement to become effective as soon as practicable and (iv) take all other
action necessary under any Federal or state law or regulation of any
governmental authority to permit all Warrant Shares which it has been so
requested to include in such registration statement to be sold or otherwise
disposed of, and will maintain such compliance with each such Federal and
state law and regulation of any governmental authority for the period necessary
for such Holders to effect the proposed sale or other disposition; provided,
however, that the Company shall not be obligated to maintain such compliance for
longer than 180 days. The Company shall be required to effect a registration or
qualification pursuant to this Subsection 5(a) on one occasion only.
(b) The Company agrees that if, at any time and from time to time during
the period commencing one year after the closing of the initial public offering
of the Company's Common Stock and ending on June 26, 1999, the Board of
Directors of the Company shall authorize the filing of a registration statement
under the Act (otherwise than pursuant to Subsection 5(a) hereof, or other than
a registration statement on Form S-8, Form S-4 or other form which does not
include substantially the same information as would be required in a form for
the general registration of securities) in connection with the proposed offer of
any of its securities by it or any of its stockholders, the Company will (i)
promptly notify the Holder and each of the Holders, if any, of other Warrants
and/or Warrant Shares not previously sold pursuant to this Section 5 that such
registration statement will be filed and that the Warrant Shares which are then
held, and/or which may be acquired upon the exercise of the Warrants, by the
Holder and such Holders, will, at the Holder's and such Holders' request, be
included in such registration statement, (ii) upon the written request of a
Holder made within 20 days after the giving of such notice by the Company,
include in the securities covered by such registration statement all such
Warrant Shares which it has been so requested to include (provided, that in the
case of an underwritten public offering if in the good faith judgement of the
managing underwriter the inclusion of the shares of Holders requesting
registration hereunder would reduce the shares to be offered by the Company or
interfere with the successful marketing of the shares offered by the Company,
the number of shares otherwise to be included shall be reduced pro rata by
number of shares among the Holders requesting such registration or excluded in
their entirely if so required by the underwriter), (iii) use its best efforts to
cause such registration statement to become effective as soon as practicable and
(iv) take all other action necessary under any Federal or state law or
regulation of any governmental
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<PAGE>
authority to permit all Warrant Shares which it has been so requested to include
in such registration statement to be sold or otherwise disposed of, and will
maintain such compliance with each such Federal and state law and regulation of
any governmental authority for the period necessary for the Holder and such
Holders to effect the proposed sale or other disposition; provided, however,
that the Company shall not be obligated to maintain such compliance for longer
than 180 days.
(c) Whenever the Company is required pursuant to the provisions of this
Section 5 to include Warrant Shares in a registration statement, the Company
shall (i) furnish each Holder of any such Warrant Shares and each underwriter of
such Warrant Shares with such copies of the prospectus, including the
preliminary prospectus, conforming to the Act (and such other documents as each
such Holder or each such underwriter may reasonably request) in order to
facilitate the sale or distribution of the Warrant Shares, (ii) use its best
efforts to register or qualify such Warrant Shares under the blue sky laws (to
the extent applicable) of such jurisdiction or laws (to the extent applicable)
of such jurisdiction or jurisdictions as the Holders of any such Warrant Shares
and each underwriter of Warrant Shares being sold by such Holders shall
reasonably request and (iii) take such other actions as may be reasonably
necessary or advisable to enable such Holders and such underwriters to
consummate the sale or distribution in such jurisdiction or jurisdictions in
which such Holders shall have reasonably requested that the Warrant Shares be
sold.
(d) The Company shall pay all expenses incurred in connection with any
registration statement or other action pursuant to the provisions of this
Section 5, other than underwriting discounts and applicable transfer taxes
relating to the Warrant Shares and the legal fees of the Holders.
(e) The Company will indemnify the Holders of Warrant Shares which are
included in each registration statement referred to in Subsections 5(a) and
5(b), and the underwriters of such Warrant Shares, substantially to the same
extent as is customary for indemnification and contribution provisions in favor
of underwriters and selling shareholders of similar offerings, and such Holders
will furnish the Company with such information as the Company may reasonably
request for inclusion in such registration statement and will indemnify the
Company (and the underwriters, if applicable) with respect to such information
furnished by them in writing to the Company substantially to the same extent as
the underwriters indemnify the Company with respect to information furnished by
such underwriters.
(f) If the Company shall at any time have completed a public offering of
shares of its Common Stock, it shall thereafter take such steps as may be
necessary to file with the Securities and Exchange Commission all current
reports and other information as may be necessary to enable the Holder to effect
sales of its shares in reliance upon Rule 144 promulgated under the Act.
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<PAGE>
6. Limited Transferability. This Warrant may not be sold, transferred,
assigned or hypothecated by the Holder (a) except in compliance with the
provisions of the Act, and (b) until the first anniversary hereof except (i) to
any successor firm or corporation of D. H. Blair Investment Banking Corp., (ii)
to any of the officers of D. H. Blair Investment Banking Corp., or of any such
successor firm or (iii) in the case of an individual, pursuant to such
individual's last will and testament or the laws of descent and distribution,
and is so transferable only upon the books of the Company which it shall cause
to be maintained for the purpose. The Company may treat the registered Holder of
this Warrant as he or it appears on the Company's books at any time as the
Holder for all purposes. The Company shall permit any Holder of a Warrant or his
duly authorized attorney, upon written request during ordinary business hours,
to inspect and copy or make extracts from its books showing the registered
holders of Warrants. All warrants issued upon the transfer or assignment of this
Warrant will be dated the same date as this Warrant, and all rights of the
Holder thereof shall be identical to those of the Holder.
7. Loss, etc., of Warrant. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver to the Holder a new Warrant of like date, tenor and
denomination.
8. Warrant Holder Not Shareholder. Except as otherwise provided herein,
this Warrant does not confer upon the Holder any right to vote or to consent to
or receive notice as a stockholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a stockholder, prior
to the exercise hereof.
9. Communication. No notice or other communication under this Warrant shall
be effective unless, but any notice or other communication shall be effective
and shall be deemed to have been given if; the same is in writing and is mailed
by first-class mail, postage prepaid, addressed to:
(a) the Company at 375 Park Avenue -- Suite 1501, New York, New York
10022 or such other address as the Company has designated in writing to the
Holder, or
(b) the Holder at 44 Wall Street, New York, New York 10005 or such
other address as the Holder has designated in writing to the Company.
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<PAGE>
10. Headings. The headings of this Warrant have been inserted as a matter
of convenience and shall not affect the construction hereof.
11. Applicable Law. This Warrant shall be governed by and construed in
accordance with the law of the State of New York without giving effect to the
principles of conflicts of law thereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
President and its corporate seal to be hereunto affixed and attested by its
Secretary this 26th day of June 1992.
APPEX TECHNOLOGIES, INC.
By: /s/ Dayne R. Myers
-----------------------------
President
ATTEST:
/s/ Judith Wurtman
- -----------------------------
Secretary
[Corporate Seal]
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<PAGE>
SUBSCRIPTION
The undersigned, _____________________, pursuant to the provisions of the
foregoing Warrant, hereby agrees to subscribe for and purchase ______________
shares of the Common Stock of Appex Technologies, Inc. covered by said Warrant,
and makes payment therefor in full at the price per share provided by said
Warrant.
Dated: _______________________ Signature: _______________________
Address: _________________________
CASHLESS EXERCISE
The undersigned, ________________, pursuant to the provisions of the
foregoing Warrant, hereby elects to Exchange its Warrant for ___________ shares
of Common Stock of Appex Technologies, Inc. pursuant to the Cashless Exercise
provisions of the Warrant.
Dated: _______________________ Signature: _______________________
Address: _________________________
ASSIGNMENT
FOR VALUE RECEIVED __________ hereby sells, assigns and
transfers unto __________________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint _________________
attorney, to transfer said Warrant on the books of Appex Technologies, Inc.
Dated: _______________________ Signature: _______________________
Address: _________________________
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<PAGE>
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED hereby assigns and transfers unto ______________________
the right to purchase _______ shares of the Common Stock of Appex Technologies,
Inc. covered by the foregoing Warrant, and a proportionate part of said Warrant
and the rights evidenced thereby, and does irrevocably constitute and appoint
___________________, attorney, to transfer that part of said Warrant on the
books of Appex Technologies, Inc.
Dated: _______________________ Signature: _______________________
Address: _________________________
-12-
Exhibit 4.10
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY BE REOFFERED AND SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.
APPEX TECHNOLOGIES, INC.
Warrant for the Purchase of Shares of Common Stock
No. 3 16,625 Shares
FOR VALUE RECEIVED, APPEX TECHNOLOGIES, INC., a New York corporation (the
"Company"), hereby certifies that Ladenburg, Thalmann & Co. Inc. or its
permitted assigns, is entitled to purchase from the Company, at any time or from
time to time commencing on July 22, 1993 and prior to 5:00 P.M., New York City
time, on July 22, 1997, sixteen thousand six hundred twenty-five (16,625) fully
paid and non-assessable shares of the Common Stock, $.001 par value per share,
of the Company for an aggregate purchase price of $39,900 (computed on the basis
of $2.40 per share). (Hereinafter, (i) said common stock, together with any
other equity securities which may be issued by the Company with respect thereto
or in substitution therefor, is referred to as the "Common Stock," (ii) the
shares of the Common Stock purchasable hereunder or under any other Warrant (as
hereinafter defined) are referred to as the "Warrant Shares," (iii) the
aggregate purchase price payable for the Warrant Shares hereunder is referred to
as the "Aggregate Warrant Price," (iv) the price payable for each of the Warrant
Shares hereunder is referred to as the "Per Share Warrant Price," (v) this
Warrant, all similar Warrants issued on the date hereof and all warrants
hereafter issued in exchange or substitution for this Warrant or such similar
Warrants are referred to as the "Warrants" and (vi) the holder of this Warrant
is referred to as the "Holder" and the holder of this Warrant and all other
Warrants or Warrant Shares issued upon the exercise of any Warrant are referred
to as the "Holders.") The Aggregate Warrant Price is not subject to adjustment.
The Per Share Warrant Price is subject to adjustment as hereinafter provided; in
the event of any such adjustment, the number of Warrant Shares shall be adjusted
by dividing the Aggregate Warrant Price by the Per Share Warrant Price in effect
immediately after such adjustment.
1. Exercise of Warrant. (a) This Warrant may be exercised, in whole at any
time or in part from time to time, commencing on July 22, 1993 and prior to 5:00
P.M., New York City time, on July 22, 1997, by the Holder:
(i) by the surrender of this Warrant (with the subscription form at
the end hereof duly executed) at the address set forth in Subsection 9(a)
hereof, together with proper payment of the Aggregate Warrant Price, or the
proportionate part thereof if this Warrant is exercised in part, with
payment for Warrant Shares made by certified or official bank check payable
to the order of the Company; or
<PAGE>
(ii) by the surrender of this Warrant (with the cashless exercise form
at the end hereof duly executed) (a "Cashless Exercise") at the address set
forth in Subsection 9(a) hereof. Such presentation and surrender shall be
deemed a waiver of the Holder's obligation to pay the Aggregate Warrant
Price, or the proportionate part thereof if this Warrant is exercised in
part. In the event of a Cashless Exercise, the Holder shall exchange its
Warrant for that number of shares of Common Stock determined by multiplying
the number of Warrant Shares subject to such Cashless Exercise by a
fraction, the numerator of which shall be the difference between the then
current market price per share of the Common Stock and the Per Share
Warrant Price, and the denominator of which shall be the then current
market price per share of the Common Stock. For purposes of any computation
under this Section 1(a)(ii), the then current market price per share of
Common Stock at any date (the "Market Price") shall be deemed to be the
last sale price of the Common Stock on the business day prior to the date
of the Cashless Exercise or, in case no such reported sales take place on
such day, the average of the last reported bid and asked prices of the
Common Stock on such day, in either case on the principal national
securities exchange on which the Common Stock is admitted to trading or
listed, or if not listed or admitted to trading on any such exchange, the
representative closing bid price of the Common Stock as reported by the
National Association of Securities Dealers, Inc. Automated Quotations
System ("NASDAQ"), or other similar organization if NASDAQ is no longer
reporting such information, or if not so available, the fair market price
of the Common Stock as determined by the Board of Directors.
(b) If this Warrant is exercised in part, this Warrant must be exercised
for a number of whole shares of the Common Stock, and the Holder is entitled to
receive a new Warrant covering the Warrant Shares which have not been exercised
and setting forth the proportionate part of the Aggregate Warrant Price
applicable to such Warrant Shares. Upon such surrender of this Warrant, the
Company will (i) issue a certificate or certificates in the name of the Holder
for the largest number of whole shares of the Common Stock to which the Holder
shall be entitled and, if this Warrant is exercised in whole, in lieu of any
fractional share of the Common Stock to which the Holder shall be entitled, pay
to the Holder cash in an amount equal to the fair value of such fractional share
(determined in such reasonable manner as the Board of Directors of the Company
shall determine), and (ii) deliver the other securities and properties
receivable upon the exercise of this Warrant, or the proportionate part thereof
if this Warrant is exercised in part, pursuant to the provisions of this
Warrant.
2. Reservation of Warrant Shares; Listing. The Company agrees that, prior
to the expiration of this Warrant, the Company will at all times (a) have
authorized and in reserve, and will keep available, solely for issuance or
delivery upon the exercise of this Warrant, the shares of the Common Stock and
other securities and properties as from time to time shall be receivable upon
the exercise of this Warrant,
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<PAGE>
free and clear of all restrictions on sale or transfer and free and clear of all
preemptive rights and rights of first refusal; and (b) if the Company hereafter
lists its Common Stock on any national securities exchange, keep the shares of
the Common Stock receivable upon the exercise of this Warrant authorized for
listing on such exchange upon notice of issuance.
3. Protection Against Dilution. (a) If, at any time or from time to time
after the date of this Warrant, the Company shall issue or distribute to the
holders of shares of Common Stock evidences of its indebtedness, any other
securities of the Company or any cash, property or other assets (excluding a
subdivision, combination or reclassification, or dividend or distribution
payable in shares of Common Stock, referred to in Subsection 3(b), and also
excluding cash dividends or cash distributions paid out of net profits legally
available therefor if the full amount thereof, together with the value of other
dividends and distributions made substantially concurrently therewith or
pursuant to a plan which includes payment thereof, is equivalent to not more
than 5% of the Company's net worth) (any such nonexcluded event being herein
called a "Special Dividend"), the Per Share Warrant Price shall be adjusted by
multiplying the Per Share Warrant Price then in effect by a fraction, the
numerator of which shall be the then current Market Price less the fair market
value (as determined by the Company's Board of Directors) of the evidences of
indebtedness, cash, securities or property, or other assets issued or
distributed in such Special Dividend applicable to one share of Common Stock and
the denominator of which shall be such then current market price per share of
Common Stock. An adjustment made pursuant to this Subsection 3(a) shall become
effective immediately after the record date of any such Special Dividend.
(b) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its capital stock in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of shares
or (iv) issue by reclassification of its Common Stock any shares of capital
stock of the Company, the Per Share Warrant Price shall be adjusted so that the
Holder upon the exercise hereof shall be entitled to receive the number of
shares of Common Stock or other capital stock of the Company which he would have
owned immediately following such action had such Warrant been exercised
immediately prior thereto. An adjustment made pursuant to this Subsection 3(b)
shall become effective immediately after the record date in the case of a
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or reclassification.
(c) Except as provided in Subsection 3(e), in case the Company shall
hereafter issue or sell any shares of Common Stock for a consideration per share
less than the Per Share Warrant Price on the date of such issuance or sale, the
Per Share Warrant Price shall be adjusted as of the date of such issuance or
sale so that the same shall equal the price determined by dividing (i) the sum
of (A) the number of shares of Common Stock outstanding immediately prior to
such issuance or sale
-3-
<PAGE>
multiplied by the Per Share Warrant Price plus (B) the consideration received by
the Company upon such issuance or sale by (ii) the total number of shares of
Common Stock outstanding after such issuance or sale.
(d) Except as provided in Subsections 3(a) and 3(e), in case the Company
shall hereafter issue or sell any rights, options, warrants or securities
convertible into Common Stock entitling the holders thereof to purchase Common
Stock or to convert such securities into Common Stock at a price per share
(determined by dividing (i) the total amount, if any, received or receivable by
the Company in consideration of the issuance or sale of such rights, options,
warrants or convertible securities plus the total consideration, if any, payable
to the Company upon exercise or conversion thereof (the "Total Consideration")
by (ii) the number of additional shares of Common Stock issuable upon exercise
or conversion of such securities) less than the then current Per Share Warrant
Price in effect on the date of such issuance or sale, the Per Share Warrant
Price shall be adjusted as of the date of such issuance or sale so that the same
shall equal the price determined by dividing (i) the sum of (A) the number of
shares of Common Stock outstanding on the date of such issuance or sale
multiplied by the Per Share Warrant Price plus (B) the Total Consideration by
(ii) the number of shares of Common Stock outstanding on the date of such
issuance or sale plus the maximum number of additional shares of Common Stock
issuable upon exercise or conversion of such securities.
(e) No adjustment in the Per Share Warrant Price shall be required in the
case of (i) the issuance by the Company of options to purchase in the aggregate
up to 700,000 shares of Common Stock pursuant to the Company's Stock Option Plan
in effect on the date hereof and the issuance by the Company of an aggregate of
700,000 shares upon the exercise of such options, and (ii) the issuance by the
Company of Common Stock pursuant to the exercise of any Warrant.
(f) In case of any capital reorganization or reclassification, or any
consolidation or merger to which the Company is a party other than a merger or
consolidation in which the Company is the continuing corporation, or in case of
any sale or conveyance to another entity of the property of the Company as an
entirety or substantially as an entirety, or in the case of any statutory
exchange of securities with another corporation (including any exchange effected
in connection with a merger of a third corporation into the Company), the Holder
of this Warrant shall have the right thereafter to receive on the exercise of
this Warrant the kind and amount of securities, cash or other property which the
Holder would have owned or have been entitled to receive immediately after such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance had this Warrant been exercised immediately prior to the
effective date of such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance and in any such case, if necessary,
appropriate adjustment shall be made in the application of the provisions set
forth in this Section 3 with respect to the rights and interests thereafter of
the Holder of this Warrant to the end that the provisions set forth in this
Section 3 shall thereafter correspondingly
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<PAGE>
be made applicable, as nearly as may reasonably be, in relation to any shares of
stock or other securities or property thereafter deliverable on the exercise of
this Warrant. The above provisions of this Subsection 3(f) shall similarly apply
to successive reorganizations, reclassifications, consolidations, mergers,
statutory exchanges, sales or conveyances. The issuer of any shares of stock or
other securities or property thereafter deliverable on the exercise of this
Warrant shall be responsible for all of the agreements and obligations of the
Company hereunder. Notice of any such reorganization, reclassification,
consolidation, merger, statutory exchange, sale or conveyance and of said
provisions so proposed to be made, shall be mailed to the Holders of the
Warrants not less than 30 days prior to such event. A sale of all or
substantially all of the assets of the Company for a consideration consisting
primarily of securities shall be deemed a consolidation or merger for the
foregoing purposes.
(g) In case any event shall occur as to which the other provisions of this
Section 3 are not strictly applicable but as to which the failure to make any
adjustment would not fairly protect the purchase rights represented by this
Warrant in accordance with the essential intent and principles hereof then, in
each such case, the Holders of Warrants representing the right to purchase a
majority of the Warrant Shares subject to all outstanding Warrants may appoint a
firm of independent public accountants of recognized national standing
reasonably acceptable to the Company, which shall give their opinion as to the
adjustment, if any, on a basis consistent with the essential intent and
principles established herein, necessary to preserve the purchase rights
represented by the Warrants. Upon receipt of such opinion, the Company will
promptly mail a copy thereof to the Holder of this Warrant and shall make the
adjustments described therein. The fees and expenses of such independent public
accountants shall be borne by such Holders.
(h) No adjustment in the Per Share Warrant Price shall be required unless
such adjustment would require an increase or decrease of at least $0.05 per
share of Common Stock; provided, however, that any adjustments which by reason
of this Subsection 3(h) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment; provided further, however, that
adjustments shall be required and made in accordance with the provisions of this
Section 3 (other than this Subsection 3(h)) not later than such time as may be
required in order to preserve the tax-free nature of a distribution to the
Holder of this Warrant or Common Stock issuable upon exercise hereof. All
calculations under this Section 3 shall be made to the nearest cent or to the
nearest 1/100th of a share, as the case may be. Anything in this Section 3 to
the contrary notwithstanding, the Company shall be entitled to make such
reductions in the Per Share Warrant Price, in addition to those required by this
Section 3, as it in its discretion shall deem to be advisable in order that any
stock dividend, subdivision of shares or distribution of rights to purchase
stock or securities convertible or exchangeable for stock hereafter made by the
Company to its stockholders shall not be taxable.
-5-
<PAGE>
(i) Whenever the Per Share Warrant Price is adjusted as provided in this
Section 3 and upon any modification of the rights of a Holder of Warrants in
accordance with this Section 3, the Company shall promptly mail to the Holders
of the Warrants a certificate of the Company's chief financial officer setting
forth the Per Share Warrant Price and the number of Warrant Shares after such
adjustment or the effect of such modification, a brief statement of the facts
requiring such adjustment or modification and the manner of computing the same,
and, at the request of the Holder of any Warrant, obtain, at the Company's
expense, a certificate of a firm of independent public accountants of recognized
standing selected by the Board of Directors (who may be the regular auditors of
the Company) to such effect and cause copies of such certificate to be mailed to
the Holders of the Warrants.
(j) If the Board of Directors of the Company shall declare any dividend or
other distribution with respect to the Common Stock other than a cash
distribution out of earned surplus, the Company shall mail notice thereof to the
Holders of the Warrants not less than 15 days prior to the record date fixed for
determining stockholders entitled to participate in such dividend or other
distribution.
(k) If, as a result of an adjustment made pursuant to this Section 3, the
Holder of any Warrant thereafter surrendered for exercise shall become entitled
to receive shares of two or more classes of capital stock or shares of Common
Stock and other capital stock of the Company, the Board of Directors (whose
determination shall be conclusive and shall be described in a written notice to
the Holder of any Warrant promptly after such adjustment) shall determine the
allocation of the adjusted Per Share Warrant Price between or among shares or
such classes of capital stock or shares of Common Stock and other capital stock.
4. Fully Paid Stock; Taxes. The Company agrees that the shares of the
Common Stock represented by each and every certificate for Warrant Shares
delivered on the exercise of this Warrant shall, at the time of such delivery,
be validly issued and outstanding, fully paid and nonassessable, and not subject
to preemptive rights or rights of first refusal, and the Company will take all
such actions as may be necessary to assure that the par value or stated value,
if any, per share of the Common Stock is at all times equal to or less than the
then Per Share Warrant Price. The Company further covenants and agrees that it
will pay, when due and payable, any and all Federal and state stamp, original
issue or similar taxes which may be payable in respect of the issue of any
Warrant Share or certificate therefor.
5. Registration Under Securities Act of 1933.
(a) The Company agrees that if, at any time during the period commencing
180 days after the initial public offering of the Company's Common Stock (but no
earlier than July 22, 1993) and ending on July 22, 1999, the Holder and/or the
Holders of any other Warrants and/or Warrant Shares who or which shall hold not
less than 50% of the Warrants and/or Warrant Shares outstanding at such time and
not
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<PAGE>
previously sold pursuant to this Section 5 shall request that the Company file,
under the Securities Act of 1933 (the "Act"), a registration statement under the
Act covering not less than 50% of the Warrant Shares issued and issuable upon
the exercise of the Warrants and not so previously sold, the Company will (i)
promptly notify each Holder of the Warrants and each holder of Warrant Shares
not so previously sold that such registration statement will be filed and that
the Warrant Shares which are then held, and/or may be acquired upon exercise of
the Warrants by the Holder and such Holders will be included in such
registration statement at the Holder's and such Holders' request, (ii) cause
such registration statement to cover all Warrant Shares which it has been so
requested to include, (iii) use its best efforts to cause such registration
statement to become effective as soon as practicable and (iv) take all other
action necessary under any Federal or state law or regulation of any
governmental authority to permit all Warrant Shares which it has been so
requested to include in such registration statement to be sold or otherwise
disposed of, and will maintain such compliance with each such Federal and state
law and regulation of any governmental authority for the period necessary for
such Holders to effect the proposed sale or other disposition; provided,
however, that the Company shall not be obligated to maintain such compliance for
longer than 180 days. The Company shall be required to effect a registration or
qualification pursuant to this Subsection 5(a) on one occasion only.
(b) The Company agrees that if, at any time and from time to time during
the period commencing one year after the closing of the initial public offering
of the Company's Common Stock and ending on July 22, 1999, the Board of
Directors of the Company shall authorize the filing of a registration statement
under the Act (otherwise than pursuant to Subsection 5(a) hereof, or other than
a registration statement on Form S-8, Form S-4 or other form which does not
include substantially the same information as would be required in a form for
the general registration of securities) in connection with the proposed offer of
any of its securities by it or any of its stockholders, the Company will (i)
promptly notify the Holder and each of the Holders, if any, of other Warrants
and/or Warrant Shares not previously sold pursuant to this Section 5 that such
registration statement will be filed and that the Warrant Shares which are then
held, and/or which may be acquired upon the exercise of the Warrants, by the
Holder and such Holders, will, at the Holder's and such Holders' request, be
included in such registration statement, (ii) upon the written request of a
Holder made within 20 days after the giving of such notice by the Company,
include in the securities covered by such registration statement all such
Warrant Shares which it has been so requested to include (provided, that in the
case of an underwritten public offering if in the good faith judgement of the
managing underwriter the inclusion of the shares of Holders requesting
registration hereunder would reduce the shares to be offered by the Company or
interfere with the successful marketing of the shares offered by the Company,
the number of shares otherwise to be included shall be reduced pro rata by
number of shares among the Holders requesting such registration or excluded in
their entirely if so required by the underwriter), (iii) use its best efforts to
cause such registration statement to become effective as soon as practicable and
(iv) take all other action necessary under any Federal or state law or
regulation of any governmental
-7-
<PAGE>
authority to permit all Warrant Shares which it has been so requested to include
in such registration statement to be sold or otherwise disposed of, and will
maintain such compliance with each such Federal and state law and regulation of
any governmental authority for the period necessary for the Holder and such
Holders to effect the proposed sale or other disposition; provided, however,
that the Company shall not be obligated to maintain such compliance for longer
than 180 days.
(c) Whenever the Company is required pursuant to the provisions of this
Section 5 to include Warrant Shares in a registration statement, the Company
shall (i) furnish each Holder of any such Warrant Shares and each underwriter of
such Warrant Shares with such copies of the prospectus, including the
preliminary prospectus, conforming to the Act (and such other documents as each
such Holder or each such underwriter may reasonably request) in order to
facilitate the sale or distribution of the Warrant Shares, (ii) use its beat
efforts to register or quality such Warrant Shares under the blue sky laws (to
the extent applicable) of such jurisdiction or laws (to the extent applicable)
of such jurisdiction or jurisdictions as the Holders of any such Warrant Shares
and each underwriter of Warrant Shares being sold by such Holders shall
reasonably request and (iii) take such other actions as may be reasonably
necessary or advisable to enable such Holders and such underwriters to
consummate the sale or distribution in such jurisdiction or jurisdictions in
which such Holders shall have reasonably requested that the Warrant Shares be
sold.
(d) The Company shall pay all expenses incurred in connection with any
registration statement or other action pursuant to the provisions of this
Section 5, other than underwriting discounts and applicable transfer taxes
relating to the Warrant Shares and the legal fees of the Holders.
(e) The Company will indemnify the Holders of Warrant Shares which are
included in each registration statement referred to in Subsections 5(a) and
5(b), and the underwriters of such Warrant Shares, substantially to the same
extent as is customary for indemnification and contribution provisions in favor
of underwriters and selling shareholders of similar offerings, and such Holders
will furnish the Company with such information as the Company may reasonably
request for inclusion in such registration statement and will indemnify the
Company (and the underwriters, if applicable) with respect to such information
furnished by them in writing to the Company substantially to the same extent as
the underwriters indemnify the Company with respect to information furnished by
such underwriters.
(f) If the Company shall at any time have completed a public offering of
shares of its Common Stock, it shall thereafter take such steps as may be
necessary to file with the Securities and Exchange Commission all current
reports and other information as may be necessary to enable the Holder to effect
sales of its shares in reliance upon Rule 144 promulgated under the Act.
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<PAGE>
6. Limited Transferability. This Warrant may not be sold, transferred,
assigned or hypothecated by the Holder (a) except in compliance with the
provisions of the Act, and (b) until the first anniversary hereof except (i) to
any successor firm or corporation of Ladenburg, Thalmann & Co. Inc., (ii) to any
of the officers of Ladenburg, Thalmann & Co. Inc., or of any such successor firm
or (iii) in the case of an individual, pursuant to such individual's last will
and testament or the laws of descent and distribution, and is so transferable
only upon the books of the Company which it shall cause to be maintained for the
purpose. The Company may treat the registered Holder of this Warrant as he or it
appears on the Company's books at any time as the Holder for all purposes. The
Company shall permit any Holder of a Warrant or his duly authorized attorney,
upon written request during ordinary business hours, to inspect and copy or make
extracts from its books showing the registered holders of Warrants. All warrants
issued upon the transfer or assignment of this Warrant will be dated the same
date as this Warrant, and all rights of the Holder thereof shall be identical to
those of the Holder.
7. Loss, etc. of Warrant. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver to the Holder a new Warrant of like date, tenor and
denomination.
8. Warrant Holder Not Shareholder. Except as otherwise provided herein,
this Warrant does not confer upon the Holder any right to vote or to consent to
or receive notice as a stockholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a stockholder, prior
to the exercise hereof.
9. Communication. No notice or other communication under this Warrant shall
be effective unless, but any notice or other communication shall be effective
and shall be deemed to have been given if, the same is in writing and is mailed
by first-class mail, postage prepaid, addressed to:
(a) the Company at 375 Park Avenue -- Suite 1501, New York, New York
10022 or such other address as the Company has designated in writing to the
Holder, or
(b) the Holder at 540 Madison Avenue, New York, New York 10022 or such
other address as the Holder has designated in writing to the Company.
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<PAGE>
10. Headings. The headings of this Warrant have been inserted as a matter
of convenience and shall not affect the construction hereof.
11. Applicable Law. This Warrant shall be governed by and construed in
accordance with the law of the State of New York without giving effect to the
principles of conflicts of law thereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
President and its corporate seal to be hereunto affixed and attested by its
Secretary this 23rd day of July, 1992.
APPEX TECHNOLOGIES, INC.
By /s/ Dayne R. Myers
-----------------------
President
ATTEST:
/s/ Judith Wurtman
- -----------------------
Secretary
[Corporate Seal]
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<PAGE>
SUBSCRIPTION
The undersigned, __________________, pursuant to the provisions of the
foregoing Warrant, hereby agrees to subscribe for and purchase _____________
shares of the Common Stock of Appex Technologies, Inc. covered by said Warrant,
and makes payment therefor in full at the price per share provided by said
Warrant.
Dated:_____________ Signature:____________________
Address:______________________
CASHLESS EXERCISE
The undersigned, ________________, pursuant to the provisions of the
foregoing Warrant, hereby elects to Exchange its Warrant for __________ shares
of Common Stock of Appex Technologies, Inc. pursuant to the Cashless Exercise
provisions of the Warrant.
Dated:_____________ Signature:____________________
Address:______________________
ASSIGNMENT
FOR VALUE RECEIVED __________ hereby sells, assigns and transfers unto
______________________ the foregoing Warrant and all rights evidenced thereby,
and does irrevocably constitute and appoint ________________ attorney, to
transfer said Warrant on the books of Appex Technologies, Inc.
Dated:_____________ Signature:____________________
Address:______________________
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<PAGE>
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED ____________ hereby assigns and transfers unto
____________________ the right to purchase ________ shares of the Common Stock
of Appex Technologies, Inc. covered by the foregoing Warrant, and a
proportionate part of said Warrant and the rights evidenced thereby, and does
irrevocably constitute and appoint __________________, attorney, to transfer
that part of said Warrant on the books of Appex Technologies, Inc.
Dated:_____________ Signature:____________________
Address:______________________
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Exhibit 4.11
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY BE REOFFERED AND SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.
APPEX TECHNOLOGIES, INC.
Warrant for the Purchase of Shares of Common Stock
No. 4 875 Shares
FOR VALUE RECEIVED, APPEX TECHNOLOGIES, INC., a New York corporation (the
"Company"), hereby certifies that Ladenburg, Thalmann & Co. Inc. or its
permitted assigns, is entitled to purchase from the Company, at any time or from
time to time commencing on August 31, 1993 and prior to 5:00 P.M., New York City
time, on August 31, 1997, eight hundred seventy-five (875) fully paid and
non-assessable shares of Common Stock, $.001 par value per share, of the Company
for an aggregate purchase price of $2,100 (computed on the basis of $2.40 per
share). (Hereinafter, (i) said common stock, together with any other equity
securities which may be issued by the Company with respect thereto or in
substitution therefor, is referred to as the "Common Stock," (ii) the shares of
the Common Stock purchasable hereunder or under any other Warrant (as
hereinafter defined) are referred to as the "Warrant Shares," (iii) the
aggregate purchase price payable for the Warrant Shares hereunder is referred to
as the "Aggregate Warrant Price," (iv) the price payable for each of the Warrant
Shares hereunder is referred to as the "Per Share Warrant Price," (v) this
Warrant, all similar Warrants issued on the date hereof and all warrants
hereafter issued in exchange or substitution for this Warrant or such similar
Warrants are referred to as the "Warrants" and (vi) the holder of this Warrant
or such similar Warrants Shares issued upon the exercise of any Warrant and all
other Warrants or Warrants Shares issued upon the exercise of any Warrant are
referred to as the "Holders.") The Aggregate Warrant Price is not subject to
adjustment. The Per Share Warrant Price is subject to adjustment as hereinafter
provided; in the event of any such adjustment, the number of Warrant Shares
shall be adjusted by dividing the Aggregate Warrant Price by the Per Share
Warrant Price in effect immediately after such adjustment.
1. Exercise of Warrant. (a) This Warrant may be exercised, in whole at any
time or in part from time to time, commencing on August 31, 1993 and prior to
5:00 P.M., New York City time, on August 31, 1997, by the Holder:
(i) by the surrender of this Warrant (with the subscription form at
the end hereof duly executed) at the address set forth in Subsection 9(a)
hereof, together with proper payment of the Aggregate Warrant Price, or the
proportionate part thereof if this Warrant is exercised in part, with
payment for Warrant Shares made by certified or official bank check payable
to the order of the Company; or
<PAGE>
(ii) by the surrender of this Warrant (with the cashless exercise form
at the end hereof duly executed) (a "Cashless Exercise") at the address set
forth in Subsection 9(a) hereof. Such presentation and surrender shall be
deemed a waiver of the Holder's obligation to pay the Aggregate Warrant
Price, or the proportionate part thereof if this Warrant is exercised in
part. In the event of a Cashless Exercise, the Holder shall exchange its
Warrant for that number of shares of Common Stock determined by multiplying
the number of Warrant Shares subject to such Cashless Exercise by a
fraction, the numerator of which shall be the difference between the then
current market price per share of the Common Stock and the Per Share
Warrant Price, and the denominator of which shall be the then current
market price per share of the Common Stock. For purposes of any computation
under this Section 1(a)(ii), the then current market price per share of
Common Stock at any date (the "Market Price") shall be deemed to be the
last sale price of the Common Stock on the business day prior to the date
of the Cashless Exercise or, in case no such reported sales take place on
such day, the average of the last reported bid and asked prices of the
Common Stock on such day, in either case on the principal national
securities exchange on which the Common Stock is admitted to trading or
listed, or if not listed or admitted to trading on any such exchange, the
representative closing bid price of the Common Stock as reported by the
National Association of Securities Dealers, Inc. Automated Quotations
System ("NASDAQ"), or other similar organization if NASDAQ is no longer
reporting such information, or if not so available, the fair market price
of the Common Stock as determined by the Board of Directors.
(b) If this Warrant is exercised in part, this Warrant must be exercised
for a number of whole shares of the Common Stock, and the Holder is entitled to
receive a new Warrant covering the Warrant Shares which have not been exercised
and setting forth the proportionate part of the Aggregate Warrant Price
applicable to such Warrant Shares. Upon such surrender of this Warrant, the
Company will (i) issue a certificate or certificates in the name of the Holder
for the largest number of whole shares of the Common Stock to which the Holder
shall be entitled and, if this Warrant is exercised in whole, in lieu of any
fractional share of the Common Stock to which the Holder shall be entitled, pay
to the Holder cash in an amount equal to the fair value of such fractional share
(determined in such reasonable manner as the Board of Directors of the Company
shall determine), and (ii) deliver the other securities and properties
receivable upon the exercise of this Warrant, or the proportionate part thereof
if this Warrant is exercised in part, pursuant to the provisions of this
Warrant.
2. Reservation of Warrant Shares; Listing. The Company agrees that, prior
to the expiration of this Warrant, the Company will at all times (a) have
authorized and in reserve, and will keep available, solely for issuance or
delivery upon the exercise of this Warrant, the shares of the Common Stock and
other securities and properties as from time to time shall be receivable upon
the exercise of this Warrant,
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<PAGE>
free and clear of all restrictions on sale or transfer and free and clear of all
preemptive rights and rights of first refusal; and (b) if the Company hereafter
lists its Common Stock on any national securities exchange, keep the shares of
the Common Stock receivable upon the exercise of this Warrant authorized for
listing on such exchange upon notice of issuance.
3. Protection Against Dilution. (a) If, at any time or from time to time
after the date of this Warrant, the Company shall issue or distribute to the
holders of shares of Common Stock evidences of its indebtedness, any other
securities of the Company or any cash, property or other assets (excluding a
subdivision, combination or reclassification, or dividend or distribution
payable in shares of Common Stock, referred to in Subsection 3(b), and also
excluding cash dividends or cash distributions paid out of net profits legally
available therefor if the full amount thereof, together with the value of other
dividends and distributions made substantially concurrently therewith or
pursuant to a plan which includes payment thereof, is equivalent to not more
than 5% of the Company's net worth) (any such nonexcluded event being herein
called a "Special Dividend"), the Per Share Warrant Price shall be adjusted by
multiplying the Per Share Warrant Price then in effect by a fraction, the
numerator of which shall be the then current Market Price less the fair market
value (as determined by the Company's Board of Directors) of the evidences of
indebtedness, cash, securities or property, or other assets issued or
distributed in such Special Dividend applicable to one share of Common Stock and
the denominator of which shall be such then current market price per share of
Common Stock. An adjustment made pursuant to this Subsection 3(a) shall become
effective immediately after the record date of any such Special Dividend.
(b) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its capital stock in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of shares
or (iv) issue by reclassification of its Common Stock any shares of capital
stock of the Company, the Per Share Warrant Price shall be adjusted so that the
Holder upon the exercise hereof shall be entitled to receive the number of
shares of Common Stock or other capital stock of the Company which he would have
owned immediately following such action had such Warrant been exercised
immediately prior thereto. An adjustment made pursuant to this Subsection 3(b)
shall become effective immediately after the record date in the case of a
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or reclassification.
(c) Except as provided in Subsection 3(e), in case the Company shall
hereafter issue or sell any shares of Common Stock for a consideration per share
less than the Per Share Warrant Price on the date of such issuance or sale, the
Per Share Warrant Price shall be adjusted as of the date of such issuance or
sale so that the same shall equal the price determined by dividing (i) the sum
of (A) the number of shares of Common Stock outstanding immediately prior to
such issuance or sale
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<PAGE>
multiplied by the Per Share Warrant Price plus (B) the consideration received by
the Company upon such issuance or sale by (ii) the total number of shares of
Common Stock outstanding after such issuance or sale.
(d) Except as provided in Subsections 3(a) and 3(e), in case the Company
shall hereafter issue or sell any rights, options, warrants or securities
convertible into Common Stock entitling the holders thereof to purchase Common
Stock or to convert such securities into Common Stock at a price per share
(determined by dividing (i) the total amount, if any, received or receivable by
the Company in consideration of the issuance or sale of such rights, options,
warrants or convertible securities plus the total consideration, if any, payable
to the Company upon exercise or conversion thereof (the "Total Consideration")
by (ii) the number of additional shares of Common Stock issuable upon exercise
or conversion of such securities) less than the then current Per Share Warrant
Price in effect on the date of such issuance or sale, the Per Share Warrant
Price shall be adjusted as of the Date of such issuance or sale so that the same
shall equal the price determined by dividing (i) the sum of (A) the number of
shares of Common Stock outstanding on the date of such issuance or sale
multiplied by the Per Share Warrant Price plus (B) the Total Consideration by
(ii) the number of shares of Common Stock outstanding on the date of such
issuance or sale plus the maximum number of additional shares of Common Stock
issuable upon exercise or conversion of such securities.
(e) No adjustment in the Per Share Warrant Price shall be required in the
case of (i) the issuance by the Company of options to purchase in the aggregate
up to 700,000 shares of Common Stock pursuant to the Company's Stock Option Plan
in effect on the date hereof and the issuance by the Company of an aggregate of
700,000 shares upon the exercise of such options, and (iii) the issuance by the
Company of Common Stock pursuant to the exercise of any Warrant.
(f) In case of any capital reorganization or reclassification, or any
consolidation or merger to which the Company is a party other than a merger or
consolidation in which the Company is the continuing corporation, or in case of
any sale or conveyance to another entity of the property of the Company as an
entirety or substantially as an entirety, or in the case of any statutory
exchange of securities with another corporation (including any exchange affected
in connection with a merger of a third corporation into the Company), the Holder
of this Warrant shall have the right thereafter to receive on the exercise of
this Warrant the kind and amount of securities, cash or other property which the
Holder would have owned or have been entitled to receive immediately after such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance had this Warrant been exercised immediately prior to the
effective date of such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance and in any such case, if necessary,
appropriate adjustment shall be made in the application of the provisions set
forth in this Section 3 with respect to the rights and interests thereafter of
the Holder of this Warrant to the end that the provisions set forth in this
Section 3 shall thereafter correspondingly
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<PAGE>
be made applicable, as nearly as may reasonably be, in relation to any shares of
stock or other securities or property thereafter deliverable on the exercise of
this Warrant. The above provisions of this Subsection 3(f) shall similarly apply
to successive reorganizations, reclassifications, consolidations, mergers,
statutory exchanges, sales or conveyances. The issuer of any shares of stock or
other securities or property thereafter deliverable on the exercise of this
Warrant shall be responsible for all of the agreements and obligations of the
Company hereunder. Notice of any such reorganization, reclassification,
consolidation, merger, statutory exchange, sale or conveyance and of said
provisions so proposed to be made, shall be mailed to the Holders of the
Warrants not less than 30 days prior to such event. A sale of all or
substantially all of the assets of the Company for a consideration consisting
primarily of securities shall be deemed a consolidation or merger for the
foregoing purposes.
(g) In case any event shall occur as to which the other provisions of this
Section 3 are not strictly applicable but as to which the failure to make any
adjustment would not fairly protect the purchase rights represented by this
Warrant in accordance with the essential intent and principles hereof then, in
each such case, the Holders of Warrants representing the right to purchase a
majority of the Warrant Shares subject to all outstanding Warrants may appoint a
firm of independent public accountants of recognized national standing
reasonably acceptable to the Company, which shall give their opinion as to the
adjustment, if any, on a basis consistent with the essential intent and
principles established herein, necessary to preserve the purchase rights
represented by the Warrants. Upon receipt of such opinion, the Company will
promptly mail a copy thereof to the Holder of this Warrant and shall make the
adjustments described therein. The fees and expenses of such independent public
accountants shall be borne by such Holders.
(h) No adjustment in the Per Share Warrant Price shall be required unless
such adjustment would require an increase or decrease of at least $0.05 per
share of Common Stock; provided, however, that any adjustments which by reason
of this Subsection 3(h) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment; provided further, however, that
adjustments shall be required and made in accordance with the provisions of this
Section 3 (other than this Subsection 3(h)) not later than such time as may be
required in order to preserve the tax-free nature of a distribution to the
Holder of this Warrant or Common Stock issuable upon exercise hereof. All
calculations under this Section 3 shall be made to the nearest cent or to the
nearest 1/100th of a share, as the case may be. Anything in this Section 3 to
the contrary notwithstanding, the Company shall be entitled to make such
reductions in the Per Share Warrant Price, in addition to those required by this
Section 3, as it in its discretion shall deem to be advisable in order that any
stock dividend, subdivision of shares or distribution of rights to purchase
stock or securities convertible or exchangeable for stock hereafter made by the
Company to its stockholders shall not be taxable.
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<PAGE>
(i) Whenever the Per Share Warrant Price is adjusted as provided in this
Section 3 and upon any modification of the rights of a Holder of Warrants in
accordance with this Section 3, the Company shall promptly mail to the Holders
of the Warrants a certificate of the Company's chief financial officer setting
forth the Per Share Warrant Price and the number of Warrant Shares after such
adjustment or the effect of such modification a brief statement of the facts
requiring such adjustment or modification, and the manner of computing the same,
and, at the request of the Holder of any Warrant, obtain, at the Company's
expense, a certificate of a firm of independent public accountants of recognized
standing selected by the Board of Directors (who may be the regular auditors of
the Company) to such effect and cause copies of such certificate to be mailed to
the Holders of the Warrants.
(j) If the Board of Directors of the Company shall declare any dividend or
other distribution with respect to the Common Stock other than a cash
distribution out of earned surplus, the Company shall mail notice thereof to the
Holders of the Warrants not less than 15 days prior to the record date fixed for
determining stockholders entitled to participate in such dividend or other
distribution.
(k) If, as a result of an adjustment made pursuant to this Section 3, the
Holder of any Warrant thereafter surrendered for exercise shall become entitled
to receive shares of two or more classes of capital stock or shares of Common
Stock and other capital stock of the Company, the Board of Directors (whose
determination shall be conclusive and shall be described in a written notice to
the Holder of any Warrant promptly after such adjustment) shall determine the
allocation of the adjusted Per Share Warrant Price between or among shares or
such classes of capital stock or shares of Common Stock and other capital stock.
4. Fully Paid Stock; Taxes. The Company agrees that the shares of the
Common Stock represented by each and every certificate for Warrant Shares
delivered on the exercise of this Warrant shall, at the time of such delivery,
be validly issued and outstanding, fully paid and nonassessable, and not subject
to preemptive rights or rights of first refusal, and the Company will take all
such actions as may be necessary to assure that the par value or stated value,
if any, per share of the Common Stock is at all times equal to or less than the
then Per Share Warrant Price. The Company further covenants and agrees that it
will pay, when due and payable, any and all Federal and state stamp, original
issue or similar taxes which may be payable in respect of the issue of any
Warrant Share or certificate therefor.
5. Registration Under Securities Act of 1933.
(a) The Company agrees that if, at any time during the period commencing
180 days after the initial public offering of the Company's Common Stock (but no
earlier than August 31, 1993) and ending on August 31, 1999, the Holder and/or
the Holders of any other Warrants and/or Warrant Shares who or which shall hold
not less than 50% of the Warrants and/or Warrant Shares outstanding at such time
and not
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<PAGE>
previously sold pursuant to this Section 5 shall request that the Company file,
under the Securities Act of 1933 (the "Act"), a registration statement under the
Act covering not less than 50% of the Warrant Shares issued and issuable upon
the exercise of the Warrants and not so previously sold, the Company will (i)
promptly notify each Holder of the Warrants and each holder of Warrant Shares
not so previously sold that such registration statement will be filed and that
the Warrant Shares which are then held, and/or may be acquired upon exercise of
the Warrants by the Holder and such Holders will be included in such
registration statement at the Holder's and such Holders' request, (ii) cause
such registration statement to cover all Warrant Shares which it has been so
requested to include, (iii) use its best efforts to cause such registration
statement to become effective as soon as practicable and (iv) take all other
action necessary under any Federal or state law or regulation of any
governmental authority to permit all Warrant Shares which it has been so
requested to include in such registration statement to be sold or otherwise
disposed of, and will maintain such compliance with each such Federal and state
law and regulation of any governmental authority for the period necessary for
such Holders to effect the proposed sale or other disposition; provided,
however, that the Company shall not be obligated to maintain such compliance for
longer than 180 days. The Company shall be required to effect a registration or
qualification pursuant to this Subsection 5(a) on one occasion only.
(b) The Company agrees that if, at any time and from time to time during
the period commencing one year after the closing of the initial public offering
of the Company's Common Stock and ending on August 31, 1999, the Board of
Directors of the Company shall authorize the filing of a registration statement
under the Act (otherwise than pursuant to Subsection 5(a) hereof, or other than
a registration statement on Form S-8, Form S-4 or other form which does not
include substantially the same information as would be required in a form for
the general registration of securities) in connection with the proposed offer of
any of its securities by it or any of its stockholders, the Company will (i)
promptly notify the Holder and each of the Holders, if any, of other Warrants
and/or Warrant Shares not previously sold pursuant to this Section 5 that such
registration statement will be filed and that the Warrant Shares which are then
held, and/or which may be acquired upon the exercise of the Warrants, by the
Holder and such Holders, will, at the Holder's and such Holders' request, be
included in such registration statement, (ii) upon the written request of a
Holder made within 20 days after the giving of such notice by the Company,
include in the securities covered by such registration statement all such
Warrant Shares which its has been so requested to include (provided, that in the
case of an underwritten public offering if in the good faith judgement of the
managing underwriter the inclusion of the shares of Holders requesting
registration hereunder would reduce the shares to be offered by the Company or
interfere with the successful marketing of the shares offered by the Company,
the number of shares otherwise to be included shall be reduced pro rata by
number of shares among the Holders requesting such registration or excluded in
their entirety if so required by the underwriter), (iii) use its best efforts to
cause such registration statement to become effective as soon as practicable and
(iv) take all other action necessary under any Federal or state law or
regulation of any governmental
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<PAGE>
authority to permit all Warrant Shares which it has been so requested to include
in such registration statement to be sold or otherwise disposed of, and will
maintain such compliance with such Federal and state law and regulation of any
governmental authority for the period necessary for the Holder and such Holders
to effect the proposed sale or other disposition; provided, however, that the
Company shall not be obligated to maintain such compliance for longer than 180
days.
(c) Whenever the Company is required pursuant to the provisions of this
Section 5 to include Warrant Shares in a registration statement, the Company
shall (i) furnish each Holder of any such Warrant Shares and each underwriter of
such Warrant Shares with such copies of the prospectus, including the
preliminary prospectus, conforming to the Act (and such other documents as each
such Holder or each such underwriter may reasonably request) in order to
facilitate the sale or distribution of the Warrant Shares, (ii) use its best
efforts to register or qualify such Warrant Shares under the blue sky laws (to
the extent applicable) of such jurisdiction or laws (to the extent applicable)
of such jurisdiction or jurisdictions as the Holders of any such Warrant Shares
and each underwriter of Warrant Shares being sold by such Holders shall
reasonably request and (iii) take such other actions as may be reasonably
necessary or advisable to enable such Holders and such underwriters to
consummate the sale or distribution in such jurisdiction or jurisdictions in
which such Holders shall have reasonably requested that the Warrant Shares be
sold.
(d) The Company shall pay all expenses incurred in connection with any
registration statement or other action pursuant to the provisions of this
Section 5, other than understanding discounts and applicable transfer taxes
relating to the Warrant Shares and the legal fees of the Holders.
(e) The Company will indemnify the Holders of Warrant Shares which are
included in each registration statement referred to in Subsections 5(a) and
5(b), and the underwriters of such Warrant Shares, substantially to the same
extent as is customary for indemnification and contribution provisions in favor
of underwriters and selling shareholders of similar offerings, and such Holders
will furnish the Company with such information as the Company may reasonably
request for inclusion in such registration statement and will indemnify the
Company (and the underwriters, if applicable) with respect to such information
furnished by them in writing to the Company substantially to the same extent as
the underwriters indemnify the Company with respect to information furnished by
such underwriters.
(f) If the Company shall at any time have completed a public offering of
shares of its Common Stock, it shall thereafter take such steps as may be
necessary to file with the Securities and Exchange Commission all current
reports and other information as may be necessary to enable the Holder to effect
sales of its shares in reliance upon Rule 144 promulgated under the Act.
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<PAGE>
6. Limited Transferability. This Warrant may not be sold, transferred,
assigned or hypothecated by the Holder (a) except in compliance with the
provisions of the Act, and (b) until the first anniversary hereof except (i) to
any successor firm or corporation of Ladenburg, Thalmann & Co. Inc., (ii) to any
of the officers of Ladenburg, Thalmann & Co. Inc., or of any such successor firm
or (iii) in the case of an individual, pursuant to such individual's last will
and testament or the laws of descent and distribution, and is so transferable
only upon the books of the Company which it shall cause to be maintained for the
purpose. The Company may treat the registered Holder of this Warrant as he or it
appears on the Company's books at any time as the Holder for all purposes. The
Company shall permit any Holder of a Warrant or his duly authorized attorney,
upon written request during ordinary business hours, to inspect and copy or make
extracts from its books showing the registered holders of Warrants. All warrants
issued upon the transfer or assignment of this Warrant will be dated the same
date as this Warrant, and all rights of the Holder thereof shall be identical to
those of the Holder.
7. Loss, etc. of Warrant. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver to the Holder a new Warrant of like date, tenor and
denomination.
8. Warrant Holder Not Shareholder. Except as otherwise provided herein,
this Warrant does not confer upon the Holder any right to vote or to consent to
or receive notice as a stockholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a stockholder, prior
to the exercise hereof.
9. Communication. No notice or other communication under this Warrant shall
be effective unless, but any notice or other communication shall be effective
and shall be deemed to have been given if, the same is in writing and is mailed
by first-class mail, postage prepaid, addressed to:
(a) the Company at 375 Park Avenue -- Suite 1501, New York, New York
10022 or such other address as the Company has designated in writing to the
Holder, or
(b) the Holder at 540 Madison Avenue, New York, New York 10022 or such
other address as the Holder has designated in writing to the Company.
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<PAGE>
10. Headings. The headings of this Warrant have been inserted as a matter
of convenience and shall not affect the construction hereof.
11. Applicable Law. This Warrant shall be governed by and construed in
accordance with the law of the State of New York without giving effect to the
principles of conflicts of law thereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its President and its corporate seal to be hereunto affixed and attested by
its Secretary this 2nd day of September, 1992.
APPEX TECHNOLOGIES, INC.
By /s/ Dayne R. Myers
-----------------------
President
ATTEST:
/s/ Judith Wurtman
- -----------------------
Secretary
[Corporate Seal]
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<PAGE>
SUBSCRIPTION
The undersigned, _________________, pursuant to the provisions of the
foregoing Warrant, hereby agrees to subscribe for and purchase ________________
shares of the Common Stock of Appex Technologies, Inc. covered by said Warrant,
and makes payment therefor in full at the price per share provided by said
Warrant.
Dated:__________________ Signature:___________________________
Address:____________________________
CASHLESS EXERCISE
The undersigned, _________________, pursuant to the provisions of the
foregoing Warrant, hereby elects to Exchange its Warrant for ________________
shares of Common Stock of Appex Technologies, Inc. pursuant to the Cashless
Exercise provisions of the Warrant.
Dated:__________________ Signature:___________________________
Address:____________________________
ASSIGNMENT
FOR VALUE RECEIVED _________________ hereby sells, assigns and transfers
unto _________________ the foregoing Warrant and all rights evidenced thereby,
and does irrevocably constitute and appoint _____________________, attorney, to
transfer said Warrant on the books of Appex Technologies, Inc.
Dated:__________________ Signature:___________________________
Address:____________________________
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<PAGE>
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _________________ hereby assigns and transfers unto
_________________ the right to purchase ___________ shares of the Common Stock
of Appex Technologies, Inc. covered by the foregoing Warrant, and a
proportionate part of said Warrant and the rights evidenced thereby, and does
irrevocably constitute and appoint _____________________, attorney, to transfer
said Warrant on the books of Appex Technologies, Inc.
Dated:__________________ Signature:___________________________
Address:____________________________
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Exhibit 4.12
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
STATE SECURITIES LAW. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT
FROM WE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.
AVAX TECHNOLOGIES, INC.
Warrant for the Purchase of Shares of
Preferred Stock
No._____
_____ Shares
FOR VALUE RECEIVED, AVAX TECHNOLOGIES, INC., a Delaware corporation (the
"Company"), hereby certifies that [Paramount Capital, Inc. or its designee] or
its permitted assigns, is entitled to purchase from the Company, at any time or
from time to time Commencing on [_______] and prior to 5:00 P.M., New York City
time, on [insert date ten years after the closing] ___________ (______) fully
paid and non-assessable shares of the Premium Preferred Stock, $.001 par value
per share, of the Company for an aggregate purchase price of $________ (computed
on the basis of $____ per share). (Hereinafter, (i) said Series [___]
Convertible Preferred Stock, together with any other equity securities which may
be issued by the Company with respect thereto (other than on conversion thereof)
or in substitution therefor, is referred to as the "Preferred Stock", (ii) the
Common Stock, $.001 par value, of the Company, into which the Preferred Stock is
convertible, is referred to as the "Common Stock", (iii) the shares of the
Preferred Stock purchasable hereunder or under any other Warrant (as hereinafter
defined) are referred to as the "Warrant Shares", (iv) the shares of Common
Stock purchasable hereunder or under any other Warrant (as hereinafter defined)
following the conversion of all shares of Preferred Stock into Common Stock and
each share of Common Stock receivable upon the conversion of the Warrant Shares
receivable upon the exercise of this Warrant are referred to as the "Conversion
Shares", (v) the aggregate purchase price payable for the Warrant Shares or the
Conversion Shares, as the case may be, hereunder is referred to as the
"Aggregate Warrant Price", (vi) the price payable (initially $110.00 per share,
subject to adjustment) for each of the Warrant Shares or the Conversion Shares,
as the case may be, hereunder is referred to as the "Per Share Warrant Price",
(vii) this Warrant, all similar Warrants issued on the date hereof and all
warrants hereafter issued in exchange or substitution for this Warrant or such
similar Warrants are referred to as the "Warrants", (viii) the holder of this
Warrant is referred to as the "Holder" and the holder of this Warrant and all
other Warrants, Warrant Shares and Conversion Shares are referred to as the
"Holders" and Holders of more than 50% of the outstanding Warrants, Warrant
Shares and Conversion Shares are referred to as the "Majority of the
<PAGE>
Holders") and (ix) the then current Market Price per share (the "Market Price")
shall be deemed to be the last sale price of the Common Stock on the trading day
prior to such date or, in case no such reported sales take place on such day,
the average of the last reported bid and asked prices of the Common Stock on
such day, in either case on the principal national securities exchange on which
the Common Stock is admitted to trading or listed, or if not listed or admitted
to trading in any such exchange, the representative closing bid price of the
Common Stock as reported by the National Association of Securities Dealers, Inc.
Automated Quotations System ("NASDAQ"), or other similar organization if NASDAQ
is no longer reporting such information, or, if the Common Stock is not reported
on NASDAQ, the high per share bid price for the Common Stock in the
over-the-counter market as reported by the National Quotation Bureau or similar
organization, or if not so available, the fair market value of the Common Stock
as determined in good faith by the Board of Directors. The then current "Market
Price Per Share of Preferred Stock" shall equal the then current Market Price
multiplied by the then effective "conversion rate" (as defined and used in the
Certificate of Designation for the Preferred Stock). The Aggregate Warrant Price
is not subject to adjustment. The Per Share Warrant Price is subject to
adjustment as hereinafter provided; in the event of any such adjustment, the
number of Warrant Shares or Conversion Shares, as the case may be, deliverable
upon exercise of this Warrant shall be adjusted by dividing the Aggregate
Warrant Price by the Per Share Warrant Price in effect immediately after such
adjustment.
1. Exercise of Warrant.
(a) This Warrant may be exercised, in whole at any time or in part from
time to time, commencing on [___________] and prior to 5:00 P.M., New York City
time, on [insert date which is ten years after the closing] by the Holder:
(i) by the surrender of this Warrant (with the subscription form at
the end hereof duly executed) at the address set forth in Subsection 9(a)
hereof, together with proper payment of the Aggregate Warrant Price, or the
proportionate part thereof if this Warrant is exercised in part, with
payment for Warrant Shares or Conversion Shares, as the case may be, made
by certified or official bank check payable to the order of the Company; or
(ii) by the surrender of this Warrant (with the cashless exercise form
at the end hereof duly executed) (a "Cashless Exercise") at the address set
forth in Subsection 9(a) hereof. Such presentation and surrender shall be
deemed a waiver of the Holder's obligation to pay the Aggregate Warrant
Price, or the proportionate part thereof if this Warrant is exercised in
part. In the event of a Cashless Exercise, the Holder shall exchange its
Warrant for that number of Warrant Shares or Conversion Shares, as the case
may be, subject to such Cashless Exercise multiplied by a fraction, the
numerator of which shall be the difference between the then current Market
Price Per Share of Preferred Stock (or the Common Stock into which the
Preferred Stock is convertible) and the Per Share Warrant Price, and the
denominator of which shall be the then current Market Price Per Share of
Preferred Stock (or the Common Stock into which the Preferred Stock is
convertible). For purposes of any computation under this Section 1(a), the
then current Market Price shall be based on the trading day prior to the
Cashless Exercise.
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(b) If this Warrant is exercised in part, this Warrant must be exercised
for a number of whole shares of the Preferred Stock, (or the Common Stock
following conversion of all the Preferred Stock) and the Holder is entitled to
receive a new Warrant covering the Warrant Shares or Conversion Shares, as the
case may be, which have not been exercised and setting forth the proportionate
part of the Aggregate Warrant Price applicable to such Warrant Shares or
Conversion Shares, as the case may be. Upon surrender of this Warrant, the
Company will (i) issue a certificate or certificates in the name of the Holder
for the largest number of whole shares of the Preferred Stock (or the Common
Stock following conversion of all the Preferred Stock) to which the Holder shall
be entitled and, if this Warrant is exercised in whole, in lieu of any
fractional share of the Preferred Stock (or the Common Stock following
conversion of all the Preferred Stock) to which the Holder shall be entitled,
pay to the Holder cash in an amount equal to the fair value of such fractional
share (determined in such reasonable manner as the Board of Directors of the
Company shall determine), and (ii) deliver the other securities and properties
receivable upon the exercise of this Warrant, or the proportionate part thereof
if this Warrant is exercised in part, pursuant to the provisions of this
Warrant.
(c) If this Warrant is exercised on or after the date on which all shares
of Preferred Stock have been converted into shares of Common Stock (the
"Conversion Date"), then this Warrant shall be exercisable only for Conversion
Shares at the then applicable Per Share Warrant Price (including any adjustment
pursuant to Section 3(f) below).
2. Reservation of Warrant Shares and Conversion Shares; Listing. The
Company agrees that, prior to the expiration of this Warrant, the Company will
at all times (a) have authorized and in reserve, and will keep available, solely
for issuance and delivery upon the exercise of this Warrant, the shares of the
Preferred Stock and other securities and properties as from time to time shall
be receivable upon the exercise of this Warrant, free and clear of all
restrictions on sale or transfer, other than under Federal or state securities
laws, and free and clear of all preemptive rights and rights of first refusal
and (b) have authorized and in reserve, and will keep available, solely for
issuance or delivery upon conversion of the Warrant Shares or the exercise of
this Warrant following the conversion of all shares of Preferred Stock into
Common Stock, the shares of Common Stock and other securities and properties as
from time to time shall be receivable upon such conversion, free and clear of
all restrictions on sale or transfer, other than under Federal or state
securities laws, and free and clear of all preemptive rights and rights of first
refusal; and (c) if the Company hereafter lists its Common Stock on any national
securities exchange, use its best efforts to keep the Conversion Shares
authorized for listing on such exchange upon notice of issuance.
3. Protection Against Dilution.
(a) If, at any time or from time to time after the date of this Warrant,
the Company shall issue or distribute to the holders of shares of Preferred
Stock evidence of its indebtedness, any other securities of the Company or any
cash, property or other assets (excluding a subdivision, combination or
reclassification, or dividend or distribution payable in shares of Preferred
Stock, referred to in Subsection 3(b), and also excluding cash dividends or cash
distributions paid out of net profits legally available therefor in the full
amount thereof (any such non-excluded event being herein called a "Special
Dividend")), the Per Share Warrant Price shall be adjusted by multiplying the
Per Share Warrant Price then in effect by a fraction, the numerator of which
shall be the then current Market Price in effect on the record date of such
issuance or distribution less the fair market value (as determined in good faith
by the Company's
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Board of Directors) of the evidence of indebtedness, cash, securities or
property, or other assets issued or distributed in such Special Dividend
applicable to one share of Preferred Stock and the denominator of which shall be
the then current Market Price in effect on the record date of such issuance or
distribution. An adjustment made pursuant to this Subsection 3(a) shall become
effective immediately after the record date of any such Special Dividend.
(b) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its capital stock in shares of Preferred Stock, (ii) subdivide
its outstanding shares of Preferred Stock into a greater number of shares, (iii)
combine its outstanding shares of Preferred Stock into a smaller number of
shares or (iv) issue by reclassification of its Preferred Stock any shares of
capital stock of the Company (other than the Conversion Shares), the Per Share
Warrant Price shall be adjusted to be equal to a fraction, the numerator of
which shall be the Aggregate Warrant Price and the denominator of which shall be
the number of shares of Preferred Stock or other capital stock of the Company
which he would have owned immediately following such action had such Warrant
been exercised immediately prior thereto. An adjustment made pursuant to this
Subsection 3(b) shall become effective immediately after the record date in the
case of a dividend or distribution and shall become effective immediately after
the effective date in the case of a subdivision, combination or
reclassification.
(c) Except as provided in Subsections 3(a) and 3(d), in case the Company
shall hereafter issue or sell any Preferred Stock, any securities convertible
into Preferred Stock, any rights, options or warrants to purchase Preferred
Stock or any securities convertible into Preferred Stock, in each case for a
price per share or entitling the holders thereof to purchase Preferred Stock at
a price per share (determined by dividing (i) the total amount, if any,
received or receivable by the Company in consideration of the issuance or sale
of such securities plus the total consideration, if any, payable to the Company
upon exercise or conversion thereof (the "Total Consideration") by (ii) the
number of additional shares of Preferred Stock issuable upon exercise or
conversion of such securities) which is less than both the then current Market
Price in effect on the date of such issuance or sale and the Per Share Warrant
Price, the Per Share Warrant Price shall be reduced as of the date of such
issuance or sale so that the same shall equal the price determined by dividing
(x) the sum of (A) the number of shares of Preferred Stock outstanding on the
date of such issuance or sale multiplied by the Per Share Warrant Price plus (B)
the Total Consideration by (y) the number of shares of Preferred Stock
outstanding on the date of such issuance or sale plus the maximum number of
additional shares of Preferred Stock issuable upon exercise or conversion of
such securities.
(d) No adjustment in the Per Share Warrant Price shall be required in the
case of the issuance by the Company of Preferred Stock (i) pursuant to the
exercise of any Warrant or (ii) pursuant to the exercise of any stock options
or warrants currently outstanding or securities issued after the date hereof
pursuant to any Company benefit plan.
(e) In case of any capital reorganization or reclassification, or any
consolidation or merger to which the Company is a party other than a merger or
consolidation in which the Company is the continuing corporation, or in case of
any sale or conveyance to another entity of the property of the Company as an
entirety or substantially as a entirety, or in the case of any statutory
exchange of securities with another corporation (including any exchange effected
in connection with a merger of a third corporation into the Company), the Holder
of this Warrant shall have the right thereafter to receive on the exercise of
this Warrant the kind and amount of securities, cash or other property which the
Holder would have owned or have been
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entitled to receive immediately after such reorganization, reclassification,
consolidation, merger, statutory exchange, sale or conveyance had this Warrant
been exercised immediately prior to the effective date of such reorganization,
reclassification, consolidation merger, statutory exchange, sale or conveyance
and in any such case, if necessary, appropriate adjustment shall be made in the
application of the provisions set forth in this Section 3 with respect to the
rights and interests thereafter of the Holder of this Warrant to the end that
the provisions set forth in this Section 3 shall thereafter correspondingly be
made applicable, as nearly as may reasonably be, in relation to any shares of
stock or other securities or property thereafter deliverable on the exercise of
this Warrant. The above provisions of this Subsection 3(e) shall similarly apply
to successive reorganizations, reclassifications, consolidations, mergers,
statutory exchanges, sales or conveyances. The Company shall require the issuer
of any shares of stock or other securities or property thereafter deliverable on
the exercise of this Warrant to be responsible for all of the agreements and
obligations of the Company hereunder. Notice of any such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
and of said provisions so proposed to be made, shall be mailed to the Holders of
the Warrants not less than 30 days prior to such event. A sale of all or
substantially all of the assets of the Company for a consideration consisting
primarily of securities shall be deemed a consolidation or merger for the
foregoing purposes.
(f) Upon the conversion of all the Preferred Stock into Common Stock the
Per Share Warrant Price shall be adjusted to be equal to a fraction, the
numerator of which shall be the Aggregate Warrant Price and the denominator of
which shall be the number of shares of Common Stock or other capital stock of
the Company which the Holder would have owned immediately following such
conversion had this Warrant been exercised (assuming a cash exercise)
immediately prior thereto.
(g) No adjustment in the Per Share Warrant Price shall be required unless
such adjustment would require an increase or decrease of at least $0.05 per
share of Preferred Stock; provided, however, that any adjustments which by
reason of this Subsection 3(g) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment; provided, further,
however, that adjustments shall be required and made in accordance with the
provisions of this Section 3 (other than this Subsection 3(g)) not later than
such time as may be required in order to preserve the tax-free nature of a
distribution to the Holder of this Warrant or Preferred Stock issuable upon the
exercise hereof. All calculations under this Section 3 shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be. Anything
in this Section 3 to the contrary notwithstanding, the Company shall be entitled
to make such reductions in the Per Share Warrant Price, in addition to those
required by this Section 3, as it in its discretion shall deem to be advisable
in order that any stock dividend, subdivision of shares or distribution of
rights to purchase stock or securities convertible or exchangeable for stock
hereafter made by the Company to its stockholders shall not be taxable.
(h) Whenever the Per Share Warrant Price is adjusted as provided in this
Section 3 and upon any modification of the rights of a Holder of Warrants in
accordance with this Section 3, the Company shall promptly prepare a brief
statement of the facts requiring such adjustment or modification and the manner
of computing the same and cause copies of such certificate to be mailed to the
Holders of the Warrants. The Company may, but shall not be obligated to unless
requested by a Holders of more than 50% of the outstanding Warrants, Warrant
Shares and Conversion Shares, obtain, at its expense, a certificate of a firm of
independent public accountants of recognized standing selected by the Board of
Directors (who
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may be the regular auditors of the Company) setting forth the Per Share Warrant
Price and the number of Warrant Shares or Conversion Shares, as the case may be,
after such adjustment or the effect of such modification, a brief statement of
the facts requiring such adjustment or modification and the manner of computing
the same and cause copies of such certificate to be mailed to the Holders of the
Warrants.
(i) If the Board of Directors of the Company shall declare any dividend or
other distribution with respect to the Preferred Stock or Common Stock other
than a cash distribution out of earned surplus, the Company shall mail notice
thereof to the Holders of the Warrants not less than 10 days prior to the record
date fixed for determining stockholders entitled to participate in such dividend
or other distribution.
(j) If, as a result of an adjustment made pursuant to this Section 3, the
Holder of any Warrant thereafter surrendered for exercise shall become entitled
to receive shares of two or more classes of capital stock or shares of Preferred
Stock and other capital stock of the Company, the Board of Directors (whose
determination shall be conclusive and shall be described in a written notice to
the Holder of any Warrant promptly after such adjustment) shall determine the
allocation of the adjusted Per Share Warrant Price between or among shares or
such classes of capital stock or shares of Preferred Stock and other capital
stock.
(k) For purposes of the anti-dilution protection contained in this Section
3, at all times following the conversion of all shares of Preferred Stock into
shares of Common Stock, the term Preferred Stock shall be read to be Common
Stock, context permitting, so that the anti-dilution provisions will continue to
protect the purchase rights represented by this Warrant after the conversion of
all the Preferred Stock into the Common Stock in accordance with the essential
intent and principles of this Section 3 (it being understood that prior to such
conversion, the anti-dilution provisions of the Preferred Stock shall protect
the Holder from dilution of the Common Stock).
(l) Upon the expiration of any rights, options warrants or conversion
privileges, if such shall not have been exercised, the number of Conversion
Shares purchasable upon exercise of this Warrant, to the extent this Warrant has
not then been exercised, shall, upon such expiration, be readjusted and shall
thereafter be such as they would have been had they been originally adjusted (or
had the original adjustment not been required, as the case may be) on the basis
of (A) the fact that Preferred Stock, if any, actually issued or sold upon the
exercise of such rights, options, warrants or conversion privileges, and (B) the
fact that such shares of Preferred Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise plus the
consideration, if any, actually received by the Company for the issuance, sale
or grant of all such rights, options, warrants or conversion privileges whether
or not exercised; provided, however, that no such readjustment shall have the
effect of decreasing the number of Conversion Shares purchasable upon exercise
of this Warrant by an amount in excess of the amount of the adjustment
initially made in respect of the issuance, sale or grant of such rights,
options, warrants or conversion privileges.
4. Fully Paid Stock; Taxes. The Company agrees that the shares of the
Preferred Stock represented by each and every certificate for Warrant Shares
delivered on the exercise of this Warrant and the shares of Common Stock
delivered upon the conversion of the Warrant Shares or the exercise of this
Warrant following the conversion of all shares of Preferred Stock into Common
Stock, shall at the time of such delivery, be validly issued and outstanding,
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fully paid and nonassessable, and not subject to preemptive rights or rights of
first refusal, and the Company will take all such actions as may be necessary to
assure that the par value or stated value, if any, per share of the Preferred
Stock and the Common Stock is at all times equal to or less than the then Per
Share Warrant Price. The Company further covenants and agrees that it will pay,
when due and payable, any and all Federal and state stamp, original issue or
similar taxes which may be payable in respect of the issue of any Warrant Share,
Conversion Share or any certificate thereof to the extent required because of
the issuance by the Company of such security.
5. Registration Under Securities Act of 1933. (a) The Holder shall with
respect to the Conversion Shares only, have the right to participate in the
registration rights granted to purchasers of Preferred Stock pursuant to the
subscription agreements (the "Subscription Agreements") between such purchasers
and the Company that were entered into at the time of the initial sale of the
Preferred Stock. By acceptance of this Warrant, the Holder agrees to comply
with the the Subscription Agreement to the same extent as if it were a party
thereto.
(b) Until all Conversion Shares have been sold under a Registration
Statement or pursuant to Rule 144, the Company shall use its reasonable best
efforts to file with the Securities and Exchange Commission all current reports
and the information as may be necessary to enable the Holder to effect sales of
its shares in reliance upon Rule 144 promulgated under the Act.
6. Limited Transferability. This Warrant may not be sold, transferred,
assigned or hypothecated by the Holder except in compliance with the provisions
of the Act. The Company may treat the registered Holder of this Warrant as he or
it appears on the Company's books at any time as the Holder for all purposes.
The Company shall permit any Holder of a Warrant or his duly authorized
attorney, upon written request during ordinary business hours, to inspect and
copy or make extracts from its books showing the registered holders of Warrants.
All Warrants issued upon the transfer or assignment of this Warrant will be
dated the same date as this Warrant, and all rights of the holder thereof shall
be identical to those of the Holder.
7. Loss, etc., of Warrant. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver to the Holder a new Warrant of like date, tenor and
denomination.
8. Warrant Holder Not Stockholder. This Warrant does not confer upon the
Holder any right to vote or to consent to or receive notice as a stockholder of
the Company, as such, in respect of any matters whatsoever, or any other rights
or liabilities as a stockholder, prior to the exercise hereof; this Warrant
does, however, require certain notices to Holders as set forth herein.
9. Communication. No notice or other communication under this Warrant shall
be effective unless, but any notice or other communication shall be effective
and shall be deemed to have been given if, the same is in writing and is mailed
by first-class mail, postage prepaid, addressed to:
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(a) the Company at AVAX Technologies, Inc., 375 Park Avenue, New York,
N.Y., 10152, Attn: President or such other address as the Company has
designated in writing to the Holder, or
(b) the Holder at [____] or other such address as the Holder has
designated in writing to the Company.
10. Headings. The headings of this Warrant have been inserted as a matter
of convenience and shall not affect the construction hereof.
11. Applicable Law. This Warrant shall be governed by and construed in
accordance with the law of the State of New York without giving effect to the
principles of conflicts of law thereof.
12. Amendment, Waiver, etc. Except as expressly provided herein, neither
this Warrant nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought;
provided, however, that any provisions hereof may be amended, waived, discharged
or terminated upon the written consent of the Company and the then current
Majority of the Holders of the Warrants only.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
President and its corporate seal to be hereunto affixed and attested by its
Secretary this ____ day of __________, 1996.
AVAX TECHNOLOGIES, INC.
By:___________________________
Name: Carl Spana
Title: Interim President
ATTEST:
_____________________
Secretary
[Corporate Seal]
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SUBSCRIPTION
The undersigned, ___________________, pursuant to the provisions of the
foregoing Warrant, hereby agrees to subscribe for and purchase
______________________ shares of the Preferred Stock, par value $.001 per share,
of AVAX Technologies, Inc. covered by said Warrant, and makes payment therefor
in full at the price per share provided by said Warrant.
Dated:_____________ Signature:____________________
Address:______________________
CASHLESS EXERCISE
The undersigned ___________________, pursuant to the provisions of the
foregoing Warrant, hereby elects to exchange its Warrant for
_______________shares of Preferred Stock, par value $.OO1 per share, of AVAX
Technologies, Inc. pursuant to the Cashless Exercise provisions of the Warrant.
Dated:_____________ Signature:____________________
Address:______________________
ASSIGNMENT
FOR VALUE RECEIVED ___________ hereby sells, assigns and transfers unto
______________________ the foregoing Warrant and all rights evidenced thereby,
and does irrevocably constitute and appoint _______________________, attorney,
to transfer said Warrant on the books of AVAX Technologies, Inc.
Dated:_____________ Signature:____________________
Address:______________________
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PARTIAL ASSIGNMENT
FOR VALUE RECEIVED ______________ hereby assigns and transfers unto
________________________ the right to purchase ________ shares of the Preferred
Stock, par value $.001 per share, of AVAX Technologies, Inc. covered by the
foregoing Warrant, and a proportional part of said Warrant and the rights
evidenced thereby, and does irrevocably constitute and appoint ________________,
attorney, to transfer that part of said Warrant on the books of AVAX
Technologies, Inc.
Dated:_____________ Signature:____________________
Address:______________________
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Exhibit 10.2
Confidential Treatment
Requested
CLINICAL STUDY AND RESEARCH AGREEMENT
This Clinical Study and Research Agreement (the "Agreement") dated as of
November 20, 1995 is entered into by and between Thomas Jefferson University
("TJU"), a not-for-profit corporation, formed under the laws of the Commonwealth
of Pennsylvania, and having its principal place of business at 11th and Walnut
Streets, Philadelphia, Pennsylvania, 19107, and Walden Laboratories, Inc.
("Sponsor"), a Delaware corporation having its principal place of business at
375 Park Avenue, New York, New York, 10152. All capitalized terms used herein
and not otherwise defined herein shall have the meanings ascribed for such terms
in the License Agreement (as hereinafter defined).
WHEREAS, Sponsor, pursuant to the License Agreement dated November 20, 1995
between TJU and Sponsor (the "License Agreement"), is the exclusive licensee of
TJU's rights to certain patent applications (as more fully defined therein)
relating to DNP Cancer Vaccines;
WHEREAS, Sponsor desires to support research conducted by TJU upon the
terms and conditions as set forth herein including clinical studies and research
programs involving human subjects (the "Study");
WHEREAS, TJU has the facilities and the personnel with the requisite
skills, experience, and knowledge to undertake such Study; and
WHEREAS, the Study contemplated by this Agreement is of mutual interest and
benefit to TJU and Sponsor, and will further the instructional and research
objectives of TJU in a manner consistent with its status as a non-profit
educational and health care institution.
NOW, THEREFORE, the parties agree as follows:
1. Description of the Study. TJU and the Principal Investigator agree to
conduct a research and clinical study program for the further development of the
DNP Cancer Vaccine technology (the "Study"). The Study shall be conducted
according to the Research Protocol which is attached hereto as Exhibit A, with
Exhibit A detailing the research activities and responsibilities to be
undertaken for the first year of the Study including objectives to be achieved
and funding commitments by Sponsor to TJU for the first year following the date
of this Agreement. The Research Protocol for each year of the Study commencing
after the first year shall be added to Exhibit A, following the completion of
good-faith negotiations between Sponsor, TJU and Principal Investigator, which
discussions shall begin ninety (90) days prior to the end of the Study for the
immediately preceding year, provided, however, that TJU's obligation to conduct
the Study in each year is expressly conditioned upon the approval of TJU's
Institutional Review Board. Sponsor shall fund this Agreement for a three-year
period pursuant to Paragraph 4 and subject to the termination provisions of
Paragraph 7.
"***" denotes confidential portion that has been redacted
("Marked Portion").
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2. Principal Investigator. The Principal Investigator (the "Principal
Investigator"), a full-time employee of TJU, shall be Dr. David Berd. Principal
Investigator agrees to use best efforts to perform the work required under this
Agreement. If Dr. Berd is unable to continue to serve as Principal Investigator
and a successor acceptable to both TJU and Sponsor is not available, the
Agreement will be terminated in accordance with Paragraph 7.
3. Compliance with Laws. The Study will be conducted in accordance with,
and the Principal Investigator will comply with all federal, state, and local
laws and regulations applicable to the Study.
4. Awards and Payments. In consideration of the work to be performed under
this Agreement as set forth in Exhibit A, Sponsor will provide financial support
for the Study as set forth in the budget (the "Budget") attached hereto and
included as part of Exhibit B. The Budget for the first year of the Study, and
extensions mutually agreed upon by the parties, shall be payable on a quarterly
basis in equal quarterly payments fifteen (15) days in advance of each quarter,
with the exception that the first such quarterly payment by Sponsor to TJU shall
be due fifteen (15) days from the Effective Date (as defined below). The Budget
for each year of the Study commencing after the first year shall be added to
Exhibit B at the same time the Research Protocol for such year is added to
Exhibit A pursuant to Paragraph 1 and shall be part of the negotiations
contemplated in Paragraph 1. Subject to Paragraph 7 of this Agreement, Company
will provide TJU with sponsored research funding of Dr. David Berd's laboratory
at TJU for the first three agreement years in the amount of $220,094 for the
first agreement year, $220,381 for the second agreement year, and $220,381 for
the third agreement year. Notwithstanding the immediately preceding sentence,
the Company may in its discretion reduce sponsored research funding in the third
agreement year to an amount not to fall below $100,000.
5. Independent Contractor. TJU and the Principal Investigator's
relationship to Sponsor under this Agreement shall be that of an independent
contractor and not an agent, joint venturer or partner of Sponsor and shall not
otherwise be construed as creating any other form of legal association or
arrangement which would impose liability upon one party for the act or failure
to act of the other party.
6. Effective Date and Term. The "Effective Date" shall be ninety (90) days
from the date of the signing of this Agreement. This Agreement shall continue in
effect until completion of the Study (the "Term") or termination of this
Agreement for other reasons as provided herein. The Research Protocol will be
deemed completed for the purposes of this Paragraph 6 whenever the Study is
concluded by the Principal Investigator.
7. Termination.
(a) Either party may immediately terminate this Agreement due to the breach
or default of this Agreement upon thirty (30) days prior written notice to the
other party unless such breach or default is cured within such thirty (30) day
period.
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(b) TJU may terminate the Agreement upon thirty (30) days written notice if
it becomes, for any reason, unable to perform or complete the Study.
(c) Sponsor may terminate this Agreement upon thirty (30) days written
notice if the Principal Investigator is unable to complete the Study and the
parties are unable to agree upon a successor.
(d) If this Agreement is terminated prior to the end of the Term, all funds
paid to the time of termination will be considered non-recoverable. Also, TJU's
sole damages and remedy shall be to recover from Sponsor all amounts owed for
work completed and expenses committed through the date of termination based
pro-rata upon the figures in Exhibit B, provided, however, that Sponsor shall
continue to pay to TJU the salaries of the employees hired by TJU pursuant to
this Agreement, except for the Principal Investigator, for the remainder of any
Agreement year which has begun and within such year the termination has
occurred. Articles 10(Confidential Information), 11(Publication), 12(Inventions
and Patent Rights), 13(Indemnification), and 14(Use of Name) shall survive any
termination of this Agreement. Termination of this Agreement for any reason
(including at the end of the Term), shall have no effect on the rights and
obligations of Sponsor and TJU contained in the License Agreement.
8. Institutional Review Board Approval. Sponsor shall cooperate with
Principal Investigator in preparing and filing the Study protocol, informed
consent form, and other information with TJU's Institutional Review Board
("IRB"). Principal Investigator shall apply for approval to conduct the Study
with the IRB.
9. Research and Clinical Data and Reporting; Site Visits.
(a) All research and clinical data, including copies of laboratory
notebooks and case report forms and other relevant information generated during
the Study will be promptly and fully disclosed to Sponsor, and shall be freely
usable by Sponsor consistent with good business judgment. TJU will submit a
complete written progress report after the Study is completed. TJU shall also
submit interim progress reports on a quarterly and annual basis providing the
Sponsor with a narrative account of the research performed, expenditures
incurred, the results of the research and the supporting data concerning the
research conducted during such quarter or such year, as the case may be, within
sixty (60) days of the end of such quarter or year, as the case may be.
(b) From time to time during the term of this Agreement, the Sponsor may
send one or more representatives to the TJU to discuss with the Principal
Investigator and their associates the results of the Study and the details of
the investigate techniques being employed therein. The representatives shall be
identified to TJU and the timing of such site visits shall be reasonably
acceptable to TJU.
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10. Confidential Information. "Confidential Information" will mean all
information provided by one party to the other and clearly identified as
"Confidential" by the transmitting party at the time of disclosure. If such
transmittal occurs orally, the transmitting party will promptly reduce such
transmittal in writing, mark and identify it as confidential, and provide such
record to the other party. Specifically excepted from this is all information:
(a) that was previously known by the receiving party's receipt of such
information; (b) that is rightfully received by the receiving party without an
express obligation of confidence; (c) that is independently developed by
personnel of either party who are not working under this Agreement; or (d) is
disclosed pursuant to any judicial or government request, requirement or order,
provided that the disclosing party takes reasonable steps to provide the other
party with sufficient notice to contest such request, requirement or order.
Subject to publication provisions of Paragraph 11, neither party will disclose
the other party's Confidential Information without prior written authorization
from the other. This provision shall remain in effect for three (3) years
following the termination of this Agreement. Sponsor shall retain ownership of
all original patient case record forms supplied by Sponsor and completed by TJU
in the Study. TJU shall be entitled to retain copies of these case report forms.
Any medical records and data which result from the Study will remain the
property of TJU. Since Sponsor may be bound by law to inform the FDA about
details of the Study, TJU shall retain with the records of the Study either the
original or copies of all volunteer consent forms, and to make these and
volunteer medical records available, with appropriate protection of patient
confidentiality, for comparison with case report forms and review if requested
by representatives of the FDA.
11. Publication. Subject to Paragraph 10, TJU and Principal Investigator
shall be free to use the results of the research and clinical study for its own
non-commercial purposes, including teaching, research, education, clinical and
publication purposes, without the payment of royalties or other fees. TJU shall
submit to Sponsor for its review, a copy of any proposed manuscript resulting
from the research at least sixty (60) days prior to the estimated date of
publication, and if no response is received within sixty (60) days of the date
submitted to Sponsor, it will be conclusively presumed that the publication may
proceed without delay. If Sponsor determines that the proposed publication
contains patentable subject matters which required protection, Sponsor may
require the delay of publication for a period of ninety (90) days (or such
longer period as may be required to file such patent application) from the date
Sponsor notifies TJU of its intention to obtain patent protection for the
purpose of filing patent applications. TJU, the Principal Investigator and any
other applicable employee of TJU will cooperate with Sponsor in accordance with
Article 7 of the License Agreement so as to enable Sponsor to file any patent
applications necessary to protect the proprietary interests of Sponsor and TJU
prior to the end of such ninety (90) day period or such longer period, as the
case may be. Sponsor will reimburse TJU, Principal Investigator or such other
employee of TJU for any reasonable out-of-pocket expenses incurred by them in
complying with the foregoing.
4
<PAGE>
12. Inventions and Patent Rights. It is recognized and understood that
certain existing inventions and technologies are the separate property of
Sponsor or TJU and are not affected by this Agreement, and neither party shall
have any claims to or rights in such separate inventions and technologies. Any
new inventions, developments or discoveries (including technical information or
know-how) ("Inventions") resulting from the Study shall be promptly disclosed in
writing to Sponsor but in any event no disclosure of such Invention by TJU, the
Principal Investigator or other researcher shall be made to any third party
unless in accordance with Paragraph 11; provided, however, that title to any new
Inventions resulting from the Study shall be in TJU. Inventorship of such
Inventions shall be determined in accordance with patent law or by mutual
agreement if the Invention is not patentable. To the extent that TJU owns the
rights of sole or joint inventorship of such Invention, Sponsor is hereby
granted, without further consideration, an exclusive right and license to any
patentable Invention upon the terms and conditions set forth in the License
Agreement and such patentable Invention shall be included as a part of the
Patent Rights. In addition, if any such Invention is not patentable, Sponsor
shall have the right to use, develop, manufacture, have manufactured, market and
employ any such unpatentable Inventions without the obligation to pay any
royalties.
13. Indemnification. Sponsor agrees to indemnify, hold harmless and defend
TJU, its trustees, officers, employees, the Principal Investigator and agents
from and against any and all claims, suits, losses, damages, costs, fees,
expenses (including attorneys' fees), and other liabilities asserted by third
parties, both government and non-government, resulting from or arising out of
the clinical study and research program carried out pursuant to this Agreement,
provided, however, that Sponsor shall not be liable for TJU' s negligence,
intentional wrongdoing, or its failure to follow the Research Protocol.
14. Use of a Party's Name. Neither party will, without the prior written
consent of the other party, use in advertising, publicity, or otherwise, the
name, trademark, logo, symbol, or other image of the party or that party's
employee or agent, provided, however, that TJU acknowledges and agrees that
Sponsor may use TJU's name and references to this Agreement and related
agreements and the names of the their employees (including, without limitation,
the Principal Investigator) as they may relate to such agreements in any private
placement memorandum, prospectus, registration statement or any similar
disclosure document used by Sponsor for capital raising and financing purposes
as may be required by and in accordance with applicable laws without such prior
written consent.
15 Equipment. Subject to Paragraph 12 hereof and to the proviso to the
immediately succeeding sentence, title to any equipment, materials, supplies and
things of value purchased, built, manufactured or acquired either from Sponsor
or from third parties in conjunction with performance of the Study shall vest in
TJU. All such equipment shall be and remain the property of TJU.
5
<PAGE>
16. Notice. Any notice or other communication required or permitted under
the Agreement shall be in writing and will be deemed given as of the date it is
received by the receiving party. Notice shall be given to the parties at the
addresses listed below:
If to TJU:
Associate Dean for Scientific Affairs
Office of Research Administration
Thomas Jefferson University
1020 Locust St.
Philadelphia, PA 19107-6799
with copies to:
Dr. David Berd
Professor of Medicine
1024 Walnut Street
Philadelphia, PA 19107-6799
Office of Technology Transfer
Attn: Director
Thomas Jefferson University
1020 Locust St.
Philadelphia, PA 19107-6799
If to Sponsor:
Carl Spana, Ph.D.
President
Walden Laboratories, Inc.
375 Park Ave
Suite 1501
New York, NY 10152
with a copy to:
Michael S. Weiss, Esq.
Secretary
Walden Laboratories, Inc.
375 Park Ave
Suite 1501
New York, NY 10152
6
<PAGE>
17. Modification. Any alteration, modification, or amendment to this
Agreement must be in writing and signed by both parties. No changes in the
Research Protocol will be made unless agreed upon by TJU, Principal
Investigator, and Sponsor or unless necessary to protect the safety, rights, or
welfare of the patients or research subjects.
18. Assignment.
This Agreement and the rights and duties appertaining thereto may not be
assigned by either party without first obtaining the written consent of the
other. Any such purported assignment, without the written consent of the other
party, shall be null and of no effect. Notwithstanding the foregoing, TJU or
Sponsor may assign this Agreement (i) to a purchaser, merging or consolidating
corporation, or acquiror of substantially all of TJU's or Sponsor's assets or
business, or (ii) to an Affiliate of TJU or Sponsor subject to the consent of
the other party which consent shall be unreasonably withheld.
19. Governing Law. The law of Pennsylvania shall govern this Agreement
without regard to principles of conflict of laws.
20. Miscellaneous. (a) Any of the provisions of this Agreement which are
determined to be invalid or unenforceable in any jurisdiction shall be
ineffective to the extent of such invalidity or unenforceability in such
jurisdiction, without rendering invalid or unenforceable the remaining
provisions hereof or affecting the validity or unenforceability of any of the
terms of this Agreement in any other jurisdiction.
(b) The headings and captions used in this Agreement are for convenience of
reference only and shall not affect its construction or interpretation.
(c) Nothing in this Agreement, express or implied, is intended to confer on
any person other than the parties hereto or their permitted assigns, any
benefits, rights or remedies.
(d) In the event that a party to this Agreement perceives the existence of
a dispute with the other party concerning any right or duty provided for herein,
the parties shall, as soon as practicable, confer in an attempt to resolve the
dispute. In the event that resolution of the dispute is not forthcoming, the
parties shall consult with a view toward submitting the dispute to mediation or
arbitration under mutually-acceptable terms.
7
<PAGE>
IN WITNESS WHEREOF, the parties, intending to be legally bound, have caused
this Agreement to be executed by their duly authorized representatives.
Sponsor:
Walden Laboratories, Inc.
By:/s/ Carl Spana
---------------------------------
Name: Carl Spana
Title: President
Date: 11/20/95
TJU:
Thomas Jefferson University
By:/s/ Thomas Wudarski
---------------------------------
Name: Thomas Wudarski
Title: Manager - ORA
Date: 11/24/95
Acknowledged and Approved:
/s/ David Berd
------------------------------------
Principal Investigator
Name: David Berd
Date: 11/21/95
8
<PAGE>
Exhibit A
Research Protocol
***
*** Denotes confidential portion that has been redacted.
<PAGE>
Exhibit B
Study Budget
***
***denotes confidential portion that has been redacted
Exhibit 10.3
WALDEN LABORATORIES, INC.
1992 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this 1992 Stock Option Plan are to
provide incentive to Employees and Consultants of the Company, to encourage
Employee proprietary interest in the Company, to encourage Employees to remain
in the employ of the Company and to attract to the Company individuals of
experience and ability.
Options granted under this Plan may be either Incentive Stock Options or
Nonstatutory Stock Options, at the discretion of the Administrator and as
reflected in the terms of the written option agreement.
2. Definitions. As used in this Plan, the following definitions shall
apply:
(a) "Administrator" shall mean the Board or any of its Committees appointed
pursuant to Section 4 of the Plan.
(b) "Applicable Laws" shall have the meaning set forth in Section 4(a)
below.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(e) "Committee" shall mean the Committee appointed by the Board of
Directors in accordance with Section 4(a) below, if one is appointed.
(f) "Common Stock" shall mean the $0.001 par value Common Stock of the
Company.
(g) "Company" shall mean WALDEN LABORATORIES, INC. (formerly APPEX
TECHNOLOGIES, INC.), a Delaware corporation, or any successor corporation to the
Company.
(h) "Consultant" shall mean (i) any person who is engaged by the Company or
any subsidiary to render consulting services and is compensated for such
consulting services, and (ii) any director of the Company whether compensated
for such services or not; provided, however, that if the Company registers any
class of any equity security pursuant to Section 12 of the Securities Exchange
Act of 1934, as amended, the term Consultant shall thereafter not include
directors who are not compensated for their services or who are paid only a
director's fee by the Company.
(i) "Continuous Status as an Employee or Consultant" shall mean the absence
of any interruption or termination of service as an Employee or Consultant.
Continuous Status as an Employee or Consultant shall not be considered
interrupted in the case of sick leave, military leave, or any other leave of
absence approved by the Administrator; provided, however, either that such
<PAGE>
leave must be for a period of not more than ninety (90) days or that
re-employment upon the expiration of such leave must be guaranteed by contract
or by statute.
(j) "Employee" shall mean any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(k) "Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:
(i) If the Common Stock is listed on any established stock exchange or
a national market system including without limitation the National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the average of
the closing sales prices for such stock as quoted on such system for the
last five trading days before the date of determination (if for a given day
no sales were reported, the closing bid on that day shall be used), as such
prices are reported in The Wall Street Journal or such other source as the
Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not on
the National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market
Value shall be the average of the mean between the bid and asked prices for
the Common Stock for the last five days before the date of determination;
or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(l) "Incentive Stock Option" shall mean an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(m) "Nonstatutory Stock Option" shall mean an Option not intended to
qualify as an Incentive Stock Option.
(n) "Option" shall mean a stock option granted pursuant to the Plan.
(o) "Optioned Stock" shall mean the Common Stock subject to an Option.
(p) "Optionee" shall mean an Employee or Consultant who receives an Option.
(q) "Parent" shall mean a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(r) "Plan" shall mean this 1992 Stock Option Plan, as amended and restated.
(s) "Share" shall mean a share of Common Stock, adjusted in accordance with
Section 11 below.
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<PAGE>
(t) "Subsidiary" shall mean a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11
below, the maximum aggregate number of shares that may be optioned and sold
under the Plan is 1,750,000 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, then the unpurchased Shares that were subject to
the Option shall, unless the Plan has been terminated, become available for
fixture grant under the Plan.
Notwithstanding any other provision of the Plan, shares issued under the
Plan and later repurchased by the Company shall not become available for fixture
grant or sale under the Plan.
4. Administration of the Plan.
(a) Composition of Administrator.
(i) Multiple Administrative Bodies. If permitted by Rule 16b-3
promulgated under the Exchange Act or any successor rule thereto, as in
effect at the time that discretion is being exercised with respect to the
Plan ("Rule 16b-3"), and by the legal requirements relating to the
administration of incentive stock option plans, if any, of applicable
securities laws and the Code (collectively, the "Applicable Laws"), the
Plan may (but need not) be administered by different administrative bodies
with respect to directors, officers who are not directors and Employees who
are neither directors nor officers.
(ii) Administration with respect to Directors and Officers. With
respect to grants of Options to Employees or Consultants who are also
officers or directors of the Company, the Plan shall be administered by (A)
the Board, if the Board may administer the Plan in compliance with Rule
16b-3 as it applies to a plan intended to qualify thereunder as a
discretionary plan, or (B) a Committee designated by the Board to
administer the Plan, which Committee shall be constituted (I) in such a
manner as to permit the Plan to comply with Rule 16b-3 as it applies to a
plan intended to qualify thereunder as a discretionary plan and (II) in
such a manner as to satisfy the Applicable Laws.
(iii) Administration with respect to Other Persons. With respect to
grants of Options to Employees or Consultants who are neither directors nor
officers of the Company, the Plan shall be administered by (A) the Board or
(B) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the Applicable Laws.
(iv) General. Once a Committee has been appointed pursuant to
subsection (ii) or (iii) of this Section 4(a), such Committee shall
continue to serve in its designated capacity until otherwise directed by
the Board. From time to time the Board may increase the size of any
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill
vacancies (however caused) and remove all
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<PAGE>
members of a Committee and thereafter directly administer the Plan, all to
the extent permitted by the Applicable Laws and, in the case of a Committee
appointed under subsection (ii), to the extent permitted by Rule 16b-3 as
it applies to a plan intended to qualify thereunder as a discretionary
plan.
(b) Powers of the Administrator. Subject to the provisions of the Plan and
in the case of a Committee, the specific duties delegated by the Board to such
Committee, the Administrator shall have the authority, in its discretion
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(k) of the Plan;
(ii) to select the officers, Consultants and Employees to whom Options
may from time to time be granted under the Plan;
(iii) to determine whether and to what extent Options are granted
under the Plan;
(iv) to determine the number of shares of Common Stock to be covered
by each such award granted under the Plan;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder (including, but not
limited to, the share price and any restriction or limitation, or any
waiver or forfeiture restrictions regarding any Option and/or the shares of
Common Stock relating thereto, based in each case on such factors as the
Administrator shall determine, in its sole discretion); and
(vii) to reduce the exercise price of any Option to the then current
Fair Market Value if the Fair Market Value of the Common Stock covered by
such Option shall have declined since the date the Option was granted.
(c) Effect of Administrator's Decision. All decisions, determinations and
interpretations of the Administrator shall be final and binding on all Optionees
and any other holders of any Options.
5. Eligibility
(a) Options may be granted only to Employees and Consultants. Incentive
Stock Options may be granted only to Employees. An Employee or Consultant who
has been granted an Option may, if he or she is otherwise eligible, be granted
an additional Option or Options.
(b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair
Market Value of Stock Options are exercisable for the
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<PAGE>
first time by an Optionee during any calendar year (under all plans of the
Company or any Parent or Subsidiary) exceeds $100,000, such excess Options shall
be treated as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be taken
into account in the order in which they were granted, and the Fair Market Value
of the Shares shall be determined as of the time the Option with respect to such
Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with respect to
continuation of employment or consulting relationship with the Company, nor
shall it interfere in any way with his or her right or the Company's right to
terminate his or her employment or consulting relationship at any time, with or
without cause,
6. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the stockholders of
the Company as described in Section 18 below. It shall continue in effect for a
term of ten (10) years unless sooner terminated under Section 13 below.
7. Term of Option. The term of each Option shall be ten (10) years from the
date of grant thereof or such shorter term as may be provided in the Stock
Option Agreement. However, in the case of an Option granted to an Optionee who,
at the time the Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the term of the Option shall be five (5) years from the date of
grant thereof or such shorter time as may be provided in the Stock Option
Agreement.
8. Exercise Price and Consideration.
(a) The per Share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be such price as is determined by the Administrator,
but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of such
Incentive Stock Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or
any Parent or Subsidiary, the per Share exercise price shall be no
less than one hundred ten percent (110%) of the Fair Market Value per
Share on the date of grant.
(B) granted to any other Employee, the per Share exercise price
shall be no less than one hundred percent (100%) of the Fair Market
Value per Share on the date of grant.
(ii) In the case of any Option, the per Share exercise price shall be
no less than eighty-five percent (85%) of the Fair Market Value per Share
on the date of grant.
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<PAGE>
(b) The Administrator shall determine the acceptable form of consideration
for exercising an Option, including the method of payment. In the case of an
Incentive Stock Option, the Administrator shall determine the acceptable form of
consideration at the time of grant. Such consideration may consist entirely oft
(i) cash;
(ii) check;
(iii) other Shares which (a) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six
months on the date of surrender, and (b) have a Fair Market Value on the
date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised;
(iv) delivery of an irrevocable subscription agreement for the Shares
to be issued which irrevocably obligates the holder to take and pay for the
shares not more than twelve (12) months after the date of delivery of the
subscription agreement;
(v) any combination of such methods of payment; or
(vi) such other consideration and method of payment for the issuance
of Shares to the extent permitted under Section 157 of the Delaware General
Corporation Law.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option granted
under this Plan shall be exercisable at such times and under such conditions as
determined by the Administrator, including performance criteria with respect to
the Company and/or the Optionee, and shall be permissible under the terms of the
Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 8(b) above. Until
the issuance (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends or any other
rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. No adjustment shall be made for a
dividend or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 11 below.
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<PAGE>
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Status as an Emoloyee or Consultant. If an Employee or
Consultant ceases to serve as an Employee or Consultant, then he or she may, but
only within three (3) months (twelve (12) months in the case of a Nonstatutory
Stock Option) or such other shorter period as is specified by the Administrator
after the date he or she ceases to be an Employee or Consultant of the Company
(but in no event later than the date of expiration of the term of such Option as
set forth in the Option Agreement), exercise his or her Option to the extent
that he or she was entitled to exercise it at the date of such termination. To
the extent that he or she was not entitled to exercise the Option at the date of
such termination, or if he or she does not exercise such Option (which he or she
was entitled to exercise) within the time specified herein, the Option shall
terminate.
(c) Disability of Optionee. Notwithstanding the provisions of Section 9(b)
above, if an Employee or Consultant is unable to continue his or her employment
or consulting relationship with the Company as a result of his or her total and
permanent disability (as defined in Section 22(e)(3) of the Code), then he or
she may, but only within twelve (12) months from the date of termination or such
other shorter period as is specified by the Administrator (but in no event later
than the date of expiration of the term of such Option as set forth in the
Option Agreement), exercise his or her Option to the extent he or she was
entitled to exercise it at the date of termination of employment or consulting.
To the extent that he or she was not entitled to exercise the Option at the date
of termination, or if he or she does not exercise such Option (which he or she
was entitled to exercise) within the time specified herein, the Option shall
terminate.
(d) Death of Optionee. In the event of the death of an Optionee:
(i) during the term of the Option who is at the time of his or her
death an Employee or Consultant of the Company and who shall have been in
Continuous Status as an Employee or Consultant since the date of grant of
the Option, the Option may be exercised, at any time within twelve (12)
months following the date of death or such other shorter period as is
specified by the Administrator (but in no event later than the date of
expiration of the term of such Option as set forth in the Option
Agreement), by the Optionee's estate or by a person who acquired the right
to exercise the Option by bequest or inheritance, but only to the extent of
the right to exercise that would have accrued had the Optionee continued
living and remained in Continuous Status as an Employee or Consultant three
(3) months after the date of death; or
(ii) within three (3) months after the termination of Continuous
Status as an Employee or Consultant, the Option may be exercised, at any
time within three (3) months following the date of death or such other
shorter period as is specified by the Administrator (but in no event later
than the date of expiration of the term of such Option as set forth in the
Option Agreement), by the Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the
extent of the right to exercise that had accrued at the date of
termination.
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<PAGE>
(e) Rule 16b-3. Options granted to persons subject to Section 16(b) of the
Exchange Act must comply with Rule 16b-3 and shall contain such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
10. Non-Transferability of Options. The Option may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent or distribution. The designation of a beneficiary
by an Optionee shall not constitute a transfer. An Option may be exercised,
during the lifetime of the Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization or Merger. Subject to any
required action by the stockholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Administrator, whose determination in that respect shall be final, binding, and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the Company, the
Administrator shall notify the Optionee at least fifteen (15) days prior to such
proposed action. To the extent it has not been previously exercised, the Option
shall terminate immediately prior to the consummation of such proposed action.
In the event of a proposed sale of all or substantially all of the assets of the
Company, or the merger of the Company with or into another corporation, the
Option shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless such successor corporation does not agree to assume the Option or to
substitute an equivalent option, in which case such Option shall terminate upon
the consummation of the merger.
12. Time of Granting Options. The date of grant of an Option shall, for all
purposes, be the date on which the Administrator makes the determination
granting such Option or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Employee or Consultant to
whom an Option is so granted within a reasonable time after the date of such
grant.
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<PAGE>
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may amend or terminate the Plan
from time to time in such respects as the Board may deem advisable; provided,
however, that the following revisions or amendments shall require approval of
the stockholders of the Company in the manner describe in Section 18 of the
Plan:
(i) any increase in the number of Shares subject to the Plan, other
than in connection with an adjustment under Section 11 above;
(ii) any change in the designation of the class of persons eligible to
be granted Options; or
(iii) if the Company has a class of equity security registered under
Section 12 of the Exchange Act at the time of such revision or amendment,
any material increase in the benefits accruing to participants under the
Plan.
(b) Stockholder Approval. If any amendment requiring stockholder approval
under Section 13(a) above is made subsequent to the first registration of any
class of equity security by the Company under Section 12 of the Exchange Act,
then such stockholder approval shall be solicited as described in Section 18
below.
(c) Effect of Amendment or Termination. Any such amendment or termination
of the Plan shall not affect Options already granted and such Options shall
remain in full force and effect as if this Plan had not been amended or
terminated, unless mutually agreed otherwise between the Optionee and the Board,
which agreement must be in writing and signed by the Optionee and the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant
to the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto complies with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder, and
the requirements of any stock exchange upon which the Shares may then be listed.
The exercise of such Option and the issuance and delivery of such Shares
pursuant thereto shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
15. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
-9-
<PAGE>
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares under this Plan, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
16. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Administrator shall approve.
17. Annual Report To Optionees. The Board of Directors shall cause an
annual report to be sent to the Optionees not later than one hundred twenty
(120) days after the close of the fiscal year adopted by the corporation. Such
report shall be sent at least fifteen (15) days (or, if sent by third-class
mail, thirty-five (35) days) before the annual meeting of stockholders to be
held during the next fiscal year. The annual report shall contain (i) a balance
sheet as of the end of the fiscal year, (ii) an income statement for the fiscal
year, (iii) a statement of cash flow for the fiscal year, and (iv) any report of
independent accountants or, if there is not such report, the certificate of an
authorized officer of the corporation that the statements were prepared without
audit from the books and records of the corporation.
The foregoing requirement of an annual report shall be waived so long as
the shares of the Company are held by fewer than one hundred (100) holders of
record.
18. Stockholder Approval.
(a) Continuance of the Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months before or after the date
the Plan is adopted.
(b) If and in the event that the Company registers any class of equity
securities pursuant to Section 12 of the Exchange Act, any required approval of
the stockholders of the Company obtained after such registration shall be
solicited substantially in accordance with Section 14(a) of the Exchange Act and
the rules and regulations promulgated thereunder.
(c) If any required approval by the stockholders of the Plan itself or of
any amendment thereto is solicited at any time otherwise than in the manner
described in Section 18(b) hereof, then the Company shall, at or prior to the
first annual meeting of stockholders held subsequent to the later of (1) the
first registration of any class of equity securities of the Company under
Section 12 of the Exchange Act or (2) the granting of an Option hereunder to an
officer or director after such registration, do the following:
(i) furnish in writing to the holders entitled to vote for the Plan
substantially the same information which would be required (if proxies to
be voted with respect to approval or disapproval of the Plan or amendment
were then being solicited) by the rules and regulations in effect under
Section 14(a) of the Exchange Act at the time such information is
furnished; and
-10-
<PAGE>
(ii) file with, or mail for filing to, the Securities and Exchange
Commission four copies of the written information referred to in subsection
(i) hereof not later than the date on which such information is first sent
or given to stockholders,
-11-
Exhibit 10.4
AVAX TECHNOLOGIES, INC.
375 PARK AVENUE, SUITE 1501
NEW YORK, NEW YORK 10152
May 17, 1996
VIA FACSIMILE
- -------------
(816) 444-8434
Jeffrey M. Jonas, M.D.
Dear Jeffrey:
It was a pleasure speaking with you again about the possibility of
your joining AVAX Technologies, Inc. (the "Corporation") as President, Chief
Executive Officer and Director. Accordingly, I would like to extend to you the
following offer of employment:
1. A base salary of $200,000 per annum, subject to semiannual review
commencing twelve months from the original date of employment. In
addition, you shall be entitled to a $12,500 signing bonus payable
within 30 days of the signing of this Agreement. In the event you are
terminated without cause or you terminate your employment for cause,
you shall be entitled to receive as severance the base salary for one
year following such termination, subject to set-off for amounts earned
from alternative employment. At the end of your first year of
employment, you shall be entitled to a bonus of $25,000. In addition,
at the discretion of the Board of Directors, you shall also be
eligible for a bonus of up to $175,000.
2. Options to purchase 637,745 of the shares of Common Stock of the
Corporation (representing 5% of the anticipated 12,754,902 fully-
diluted shares of common stock of the Company to be outstanding if the
Company raises $12,000,000 during the current private placement
offering (the "Offering"), exercisable for 7 years at an exercise
price equal to $.50. Your options shall vest and be exercisable
(subject to resale restrictions for a period of up to 18 months
following any public offering), and provided you are still employed by
the Corporation on such dates, one-sixteenth each quarter until the
fourth anniversary
<PAGE>
of the commencement of such employment, at which point all remaining
shares shall be vested. In the event that the Offering is for less
than $12,000,000 the Company shall have the right to repurchase for
$.001 per share the number of shares underlying the Options needed to
adjust the Options granted such that you will have options to purchase
5% of the outstanding shares of common stock of the Company at the
close of the current Offering.
In addition to the foregoing stock options you shall be entitled to
additional stock options from time to time at the discretion of the
Board of Directors.
3. The Corporation shall reimburse you for all normal, usual and
necessary expenses incurred by you in furtherance of the business and
affairs of the Corporation, including reasonable travel (including
cost of reasonable lodging and transportation between New York and
Kansas City as necessary), against receipt by the Corporation of
appropriate vouchers or other proof of the CEO's expenditures and
otherwise in accordance with such Expense Reimbursement Policy as may
from time to time be adopted by the Board of Directors of the
Corporation.
4. It is the intention that the Company will be located in Kansas City or
such other location that you deem advisable. Please be aware,
however, that it is expected that Board of Director's meetings will be
held in New York every other month.
5. You shall be, during the term of your employment, entitled to
vacations of not less than three (3) weeks per annum.
6. The Corporation shall make available to you and your dependents, such
paid medical, long-term disability, life insurance up to $200,000 and
such other health benefits as the Corporation makes available to its
other senior officers and directors.
7. Your start date shall be June 1, 1996.
8. Please be aware that the foregoing offer is subject to the
satisfactory completion by us of our reference due diligence process.
<PAGE>
9. The parties intend that an employment agreement satisfactory to the
Company and you will be signed within a reasonable time after the
commencement of your employment and will contain the foregoing
provisions and additional provisions relating to, without limitation,
confidentiality of certain information and restrictions on activities
in competition with the Company.
Sincerely,
/s/ Carl Spana
-------------------
Carl Spana, Ph.D.
Interim President
AGREED AND ACCEPTED:
/s/ Jeffrey Jonas
- ----------------------
Jeffrey M. Jonas, M.D.
Exhibit 10.5
EMPLOYMENT AGREEMENT
Agreement, made and entered as of the 19th day of August, 1991, by and
between Nehoc, Inc., a New York corporation, having a place of business at 44
Wall Street, New York, New York 10005 (the "Corporation"), and Dayne R. Myers,
an individual residing at 6140 Monterey Road, #424, Los Angeles, California
90042 (the "Executive").
WITNESSETH
WHEREAS, the Corporation desires to employ the Executive and the Executive
desires to be employed by the Corporation, all pursuant to the terms and
conditions herein set forth;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and covenants herein contained, it is agreed as follows:
1. EMPLOYMENT; DUTIES
(a) The Corporation engages and employs the Executive, and the Executive
hereby accepts engagement and employment, as President and Chief Executive
Officer of the Corporation, to perform such services and duties as are commonly
performed by chief executive officers of similarly situated companies in the
same business as the Corporation and to perform such other services and duties
as the Board of Directors of the Corporation shall determine. As President and
Chief Executive Officer of the Corporation, the Executive shall have, subject to
the control of the Board of Directors of the Corporation, the ultimate authority
and responsibility for all of the financial, administrative and operational
aspects of the business and affairs of the Corporation including, but not
limited to, preparation of annual and long-range business plans, supervision of
all R & D, development of products and services to be sold by the Corporation,
design and implementation of marketing strategies, recruiting and hiring of
other executives and key employees, seeking and identifying opportunities for
acquisitions and arranging and securing licenses and other rights for the
Corporation, establishing and promoting franchise and other programs for
distribution of products and services to be sold by the Corporation, and
negotiating and entering into partnerships, joint ventures and other strategic
alliances and business relationships to promote the interests of the
Corporation. The Executive shall serve without additional compensation as a
director and in any other corporate office to which he may be elected by the
Board of Directors of the Corporation.
(b) The Executive shall be based at the Corporation's executive offices,
which will be located in a city to be mutually agreed upon by the Executive and
the Corporation, provided, however, that the parties acknowledge and agree that
the performance by the Executive of his duties hereunder may require significant
travel by the Executive throughout the United States (and, depending upon the
development and success of the business of the Corporation, to other countries).
<PAGE>
(c) the Executive agrees that during the term of this Agreement, the
Executive shall devote his full business time, effort and energies to the
business and affairs of the Corporation. The Executive, during the term of this
Agreement, shall not, without the prior approval of the Board of Directors of
the Corporation, perform any services for any other entity which is competitive
with the business of the Corporation, provided, however, that nothing herein
contained shall be construed as preventing the Executive from (i) completing his
present consulting obligation to EML group, or (ii) investing his personal
assets in any business which does not compete directly or indirectly with the
Corporation, provided such investment or investments do not require any services
on his part in the operation of the affairs of the entity in which such
investment is made and his participation is solely that of an investor.
2. TERM
The Executive's employment hereunder shall be for a term of three years and
four months commencing on the date hereof and continuing through December 31,
1994, unless sooner terminated or extended as hereinafter provided.
3. COMPENSATION
(a) As compensation for the performance of his duties on behalf of the
Corporation, the Executive shall be compensated as follows:
(i) The Corporation shall pay the Executive a one-time payment (the
"Signing Bonus") upon the commencement of the Executive's employment hereunder
in the aggregate amount of $10,000 less federal, state and local taxes, social
security and workers' compensation contributions and such other amounts as may
be required by law or agreed upon by the contributions (collectively, "Payroll
Deductions"). The parties agree that the Signing Bonus is, in part, in lieu of
reimbursement of any moving expenses that may be incurred by the Executive, with
respect to which expenses the Executive waives all claim for reimbursement.
(ii) The Corporation shall pay the Executive a base salary ("Base Salary")
of $75,000 per annum, with such increases as may be approved from time to time
by the Board of Directors of the Corporation, less Payroll Deductions, in
accordance with the usual payroll practice of the Corporation or as otherwise
determined by the Board of Directors of the Corporation.
(iii) The Corporation shall pay the Executive an annual bonus (the "Annual
Bonus") based upon Annual Pre-Tax Income (as hereinafter defined), pro-rated in
the event the Executive is employed for less than the full fiscal year, as
follows:
25.0% of the first $100,000 of the annual Pre-Tax Income;
10.0% of next $240,000 of Annual Pre-Tax Income;
5.0% of next $19,660,000 of Annual Pre-Tax Income;
and 2.5% of all Annual Pre-Tax Income above $20,000,000.
As used herein, the term Annual Pre-Tax Income shall mean the Corporation's
annual net income before provision for income taxes and without giving effect to
the payment of the Annual Bonus to the Executive, but exclusive of any
extraordinary earnings or losses, all as determined by the Corporation's regular
independent public accountants in accordance with generally accepted accounting
principals applied on a consistent basis.
2
<PAGE>
The Annual Bonus shall be payable to the Executive, less Payroll Deductions,
within thirty (30) days after receipt by the Corporation of the audited
financial statements for the fiscal year with respect to which such Annual Bonus
is payable.
(b) The Corporation shall reimburse the Executive for all normal, usual and
necessary expenses incurred by the Executive in the furtherance of the business
and affairs of the Corporation, against receipt by the Corporation of
appropriate vouchers or other proof of the Executive's expenditures and
otherwise in accordance with such Expense Reimbursement Policy as may be adopted
by the Board of Directors of the Corporation, provided, however, that any single
expense in excess of $2,500 and any total monthly expenses in excess of $10,000
shall require prior written authorization by the Board of Directors of the
Corporation.
(c) The Executive shall be, during the term of this Agreement, entitled to
vacations in accordance with the then current Vacation Policy of the Corporation
as from time to time adopted by the Board of Directors of the Corporation.
(d) The Corporation shall make available to the Executive such medical,
disability and life insurance and such other health benefits as the Corporation
may from time to time make available to its executives of substantially the same
authority and compensation as the Executive. Term life insurance provided shall
be at least 4 x Base Salary and shall be paid by the Corporation so long as the
Executive is employed by the Corporation.
(e) The Executive shall be entitled to all other fringe benefits and
perquisites, including, but not limited to, participation in stock option,
deferred compensation and 401K plans, as the Corporation may from time to time
make available to executives of substantially the same authority and
compensation as the Executive, provided, however, that the Annual Bonus payable
to the Executive pursuant to paragraph (a)(ii) of this Section 3 shall be the
sole and exclusive cash bonus payable to the Executive and the Executive shall
not be entitled to participate in any other cash bonus plan or program that the
Corporation may from time to time make available to any executives or other
employees of the Corporation.
(f) The Corporation shall grant to the Executive, upon the execution hereof
and the commencement of the Executive's employment with the Corporation
hereunder, a one-time bonus (the "Equity Bonus") in the amount of $800.00
payable by the issuance to the Executive of eight (8) shares (the "Shares") of
the Common Stock of the Corporation ("Common Stock"), each Share having a value
of $100.00, which Shares, upon issuance, shall represent 8% of the issued and
outstanding shares of the Common Stock of the Corporation, provided, however,
that six (6) Shares shall be held in escrow by the Corporation and released from
escrow to the Executive, as follows: (i) two (2) Shares if the Executive
continues as an employee of the Corporation hereunder through December 31, 1992;
(ii) an additional two (2) Shares if the Executive continues as an employee of
the Corporation hereunder through December 31, 1993; and (iii) the final two (2)
Shares if the Executive continues as an employee of the Corporation hereunder
through December 31, 1994; provided, however, that in the event the Corporation
(or a majority interest in the Corporation) is acquired by another company, firm
or individual (a "Change of Control"), prior to December 31, 1994 and if the
Executive is an employee of the Corporation immediately prior to such Change of
Control, then all Shares then held in escrow shall be released therefrom and
delivered to the Executive; and, further provided, that in the event the
Executive ceases for any reason whatsoever to be an employee of the Corporation
prior to December 31, 1994, then all Shares then held in escrow shall be
forfeited by the Executive and placed in the
3
<PAGE>
Corporation's treasury for cancellation thereof as a contribution to capital. In
addition, in connection with any future issuances of Common Stock (an
"Issuance") prior to an initial public offering of Common Stock by the
Corporation (an "IPO"), the Corporation shall grant the Executive a six-month
option to acquire, at a nominal price, additional shares of Common Stock (which
additional shares shall be subject, on a proportional basis, to the escrow
provisions applicable to the Shares pursuant to this paragraph (f)), as follows:
(x) if the Corporation has been Cash Flow Positive (as hereinafter defined) for
the three full months immediately preceding the Issuance, or if Total Investment
(as hereinafter defined) is $1 million or less but the Corporation has not been
Cash Flow Positive for such three month period, the number of additional shares
shall be such as, together with the Shares, will bring the percentage of Common
Stock of the Corporation held by the Executive after the Issuance to the same
percentage held by the Executive (assuming all of the Shares have vested)
immediately prior to the Issuance; and (y) if Total Investment is more than $1
million but less than $2 million and the Corporation has not been Cash Flow
Positive for the three full months immediately preceding the Issuance, then the
number of additional shares of Common Stock subject to the option pursuant to
this clause (y) shall be one-half of the number of shares of Common Stock that
would be issuable to the Executive pursuant to clause (x) if that clause had
been applicable to the Issuance. As used herein, the term "Total Investment"
shall mean the total consideration paid for all equity securities of the
Corporation (any non-cash consideration being valued at the fair market value
thereof) plus all additional capital contributed to the Corporation by any
equity security holders of the Corporation. As used herein, the term "Cash Flow
Positive" shall mean, with respect to any period, a positive net cash used by
operating activities as shown on a statement of cash flow of the Corporation for
such period. all as prepared on an accrual basis and as determined by the
Corporation's regular independent public accountants in accordance with
generally accepted accounting principles applied on a consistent basis.
(g) The Corporation shall pay the Executive a special one-time bonus (the
"Special Bonus") comprised of shares of Common Stock of the Corporation (the
"Special shares") and cash (the "Special Cash Bonus") if, prior to an IPO, the
Corporation is Cash Flow Positive for one fiscal year, which Special Bonus shall
be calculated based upon the Total Investment in the Corporation, as follows:
Total Investment No. of Special Shares Special Cash Bonus
- ---------------- --------------------- ------------------
Less than $500,000 7 $100,000
$500,000-$1 million 3 $ 50,000
More than $1 million 1 $ 25,000
Simultaneously herewith, the present shareholder of the Corporation (the
"Present Shareholder") shall deliver to the Corporation seven (7) shares of
Common Stock representing, after giving effect to the issuance of the Shares to
the Executive pursuant to paragraph (f) of the Section 3, 7% of the issued and
outstanding shares of Common Stock of the Corporation, which shares shall be
held in escrow by the Corporation for issuance to the Executive as the Special
Shares payable to the Executive as part of the Special Bonus pursuant to this
paragraph (g). All Special Shares, if any, issuable to the Executive shall be
subject to the vesting provisions of paragraph (f), to wit, one-third of any
Special Shares issuable to the Executive shall be subject to the additional
condition that the Executive continues as an employee of the Corporation
hereunder through December 31, 1992, one-third subject to the Executive
continuing as an
4
<PAGE>
employee through December 31, 1993, and the final one-third subject to the
Executive continuing as an employee through December 31, 1994, provided,
however, that all Special Shares, if any issuable to the Executive shall
immediately vest in the event of a Change of Control prior to December 31, 1994
and if the Executive is an employee of the Corporation immediately prior to such
Change of Control. Any Special Shares not earned by the Executive because the
Corporation did not become Cash Flow Positive within the parameters set forth
above, and any Special Shares not released from escrow because the Executive
failed to satisfy the continuous employment requirement for vesting thereof,
shall be released from escrow and returned to the Present Shareholder. The
Special Cash Bonus, less applicable Payroll Deductions, shall be payable to the
Executive as soon as practicable after the completion of the financial
statements for the fiscal year with respect to which the Corporation becomes
Cash Flow Positive.
(h) The Corporation shall pay the Executive a one-time bonus (the "First
Year Performance Bonus") in the amount of $25,000, less Payroll Deductions, if
the net operating loss of the Corporation for the fiscal year ending December
31, 1992, as determined by the Corporation's regular independent public
accountants in accordance with generally accepted accounting principles applied
on a consistent basis, is not more than ten (10%) percent greater than the
projected net operating loss for such fiscal year as set forth in a budget for
such year to be mutually agreed upon by the Executive and the Chairman of the
Board of the Corporation on or before December 31, 1991.
(i) If, during the term of this Agreement and prior to an IPO, the
Corporation sells any of its equity securities to investors identified and
introduced to the Corporation by the Executive, then the Corporation shall pay
to the Executive, simultaneously with the closing of any such sale of equity
securities, a fee (a "Placement Fee") equal to: (i) seven (7%) percent of the
gross proceeds from the sale of such equity securities, less (ii) all other
commissions, placement fees, finders fees, underwriting discounts, etc., payable
in connection with such sale, less, in such case, applicable Payroll Deductions,
provided, however, that nothing in this paragraph (i) shall obligate the
Corporation to sell any securities to any prospective investor identified and
introduced to the Corporation by the Executive, and, further provided, that any
sale of securities by the Corporation, and the payment of any Placement Fee to
the Executive in connection with any such sale of securities, shall be subject
to all applicable governmental and regulatory rules and regulations, including,
but not limited to, federal securities laws and state blue sky regulations.
4. REPRESENTATIONS AND WARRANTIES BY EXECUTIVE
The Executive hereby represents and warrants to the Corporation as follows:
(a) Neither the execution and delivery of this Agreement nor the
performance by the Executive of his duties and other obligations hereunder
violate or will violate any statute, law, regulation, rule, ordinance, code,
standard, order, writ, judgment, injunction, decree, determination or award, or
conflict with or constitute a default under (whether immediately, upon the
giving of notice or lapse of time or both) any prior employment agreement,
contract, or other instrument to which the Executive is a party or by which he
is bound.
(b) The Executive has the full right, power and legal capacity to enter and
deliver this Agreement and to perform his duties and other obligations
hereunder. This Agreement constitutes the legal, valid and binding obligation of
the Executive
5
<PAGE>
enforceable in accordance with its terms. No approvals or consents of any
persons or entities are required for the Executive to execute and deliver this
Agreement or perform his duties and other obligations hereunder.
(c) The Executive has been advised that the Shares have not been, and will
not be registered under the Securities Act of 1933 (the "1933 Act"),
acknowledges that he is acquiring the Shares for his own account for investment
and not with a view to, or for resale in connection with a distribution thereof,
understands that he must bear the economic risk of his investment in the Shares
for an indefinite period of time, and agrees that the Shares will not be resold
or otherwise disposed of unless registered under the 1933 Act or unless an
exemption from registration is available, and that the certificates evidencing
the Shares will bear a legend to that effect.
5. NON-COMPETITION
(a) The Executive understands and recognizes that his services to the
Corporation are special and unique and agrees that, during the term of this
Agreement and for a period of two (2) years from the date of termination of his
employment hereunder, he shall not in any manner, directly or indirectly, on
behalf of himself or any person, firm, partnership, joint venture, corporation
or other business entity ("Person"), enter into or engage in any business
Directly Competitive (as hereinafter defined) with the Corporation's business,
either as an individual for his own account, or as a partner, joint venture,
executive, agent, consultant, salesman, officer, director or shareholder of a
Person operating or intending to operate within the area that the Corporation
is, at such time, conducting its business, or solicit any customers of the
Corporation. As used herein the term "Directly Competitive" shall mean any
Person if its principal business is the sale of diet counseling services and/or
diet food products.
(b) Subsequent to the termination of this Agreement, the Executive shall
not interfere with or disrupt or attempt to disrupt the Corporation's business
relationship with any of its customers or suppliers, or solicit any of the
employees of the Corporation.
(c) In the event that the Executive breaches any provisions of this Section
5 or there is a threatened breach, then, in addition to any other rights which
the Corporation may have, the Corporation shall be entitled, without the posting
of a bond or other security, to injunctive relief to enforce the restrictions
contained herein. In the event that an actual proceeding is brought in equity to
enforce the provisions of this Section 5, the Executive shall not urge as a
defense that there is an adequate remedy at law nor shall the Corporation be
prevented from seeking any other remedies which may be available.
6. CONFIDENTIAL INFORMATION
The Executive agrees that during the course of his employment or at any
time after termination, he will not disclose or make accessible to any other
Person, the Corporation's products and services, both current and under
development, promotion and marketing programs, customer lists, trade secrets and
other confidential and proprietary business information (collectively, "Trade
Secrets").
(a) The Executive will have possession of or access to materials embodying
the Trade Secrets and other confidential, technical or business information of
the
6
<PAGE>
Corporation. The Executive agrees: (i) not to use any such information for
himself or others; and (ii) not to take any such material or reproductions
thereof from the Corporation's facilities at any time during his employment by
the Corporation, except as required in the Executive's duties to the
Corporation. The Executive agrees immediately to return all such material and
reproductions thereof in his possession to the Corporation upon request and in
any event upon termination of employment.
(b) Except with prior written authorization by the Corporation, the
Executive agrees not to disclose or publish any of the Trade Secrets or
confidential, technical or business information or material of the Corporation
or any of its affiliates or subsidiaries or of another party to whom the
Corporation owes an obligation of confidence, at any time during or after his
employment with the Corporation.
7. TERMINATION
(a) This Agreement shall begin on the effective date hereof and shall
continue for the period forth in Section 2 hereof unless sooner terminated upon
the first to occur of the following events:
(i) The death of the Executive.
(ii) Termination by the Board of Directors of the Corporation for just
cause. Any of the following actions by the Executive shall constitute just
cause:
(A) Material breach by the Executive of Section 5 or Section 6 of this
Agreement;
(B) Material breach by the Executive of any provision of this Agreement
other than Section 5 or 6 which has not been cured by the Executive within
fifteen (15) days of notice of the breach of the Agreement from the Corporation;
(C) Any action by the Executive to intentionally harm the Corporation; or
(D) The Executive's conviction of a felony.
(b) Upon termination for the reasons set forth in paragraph (a), the
Executive (or his estate in the event of termination pursuant to subparagraph
(i)), shall be entitled to receive the Base Salary accrued but unpaid as of the
date of termination, provided, however, that in the event such termination is
for the reason set forth in subparagraph (i), the Executive's estate shall also
be entitled to receive a pro rata portion of the Annual Bonus based upon the
portion of the fiscal year during which the Executive's employment continued
with the Corporation, plus the Shares and options issued to the Executive
pursuant to paragraph (f) of Section 3 to the extent, but only to the extent,
the Executive's right thereto has vested in full prior to the date of the
Executive's death.
(c) Upon termination of the Executive by the Corporation for any reason
other than the reasons set forth in paragraph (a) above, or in the event the
Executive voluntarily terminates his employment with the Corporation because of
a substantial and unjustified (that is not in response to a failure to perform)
reduction by the Corporation in the Executive's responsibilities, duties and
authority, then the Corporation shall pay the Executive the Base Salary which
the Executive would have received had his employment not been so terminated,
without any obligation to mitigate
7
<PAGE>
on the part of the Executive but subject to offset to the extent the Executive
is otherwise employed, plus the Annual Bonus for the fiscal year during which
such termination occurred, plus the Shares and options issued to the Executive
pursuant to paragraph (f) of Section 3 to the extent, but only to the extent,
the Executive's right thereto has vested in full prior to any such termination.
(d) In the event of Change of Control of the Corporation, the Executive
shall have the right to sell to the Corporation, and the Corporation shall have
the right to purchase from the Executive, all of the shares of Common Stock of
the Corporation then owned by the Executive (including the shares of Common
Stock, if any, that may vest with the Executive upon such Change of Control), at
the greater of the same price paid, on a per share basis, by the company
acquiring the Corporation (or a majority interest in the Corporation) in such
Change of Control, or, if the Common Stock is then publicly traded, the current
market price thereof. The provisions of this paragraph (d) shall survive the
termination of the Executive's employment with the Corporation for any reason
whatsoever.
8. EXTENSION
The term of this Agreement may be extended for one additional period of
three years commencing on January 1, 1995 and continuing through December 31,
1997, upon the mutual agreement of the Executive and the Corporation not more
than six (6) nor less that three (3) months prior to the expiration of the
initial term hereof, in which event the Executive's employment with the
Corporation shall continue upon such mutual agreement for such additional three
year period subject to all of the terms and conditions hereof, provided,
however, that the Executive shall not be entitled to a further Signing Bonus,
Equity Bonus, Special Bonus or First Year Performance Bonus pursuant to
paragraphs (a)(l), (f), (g) and (h), respectively, of Section 3.
9. NOTICES
Any notice or other communication under this Agreement shall be in writing
and shall be deemed to have been given: when delivered personally against
receipt therefor; one (1) day after being sent by Federal Express or similar
overnight delivery; or three (3) days after being mailed registered or certified
mail, postage prepaid, return receipt requested, to any party at the address
first set forth above, or to such other address as such party shall give by
notice hereunder to the other parties.
10. SEVERABILITY OF PROVISIONS
If any provision of this Agreement shall be declared by a court of
competent jurisdiction to be invalid, illegal or incapable of being enforced in
whole or in part, the remaining conditions and provisions or portions thereof
shall nevertheless remain in full force and effect and enforceable to the extent
they are valid, legal and enforceable, and no provision shall be deemed
dependent upon any other covenant or provision unless so expressed herein.
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11. ENTIRE AGREEMENT; MODIFICATION
This Agreement contains the entire agreement of the parties relating to the
subject matter hereof, and the parties hereto have made no agreements,
representations or warranties relating to the subject matter of this Agreement
which are not set forth herein. No modification of this Agreement shall be valid
unless made in writing and signed by the parties hereto.
12. BINDING EFFECT
The rights, benefits, duties and obligations under this Agreement shall
inure to, and be binding upon, the Corporation, its successors and assigns, and
upon the Executive and his legal representatives, heirs and legatees. This
Agreement constitutes a personal service agreement, and the performance of the
Executive's obligations hereunder may not be transferred or assigned by the
Executive.
13. NON-WAIVER
The failure of either party to insist upon the strict performance of any of
the terms, conditions and provisions of the Agreement shall not be construed as
a waiver or relinquishment of future compliance therewith, and said terms,
conditions, and provisions shall remain in full force and effect. No waiver of
any term or condition of this Agreement on the part of either party shall be
effective for any purpose whatsoever unless such waiver is in writing and signed
by such party.
14. GOVERNING LAW
This Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York without regard to principles
of conflict of laws.
15. HEADINGS
The headings of the paragraphs are inserted for convenience and shall not
affect any interpretation of this Agreement.
(concluding on next page...)
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
NEHOC, INC.
By : /s/ Lindsay Rosenwald
-------------------------
Lindsay Rosenwald, M.D.
Chairman of the Board
/s/ Dayne R. Myers
------------------------------
DAYNE R. MYERS
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<PAGE>
AMENDMENT NO. 1
TO
EMPLOYMENT AGREEMENT
AGREEMENT, made this 13th day of April, 1992, by and between Nehoc, Inc., a
New York corporation, having a place of business at 375 Park Avenue, New York,
New York 10005 (the "Corporation") and Dayne R. Myers, an individual residing at
6140 Monterey Road, #424, Los Angeles, California 90042 (the "Executive").
W I T N E S S E T H :
WHEREAS, by an agreement made and entered as of the 19th day of August 1991
(the "Prior Agreement") the Corporation employed the Executive as President and
Chief Executive Officer of the Company for the period from the date thereof
through December 31, 1994, unless sooner terminated or extended, all pursuant to
the terms and conditions set forth in the Prior Agreement; and
WHEREAS, each of the Corporation and the Executive desire to amend the
Prior Agreement; and
NOW, THEREFORE, and in consideration of the foregoing and of the terms and
conditions herein contained, the parties hereto agree as follows:
1. Defined Terms. All capitalized terms used herein, unless otherwise
specifically defined, shall have the meanings ascribed thereto in the Prior
Agreement.
2. Amendment of the Prior Agreement. The parties hereto hereby agree to
amend the Prior Agreement as set forth below:
(i) The second sentence of Section 3(f) off the Prior Agreement is hereby
amended and restated in its entirety as follows:
"(f) In addition, in connection with any future issuance of Common Stock
or any security convertible into or exchangeable for Common Stock (an
"Issuance") prior to an initial public offering of Common Stock by the
Corporation (an "IPO"), (it being specifically understood that the provisions of
the remainder of this paragraph shall terminate immediately prior to any IPO)
Executive shall have the right (the "Ownership Maintenance Right") to be issued
additional shares of Common Stock at no additional consideration (which
additional shares shall be subject, on a proportional basis, to the escrow
provisions applicable to the shares pursuant to the first sentence of this
paragraph (f)), as follows: (x) if (i) Total Investment (as hereinafter
defined) is $4 million or less or (ii) if in connection with an initial private
placement of Company securities of at least $2 million Total Investment exceeds
$4 million but is less than $10 million (the "Maximum Initial Investment") the
number of additional shares which shall, together with the Shares, bring the
percentage of Common
<PAGE>
Stock of the Corporation held by the Executive after the Issuance (assuming
conversion or exchange into shares of Common Stock of any security issued in
such private placement which by its terms is convertible or exchangeable for
shares of Common Stock) in connection with the Maximum Initial Investment to the
same percentage held by the Executive (giving effect to the vesting of all of
the Shares) immediately prior to the Issuance, and (y) to the extent Total
Investment is more than the amount of the Maximum Initial Investment but less
than $10 million, one-half of the number of shares of Common Stock that would
have been issuable to Executive pursuant to clause (x) of this paragraph had
clause (x) been applicable to the Issuance; provided, however, that the
Ownership Maintenance Right shall terminate immediately upon the Total
Investment equaling $10 million and shall not apply to any further Issuances.
(ii) In consideration of the amendment to Section 3(f) as set forth above,
Section 3(g) of the Prior Agreement is hereby deleted in its entirety and any
obligations which may have accrued under Section 3(g) of the Prior Agreement are
hereby waived by Executive.
3. Effect of Amendment. Except as amended hereby all of the terms and
conditions of the Prior Agreement shall remain in full force and effect, without
modification.
4. Binding Effect; Successors. The rights, benefits, duties and obligations
under this Agreement shall inure to, and be binding upon, the Corporation, its
successors and assigns, and upon the Executive and his legal representatives,
heirs and legatees.
5. Governing Law. This Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York without regard
to principles of conflict of laws.
6. Headings. The headings of the paragraphs are inserted for convenience
and shall not affect any interpretation of this agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
NEHOC, Inc.
By:
---------------------------
/s/ Dayne R. Myers
------------------------------
DAYNE R. MYERS
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INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT, made and entered into as of the 25th day of
May, 1993 ("Agreement"), by and between WALDEN LABORATORIES, INC., a Delaware
corporation (the "Corporation"), and DAYNE R. MYERS ("Indemnitee"):
WHEREAS, recently, highly competent persons have become more reluctant to
serve both privately and publicly-held corporations as directors, officers, or
in other capacities, unless they are provided with better protection from the
risk of claims and actions against them arising out of their service to and
activities on behalf of such corporations; and
WHEREAS, the current impracticability of obtaining adequate insurance and
the uncertainties related to indemnification have increased the difficulty of
attracting and retaining such persons; and
WHEREAS, the Board of Directors of the Corporation (the "Board") has
determined that the ability to attract and retain such persons is in the best
interests of the Corporation's shareholders and that such persons should be
assured that they will have better protection in the future; and
WHEREAS, it is reasonable, prudent and necessary for the Corporation to
obligate itself contractually to indemnify such persons to the fullest extent
permitted by applicable law, so that such persons will serve or continue to
serve the Corporation free from undue concern that they will not be adequately
indemnified; and
WHEREAS, this Agreement is a supplement to and in furtherance of Article
SEVENTH of the Certificate of Incorporation of the Corporation (the
"Certificate"); any rights granted under the Certificate and any resolutions
adopted pursuant thereto shall not be deemed to be a substitute therefor nor to
diminish or abrogate any rights of Indemnitee thereunder; and
WHEREAS, Indemnitee may serve, continue to serve and to take on additional
service for or on behalf of the Corporation;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Corporation and Indemnitee do hereby covenant and agree as
follows:
Section 1. Definitions. For purposes of this Agreement:
<PAGE>
(a) "Corporate Status" means the status of a person who is or was a
director, officer, employee, agent or fiduciary of the Corporation or any
majority owned subsidiary or of any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise which such person is
or was serving at the request of the Corporation.
(b) "Disinterested Director" means a director of the Corporation who is not
and was not a party to the Proceeding in respect of which indemnification is
sought by Indemnitee.
(c) "Expenses" means all reasonable attorneys' fees, retainers, court
costs, transcript costs, fees of experts, witness fees, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees, and all other disbursements or expenses of the types
customarily incurred in connection with prosecuting, defending, preparing to
prosecute or defend, investigating, or being or preparing to be a witness in a
Proceeding.
(d) "Independent Counsel" means a law firm, or a member of a law firm, that
is experienced in matters of corporation law and neither presently is, nor in
the past five years has been, retained to represent: (i) the Corporation or
Indemnitee in any other matter material to either such party, or (ii) any other
party to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the
Corporation or Indemnitee in an action to determine Indemnitee's rights under
this Agreement.
(e) "Proceeding" means any action, suit, arbitration, alternate dispute
resolution mechanism, investigation, administrative hearing or any other
proceeding, whether civil, criminal, administrative or investigative, except one
initiated by an Indemnitee pursuant to Section 11 of this Agreement to enforce
his rights under this Agreement.
Section 2. Services by Indemnitee. Indemnitee may at any time and for any
reason resign from any position (subject to any other contractual obligation or
any obligation imposed by operation of law), without affecting the
indemnification hereunder, except as specifically provided in this agreement.
Section 3. Indemnification - General. The Corporation shall indemnify, and
advance Expenses to, Indemnitee as provided in this Agreement to the fullest
extent permitted by applicable law in effect on the date hereof and to
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<PAGE>
such greater extent as applicable law may thereafter from time to time permit.
The rights of Indemnitee provided under the preceding sentence shall include,
but shall not be limited to, the rights set forth in the other Sections of this
Agreement.
Section 4. Proceedings Other Than Proceedings by or in the Right of the
Corporation. Indemnitee shall be entitled to the rights of indemnification
provided in this Section if, by reason of his Corporate Status he is, or is
threatened to be made, a party to any threatened, pending, or completed
Proceeding, other than a Proceeding by or in the right of the Corporation.
Pursuant to this Section, Indemnitee shall be indemnified against Expenses,
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with any such
Proceeding or any claim, issue or matter therein, if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the Corporation, and, with respect to any criminal Proceeding, had no
reasonable cause to believe his conduct was unlawful.
Section 5. Proceedings by or in the Right of the Corporation. Indemnitee
shall be entitled to the rights of indemnification provided in this Section if,
by reason of his Corporate Status, he is, or is threatened to be made, a party
to any threatened, pending, or completed Proceeding brought by or in the right
of the Corporation to procure a judgment in its favor. Pursuant to this Section,
Indemnitee shall be indemnified against Expenses, judgments, penalties, fines
and amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with any such Proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation. Notwithstanding the foregoing, no indemnification against such
Expenses shall be made in respect of any claim, issue or matter in any such
Proceeding as to which Indemnitee shall have been adjudged to be liable to the
Corporation if applicable law prohibits such indemnification unless the Chancery
Court of the State of Delaware or the court in which such Proceeding shall have
been brought or is pending, shall determine that indemnification against
Expenses may nevertheless be made by the Corporation.
Section 6. Indemnification for Expenses of a Party Who is Wholly or Partly
Successful. Notwithstanding any other provision of this Agreement, to the extent
that Indemnitee is, by reason of his Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified against all Expenses actually and reasonably incurred by him or on
his behalf in connection therewith. If Indemnitee is not wholly successful in
such
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<PAGE>
Proceeding but is successful, on the merits or otherwise, as to one or more but
less than all claims, issues or matters in such Proceeding, the Corporation
shall indemnify Indemnitee against all Expenses actually and reasonably incurred
by him or on his behalf in connection with each successfully resolved claim,
issue or matter. For the purposes of this Section and without limiting the
foregoing, the termination of any claim, issue or matter in any such Proceeding
by dismissal, with or without prejudice, shall be deemed to be a successful
result as to such claim, issue or matter.
Section 7. Indemnification for Expenses of a Witness. Notwithstanding any
other provision of this Agreement, to the extent that Indemnitee is, by reason
of his Corporate Status, a witness in any Proceeding, he shall be indemnified
against all Expenses actually and reasonably incurred by him or on his behalf in
connection therewith.
Section 8. Advancement of Expenses. The Corporation shall advance all
Expenses incurred by or on behalf of Indemnitee in connection with any
Proceeding within twenty days after the receipt by the Corporation of a
statement or statements from Indemnitee requesting such advance or advances from
time to time, whether prior to or after final disposition of such Proceeding.
Such statement or statements shall reasonably evidence the Expenses incurred by
Indemnitee and shall include or be preceded or accompanied by an undertaking by
or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately
be determined that Indemnitee is not entitled to be indemnified against such
Expenses.
Section 9. Procedure for Determination of Entitlement to Indemnification.
(a) To obtain indemnification under this Agreement in connection with any
Proceeding, and for the duration thereof, Indemnitee shall submit to the
Corporation a written request, including therein or therewith such documentation
and information as is reasonably available to Indemnitee and is reasonably
necessary to determine whether and to what extent Indemnitee is entitled to
indemnification. The Secretary of the Corporation shall, promptly upon receipt
of any such request for indemnification, advise the Board in writing that
Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for indemnification pursuant to
Section 9(a) hereof, a determination, if required by applicable law, with
respect to Indemnitee's entitlement thereto shall be made in such case: (i) (A)
by the Board by a majority vote of a quorum consisting of Disinterested
Directors, or (B) if a quorum of the Board
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<PAGE>
consisting of Disinterested Directors is not obtainable, or even if such quorum
is obtainable, if such quorum of Disinterested Directors so directs, either (x)
by Independent Counsel in a written opinion to the Board, a copy of which shall
be delivered to Indemnitee, or (y) by the shareholders of the Corporation, as
determined by such quorum of Disinterested Directors, or a quorum of the Board,
as the case may be; or (ii) as provided in Section 10(b) of this Agreement. If
it is so determined that Indemnitee is entitled to indemnification, payment to
Indemnitee shall be made within twenty (20) days after such determination.
Indemnitee shall cooperate with the person, persons or entity making such
determination with respect to Indemnitee's entitlement to indemnification,
including providing to such person, persons or entity upon reasonable advance
request any documentation or information which is not privileged or otherwise
protected from disclosure and which is reasonably available to Indemnitee and
reasonably necessary to such determination. Any costs or expenses (including
attorneys' fees and disbursements) incurred by Indemnitee in so cooperating with
the person, persons or entity making such determination shall be borne by the
Corporation (irrespective of the determination as to Indemnitee's entitlement to
indemnification) and the Corporation hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.
(c) If required, Independent Counsel shall be selected by the Board, and
the Corporation shall give written notice to Indemnitee advising him of the
identity of Independent Counsel so selected. Indemnitee may within 7 days after
such written notice of selection shall have been given, deliver to the
Corporation, a written objection to such selection. Such objection may be
asserted only on the grounds that Independent Counsel so selected does not meet
the requirements of "Independent Counsel" as defined in Section 1 of this
Agreement, and the objection shall set forth with particularity the factual
basis of such assertion. If such written objection is made, Independent Counsel
so selected may not serve as Independent Counsel unless and until a court has
determined that such objection is without merit. If, within 20 days after
submission by Indemnitee of a written request for indemnification pursuant to
Section 9(a) hereof, no Independent Counsel shall have been selected and not
objected to, either the Corporation or Indemnitee may petition the Chancery
Court of the State of Delaware, or other court of competent jurisdiction, for
resolution of any objection which shall have been made by the Corporation or
Indemnitee to the other's selection of Independent Counsel and/or for the
appointment as Independent Counsel of a person selected by such court or by such
other person as such court shall designate, and the person with respect to whom
an objection is so resolved or the person so appointed shall act as Independent
Counsel under Section
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<PAGE>
9(b) hereof. The Corporation shall pay any and all reasonable fees and expenses
of Independent Counsel incurred by such Independent Counsel in connection with
its actions pursuant to this Agreement, and the Corporation shall pay all
reasonable fees and expenses incident to the procedures of the Section 9(c),
regardless of the manner in which such Independent Counsel was selected or
appointed, Upon the due commencement date of any judicial proceeding or
arbitration pursuant to Section 11(a) (iii) of this Agreement, Independent
Counsel shall be discharged and relieved of any further responsibility in such
capacity (subject to the applicable standards of professional conduct then
prevailing).
Section 10. Presumption and Effects of Certain Proceedings.
(a) In making a determination with respect to entitlement to
indemnification hereunder, the person or persons or entity making such
determination shall presume that Indemnitee is entitled to indemnification under
the Agreement if Indemnitee has submitted a request for indemnification in
accordance with Section 9(a) of this Agreement, and the Corporation shall have
the burden of proof to overcome that presumption in connection with the making
by any person, persons or entity of any determination contrary to that
presumption.
(b) If the person, persons or entity empowered or selected under Section 9
of this Agreement to determine whether Indemnitee is entitled to indemnification
shall not have made a determination within 60 days after receipt by the
Corporation of the request therefor, the requisite determination of entitlement
to indemnification shall be deemed to have been made and Indemnitee shall be
entitled to such indemnification, absent (i) a misstatement by Indemnitee of a
material fact, or an omission of a material fact necessary to make Indemnitee's
statement not materially misleading, in connection with the request for
indemnification, or (ii) prohibition of such indemnification under applicable
law; provided, however, that such 60-day period may be extended for a reasonable
time, not to exceed an additional 30 days, if the person, persons or entity
making the determination with respect to entitlement to indemnification in good
faith require(s) such additional time for the obtaining or evaluating of
documentation and/or information relating thereto; and provided, further, that
the foregoing provisions of this Section 10 (b) shall not apply (i) if the
determination of entitlement to indemnification is to be made by the
shareholders pursuant to Section 9(b) of this Agreement and if (A) within 15
days after receipt by the Corporation of the request for such determination the
Board has resolved to submit such determination to the shareholders for
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their consideration at an annual meeting thereof to be held within 75 days after
such receipt and such determination is made thereat, or (B) a special meeting of
shareholders is called within 15 days after such receipt for the purpose of
making such determination, such meeting is held for such purpose within 60 days
after having been so called and such determination is made thereat, or (ii) if
the determination of entitlement to indemnification is to be made by Independent
Counsel pursuant to Section 9(b) of this Agreement.
Section 11. Remedies of Indemnitee.
(a) In the event that (i) a determination is made pursuant to Section 9 of
this Agreement, (ii) advancement of Expenses is not timely made pursuant to
Section 8 of this Agreement, (iii) the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section 9(b) of
this Agreement and such determination shall not have been made and delivered in
a written opinion within 90 days after receipt by the Corporation of the request
for indemnification, (iv) payment of indemnification is not made pursuant to
Section 7 of this Agreement within ten (10) days after receipt by the
Corporation of a written request therefor, or (v) payment of indemnification is
not made within ten (10) days after a determination has been made that
Indemnitee is entitled to indemnification or such determination is deemed to
have been made pursuant to Section 9 or 10 of this Agreement, Indemnitee shall
be entitled to an adjudication in the Chancery Court of the State of Delaware,
or in any other court of competent jurisdiction, of his entitlement to such
indemnification or advancement of Expenses. Alternatively, Indemnitee, at his
option, may seek an award in arbitration to be conducted by a single arbitrator
in Delaware. Indemnitee shall commence such proceeding seeking an adjudication
or an award in arbitration within 180 days following the date on which
Indemnitee first has the right to commence such proceeding pursuant to this
Section 11(a). The Corporation shall not oppose Indemnitee's right to seek any
such adjudication or award in arbitration.
(b) In the event that a determination shall have been made pursuant to
Section 9 of this Agreement that Indemnitee is not entitled to indemnification,
any judicial proceeding or arbitration commenced pursuant to this Section shall
be conducted in all respects as a de novo trial or arbitration on the merits and
Indemnitee shall not be prejudiced by reason of that adverse determination.
(c) If a determination shall have been made or deemed to have been made
pursuant to Section 9 or 10 of this Agreement that Indemnitee is entitled to
indemnification, the Corporation
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<PAGE>
shall be bound by such determination in any judicial proceeding or arbitration
commenced pursuant to this Section, absent (i) a misstatement by Indemnitee of a
material fact, or an omission of a material fact necessary to make Indemnitee's
statement not materially misleading, in connection with the request for
indemnification, or (ii) prohibition of such indemnification under applicable
law.
(d) In the event that Indemnitee, pursuant to this Section, seeks a
judicial adjudication of, or an award in arbitration to enforce, his rights
under, or to recover damages for breach of, this Agreement, Indemnitee shall be
entitled to recover from the Corporation, and shall be indemnified by the
Corporation against, any and all expenses (of the kinds described in the
definition of Expenses) actually and reasonably incurred by him in such judicial
adjudication or arbitration, but only if he prevails therein. If it shall be
determined in such judicial adjudication or arbitration that Indemnitee is
entitled to receive part but not all of the indemnification or advancement of
expenses sought, the expenses incurred by Indemnitee in connection with such
judicial adjudication or arbitration shall be appropriately prorated.
Section 12. Non-Exclusivity; Survival of Rights; Insurance; Subrogation.
(a) The rights of indemnification and to receive advancement of Expenses as
provided by this Agreement shall not be deemed exclusive of any other rights to
which Indemnitee may at any time be entitled under applicable law, the
certificate of incorporation or by-laws of the Corporation, any agreement, a
vote of shareholders or a resolution of directors, or otherwise. No termination
of this Agreement pursuant to Section 13 herein shall be effective as to any
Indemnitee with respect to any action taken or omitted by such Indemnitee in his
Corporate Status prior to such termination and he shall continue to be fully
indemnified for such actions or omissions in accordance with the terms of this
Agreement.
(b) In the event of any payment under this Agreement, the Corporation shall
be subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and take all action necessary
to secure such rights, including execution of such documents as are necessary to
enable the Corporation to bring suit to enforce such rights.
(c) The Corporation shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if and to the extent that
Indemnitee has otherwise actually received such payment under any
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insurance policy, contract, agreement or otherwise.
Section 13. Duration of Agreement. This Agreement shall continue until and
terminate upon the later of (i) five (5) years after the date that Indemnitee
shall have ceased to serve as a director, officer, employee, agent or fiduciary
of the Corporation or of any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise which Indemnitee served at the
request of the Corporation; or (b) the final termination of all pending
Proceedings in respect of which Indemnitee is granted rights of indemnification
or advancement of Expenses hereunder and of any proceeding commenced by
Indemnitee pursuant to Section 11 of this Agreement. This Agreement shall be
binding upon the Corporation and its successors and assigns and shall inure to
the benefit of Indemnitee and his heirs, executors and administrators.
Section 14. Severability. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable for any reason whatsoever:
(a) the validity, legality and enforceability of the remaining provisions of
this Agreement (including, without limitation, each portion of any Section of
this Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby; and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, each
portion of any Section of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
Section 15. Exception to Right of Indemnification or Advancement of
Expenses. Except as provided in Section 11(d), Indemnitee shall not be entitled
to indemnification or advancement of Expenses under this Agreement with respect
to any Proceeding, or any claim therein, brought or made by him against the
Corporation.
Section 16. Identical Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute one and the same Agreement.
Only one such counterpart signed by the party against whom enforceability is
sought needs to be produced to evidence the existence of this Agreement.
Section 17. Headings. The headings of the paragraphs
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of this Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof.
Section 18. Modification and Waiver. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
Section 19. Notice by Indemnitee. Indemnitee agrees promptly to notify the
Corporation in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding
or matter which may be subject to indemnification or advancement of Expenses
covered hereunder.
Section 20. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if (i) delivered by hand and receipted for by the party to whom such
notice or other communication shall have been directed, or (ii) mailed by
certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed:
(a) If to Indemnitee, to:
Dayne R. Myers
Walden Laboratories, Inc.
2330 Marinship Way - Suite 301
Sausalito, CA 94965
(b) If to the Corporation, to:
Walden Laboratories, Inc.
Marina Plaza
2330 Marinship Way - Suite 301
Sausalito, CA 94965
or to such other address as may have been furnished to Indemnitee by the
Corporation or to the Corporation by Indemnitee, as the case may be.
Section 21. Governing Law. The parties agree that this Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Delaware.
Section 22. Miscellaneous. Use of the masculine
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pronoun shall be deemed to include usage of the feminine pronoun where
appropriate.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
WALDEN LABORATORIES, INC.
By: /s/ John F. Dee
-----------------------------
Name: John F. Dee
Title: Assistant Secretary &
Chief Financial Officer
INDEMNITEE
/s/ Dayne R. Myers
----------------------------------
Dayne R. Myers
-11-
Exhibit 10.6
CONSULTING AGREEMENT
CONSULTING AGREEMENT dated as of February 22, 1996 (the "Agreement") by and
between Walden Laboratories, Inc., a Delaware corporation (the "Company") and
Dr. Carl Spana ("Consultant").
WHEREAS the Company desires that it be able to call upon the experience and
knowledge for consultation services and advice;
WHEREAS Consultant is willing to render such services to the Company on the
terms and conditions hereinafter set forth in this Agreement;
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Term of Agreement. Commencing on the Effective Date (as defined below),
Consultant shall be retained by the Company for a period of three years, which
shall be renewable upon agreement of the parties for additional one year
periods. The initial period and any extensions or renewals thereof shall
constitute the "Consulting Term".
2. Position and Responsibilities. Consultant agrees to serve as a
consultant to the Company and to render such advice and services to the Company
as may be reasonably required by the Company including, without limitation,
advising the Company with respect to the direction of the Company's research and
product development and business development activities. During the Consulting
Term, Consultant shall report directly to the President and/or Chief Executive
Officer of the Company.
3. Compensation. The Company shall pay Consultant at a rate of $25,000 per
year payable monthly commencing upon the date in which the Company shall have
raised $1,000,000 through the sale of equity securities of the Company (the
"Effective Date").
4. Expenses and Other Facilities. Consultant shall be reimbursed in
accordance with the policies of the Company for necessary and reasonable
business expenses incurred by Consultant in connection with performance of his
duties hereunder.
5. Termination. This Agreement and Consultant's retention hereunder may be
terminated prior to the end of the Consulting Term for any reason upon thirty
days written notice by either party.
6. Non-Competition. During the Consulting Term, and for a period of one
year thereafter, if this Agreement and Consultant's retention hereunder is
terminated pursuant to Section 5 herein, Consultant shall not directly or
indirectly be or remain employed or retained by, or render any services for any
person, firm, partnership, joint venture, association, corporation or other
business organization, entity or enterprise engaged in any business, which is
competitive in with the immunotherapy business of the Company or any of its
subsidiaries or affiliates are engaged.
7. Confidentiality. During and after the Consulting Term, Consultant shall
not disclose or use for Consultants own benefit or the benefit or purposes of
any other person, firm, partnership, joint venture, association, corporation or
other business organization,
<PAGE>
entity or enterprise other than the Company and any of it subsidiaries or
affiliates or any trade secrets, information, data, or other confidential
information relating to customers, development programs, costs, marketing,
trading, investment, sales activities, promotion, credit and financial data,
manufacturing processes, financing methods, plans or the business and affairs of
the Company generally, or of any subsidiary or affiliate of the Company;
provided that the foregoing shall not apply to information which is not unique
to the Company or which is generally known to the industry or the public other
than as a result of Consultant's breach of this covenant.
8. Specific Performance. Consultant acknowledges and agrees that the
Company's remedies at law for a breach or threatened breach of any of the
provisions of Section 6 or Section 7 would be inadequate and, in recognition of
this fact, Consultant agrees that, in the event of such a breach or threatened
breach, in addition to any remedies at law, the Company, without posting any
bond, shall be entitled to obtain equitable relief in the form of specific
performance, temporary restraining order, temporary or permanent injunction or
any other equitable remedy which may then be available.
9. Consultant Not an Employee. The Company and Consultant hereby
acknowledge and agree that Consultant shall perform the services hereunder as an
independent contractor and not as an employee of the Company. Consultant agrees
that he will file his own tax returns on the basis of his status as an
independent contractor for the reporting of all income, social security,
employment and other taxes due and owing on the consideration received by him
under this Agreement and that he is responsible for the payment of such taxes.
Similarly, Consultant shall not be entitled to benefits specifically associated
with employment status, such as medical, dental and life insurance, stock or
stock options of the Company and shall not be entitled to participate in any
other employer benefit programs, except as is set forth in a separate
Subscription Agreement between the parties hereto. As an independent contractor,
Consultant acknowledges, understands and agrees that he is not, and shall not
represent himself to third parties as being, the agent or representative of the
Company nor does he have, and shall not represent himself to third parties as
having, power or authority to do or take any action for or on behalf of the
Company, as its agent, representative or otherwise, except as specifically
herein set forth.
10. Miscellaneous.
(a) Governing Law; No Liability of Consultant. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
without regard to principles of conflicts of laws, Consultant shall not be
subject to liability for breach of this Agreement by reason of his termination
of his retention hereunder.
(b) Entire Agreement; Amendment. This Agreement contains the entire
understanding of the parties with respect to the retention of Consultant by the
Company. There are no restrictions, agreements, promises, warranties, covenants
or undertakings between the parties with respect to the subject matter herein
other than those expressly set forth herein. This Agreement may not be altered,
modified, or amended except by written instrument signed by the parties hereto.
(c) No Waiver. The failure of a party to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver of
such party's rights or deprive such party of the right thereafter to insist upon
strict adherence to that therm of any other term of this Agreement.
(d) Severability. In the event that any one or more of the provisions of
<PAGE>
this Agreement shall be or become invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
of this Agreement shall not be affected thereby.
(e) Arbitration. Any dispute between the parties to this Agreement arising
from or relating to the terms of this Agreement or the retention of Consultant
by the Company shall be submitted to binding arbitration in New York under the
auspices of the American Arbitration Association.
(f) Successors; Binding Agreement. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
representatives, successors and assigns.
(g) Counterparts; Effectiveness. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective when each party hereto shall have received a counterpart
hereof signed by the other party hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
Consultant:
/s/ Carl Spana
----------------------------------
Dr. Carl Spana
Company:
WALDEN LABORATORIES, INC.
/s/ Jerry A. Weisbach
- ----------------------------------
By: Jerry A. Weisbach
Its: Chairman
Exhibit 10.7
AVAX Technologies, Inc.
375 Park Avenue, Suite 1501
New York, New York 10152
Phone (212) 832-4330
Fax (212) 832-4389
SCIENTIFIC ADVISORY BOARD AGREEMENT
This Agreement is made as of March 25, 1996 (the "Effective Date") between
Jerry A. Weisbach, Ph.D., whose present address is 1351 Glendaloch Circle, Ann
Arbor, Michigan, 48104 (hereinafter called "Dr. Weisbach") and Avax
Technologies, Inc., a Delaware corporation, having a place of business at 375
Park Avenue, Suite 1501, New York, New York, 10152 (hereinafter called "AVAX").
WITNESSETH:
Whereas, Dr. Weisbach is an expert in scientific matters of particular
importance to the advancement of AVAX's technology;
Whereas, Dr. Weisbach wishes, and has the competence, to act as a Member of
the Scientific Advisory Board of AVAX; and
Whereas, AVAX wishes to retain Dr. Weisbach to assist it in the advancement
of its business and scientific interests and to utilize Dr. Weisbach's expertise
in its research and development programs.
Now, therefore, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereby agree as follows:
<PAGE>
ARTICLE I. TERM OF AGREEMENT.
This agreement shall be in effect for a period of three (3) years from the
effective date. During this initial three year period, this Agreement may be
terminated by Dr. Weisbach or AVAX upon thirty (30) days prior written notice.
The term of this Agreement shall automatically be extended for consecutive
periods of one year each, unless either party shall give written notice of
non-renewal, to the other, at least thirty (30) days prior to the expiration of
the initial, or then current renewal, term.
ARTICLE II. RESPONSIBILITIES.
Dr. Weisbach agrees to serve under the term of this Agreement to the best
of his abilities as a Member of the Scientific Advisory Board.
ARTICLE III. ADVISORY FUNCTION.
Dr. Weisbach, as a member of the Scientific Advisory Board to AVAX, agrees
to meet at least semi-annually to advise AVAX of advances in his field of
expertise, and to consult with AVAX, assessing the feasibility of research and
development programs under consideration by AVAX and offering guidance for
current and future research and clinical applications of AVAX's technology. In
addition to these meetings, Dr. Weisbach further agrees to meet individually and
in groups as called upon from time to time to review and advise AVAX on its
research, development and commercialization of its technology and to consult at
reasonable times and upon reasonable prior notice with AVAX and AVAX's
management, agents, employees and other Scientific Advisors on projects.
In order to protect AVAX's patent rights, any actual research done by Dr.
Weisbach under this agreement shall be done at AVAX's place of business or at
some other
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<PAGE>
location approved in advance by AVAX and no research under this Agreement shall
be done by Dr. Weisbach at his employer's place of business.
ARTICLE IV. COMPENSATION.
AVAX hereby agrees to compensate Dr. Weisbach for his services hereunder
the sum of Two Thousand Dollars ($2,000) per meeting of the Scientific Advisory
Board. In addition, the Board of Directors of AVAX, in their discretion, may
grant options to Dr. Weisbach to purchase shares of the Common Stock, par value
$.001, of AVAX.
ARTICLE V. EXPENSES.
AVAX shall prompty reimburse Dr. Weisbach for all reasonable and necessary
expenses incurred by him in connection with his services hereunder, as approved
by AVAX.
ARTICLE VI. CONFIDENTIALITY AGREEMENT.
Dr. Weisbach recognizes and acknowledges that in the course of his duties
Dr. Weisbach may receive confidential or proprietary information owned by AVAX,
or other third parties with whom AVAX has an obligation of confidentiality. Dr.
Weisbach therefore agrees to keep confidential and not disclose or use (except
in connection with the fulfillment of his consulting duties to AVAX under this
Agreement) all confidential or proprietary information owned by, or received by
or on behalf of, AVAX. "Confidential Information" shall include, but shall not
be limited to, confidential or proprietary scientific or technical information,
business plans, buy or sell recommendations, current or proposed investment
positions of AVAX, or changes to, or proposed changes to, AVAX's investment
portfolio. "Confidential Information" shall not include, however, information in
the public domain,
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<PAGE>
information disclosed to Dr. Weisbach by a third party entitled to disclose it
without any obligation of confidentiality, or, information already known to Dr.
Weisbach prior to its receipt.
ARTICLE VII. INSIDER TRADING.
Dr. Weisbach recognizes that in the course of his duties hereunder, Dr.
Weisbach may receive from AVAX or others information which may be considered
"material, non-public information" concerning a public company that is subject
to the reporting requirements of the Securities and Exchange Act of 1934, as
amended. Dr. Weisbach agrees not to:
(i) Buy or sell any security, option, bond or warrant while in possession
of relevant material, nonpublic information received from AVAX or
others in connection herewith;
(ii) Provide AVAX with information with respect to any public company that
may be considered material, nonpublic information;
(iii) Provide any person with material, nonpublic information, received
from AVAX, including any relative, associate, or other individual who
intends to, or may, (a) trade securities with respect to the company
which is the subject of such information or (b) otherwise directly or
indirectly benefit from such information.
ARTICLE VIII. USE OF NAME.
Dr. Weisbach consents to the use of his name in various reports, brochures
or other documents produced by or on behalf of AVAX, including any and all
documents filed
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<PAGE>
with the Securities and Exchange Commission.
ARTICLE IX. SURVIVAL.
The provisions of this Agreement relating to confidentiality and insider
trading shall survive for three years after termination orr expiration hereof.
ARTICLE X. MISCELLANEOUS.
Dr. Weisbach shall keep confidential from AVAX all technical, scientific,
and other information concerning the business and research plans of Dr.
Weisbach's other employers.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
AVAX TECHNOLOGIES, INC. JERRY A. WEISBACH, Ph.D.
By : /s/ Carl Spana /s/ JERRY A. WEISBACH
---------------------------- -------------------------------
Its: President
----------------------------
5
Exhibit 10.8
CONSULTING AGREEMENT
This Consulting Agreement is made and entered into as of the 9th day of
May, 1996, between Walden Laboratories, Inc., a Delaware Corporation (the
"Company") and Dr. David Berd (the "Consultant").
Whereas, the Company desires to engage Consultant to provide consulting
services to it in connection with its business; and
Whereas, the Consultant desires to provide consulting services to the
Company.
Now therefore, in consideration of and for the mutual promises and
covenants contained herein, and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. Consulting Services.
(a) Subject to the terms and conditions hereinafter set forth, the Company
retains Consultant, and Consultant hereby accepts such retention by the Company,
(i) to undertake on a best-efforts basis such consultative and
advisory services as the Company shall reasonably request, in connection
with the Company's business, including, but not limited to, the following:
A. The Company's research and development of its
immunotherapeutic vaccines for the treatment of malignant
melanoma and other carcinomas and related technology in
which the Company develops a proprietary or other interest.
B. The Company's gathering, implementation and recording of
data relating to the development of the aforementioned
technology.
C. The Company's efforts to identify qualified scientists and
management personnel and to evaluate the performance of its
scientific and management personnel.
(ii) as requested, to review the Company's research plans and their
progress, discuss new areas of investigation for the Company, review
research contracts the Company may wish to execute, review the Company's
products and marketing plans and their progress and advise the Company on
product development and marketing matters.
<PAGE>
(b) The Company and Consultant hereby acknowledge and agree that Consultant
shall perform the services specified in paragraph (a) above (collectively, the
"Consulting Services") as an independent contractor and not as an employee of
the Company. Consultant agrees that he will file his own tax returns on the
basis of his status as an independent contractor for the reporting of all
income, social security, employment and other taxes due and owing on the
consideration received by him under this Agreement and that he is responsible
for the payment of such taxes. Similarly, Consultant shall not be entitled to
benefits specifically associated with employment status, such as medical, dental
and life insurance, stock or stock options of the Company and shall not be
entitled to participate in any other employer benefit programs, unless otherwise
stipulated in the License Agreement between Thomas Jefferson University and the
Company, dated November 20, 1995 (the "License Agreement"). As an independent
contractor, Consultant acknowledges, understands and agrees that he is not, and
shall not represent himself to third parties as being, the agent or
representative of the Company nor does he have, and shall not represent himself
to third parties as having, power or authority to do or take any action for or
on behalf of the Company, as its agent, representative or otherwise, except as
specifically herein set forth.
(c) All such services shall be rendered in the Philadelphia area, unless
mutually agreed by Consultant and the Company, at such times as are consistent
with Consultant's obligations to his Primary Employer (as defined herein).
Without limiting the generality of the foregoing, Consultant shall not be
required to expend more than two (2) days per month rendering services under
this Agreement.
2. Consideration of Consulting Services.
(a) In consideration of Consultant's performance of the Consulting
Services, during the Term (as defined below in Section 4) the Company shall pay
Consultant a consulting fee at the rate of thirty-six thousand dollars ($36,000)
per year, to be paid to Consultant on a monthly basis in twelve (12) equal
monthly installments of three thousand dollars ($3,000) each (the "Consulting
Fee"), payable on the fifteenth day of each month, with the first such payment
accruing on January 1, 1996 (the "Effective Date"), provided that no such
payments shall be made until (i) the Company conducts the First Financing as
described in the License Agreement or (ii) June 15, 1996, whichever is earlier.
All accrued amounts shall be payable within fifteen (15) days of the First
Financing or June 15, 1996, whichever is earlier. Consultant shall receive upon
the execution of this Agreement an additional one thousand and five hundred
dollars ($1,500) as consideration for entering into this Agreement.
(b) Notwithstanding the foregoing, the Company's obligation to pay
Consultant any compensation shall be conditioned upon Consultant's continuing
performance during the period to which the compensation relates of all of his
obligations to the Company arising under this Agreement.
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<PAGE>
3. Reimbursement of Expenses. The Company shall reimburse Consultant for
his reasonable out-of-pocket expenses incurred in connection with the Consulting
Services; provided that (i) the incurrence of any significant item of expense in
excess of $100 per week plus air travel expenses on business for the Company
must be approved in writing by the President of the Company or his designee, and
(ii) Consultant must submit evidence reasonably satisfactory to the Company of
the incurrence of any expense. Reimbursement as provided for herein shall be
made to Consultant within thirty (30) days of receipt by the Company of
satisfactory evidence of the incurrence of such expense and Consultant's written
request for such reimbursement. Reimbursement for mileage for automobile travel
in Consultant's own vehicle shall be at the rate of $0.310 per mile. Expenses
related to meals and entertainment shall generally not be considered a
reimbursable expense but may be treated as such if directly related to
Consultant's services and Company business and approved in advance by the
President or his designee.
4. Terms and Termination.
(a) The term of this Agreement (together with any renewals hereof upon
mutual agreement, the "Term") shall commence on the Effective Date and shall
expire three years after the Effective Date of this Agreement unless sooner
terminated upon the first to occur of the following events:
(i) The death of the Consultant;
(ii) Merger or consolidation in which either more than fifty percent
of the voting power of the Company is transferred or the Company is not the
surviving entity, or sale or other disposition of all or substantially all
the assets of the Company;
(iii) Upon thirty (30) days prior written notice to Consultant, the
discontinuance by the President or his designee or the Board of Directors
of the development of the Consultant's technology;
(iv) At the option of the Company, upon the termination of the
Clinical Study and Research Agreement between Thomas Jefferson University
and the Company, dated November 20, 1995 (the "Research Agreement"), but
only in the event that any such termination is a direct result of
Consultant's acts or omissions.
(v) Termination by the President or his designee or the Board of
Directors of the Company for just cause. Any of the following actions by
the Consultant shall constitute just cause:
(A) Material breach by the Consultant of Sections 5, 7, 12 or 13
of this Agreement;
(B) Material breach by the Consultant of any provision of this
Agreement other than Sections 5, 7, 12 or 13 which is not
cured by the Consultant
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<PAGE>
within thirty (30) days of notice thereof from the Company;
(C) The conviction of the Consultant of a felony;
(vi) Termination by the Consultant for just cause. Any of the
following actions or omissions by the Company shall constitute just cause:
(A) Material breach by the Company of any provision of this
Agreement which is not cured by the Company within thirty
(30) days of notice thereof from the Consultant; or
(B) Any action by the Company to intentionally harm the
Consultant.
(vii) Termination by the Consultant, upon 180 days prior notice to the
Company, at Consultant's discretion.
(viii) Termination by Consultant, upon sixty (60) days prior written
notice, upon the occurrence of a Permitted Assignment as defined in Section
15(f) below.
(b) Upon termination by Company pursuant to either subparagraph (i) or (v)
of paragraph (a) above or by Consultant other than pursuant to subparagraph (vi)
of paragraph (a) above, the Consultant (or his estate in the event of
termination pursuant to subparagraph (i)), shall be entitled to receive the
Consulting Fee and expense reimbursement accrued but unpaid as of the date of
termination.
(c) Upon termination by the Company pursuant to subparagraphs (ii), (iii)
or (iv) of paragraph (a) above, then the Company shall continue to pay the
Consultant, as the Consultant's sole damages for such termination, for six
months following such termination the Consulting Fee (at the rate in effect at
the date of termination) which the Consultant would have received during the six
months following the termination of this Agreement had his consulting services
not been so terminated.
(d) Upon termination by the Company without just cause or by the Consultant
for any reason set forth in subparagraph (vi) of paragraph (a) above, then the
Company shall continue to pay the Consultant, as the Consultant's sole damages
for such termination, for six months following such termination the Consulting
Fee (at the rate in effect at the date of termination) which the Consultant
would have received during the six months following the termination of this
Agreement had his consulting services not been so terminated.
(e) The provisions of Sections 5 through 16 hereof shall survive any
termination of this Agreement at the expiration of the Term or prior thereto.
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<PAGE>
5. Ownership of Proprietary Information.
(a) Consultant agrees that all information that has been created,
discovered or developed by the Company, its subsidiaries, affiliates, successors
or assigns (collectively, the "Affiliates") (including, without limitation,
information relating to the development of the Company's business created,
discovered, developed or made known to the Company or the Affiliates by
Consultant during the Term and information relating to Company's customers,
suppliers, consultants, and licensees) and/or in which property rights have been
assigned or otherwise conveyed to the Company or the Affiliates, shall be the
sole property of the Company or the Affiliates, as applicable, and the Company
or the Affiliates, as the case may be, shall be the sole owner of all patents,
copyrights and other rights in connection therewith, including but not limited
to the right to make application for statutory protection. All of the
aforementioned information is hereinafter called "Proprietary Information." By
way of illustration, but not limitation, Proprietary Information includes trade
secrets, processes, discoveries, structures, inventions, designs, ideas, works
of authorship, copyrightable works, trademarks, copyrights, formulas, data,
know-how, show-how, improvements, inventions, product concepts, techniques,
information or statistics contained in, or relating to, marketing plans,
strategies, forecasts, blueprints, sketches, records, notes, devices, drawings,
customer lists, patent applications, continuation applications,
continuation-in-part applications, file wrapper continuation applications and
divisional applications and information about the Company's or the Affiliates'
employees and/or consultants (including, without limitation, the compensation,
job responsibility and job performance of such employees and/or consultants).
(b) Consultant further agrees that at all times, both during the Term and
after the termination of this Agreement, he will keep in confidence and trust
all Proprietary Information, and he will not use or disclose any Proprietary
Information or anything directly relating to it without the written consent of
the Company or the Affiliates, as appropriate, except as may be necessary in the
ordinary course of performing the Consulting Services hereunder and except for
academic, non-commercial research purposes. Consultant acknowledges that the
Proprietary Information constitutes a unique and valuable asset of the Company
and each Affiliate acquired at great time and expense, which is secret and
confidential and which will be communicated to Consultant, if at all, in
confidence in the course of his performance of the Consulting Services, and that
any disclosure or other use of the Proprietary Information other than for the
sole benefit of the Company or the Affiliates and except for academic,
non-commercial research purposes with the prior written approval of the Board of
Directors would be wrongful and could cause irreparable harm to the Company or
the Affiliates, as the case may be.
Notwithstanding the foregoing, the parties agree that, at all such times,
Consultant is free to use (i) information as permitted under the terms of the
License Agreement and the Research Agreement, (ii) information in the public
domain not as a result of a breach of this Agreement, (iii) information lawfully
received from a third party and (iv) Consultant's own skill, knowledge, know-how
and experience to whatever extent and in whatever way he wishes, in each case
consistent with his obligations as Consultant and that, at all times, Consultant
is free to conduct any non-commercial research not relating to immunotherapeutic
vaccines for the treatment of
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<PAGE>
malignant melanoma and other carcinomas and related technology. Consultant,
however, shall not use information provided to the Consultant by the Company
when the Company is bound by the terms of a Confidentiality Agreement.
6. Disclosure of Inventions.
(a) During the Term, Consultant agrees that he will promptly disclose to
the Company, or any persons designated by it, all improvements, inventions,
designs, ideas, works of authorship, copyrightable works, discoveries,
trademarks, copyrights, trade secrets, formulas, processes, structures, product
concepts, marketing plans, strategies, customer lists, information about the
Company's or the Affiliates' employees and/or consultants (including, without
limitation, job performance of such employees and/or consultants), techniques,
blueprints, sketches, records, notes, devices, drawings, know-how, data, whether
or not patentable, patent applications, continuation applications,
continuation-in-part applications, file wrapper continuation applications and
divisional applications, made or conceived or reduced to practice or learned by
his, either alone or jointly with others, while providing the Consulting
Services which are related to or useful in the actual or anticipated business of
the Company or the Affiliates, or result from use of premises or equipment
owned, leased or contracted for by the Company or the Affiliates (all said
improvements, inventions, designs, ideas, works of authorship, copyrightable
works, discoveries, trademarks, copyrights, trade secrets, formulas, processes,
structures, product concepts, marketing plans, strategies, customer lists,
information about the Company's or the Affiliates' employees and/or consultants,
techniques, blueprints, sketches, records, notes, devices, drawings, know-how,
data, patent applications, continuation applications, continuation-in-part
applications, file wrapper continuation applications and divisional applications
shall be collectively hereinafter called "Inventions"). Notwithstanding any
provisions to the contrary herein, however, Consultant agrees that Consultant
shall not disclose to the Company any improvements, inventions, designs, ideas,
works of authorship, copyrightable works, discoveries, trademarks, copyrights,
trade secrets, formulas, processes, structures, product concepts, marketing
plans, strategies, customer lists, blueprints, sketches, records, notes,
devices, drawings, techniques, know-how, data, patent applications, continuation
applications, continuation-in-part applications, file wrapper continuation
applications and divisional applications which Consultant possesses under the
obligation of secrecy or confidentiality to a third party.
(b) Consultant understands and acknowledges that all original works of
authorship which are made by him (solely or jointly with others) while
performing the Consulting Services and which are protectable by copyright are
being created at the instance of the Company and are "works made for hire," as
that term is defined in the United States Copyright Act (17 USCA, Section 101).
7. Assignment of and Assistance with Inventions.
(a) To the extent it does not conflict with the obligations the Consultant
has to third parties, Consultant hereby assigns to the Company all right, title
and interest he may have or acquire in all Inventions that arise out of the
Consulting Services (the "Qualified Inventions") and agrees that all Qualified
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<PAGE>
Inventions shall be the sole property of the Company and its assigns, and the
Company and its assigns shall be the sole owner of all patents, copyrights and
other rights in connection therewith. Consultant further agrees to assist the
Company in every proper way (but at the Company's expense) to obtain and from
time to time enforce patents, copyrights or other rights on said Qualified
Inventions in any and all countries, and to that end Consultant will execute all
documents necessary:
(i) to apply for, obtain and vest in the name of the Company alone (unless
the Company otherwise directs) letters patent, copyrights or other
analogous protection in any country throughout the world and when so
obtained or vested to renew and restore the same; and
(ii) to defend any opposition proceedings in respect of such applications
and any opposition proceedings or petitions or applications for
revocation of such letters patent, copyright or other analogous
protection.
(b) Consultant's obligation to assist the Company in obtaining and
enforcing patents and copyrights for the Qualified Inventions in any and all
countries shall continue beyond the Term or earlier termination of this
Agreement pursuant to Section 4 hereof, but the Company agrees to compensate
Consultant at a reasonable rate after the expiration of the Term or such earlier
termination for time actually spent by Consultant at the Company's request on
such assistance.
(c) It is recognized, understood and agreed that any Qualified Inventions
arising out of the performance of the Research Agreement shall be governed by
the Research Agreement.
8. No Breach of Duty. Consultant represents and warrants, to the best of
his knowledge, that the performance by him of all the terms of this Agreement
will not breach any agreement or duty to keep in confidence proprietary
information acquired by Consultant in confidence or in trust from a commercial
venture prior to his engagement hereunder. However, it is explicitly understood
that Consultant will have such information from his Primary Employer (as defined
below), which he is not permitted to use pursuant to the License Agreement and
the Research Agreement. Consultant further represents and warrants, to the best
of his knowledge, that he has not entered into, and, subject to Section 9
hereof, Consultant hereby agrees to not enter into, any agreement either written
or oral in conflict herewith.
9. Primary Employer. The Company acknowledges that Consultant's present
primary employer is Thomas Jefferson University and that Consultant may become
employed in the future by another employer. Thomas Jefferson University and such
other employers are referred herein as the "Primary Employer". The Company
acknowledges that Consultant may perform research for the Primary Employer in
areas related to the business of the Company or otherwise of interest to the
Company and that the Primary Employer will be the owner of all Inventions
resulting from Consultants research for the Primary Employer. While Consultant
will endeavor to avoid conflicts between his responsibilities and obligations to
the Primary
-7-
<PAGE>
Employer, the Company agrees that, in the event of conflict, Consultant's
obligations to the Primary Employer will take precedence.
10. No Prior Employer Property.
(a) Consultant undertakes that, in the performance of the Consulting
Services, Consultant will not use any materials or documents of a former or
current employer which are not generally available to the public, unless
Consultant or the Company has obtained written authorization from the current or
former employer for their possession and use.
(b) Consultant hereby represents and notifies the Company that the only
materials or documents of a former or current employer which are not generally
available to the public that Consultant intends to use in the performance of the
Consulting Services are identified on Exhibit B attached hereto.
11. Non-Solicitation. During the Term, and for two (2) years thereafter,
Consultant shall not, directly or indirectly, without the prior written consent
of the Company:
(a) solicit or induce any employee of the Company or any Affiliate to leave
the employ of the Company or any Affiliate or hire for any purpose any employee
of the Company or any Affiliate or any employee who has left the employment of
the Company or any Affiliate within six months of the termination of said
employee's employment with the Company; or
(b) solicit or accept employment or be retained by any party who, at any
time during the Term, was a customer or supplier of the Company or any Affiliate
where his position will be related to the business of the Company; or
(c) solicit or accept the business of any customer or supplier of the
Company or any Affiliate with respect to products similar to those supplied by
the Company.
Consultant's agreements under Sections 12(b) and 12(c) above shall not apply to
Consultant's employment with his Primary Employer.
12. Agreement Not to Compete. Except for (i) Consultant's employment with a
Primary Employer and (ii) Consultant's use of research and clinical study
information for his own non-commercial purposes without payment of royalties (as
permitted under and subject to the provisions of the License Agreement and the
Research Agreement), Consultant agrees that during the Term, and, for a period
of eighteen (18) months thereafter, Consultant will not, directly or indirectly,
engage or become interested (whether as an owner, stockholder, partner, lender,
investor, director, officer, employee, consultant or otherwise) in any activity,
business or enterprise that shall, at the time, be competitive with any
significant part of the business conducted by the Company or any Affiliate as to
which Consultant rendered services hereunder (which for purposes of this Section
13 shall be deemed to be competitive if it involves predominantly similar types
of products or services and is
-8-
<PAGE>
directed at predominantly similar types of customers as any business of the
Company or any Affiliate as to which Consultant rendered services hereunder
(except that ownership of not more than 1% of the outstanding securities of any
class of any corporation that are listed on a national securities exchange or
traded in the over-the-counter market shall not be considered a breach of this
Section 13)).
In connection with the foregoing, Consultant affirms, represents, and
acknowledges that Consultant's experience and capabilities are such that the
enforcement of this Agreement will not prevent Consultant from obtaining
employment or a position as a consultant in another line of business different
from that carried on by the Company and the Affiliates and permitted under this
Agreement.
13. Remedies for Breach. Consultant understands and agrees that any breach
of Sections 5, 7, 11 and 12 of this Agreement by the Consultant could cause
irreparable damage to the Company, and to the Affiliates and that monetary
damages alone would not be adequate and, the event of such breach, the Company
shall have, in addition to any and all remedies of law, the right to an
injunction, specific performance or other equitable relief to prevent or redress
the violation of Consultant's obligations under such Sections.
14. Severability. Every provision of this Agreement is intended to be
severable. If any term or provision hereof is deemed unlawful or invalid in any
jurisdiction for any reason whatsoever, such unlawfulness or invalidity shall
not affect the validity of the remainder of this Agreement or the enforceability
of such term or provision in any other jurisdiction. To the extent that any such
term or provision is held to be unlawful or invalid, the parties agree to reform
such term or provision in such a way which will be enforceable in the
jurisdiction to which such holding applies, and which will reflect, as nearly as
permissible, the intention of the parties.
15. Miscellaneous.
(a) Any notice or other communication between parties shall be sufficiently
given if sent by certified or registered mail, postage prepaid, if to the
Company, addressed to it at Walden Laboratories, Inc., 375 Park Avenue, New
York, N.Y., 10019, Attention: Carl Spana, or if to Consultant, addressed to
Consultant at the address set forth below Consultant's name on the signature
page hereof with a copy to Gary P. Biehn, Esquire, White and Williams, 1800 One
Liberty Place, 1650 Market Street, Philadelphia, PA 19103-7395, or to such
address as may hereafter be designated in writing by one party to the other.
Such notice or other communication shall be deemed to be given on the date of
receipt.
(b) This Agreement embodies the entire agreement and understanding between
the Company and Consultant regarding the subject matter hereof and supersedes
any and all negotiations, prior discussions and preliminary and prior agreements
and understandings related to the central subject matter thereof.
-9-
<PAGE>
(c) This Agreement shall in all respects be governed by, and contained and
enforced in accordance with the internal substantive laws of the State of New
York and not the law of conflict of laws.
(d) This Agreement may be executed in one or more counterparts, each of
which, when so executed shall be deemed to be an original and all of which
counterparts, taken together, shall constitute one and the same instrument.
(e) Neither this Agreement nor any term hereof may be amended, modified,
supplemented or waived save in a written instrument executed by each of the
parties hereto.
(f) This Agreement and the rights and duties appertaining thereto may not
be assigned by either party without first obtaining the written consent of the
other. Any such purported assignment, without the written consent of the other
party, shall be null and of no effect. Notwithstanding the foregoing, the
Company may assign this Agreement (i) to a purchaser, merging or consolidating
corporation, or acquiror of substantially all of the Company's assets or
business and/or pursuant to any reorganization qualifying under Section 368 of
the Internal Revenue Code of 1986, as amended, as may be in effect at such time,
or (ii) to an affiliate of the Company subject to the consent of the Consultant
which consent shall not be unreasonably withheld (with either of the foregoing
permitted assignments being referred to herein as a "Permitted Assignment").
16. Arbitration.
(a) At the option of any party, any and all disputes or controversies,
whether of law or fact and of any nature whatsoever arising from or respecting
this Agreement, shall be decided by binding arbitration in accordance with the
rules and regulations of the American Arbitration Association (the
"Association").
(b) If the parties are unable to agree upon a single arbitrator, the
arbitrator shall be a single, independent arbitrator selected by the
Association. The Company reserves the right to disqualify any individual
arbitrator who shall be employed by or affiliated with a competing organization.
(c) Arbitration shall take place in Philadelphia, Pennsylvania or any other
location mutually agreeable to the parties. At the request of any party,
arbitration proceedings will be conducted in the utmost secrecy; in such case
all documents, testimony and records shall be received, heard and maintained by
the arbitrator in secrecy under seal, available for inspection only of the
parties and their respective attorneys and their respective experts who shall
agree in advance and in writing to receive all such information confidentially
and to maintain such information in secrecy until such information shall become
generally known. The decision of the arbitrator will be final and binding upon
the parties hereto and all persons claiming under and through them.
-10-
<PAGE>
(d) The costs of the arbitration procedure shall be borne by the losing
party, and if the decision is not clearly in favor or one party or the other,
then the cost shall be borne as determined by each arbitration proceeding.
IN WITNESS WHEREOF, the parties have hereto set their hand on the date
first above written.
Consultant:
/s/David Berd
------------------------------
Name: Dr. David Berd
Address: 125 Heacock Lane
Wyncote, PA 19095
Company:
WALDEN LABORATORIES, INC.
By: /s/Carl Spana
------------------------------
Name: Carl Spana, Ph.D.
Title: Interim President
-11-
<PAGE>
EXHIBIT A
WALDEN LABORATORIES, INC.
TERMINATION CERTIFICATION
This is to certify that, except as permitted by the Consulting Agreement
(as defined below) I do not have in my possession, nor have I failed to return,
any structures, inventions, designs, works of authorship, copyrightable works,
formulas, data, marketing plans, forecasts, product concepts, marketing plans,
strategies, forecasts, devices, records, data, notes, reports, proposals,
customer lists, correspondence, specifications, drawings, blueprints, sketches,
materials, patent applications, continuation applications, continuation-in-part
applications, divisional applications, other documents or property, or
reproductions of any aforementioned items belonging to Walden Laboratories,
Inc., its subsidiaries, affiliates, successors or assigns (together, the
"Company").
I further certify that I have complied with all the terms of the Consulting
Agreement, dated March __, 1996 between the Company and me (the "Consulting
Agreement"), relating to the reporting of any Inventions (as defined therein),
conceived or made by me (solely or jointly with others) covered by the
Consulting Agreement.
I further acknowledge that the provisions of the Consulting Agreement
relating to Proprietary Information, as defined in the Consulting Agreement,
continue in effect beyond the termination of the Consulting Agreement, as set
forth therein.
Date: ______________, 19__
---------------------------------------
(Signature)
Dr. David Berd
(print or type name)
<PAGE>
EXHIBIT B
_________________, 19__
Walden Laboratories, Inc.
375 Park Avenue
New York, New York 10019
Attention: Carl Spana
Gentlemen:
1. The following is a complete list of all inventions or improvements
relevant to the subject matter of my Consulting Agreement, dated the date hereof
(the "Consulting Agreement"), with you (the "Company") which have been made or
conceived or first reduced to practice by me alone or jointly with others prior
to my engagement by the Company which shall not be deemed to be "Inventions" for
purposes of the Consulting Agreement:
_____ No inventions or improvements
_____ See Below
______________________________________
_____ Additional sheets attached
2. I propose in performing the Consulting Services, as defined in the
Consulting Agreement, to use the following materials and documents of a current
or former employer which are not generally available to the public,
<PAGE>
which materials and documents may be used by me in the provision of the
Consulting Services:
_____ No materials
_____ See below
______________________________________
______________________________________
_____ Additional sheets attached
The signature below confirms my understanding that my continued possession
and use of these materials is authorized by said Consulting Agreement.
Very truly yours,
---------------------------------
Dr. David Berd
Exhibit 10.9
[Letterhead of Paramount Capital]
June 12, 1996
AVAX Technologies, Inc.
375 Park Avenue, Suite 1501
New York, N.Y. 10152
Dear Sirs:
1. This is to confirm our understanding that Paramount Capital, Inc.
("Paramount") has been engaged as financial advisor of AVAX Technologies, Inc.
(the "Company") for an initial period of twenty-four (24) months commencing on
the date hereof (as extended pursuant to Paragraph 10 hereto, or by mutual
agreement of the parties hereto, the "Term"). In its role as financial advisor,
Paramount will maintain its familiarity with the business, operations,
properties, financial condition, prospects and management of the Company and
assist the Company in: (a) identifying prospective strategic partners, acquirors
and/or investors; (b) evaluating offers received from prospective partners,
acquirors and/or investors; and (c) conducting discussions and negotiations
leading toward the consummation of a strategic partnership, merger or an
investment.
2. The Company will pay Paramount a non-refundable retainer fee for
Paramount's services hereunder of $4,000 per month for twenty-four (24) months.
The first payment shall be due within ten days of the date hereof and thereafter
payable on the fifteenth day of each month during the Term.
The Company also agrees to pay in cash all reasonable out-of-pocket
expenses incurred by Paramount in providing its services hereunder, including
fees and disbursements of Paramount's counsel, such expenses to be paid upon
submission of a bill or bills by Paramount from time to time. However, any
single expense over $500 for any month will require the prior written approval
of the Company. Fees and expenses of consultants or experts shall not be
included unless approved by the Company.
3. Upon the Closing of each Investment (as defined below) during the Term
or during the twelve-month period following the expiration or earlier
termination of the Term, the Company shall pay to Paramount a fee in an amount
equal to 9% of the aggregate value of such Investment and shall issue to
Paramount warrants to purchase an amount of securities equal to 10% of the
securities sold as part of such Investment at an exercise price of 110% of the
price of such securities, exercisable until five years from the date of issuance
of such warrants. For the purposes of this Agreement, an Investment shall be any
purchase of securities of the Company which is made during the Term or during
the twelve-month period following the expiration of the Term by an investor
first introduced to the Company by or through Paramount during or prior to the
Term.
<PAGE>
4. (a) If the Company enters into an agreement with a party first
introduced to the Company by or through Paramount during or prior to the Term
pursuant to which the Company consummates a sale, merger, consolidation, tender
offer, business combination or similar transaction involving a majority of the
business assets or stock of the Company in which the Company is not the
surviving entity (a "Sale") during the Term, or during the twelve-month period
following the expiration of such Term, then the Company shall pay Paramount a
fee equal to 7% of the aggregate consideration paid to the Company by the
acquiror, such fee to be payable in cash simultaneously with the closing of such
Sale. With the exception of Acquiror Future Payments in which case such fees are
to be payable at such time, and only if, the Company receives such Acquiror
Future Payments.
(b) If the Company enters into an agreement with an investor first
introduced to the Company by or through Paramount during or prior to the Term
pursuant to which the Company consummates a transaction wherein the Company
acquires all or substantially all of the business assets or stock of another
entity in which the Company is the surviving entity (an "Acquisition") during
the Term, or during the twelve-month period following the expiration of such
Term, then the Company shall pay Paramount a fee equal to 7% of the aggregate
consideration paid by the Company to the entity acquired, such fee to be payable
in cash simultaneously with the closing of such Acquisition. With the exception
of Acquiror Future Payments in which case such fees are to be payable at such
time, and only if, the Company receives such Acquiror Future Payments.
(c) For purposes of calculating Paramount's fee under this Paragraph 4, the
aggregate consideration paid with respect to the business, assets or stock of
the Company shall be equal to the total of all cash, securities and/or other
assets paid for such business, assets or stock by the acquiror. Aggregate
consideration shall also include: (a) any commercial bank or similar
indebtedness of the Company that is repaid or for which the responsibility to
pay is assumed by the acquiror in connection with such transaction, (b) the
greater of the stated value or the liquidation value of preferred stock of the
Company that is assumed or acquired by the acquiror that is not converted into
common stock upon the consummation of such transaction, and (c) future payments
for which the acquiror is obligated either absolutely or upon the attainment of
milestones or financial results ("Acquiror Future Payments"). The fee paid to
Paramount as a result of Acquiror Future Payments shall be paid at closing and
shall be valued at the present value of the Acquiror Future Payments. In the
event a Sale of the Company or an Acquisition by the Company is consummated
through a multiple-step transaction wherein the acquiror is not obligated either
absolutely or upon the attainment of milestones or financial results to make
future payments to further increase the acquiror's ownership in the Company (the
"Multiple-Step Payments"), the Company agrees to pay Paramount a fee on such
Multiple-Step Payments, and such fee shall be calculated pursuant to this
Paragraph 4. Such fee shall be payable when such Multiple-Step Payments are made
and shall be in addition to the fee paid to Paramount in the first step of such
transaction.
2
<PAGE>
5. If the Company enters into an agreement with an investor first
introduced to the Company by or through Paramount during or prior to the Term
pursuant to which the Company consummates a Strategic Alliance(s) (as defined
below) during the Term, or during the twelve-month period following the
expiration of such Term, then the Company shall pay Paramount a fee equal to 6%
of the present value of the Aggregate Consideration (as defined below) to be
received by the Company, its shareholders or employees in each such transaction;
such fee to be payable in cash simultaneously with the closing of each such
transaction. With the exception of payments received by the Company after the
closing of such transaction as in Paragraphs 5(c) and 5(d) below, in which case
such fees are to be payable at such time, and only if, the Company receives such
payments. For the purpose of calculating Paramount's fee under this Paragraph 5,
Aggregate Consideration shall include, but not be limited to, (a) all payments
made at closing for equity securities, equity security rights or similar rights,
(b) technology access fees or similar up-front payments, (c) other future
payments to be made to the Company or its employees for which the Strategic
Alliance partner(s) (each a "Partner") is obligated either absolutely or upon
the attainment of milestones, (d) funding provided by the Partner (through
reimbursement or otherwise) relative to research and development, clinical
trials and related expenditures, whether such work is performed or managed by
the Company or its Partner and (e) the repayment or assumption by the Partner of
obligations of the Company, including indebtedness for money borrowed or amounts
owed by the Company to investors or owners of technology. It is further
understood that Aggregate Consideration shall not be reduced by the amount of
the fee due Paramount hereunder. Any future rights, commitments, contingent
payments and the like (together, "Strategic Alliance Payments") which are part
of the Aggregate Consideration shall be valued at the present value of such
amounts. A "Strategic Alliance" may include, but is not limited to: (a) joint
venture, partnership, license or other contract for the research, development,
manufacturing, marketing, distribution, sale or other activity relating to the
Company's present and/or future products; (b) the purchase of, or commitment to
purchase from the Company, less than a majority of the business, assets or stock
of the Company by a Partner(s); (c) the sale of any of the Company's assets or
any rights in respect to its products and/or technology; and (d) a commitment to
provide funding for all or part of the Company's research and development
activities, whether such work is performed or managed by the Company or Partner.
For purposes of calculating the present value of the Strategic Alliance
payments or Acquiror Future Payments, the Company and Paramount agree to
discount all such payments by a discount factor equal to 15% per annum, and,
where necessary, to use the projections which have been provided to prospective
Partners in the course of this transaction to quantify these Strategic Alliance
Payments or Acquiror Future Payments. For the purposes of calculating
Paramount's fee, securities constituting part of Aggregate Consideration that
are traded on a national securities exchange or the Nasdaq national market
System shall be valued at the last closing price thereof prior to the date of
the consummation or closing of any such transaction. Such securities which are
traded over-the-counter shall be valued at the mean between the latest bid and
asked prices prior to date.
3
<PAGE>
6. In the event that the Company, its directors or management initiate any
discussions with a third party in furtherance of any Sale, Acquisition,
Investment or Strategic Alliance or receive any meaningful inquiry or are aware
of the interest of any third party concerning a Sale, Acquisition, Investment or
Strategic Alliance which is the subject of this Agreement, they will promptly
inform Paramount of the party and its interest and, subject to Paragraph 7, if
applicable, Paramount will undertake to provide its services contemplated
hereunder.
7. Any financial advice rendered by Paramount pursuant to this Agreement
(and the existence of this Agreement) may not be disclosed publicly in any
manner without Paramount's prior written approval and will be treated by the
Company as confidential. The Company will provide Paramount with all financial
and other information requested by Paramount for the purposes of rendering its
services pursuant to this Agreement.
8. All non-public information given to Paramount by the Company will be
treated by Paramount as confidential. In this regard, Paramount agrees to enter
into such confidentiality agreements which may be reasonably requested by the
Company. Paramount may rely, without independent verification, on the accuracy
and completeness of any information furnished by Paramount by the Company,
subject to its obligations under the securities laws.
9. In the event that Paramount becomes involved in any capacity in any
action, proceeding, investigation or inquiry in connection with any matter
referred to in this Agreement or arising out of the matters contemplated by this
Agreement, the Company will reimburse Paramount for its legal and other expenses
(including the cost of any investigation and preparation) as they are incurred
by Paramount in connection therewith. The Company also agrees to indemnify each
of Paramount, the directors, officers, employees and agents thereof (the
"Indemnitees"), pay on demand and protect, defend, save and hold each Indemnitee
harmless from and against, on an after-tax basis, any and all liabilities,
damages, losses, settlements, claims, actions, suits, penalties, fines, costs or
expenses (including, without limitation, reasonable attorneys' fees) (any of the
foregoing, a "Claim") incurred by or asserted against any Indemnitee of whatever
kind or nature, arising from, in connection with or occurring as a result of
this Agreement or the matters contemplated by this Agreement, unless it shall be
finally judicially determined that such losses, claims, damages or liabilities
arise solely out of the gross negligence or willful misfeasance of Paramount in
performing the services which are the subject of this Agreement. The foregoing
agreement shall be in addition to any rights that any Indemnitee may have at
common law or otherwise.
10. The Term of this Agreement shall be renewed for consecutive six month
periods upon the execution of a written agreement by both parties to extend such
Term; provided, however, regardless of any termination, the rights to
compensation contained in Paragraphs 3, 4 and 5 and to indemnity and
reimbursement contained in Paragraph 9 shall survive. In addition, Paramount
shall be entitled to the reimbursement of expenses incurred by Paramount as a
result of services rendered prior to the date of the termination.
4
<PAGE>
11. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without regard to principles of conflicts of
law.
12. This Agreement shall be binding upon Paramount and the Company and the
successors and assigns of Paramount. The Company shall not assign or sell all or
substantially all of the Company's business and/or assets without first
requiring in writing that such assignee or successor is bound by the provisions
of this Agreement.
Please confirm that the foregoing is in accordance with your understanding
by signing and returning to us the enclosed duplicate of this letter.
Sincerely yours,
PARAMOUNT CAPITAL, INC.
By: /s/Lindsay A. Rosenwald, M.D.
---------------------------------
Name: Lindsay A. Rosenwald, M.D.
Title: Chairman
Confirmed as of the date hereof:
AVAX TECHNOLOGIES, INC.
By: /s/Carl Spana
- -----------------------------
Name: Carl Spana
Title: Interim President
5
Exhibit 10.10
CONFIDENTIAL TREATMENT REQUESTED
LICENSE AGREEMENT
THIS AGREEMENT, effective as of November 20, 1995, (the "EFFECTIVE DATE"), by
and between THOMAS JEFFERSON UNIVERSITY ("TJU"), a not-for-profit corporation,
formed under the laws of the Commonwealth of Pennsylvania, and having its
principal place of business at the 11th and Walnut Streets, Philadelphia,
Pennsylvania 19107, and Walden Laboratories, Inc. ("COMPANY"), a Delaware
corporation having its principal place of business at 375 Park Avenue, New York,
NY, 10152.
WITNESSETH
WHEREAS, TJU is engaged in programs of research in the medical and health
fields, and possesses know-how, materials, and patent rights relating to the
development of immunotherapeutic vaccines for the treatment of malignant
melanoma and other carcinomas developed by Dr. David Berd (the "INVENTION"); and
WHEREAS, TJU is the owner of U.S. Patent Application Serial No. 08/520,649 filed
on 8 May 1990 entitled "Treatment Of Human Cancer With A Haptenized Tumor
Vaccine," (the "BASIC TJU APPLICATION") and has the exclusive right to grant the
licenses set forth hereinbelow; and
WHEREAS, TJU and COMPANY are parties to a Research Agreement of even date
herewith under which COMPANY is funding research by Dr. David Berd related to
the INVENTION ("RESEARCH AGREEMENT"); and
WHEREAS, COMPANY does not now make or sell any products which embody the
INVENTION, but desires to do so; and
WHEREAS, COMPANY desires to secure the exclusive right and license to use,
develop, manufacture, have manufactured, market, and exploit any inventions,
improvements, technical
"***" denotes confidential portion that has been redacted ("Marked Portion").
<PAGE>
information, technology, know-how, or proprietary rights discovered or developed
by TJU during its performance of the RESEARCH AGREEMENT; and
WHEREAS, COMPANY desires to receive from TJU licenses to develop, commercially
manufacture, and sell products embodying the INVENTION and TJU is willing to
grant COMPANY and its AFFILIATES (as hereinafter defined) such licenses.
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein
contained and intending to be bound thereby, the parties hereto agree as
follows:
ARTICLE I DEFINITIONS
1.01 "PARTIES or PARTY" shall mean COMPANY or TJU in singular or plural usage,
as indicated by the context.
1.02 The term "PATENT RIGHTS" shall mean the BASIC TJU APPLICATION and any
divisions, continuations, continuations-in-part, or foreign counterparts
thereof, or any Letters Patent issuing thereon or reissue, extension or
reexamination thereof and any applications covering inventions or improvements
discovered by TJU through, by or under the direction of Dr. David Berd during
the performance of the RESEARCH AGREEMENT.
1.03 The term "VALID CLAIM" shall mean a claim of an issued patent or pending
patent application within PATENT RIGHTS so long as such claim shall not have
been disclaimed by TJU or shall not have been held invalid in an unappealed or
unappealable decision rendered by a tribunal of proper jurisdiction. Any such
claim finally held invalid shall be considered canceled from the PATENT RIGHTS,
effective as of the
2
<PAGE>
date such claim is finally held invalid by a tribunal of proper jurisdiction in
an unappealable decision.
1.04 The term "TJU KNOW-HOW" shall mean information and materials developed by
TJU related to the INVENTION (including, but not limited to, pharmaceutical,
chemical, biological and biological products, information, trade secrets,
know-how, technical and non-technical data, materials, methods and processes and
any drawings, plans, diagrams, specifications and/or other documents containing
such information) which is provided by TJU to COMPANY.
1.05 The term "PRODUCTS" shall mean any products covered by a VALID CLAIM in the
country of manufacture, use or sale, or any other products, the normal and
customary use of which, or the use of which pursuant to the associated labeling,
is in the performance of processes covered by a VALID CLAIM in the country of
manufacture, use or sale, or that are employed as one or more claimed elements,
claimed components, or claimed processes in a product covered by a VALID CLAIM
in the country of manufacture, use or sale, or any products based on or
developed using TJU KNOW-HOW.
1.06 The term "AFFILIATE" with respect to any entity shall mean any individual,
company, firm, partnership or other entity which, directly or indirectly, owns,
is owned, controls, controlled by, or is under common control with such entity.
The term "CONTROL" means the direct or indirect ownership of over fifty percent
(50%) of the outstanding voting securities of such entity or the right to
receive over fifty percent (50%) of the profits or earnings of such entity.
1.07 The term "CUSTOMERS" shall mean users of PRODUCTS.
3
<PAGE>
1.08 The term "SALE" shall mean the transfer of PRODUCTS by COMPANY or
AFFILIATES to CUSTOMERS in exchange for cash, an invoice for cash, cash
equivalents, or other consideration.
1.09 The term "NET SALES REVENUE" means the cash consideration or fair market
value of cash equivalents attributable to the SALE of any PRODUCTS by COMPANY or
AFFILIATES, less qualifying costs directly attributable to such SALE. Such
qualifying costs shall be limited to the following:
(i) Discounts, in amounts customary in the trade, for quantity purchases,
prompt payments and for wholesalers and distributors;
(ii) Credits or refunds, not exceeding the original invoice amount, for
claims or returns;
(iii) Prepaid transportation insurance premiums;
(iv) Prepaid outbound transportation expenses and packaging;
(v) Unit sales and use taxes imposed by a governmental agency.
In the event of use of a product solely for clinical testing or research and
development purposes, then no royalty shall be due or payable to TJU pursuant to
Article 3.04 or otherwise. In addition to the deductions listed in (i)-(v)
above, NET SALES REVENUE may also be reduced as follows: (a) if after use of its
best efforts, COMPANY or an AFFILIATE can not collect moneys owed to it on
account of which royalties were paid, COMPANY and TJU will confer in effort to
reduce NET SALES REVENUE proportionately to the bad debt deductions actually
written off
4
<PAGE>
by COMPANY during such period and (b) should a bankruptcy event occur for a
sublicensee or a customer of COMPANY or an AFFILIATE and monies are owed to
COMPANY or an AFFILIATE by such sublicensee or customer suffering said
bankruptcy event, then such monies shall be deemed uncollectible and COMPANY
shall not therefore owe royalties on account of the NET SALES REVENUE of such
debts and a proportionate deduction to NET SALES REVENUE shall be made on
account or royalties previously paid, unless and until payment to the COMPANY or
AFFILIATE is made, at which time royalties shall be payable to TJU. Transfer of
PRODUCTS to an AFFILIATE for SALE by the AFFILIATE to a CUSTOMER shall not be
considered a SALE; in the case of such a transfer, the NET SALES REVENUE shall
be based on the gross revenue of PRODUCTS sold by the AFFILIATE.
1.10 The term "AGREEMENT YEAR" shall mean the yearly period beginning on the
EFFECTIVE DATE and each succeeding year thereafter for the term of the
AGREEMENT.
1.11 The term "PROVIDER" shall mean any individual, organization, or other legal
entity which provides patient care services or cell therapy services, including
but not limited to, public or private, for-profit or not-for-profit hospitals,
academic research institutions, academic healthcare institutions, cancer
treatment centers or managed care organizations.
1.12 The term "FIRST FINANCING" shall mean the first financing in which COMPANY
raises equity funding from sources other than The Castle Group, 375 Park Avenue,
New York, NY ("CASTLE") or its AFFILIATES of, in total, at least *** provided,
however, that the FIRST FINANCING may include an offering conducted by Paramount
Capital, 375 Park Avenue, New York, NY, and investments made by any funds
managed by Aries Financial Services Inc., New York, NY, in such Paramount-
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led offering provided that in the aggregate such Aries investments represent
less than *** of such offering.
1.13 The term "PHILADELPHIA REGION" shall mean the area within a seventy-five
(75) mile radius of the City of Philadelphia, Pennsylvania, except the State of
New York.
1.14 The term "FDA" shall mean the U.S. Food and Drug Administration or any
successor agency.
ARTICLE II - GRANT OF LICENSES
2.01 TJU hereby grants to COMPANY an exclusive worldwide right and license under
PATENT RIGHTS to develop, make, have made, use, sell, offer to sell, and import
PRODUCTS and to grant the purchaser of such products the right to use such
purchased products in accordance with PATENT RIGHTS, subject to TJU retaining
the right to practice under PATENT RIGHTS for its own research and patient care
purposes on a non-commercial basis.
2.02 The rights granted to COMPANY hereunder are subject to any prior rights
which the U.S. Government (or any of its agencies) may have in or to the PATENT
RIGHTS, as a result of 35 U.S.C. 200 et seq. or otherwise.
2.03 TJU hereby grants to COMPANY the right to grant sublicenses under PATENT
RIGHTS to make, use, and sell PRODUCTS and to grant the purchaser of such
PRODUCTS the right to use such purchased products in accordance with PATENT
RIGHTS, provided that such sublicenses contain provisions at least as favorable
to TJU as those contained in the AGREEMENT, and that a complete and accurate
copy written in the English language is submitted to TJU thirty (30) days after
signing such
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sublicenses. Regardless of the terms of such sublicense, COMPANY shall remain
jointly and separately liable to TJU under the present AGREEMENT for all
obligations, including royalties, under this AGREEMENT, and any act or omission
of a sublicensee which would be a breach of this AGREEMENT if performed by
COMPANY shall be deemed to be a breach by COMPANY of this AGREEMENT.
2.04 Should COMPANY choose to pursue a commercialization strategy of granting
exclusive sublicenses under PATENT RIGHTS to PROVIDERS in particular geographic
regions, then TJU shall have the first option to be the exclusive PROVIDER in
the PHILADELPHIA REGION, under terms at least as favorable to TJU as terms
negotiated between COMPANY and any other PROVIDER, then or in the future.
2.05 Subject to any regulatory restrictions, TJU shall have the right of first
refusal to act as a clinical site for any COMPANY-sponsored human clinical
trials of the INVENTION, under terms no less favorable to TJU than the terms
offered then or thereafter to other potential clinical sites.
ARTICLE III - PAYMENTS
3.01 In partial consideration of the grant of the exclusive rights and license
to COMPANY hereunder, COMPANY will issue to TJU that number of shares of its
Common Stock ("COMMON STOCK") that will represent *** of the total outstanding
securities of the COMPANY after giving effect to all issuances by the COMPANY of
securities prior to the FIRST FINANCING and, in consideration of his role as
co-founder and Chairman of the Scientific Advisory Board, COMPANY will issue to
Dr. David Berd that number of shares of COMMON STOCK (together with the shares
issued to TJU, the "SHARES") that will
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represent *** of the total outstanding securities of the COMPANY after giving
effect to all issuances by the COMPANY of securities prior to the FIRST
FINANCING. It is understood between the PARTIES that prior to the FIRST
FINANCING, CASTLE and/or its AFFILIATES will provide initial funding for COMPANY
operations, and may acquire rights to additional technologies from third parties
and recruit management for COMPANY. The above percentages of stock owned by TJU
and Dr. Berd shall not be reduced based on these events prior to the FIRST
FINANCING, however, funds invested by CASTLE and/or its AFFILIATES prior to the
FIRST FINANCING many be converted into equity at a price equal to at least ***
of the price paid by third party investors in the FIRST FINANCING, subject to
proper disclosure to the third party investors.
In the event that COMPANY elects to finance the COMPANY in the FIRST FINANCING
or subsequent financings prior to an initial public offering or at any time
prior to the SHARES being publicly traded by issuing additional shares of the
COMPANY or securities convertible to shares of the COMPANY, COMPANY shall
provide at least thirty (30) days prior written notice to TJU and Dr. Berd of
such election, and TJU and Dr. Berd shall each have the right, exercised by
notice to COMPANY no later than thirty (30) days after receipt of such prior
notice from COMPANY, to participate in any COMPANY financing under the same
terms offered to other investors in COMPANY at such financing to maintain their
percentage ownership in COMPANY at a level of up to the level it was at prior to
such financing. TJU and Dr. Berd shall each have the right to participate in the
FIRST FINANCING under the same terms offered to other investors in the FIRST
FINANCING to maintain their percentages of ownership in the COMPANY at a level
of up to *** each. It is understood that if funds invested by CASTLE or its
AFFILIATES
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prior to the FIRST FINANCING are converted into equity, then TJU and Dr. Berd
shall each have the right to invest up to *** of the funds invested in the ***
FINANCING plus an amount sufficient to purchase up to *** of the number of
SHARES which CASTLE or its AFFILIATES receive from converting such funds
invested prior to the FIRST FINANCING into equity.
a. Restrictions on Transfer and Registration Rights
(i) Restriction on Transferability: The SHARES shall not be transferable in
the absence of a registration under the SECURITIES ACT of 1933, as amended (the
"SECURITIES ACT") or an exemption therefrom. COMPANY shall be entitled to give
stop transfer instructions to the transfer agent with respect to the SHARES in
order to enforce the foregoing restrictions.
(ii) Restrictive Legend: Each certificate representing the SHARES shall
bear substantially the following legend (in addition to any legends required
under applicable securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED FOR SALE,
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE ENCUMBERED
OR DISPOSED OF (A "TRANSFER") UNLESS SUCH TRANSFER COMPLIES WITH THE
PROVISIONS OF A SUBSCRIPTION AGREEMENT BETWEEN THE REGISTERED HOLDER AND
THE CORPORATION (THE "AGREEMENT") (A COPY OF WHICH IS ON FILE WITH
SECRETARY OF THE CORPORATION AND WHICH WILL BE FURNISHED BY THE CORPORATION
TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE). THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES
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OR "BLUE SKY" LAWS. ACCORDINGLY, NO TRANSFER OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE MAY BE MADE EXCEPT IN ACCORDANCE WITH THE AGREEMENT AND
(A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AMENDMENT THERETO
UNDER THE ACT OR (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
ACT AND UNDER ANY APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS.
b. Registration of SHARES
(i) Registration on Demand: At any time twelve (12) months after COMPANY
has completed an initial public offering of its COMMON STOCK (the "IPO"), each
of TJU and Dr. Berd will have the right, on one occasion during the period
ending five (5) years from the date hereof after completion of such initial
public offering, to require COMPANY to file a REGISTRATION STATEMENT on Form S-3
( the "REGISTRATION STATEMENT") with the SEC under the SECURITIES ACT to
register the resale of the SHARES, or, if Form S-3 is not available, to
otherwise effect the registration or resale of the SHARES. COMPANY will use its
best efforts to have such REGISTRATION STATEMENT declared effective as soon as
possible.
(ii) Piggyback Registration: If COMPANY proposes at any time one year after
COMPANY has completed the IPO during the period ending five (5) years from the
date hereof for any reason to register any of its securities under the
SECURITIES ACT (other than pursuant to a REGISTRATION STATEMENT on Forms S-8,
S-4 or similar or successor form), it shall each such time promptly give written
notice to each of Dr. Berd and TJU of its intention so to do, and, upon the
written request of either (a "SELLING SHAREHOLDER"), given within 30 days after
receipt of any such notice, to register any of such party's SHARES (which
request shall specify the SHARES intended to be sold or disposed
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of such party and shall state the intended method of disposition of such
SHARES), COMPANY shall use its best efforts to cause all such SHARES to be
registered under the SECURITIES ACT promptly upon receipt of the written request
of a SELLING SHAREHOLDER for such registration, all to the extent requisite to
permit the sale or other disposition (in accordance with the intended methods
thereof as set forth in such request) by a SELLING SHAREHOLDER. In the event
that the proposed registration by COMPANY is, in whole or in part, an
underwritten public offering of securities of COMPANY, any request pursuant to
this Section 3.01 (b) to register SHARES may specify that such SHARES are to be
included in the underwriting (a) on the same terms and conditions as the SHARES
of COMMON STOCK, if any, otherwise being sold through underwriters under such
registration or (b) on terms and conditions comparable to those normally
applicable to offerings of COMMON STOCK in reasonably similar circumstances in
the event that no SHARES of COMMON STOCK, other than such party's SHARES, are
being sold through underwriters under such registration; provided, however, that
the "piggyback" registration rights shall be subject to the cutback in the sole
discretion of the underwriter for the COMPANY, provided that such cutback is on
a pro rata basis with all other SHARES to be sold in such offering, except for
(i) those SHARES that are newly issued by the COMPANY and (ii) those SHARES that
are subject to the demand rights of other parties.
(iii) Termination of Registration Rights: In addition, the right of any
holder to request registration shall terminate on the closing of the IPO if all
SHARES of REGISTRABLE SECURITIES (as defined below) held by such holder may
immediately be sold under Rule 144 or Rule 701 during any ninety (90) day
period, or on such date after the IPO date that the SHARES can be sold freely
without restriction during any ninety (90) day period under the SECURITIES ACT,
provided that the REGISTRATION
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RIGHTS in 3.01b(i) and 3.01b(ii) shall be available until such time as Rule 144
or Rule 701 is available for sale of the REGISTRABLE SECURITIES.
(iv) If the COMPANY files a registration statement with the Securities and
Exchange Commission in connection with a public offering of the COMPANY's
securities, the Holder, by accepting the SHARES of COMMON STOCK or other equity
securities, agrees, if so requested by the COMPANY, that such Holder will not
directly or indirectly sell, transfer, make any short sale of, grant any option
for the purchase of, or otherwise dispose of any shares of COMMON STOCK or other
equity securities of the COMPANY during the thirty (30) day period ending, and
the one hundred eighty (180) day period beginning (or any such other period as
is required by the underwriter of such offering to the extent that such period
is the same for all other shareholders of the COMPANY) on the first date of the
effectiveness of such registration statement. Upon request, the Holder will sign
an agreement in reasonable form to such effect with the underwriter of such an
offering.
c. About Registration
(i) COMPANY shall pay all REGISTRATION EXPENSES (as defined below) in
connection with any registration, qualification or compliance hereunder, and a
SELLING SHAREHOLDER shall pay all SELLING EXPENSES (as defined below) and other
expenses that are not REGISTRATION EXPENSES relating to the securities
("REGISTRABLE SECURITIES") resold by such Selling Shareholder. "REGISTRATION
EXPENSES" shall mean all expenses, except for SELLING EXPENSES, incurred by
COMPANY in complying with the registration provisions of this AGREEMENT,
including without limitation all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for COMPANY,
blue sky fees and
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expenses and the expense of any special audits incident to or required by any
such registration. "SELLING EXPENSES" shall mean all selling commissions and
discounts, underwriting fees and stock transfer taxes applicable to the
REGISTRABLE SECURITIES and all fees and disbursements of counsel for such
SELLING SHAREHOLDER.
(ii) In the case of any registration effected by COMPANY pursuant to these
registration provisions, COMPANY will use its best efforts to: (i) prepare and
file with the SEC such amendments and supplements to the REGISTRATION STATEMENT
and the prospectus used in connection with the provisions of the SECURITIES ACT
with respect to the disposition of the REGISTRABLE SECURITIES; (ii) furnish such
number of prospectuses and other documents incident thereto, including any
amendment of or supplement to the prospectus, as the SELLING SHAREHOLDER from
time to time may reasonably request; (iii) cause all such REGISTRABLE SECURITIES
registered as described herein to be listed on each securities exchange and
quoted on each quotation service on which similar securities issued by COMPANY
are then listed or quoted; (iv) provide a transfer agent and registrar for all
REGISTRABLE SECURITIES registered pursuant to the REGISTRATION STATEMENT and a
CUSIP number for all such REGISTRABLE SECURITIES; (v) comply with all applicable
rules and regulations of the SEC; and (vi) file the documents required of
COMPANY and otherwise use its best efforts to maintain requisite blue sky
clearance in (a) all jurisdictions in which any of the SHARES is originally sold
and (b) all other states specified in writing by the SELLING SHAREHOLDER,
provided as to clause (b), however, that COMPANY shall not be required to
qualify to do business or consent to service of process in any state in which it
is not now so qualified or has not so consented.
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(iii) A SELLING SHAREHOLDER shall furnish to COMPANY such information
regarding it and the distribution proposed by it as COMPANY may reasonably
request in writing and as shall be reasonably required in connection with any
registration, qualification or compliance described herein. Such SELLING
SHAREHOLDER shall represent that such information is true and complete.
(iv) When a SELLING SHAREHOLDER is entitled to sell and gives notice of its
intent to sell pursuant to a REGISTRATION STATEMENT, COMPANY shall furnish to
such SELLING SHAREHOLDER a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such SHARES, such prospectus shall not include an
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances then existing.
d. Indemnification and Contribution
(i) COMPANY agrees to indemnify and hold harmless each of TJU and Dr. Berd
from and against any losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) to which such SELLING SHAREHOLDER may become
subject (under the SECURITIES ACT or otherwise) insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of, or are based upon, any claim by a third party asserting any untrue statement
of a material fact or omission of a material fact contained in a REGISTRATION
STATEMENT, on the effective date thereof, or arise out of any failure by COMPANY
to fulfill any undertaking included in such REGISTRATION STATEMENT, and COMPANY
will, as incurred, reimburse such SELLING SHAREHOLDER for any legal or other
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expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim; provided, however, that COMPANY shall not
be liable in any such case to the extent that such loss, claim, damages or
liability arises out of, or is based upon (i) an untrue statement made in such
REGISTRATION STATEMENT in reliance upon and in conformity with written
information furnished to COMPANY by or on behalf of such SELLING SHAREHOLDER
specifically for use in preparation of such REGISTRATION STATEMENT to the extent
that such untrue statement was made in such REGISTRATION STATEMENT in reliance
upon and conformity with written information about TJU furnished to COMPANY by
TJU legal counsel specifically for use in preparation of such REGISTRATION
STATEMENT or (ii) any untrue statement in any prospectus that is corrected in
any subsequent prospectus that was delivered to such SELLING SHAREHOLDER prior
to the pertinent sale or sales by such SELLING SHAREHOLDER.
(ii) TJU agrees to indemnify and hold harmless the COMPANY, the COMPANY's
directors, officers, employees and agents and each person who controls the
COMPANY within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act and each and all of them from any liabilities arising out of legal
action based upon an untrue statement made in such REGISTRATION STATEMENT in
reliance upon and conformity with written information about TJU furnished to
COMPANY by TJU legal counsel specifically for use in preparation of such
REGISTRATION STATEMENT.
(iii) Promptly after receipt by any indemnified person of a notice of a
claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 3.01(d), such
indemnified person shall notify the indemnifying person in writing of such claim
or of the
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commencement of such action, and, subject to the provisions hereinafter stated,
in case any such action shall be brought against an indemnified person and the
indemnifying person shall have been notified thereof, the indemnifying person
shall be entitled to participate therein, and, to the extent that it shall wish,
to assume the defense thereof, with counsel reasonable satisfactory to the
indemnified person. After notice from the indemnifying person to such
indemnified person of the indemnifying person's election to assume the defense
thereof, the indemnifying person shall not be liable to such indemnified person
for any legal expenses subsequently incurred by such indemnified person in
connection with the defense thereof; provided that if there exists or shall
exist a conflict of interest that would make it inappropriate in the reasonable
judgment of the indemnified person for the same counsel to represent both the
indemnified person and such indemnifying person or any affiliate or associate
thereof, the indemnified person shall be entitled to retain its own counsel at
the expense of such indemnifying person.
(iv) The obligations of COMPANY and a SELLING SHAREHOLDER under this
Section 3.01(d) shall be in addition to any liability which COMPANY and such
SELLING SHAREHOLDER may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls COMPANY or such SELLING
SHAREHOLDER within the meaning of the SECURITIES ACT.
e. Sales by CASTLE
Prior to the initial offering by the COMPANY of its securities, neither
CASTLE nor its AFFILIATES will sell, transfer or otherwise dispose of for
consideration any SHARES of COMMON STOCK of COMPANY unless TJU and Dr. Berd have
the opportunity to include in such sale, transfer or disposition of the
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SHARES, on the same terms and conditions as CASTLE or of its AFFILIATES on a pro
rata basis based on the relative percentage of ownership of each party.
f. Representations and Warranties
(i) Authorization of SHARES: The issuance and delivery to TJU and Dr. Berd
of the SHARES have been duly authorized by all requisite corporate action of
COMPANY and COMPANY has full corporate power and lawful authority to issue and
deliver the SHARES on the terms and conditions contemplated herein, and, when so
issued and delivered, the SHARES will be validly issued and outstanding, fully
paid and nonassessable, with no personal liability attaching to the ownership
thereof, and not subject to preemptive or any similar rights of the stockholders
of COMPANY or any liens or encumbrances arising through COMPANY.
(ii) Capitalization: Prior to the issuance of the stock, COMPANY will
provide a capitalization table to both TJU and Dr. Berd.
3.02 In further consideration of the rights and licenses herein granted to it,
COMPANY shall pay to TJU an initial non-refundable license fee of *** within
thirty (30) days of the EFFECTIVE DATE of this AGREEMENT. Said initial license
fee is not creditable against royalties or any other payment due to TJU from
COMPANY for the life of this AGREEMENT.
3.03 In further consideration of the rights and licenses herein granted to it,
COMPANY shall pay to TJU milestone fees according to the following schedule
within thirty (30) days of COMPANY achieving such milestones. Milestone fees are
not creditable against royalties or any other payment due to TJU from COMPANY
for the life of this AGREEMENT:
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(i) A $ *** non-refundable fee upon initiation of the first
COMPANY-sponsored clinical trial that is approved either by the FDA or
comparable international agency;
(ii) A $ *** non-refundable fee upon the first filing by COMPANY of an NDA
with the FDA or comparable international agency with respect to PRODUCTS;
(iii) A $ *** non-refundable fee upon receipt by the COMPANY of approval
from the FDA or comparable International agency to market PRODUCTS, or if
such approval is not required as a result of Congressional or international
governments action, the marketing of PRODUCTS.
3.04 In further consideration of the rights and licenses herein granted to it,
COMPANY shall pay to TJU a royalty of *** on worldwide NET SALES REVENUE of
PRODUCTS sold by COMPANY and its AFFILIATES each calendar year, subject to
deducting any credits pursuant to Article 7.01(b) of this AGREEMENT.
3.05 COMPANY shall pay TJU *** of all revenue received from third parties who
have been granted any rights in PATENT RIGHTS by COMPANY, including but not
limited to, license fees, up-front payments, royalties, milestone payments, and
installment payments, but excluding funding received by COMPANY from such third
parties which is designated by the third parties for funding research at COMPANY
related to the INVENTION, provided that such revenue shall not be less than:
[i] *** of NET SALES
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REVENUE by the sublicensee, if an agreement between the COMPANY and a third
party granting any rights under PATENT RIGHTS or TJU KNOW-HOW is entered
into by COMPANY during the first AGREEMENT YEAR;
[ii] *** of NET SALES REVENUE by the sublicensee, if an agreement between
COMPANY and a third party granting any rights under PATENT RIGHTS or TJU
KNOW-HOW is entered into by COMPANY during the second AGREEMENT YEAR;
[iii] *** of NET SALES REVENUE by the sublicensee, if an agreement with a
third party granting any rights under PATENT RIGHTS or TJU KNOW-HOW is
entered into by COMPANY during the third AGREEMENT YEAR.
3.06 If COMPANY becomes subject to a bankruptcy or asset seizure event, all
payments then or thereafter due and owing to COMPANY from its sublicensees shall
upon notice from TJU to any such sublicensee become directly payable to TJU for
the account of COMPANY.
3.07 Royalties for PRODUCTS, whether a patent within PATENT RIGHTS has issued or
is pending, are payable in all markets where PRODUCTS are made, used, sold,
practiced or administered.
ARTICLE IV - GOVERNMENT APPROVALS
4.01 COMPANY shall, at its own expense, obtain all filings and clearances from
governmental agencies which COMPANY in its discretion deems necessary and take
proper action which
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COMPANY in its discretion deems necessary to develop, promote, market, and sell
PRODUCTS. Said request for market clearance shall be filed with the necessary
governmental agencies by COMPANY as soon as reasonably practical after a
commercial embodiment of such PRODUCTS is developed by or for COMPANY.
4.02 TJU agrees to cooperate with COMPANY, at COMPANY expense, to provide
reasonable assistance where appropriate in obtaining any such clearance. Any
expense incurred by TJU in assisting COMPANY's said efforts will be directly
reimbursed to TJU by COMPANY within thirty (30) days following receipt of
invoice, or paid directly by COMPANY to vendors within thirty (30) days
following TJU's receipt of invoice.
4.03 COMPANY shall indemnify, defend, and hold harmless TJU, its trustees,
officers, staff and agents from any and all liability, judgments or expenses
arising from failure to obtain any such clearance or violation of any
governmental regulation related to PRODUCTS.
ARTICLE V - BOOKS OF ACCOUNTS AND REPORTS
5.01 COMPANY shall keep and shall require its AFFILIATES and sublicensees to
keep complete and accurate records of the SALES of PRODUCTS and all data
necessary for the computation of payments to be made to TJU hereunder. TJU shall
have the right to nominate an independent Certified Public Accountant who shall
have access to COMPANY's records and those of its AFFILIATES and sublicensees
during reasonable business hours for the purpose of verifying the payments made
in accordance with this AGREEMENT. Such right may be exercised no more than two
times per calendar year with reasonable notice to COMPANY. The cost of the
accountant's services shall be borne by TJU, unless the accountant discovers any
discrepancy in
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payment to TJU by an amount equal to the greater of *** in which case the cost
of the accountant's services shall be borne by COMPANY.
5.02 Royalty payments to TJU shall be made within thirty (30) days of the end of
each AGREEMENT YEAR on worldwide NET SALES REVENUE of PRODUCTS by COMPANY,
AFFILIATES, and sublicensees. Such payments to TJU shall be accompanied by a
statement showing all sales of PRODUCTS, including the gross sales revenue and
qualifying costs of PRODUCTS sold by COMPANY, its AFFILIATES and its
sublicensees, and such other particulars as are necessary for the account of the
payments to be made pursuant to this AGREEMENT. Payment of the amount due shall
accompany such statement.
5.03 All payments hereunder shall be payable by COMPANY to TJU in United States
Dollars by check or checks to the order of "Thomas Jefferson University."
5.04 To the extent sales may have been made by COMPANY in a foreign country,
such royalty payment shall be made in United States dollars on the basis of
conversion, from the currency of such foreign country, at the rate of exchange
quoted by New York Clearing House Banks for outbound telegraphic transfers, on
the last business day of the reporting period prior and shall be paid at the
time and in the manner set forth above, provided however, that royalties based
on sales in any foreign country shall be payable to TJU subject to the exchange
rate and only after deducting for exchange and all other charges due foreign
governments, including withholding taxes, currency exchange commissions, and
transaction fees arising from the origin and transmittal of such royalties. In
the event of royalties due in any country where the currency is blocked or where
legal conversions of the currency billed cannot be made into United
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States dollars, COMPANY will deposit such royalty payments in TJU's name in a
bank designated by TJU within such country. If such royalties cannot be returned
to the United States after one year of good faith efforts on the part of TJU to
recover them, COMPANY shall be responsible to make payment to TJU in the United
States in United States dollars.
5.05 COMPANY shall pay interest to TJU on overdue payments at a rate per annum
which shall be the prime rate of Citibank N.A. of New York on the due date of
the payment, plus two percent (2.0%).
ARTICLE VI - PERFORMANCE
6.01 In order to initiate commercial operations, COMPANY will raise a minimum of
$500,000 of net operating capital during the first twelve (12) months following
execution of this AGREEMENT. Following the initial twelve (12) month period,
COMPANY shall use its reasonable best efforts to obtain financing to sustain
commercial operations and to develop and bring to market the INVENTION described
under PATENT RIGHTS.
6.02 COMPANY shall use its reasonable best efforts to develop, promote, sell,
and maintain a market for PRODUCTS for treating melanoma and PRODUCTS for
treating other carcinomas. On each anniversary of the EFFECTIVE DATE during the
term of the AGREEMENT, COMPANY shall provide TJU with a written report detailing
COMPANY's efforts to develop and market PRODUCTS for treating melanoma and
PRODUCTS for treating other carcinomas during that AGREEMENT YEAR.
6.03 If COMPANY has not used reasonable best efforts to initiate
COMPANY-sponsored FDA-approved clinical trials of PRODUCTS for treating melanoma
by the second anniversary of
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this AGREEMENT, then TJU shall have the right to terminate COMPANY's rights in
the field of melanoma. This shall not affect COMPANY's rights in other fields.
6.04 Subject to Paragraph 7 of the RESEARCH AGREEMENT, COMPANY will provide TJU
with sponsored research funding of Dr. David Berd's laboratory at TJU for the
first three (3) AGREEMENT YEARS in the amount of $220,094 for the AGREEMENT
YEAR, $220,381 for the second (2) AGREEMENT YEAR, and $220,381 for the third (3)
AGREEMENT YEAR. Notwithstanding the above, the COMPANY may in its discretion
reduce sponsored research funding in the third (3) AGREEMENT YEAR to an amount
not to fall below $100,000.
6.05 Following the third (3) AGREEMENT YEAR, COMPANY will spend a minimum of
$500,000 per AGREEMENT YEAR on the development of the INVENTION until
commercialized in the United States. If, following the third (3) AGREEMENT YEAR,
the COMPANY files for United States marketing approval through a
COMPANY-sponsored New Drug Application (NDA) or equivalent with the FDA, the
COMPANY at that time may elect to spend less than $500,000 per AGREEMENT YEAR on
the development of the INVENTION during the period of time that the NDA is under
review by the FDA.
ARTICLE VII - PATENT PROSECUTION AND LITIGATION
7.01(a) TJU shall diligently prosecute and maintain PATENT RIGHTS utilizing
counsel reasonably satisfactory to COMPANY. Following the EFFECTIVE DATE,
COMPANY shall reimburse TJU for all ongoing costs related to PATENT RIGHTS,
including all costs relating to preparation, filing and prosecution, issuance,
reissuance, reexamination, interference and maintenance. COMPANY shall reimburse
TJU or its attorneys
23
<PAGE>
within sixty (60) days of receiving an invoice for such costs. All reasonable
costs incurred prior to the EFFECTIVE DATE of this AGREEMENT relating to PATENT
RIGHTS, including all costs incurred by TJU relating to the preparation, filing
and prosecution, issuance, reissuance, reexamination, interference and
maintenance, shall be reimbursed to TJU by COMPANY within sixty (60) days after
the FIRST FINANCING. TJU agrees to keep COMPANY reasonably well informed with
respect to the status and progress of any patent prosecutions and maintenance
activities, to consult in good faith with COMPANY and take into account
COMPANY's reasonable comments and requests with respect thereto, and to permit
COMPANY to have direct access to TJU's patent counsel to discuss such
activities. Both parties agree to provide reasonable cooperation to each other
to facilitate the prosecution of patents pursuant to this AGREEMENT.
In the event COMPANY wishes to relieve itself of any obligation to pay for the
future reasonable expenses of preparation, filing, prosecution, issuance,
reissuance, reexamination, interference or maintenance of any PATENT RIGHTS
submitted to COMPANY by TJU under this paragraph, it may provide TJU with
one-hundred and twenty (120) days notice of such decision, whereupon TJU may
assume such costs and thereafter those PATENT RIGHTS for which COMPANY elects
not to cover patent costs shall be the sole property of TJU and not be subject
to the right and licenses provided for in ARTICLE II. COMPANY shall be
responsible for all reasonable expenses incurred prior to, or as a result of
irrevocable action taken prior to, the effective date of such decision.
Should TJU elect to abandon any patent applications or issued patent comprising
PATENT RIGHTS, or if TJU otherwise fails to prosecute or maintain any PATENT
RIGHTS, COMPANY shall have the right, but not the obligation, to commence or
continue such
24
<PAGE>
prosecution and to maintain any such PATENT RIGHTS under its own control and
expense. COMPANY shall then have no royalty or other obligation to TJU based
solely on such PATENT RIGHTS which TJU elects to abandon, but COMPANY's
obligations to TJU based on other PATENT RIGHTS or TJU KNOW-HOW shall remain
unaffected.
7.01(b) On sales of a PRODUCT in a country other than the United States which
are covered by an issued patent within PATENT RIGHTS in such country, COMPANY
may apply as a credit against royalties on such sales due under Article 3.04 of
this AGREEMENT *** of patent expenses paid by COMPANY in securing such patent
covering such PRODUCT in such country. Patent expenses on a patent covering a
particular PRODUCT or PRODUCTS in a particular country are not creditable
against royalties on other PRODUCTS in such country or against royalties on such
PRODUCTS in other countries.
7.02 COMPANY shall take the reasonably appropriate steps to ensure that, if
eligible, TJU will be able to obtain patent term extension(s) pursuant to 35
U.S.C. 156 et seq., as appropriate. COMPANY shall keep TJU fully informed with
respect to its submissions to governmental authorities for regulatory review for
PRODUCTS which may be eligible for patent term extension. COMPANY acknowledges
that time is of the essence with respect to submission of the application for
patent term extension. COMPANY shall send written notice to TJU within three (3)
business days of the date a PRODUCT receives permission under the provision of
the law under which the applicable regulatory review period occurred for
commercial marketing or use ("APPROVAL DATE"). COMPANY shall provide all
necessary information in its possession and reasonable assistance in preparing
an application, if TJU is eligible, for patent term extension in compliance with
35 U.S.C. 156 et. seq. and any
25
<PAGE>
applicable governmental regulations within thirty (30) days after APPROVAL DATE.
COMPANY agrees to cooperate fully with TJU in preparing such application for
patent term extension. If eligible, TJU shall file, in their own name, such
application for patent term extension. COMPANY, if requested, agrees to join in
such application for patent term extension. COMPANY shall fully support such
application and shall provide such information as may reasonably be requested in
support of the application by TJU or by the government.
7.03 Both TJU and COMPANY are responsible for notifying the other of any
infringement of PATENT RIGHTS which may come to their attention. TJU and COMPANY
shall consult one another in a timely manner concerning any appropriate response
thereto.
7.04 COMPANY shall have the right, but not the obligation, to prosecute such
infringement at its own expense. COMPANY shall not settle or compromise any such
suit in a manner that imposes any obligations or restrictions on TJU or grants
any rights to the PATENT RIGHTS, without TJU's prior written permission. Such
rights shall be subject to the continuing right of TJU to intervene at TJU's own
expense and join COMPANY in any claim or suit for infringement of the PATENT
RIGHTS. Any consideration received by COMPANY in settlement of any claim or suit
shall first be applied to pay the litigation expenses of COMPANY and TJU
(proportionately based on the relative amounts of such expenses) and the balance
shall be treated as royalties received by COMPANY from sublicensees and shared
by TJU and COMPANY in accordance with Section 3.05 hereof. COMPANY may credit
against payments of royalties hereunder one-half of any litigation costs,
expenses, penalties, judgments or royalties assessed against COMPANY or its
AFFILIATES pursuant to this Section 7.04, provided that royalties paid to TJU
are not
26
<PAGE>
reduced by more than *** in any year with excess expenses carried over and
credited against royalty payments in future years. Any royalties actually
withheld from TJU under this paragraph shall be considered litigation expenses
of TJU, which shall be reimbursed on a pro rata basis as described in this
paragraph.
7.05 If COMPANY fails to prosecute such infringement, TJU shall have the right,
but not the obligation, to prosecute such infringement at its own expense. In
such event, financial recoveries will be entirely retained by TJU.
7.06 In any action to enforce any of the PATENT RIGHTS, either party at the
request and expense of the other party, shall cooperate to the fullest extent
reasonably possible. This provision shall not be construed to require either
party to undertake any activities, including legal discovery, at the request of
any third party except as may be required by lawful process of a court of
competent jurisdiction.
ARTICLE VIII - INDEMNIFICATION AND INSURANCE
8.01 COMPANY hereby waives any claim against TJU and agrees to indemnify,
defend, and hold harmless, TJU, its trustees, officers, staff and agents,
including Dr. David Berd, from all liabilities, demands, damages, expenses and
losses (including attorneys' fees) arising out of, or in connection with this
AGREEMENT (collectively the "INDEMNIFIED LOSSES"), including without limitation
INDEMNIFIED LOSSES resulting from any use, sale, or other disposition of
PRODUCTS, and any claim that COMPANY's use, sale, or other disposition of
PRODUCTS infringes or violates any patent or other intellectual property rights,
but excluding INDEMNIFIED LOSSES arising out of human clinical trials conducted
at TJU under an investigator-sponsored IND not
27
<PAGE>
sponsored by the COMPANY. The indemnification rights contained herein are in
addition to all rights which TJU may have at law, in equity, or otherwise.
8.02 Prior to the first COMPANY-sponsored clinical trial of any PRODUCTS,
COMPANY shall obtain and maintain commercial general liability insurance,
including commercial liability, product liability, and completed operations
insurance coverage in the minimum amounts of five million dollars ($5,000,000)
per loss, including coverage for any and all prior acts arising from the sale or
use of PRODUCTS and contractual liability coverage which, by virtue of the
aforementioned indemnification clause, makes the above identified indemnities
named as additional insureds under this coverage. Evidence of extended reporting
period coverage at original policy limits, if applicable, in the event either
the insured or insurer cancels must also be provided. A certificate of insurance
evidencing such coverage will be provided to TJU prior to the first
COMPANY-sponsored clinical trial of PRODUCTS. Notwithstanding the foregoing, if
the requirements of this Section 8.02 are not consistent with general industry
norms or good business practices at the time, TJU agrees to discuss in good
faith with COMPANY whether the above insurance requirement may be modified. Any
such modification shall be in writing signed by both parties.
8.03 Neither TJU, its trustees, officers, staff nor agents assume any
responsibility for the manufacture, or product specifications, or end use of any
Product manufactured by or for or sold by COMPANY, it Affiliates, and its
sublicensees. TJU expressly disclaims any and all implied warranties of
merchantability or fitness for any particular purpose of any PRODUCT. Further,
TJU makes no representation that PRODUCTS or their manufacturer or use will be
free from liability for infringement
28
<PAGE>
of patents of third parties.
ARTICLE IX - DURATION AND TERMINATION
9.01 Unless sooner terminated as herein provided, this AGREEMENT shall continue
in effect from the EFFECTIVE DATE until the expiration of the last to expire of
the PATENT RIGHTS.
9.02 Subject to Section 10.09, this AGREEMENT, and all rights and licenses
granted hereunder to COMPANY, may sooner be terminated as follows:
a. By COMPANY, at any time giving TJU one hundred twenty (120) days
advance written notice thereof, by paying all amounts due, including unpaid
license fees and minimum and earned royalties on the PRODUCTS sold, prior
to the EFFECTIVE DATE of termination, and by thereafter ceasing to develop,
make, have made, use, sell offer to sell, and import PRODUCTS.
b. By TJU effective immediately on written notice to COMPANY if
COMPANY:
(i) files or has filed against it a petition under the Federal
Bankruptcy Act, which petition if for an involuntary proceeding shall
not have been dismissed within ninety (90) days after the date of
filing, or
(ii) makes an assignment for the benefit of creditors or has a
receiver appointed for it, if such receiver has not been dismissed
within ninety (90) days after the date of filing, or otherwise takes
advantage of laws designed for the relief of debtors, all to the
extent permitted by the Bankruptcy Reform Act of 1978.
29
<PAGE>
c. By TJU upon written notice in the event COMPANY becomes more that
forty-five (45) days in arrears in payment of any royalty or other payment
due hereunder, including any minimum royalty payment, provided however that
COMPANY shall have forty-five (45) days from said notice to cure such
default by making all such payments.
d. Should a PARTY hereto fail to perform any material covenant of this
AGREEMENT on its part to be performed, then upon ninety (90) days written
notice of such failure from the other PARTY, the PARTY in breach or default
shall have ninety (90) days from the date of notice to correct the breach
or default, and upon failure to do so, the PARTY not in breach or default
may cancel and terminate this AGREEMENT upon written notice, unless this
AGREEMENT shall require other remedies.
Termination of the AGREEMENT by either PARTY for any reason shall not relieve
either PARTY of obligations accruing prior to the effective date of the
termination.
ARTICLE X - MISCELLANEOUS
10.01 This AGREEMENT constitutes the entire understanding between the PARTIES
with respect to the obligations of the PARTIES hereto, and supersedes and
replaces all prior agreements, understandings, writings and discussions between
the PARTIES relating to the subject matter of this AGREEMENT.
10.02 This AGREEMENT may be amended and any of its terms or conditions waived
only by written instrument executed by the PARTIES. The failure of either PARTY
at any time or times to require performance of any provision hereof shall in no
manner
30
<PAGE>
affect its right at a latter time to enforce the same. No waiver by either PARTY
of any condition or term in any one or more instances shall be construed as a
further or continuing waiver of such condition or term or of any other condition
or term.
10.03 This AGREEMENT shall be binding upon and inure to the benefit of and be
enforceable by the PARTIES hereto and their respective successors and assignees.
10.04 Any delays in or failure of performance by either PARTY under this
AGREEMENT other than payment of obligations shall not be considered a breach of
this AGREEMENT if and to the extent caused by occurrences beyond the reasonable
control of the PARTY affected, including but not limited to acts of God; acts,
regulations or laws of any government; strikes or other concerted acts of
workers; fires; floods; explosions; riots; illness; death; incapacity;
disability; wars; rebellion and sabotage; and any time for performance hereunder
shall be extended by the actual time of delay caused by such occurrence.
10.05 COMPANY and TJU shall not use the name of the other or the names of any of
the other's staff members, employees or students or any adaption thereof in any
advertising, promotional or sales literature to the extent such use might imply
a relationship between the PARTIES or approval or endorsement by TJU of any
aspect described in this AGREEMENT, other than as may be required by law,
without the prior written approval of the other PARTY which shall not be
unreasonably withheld.
10.06 COMPANY shall be responsible for the compliance of PRODUCTS sold hereunder
with all applicable laws and regulations. without limiting the foregoing, all
PRODUCTS sold by COMPANY, its AFFILIATES and sublicenses shall be labeled with
31
<PAGE>
such legends and statements as may be required by applicable law or regulations.
10.07 Any notice required or permitted to be given hereunder shall be deemed
sufficient if mailed by registered or certified mail (return receipt requested)
or delivered by hand to the PARTY to whom such notice is required or permitted
to be given.
All notices to TJU shall be addressed as follows:
Thomas Jefferson University
Office of Technology Transfer
1020 Locust Street
Philadelphia, PA 19107
Attention: Director, Technology Transfer
Telefax: (215) 923 5835
All notices to COMPANY shall be addressed as follows:
Carl Spana, Ph.D.
President
Walden Laboratories, Inc.
375 Park Avenue
Suite 1501
New York, NY 10152
Telefax: (212) 832 4389
With copies to:
Michael S. Weiss, Esq.
Secretary
Walden Laboratories, Inc.
375 Park Avenue
Suite 1501
New York, NY 10152
32
<PAGE>
10.08 COMPANY, AFFILIATES and its sublicensees, if any, shall comply with all
Federal and foreign jurisdiction laws in respect of patent marking, if any, but
the selection, location and particulars of such marking shall be at COMPANY's
discretion.
10.09 With regard to any disputes arising out of or in relation to this
AGREEMENT that TJU and COMPANY cannot resolve among themselves without
assistance, TJU and COMPANY agree to attempt to resolve such dispute through
third-party mediation in accordance with the then-applicable rules of the
American Arbitration Association. Any such dispute that is not resolved within
thirty (30) days after a request for mediation by either of the parties shall be
settled by arbitration to be held in Philadelphia, PA, and shall be conducted in
accordance with the then-applicable Patent Arbitration Rules of the American
Arbitration Association or any successor thereto. A single arbitrator with
reasonable knowledge of or experience in the pharmaceutical or biotechnology
industries shall be appointed by agreement of the PARTIES or, by mutual
agreement the arbitration may be conducted by three arbitrators, with each PARTY
selecting one and those arbitrators selecting the third. If the PARTIES shall
not have agreed on mutually satisfactory arbitration panel within ten days of
the request of any party for the arbitration hereunder, an arbitration panel
shall be forthwith be appointed pursuant to the aforesaid rules of the American
Arbitration Association. The panel may grant injunctions and any and all other
forms of relief in such dispute permitted under the American Arbitration
Association rules. The decision of the panel shall be final, conclusive and
binding on the parties to the arbitration. Judgment may be entered on the
panel's decision in any court having jurisdiction. As a part of any arbitration
decision, the prevailing party in any such arbitration may be entitled to
payment of its costs and expenses, including
33
<PAGE>
attorneys' fees and expenses, by the other party.
10.10 This AGREEMENT and the rights and duties appertaining thereto may not be
assigned by either party without first obtaining the prior written consent of
the other. Any such purported assignment, without the written consent of the
other party, shall be null and of no effect. Notwithstanding the foregoing,
COMPANY may assign this AGREEMENT (i) to a purchaser, merging or consolidating
corporation, or acquirer of substantially all of COMPANY's assets or business
and/or pursuant to any reorganization qualifying under Section 368 of the
Internal Revenue Code of 1986 as amended, as may be in effect at such time, or
(ii) to an AFFILIATE of COMPANY subject to the consent of TJU which consent
shall not be unreasonably withheld, provided that AFFILIATE shall become
responsible for all obligations of COMPANY under this AGREEMENT.
10.11 If any provisions of this AGREEMENT are or become invalid, are ruled
illegal by any court of competent jurisdiction or unenforceable under current
applicable law from time to time in effect during the term hereof, then in that
event, it is the intention of the PARTIES that the remainder of this AGREEMENT
shall not be affected thereby.
10.12 This AGREEMENT shall be governed by and construed and interpreted in
accordance with the laws of the Commonwealth of Pennsylvania.
The PARTIES have duly executed this AGREEMENT as of the date first above
written.
34
<PAGE>
FOR TJU: FOR COMPANY:
/s/ Jussi J. Saukkonen /s/ Carl Spana
- ------------------------------ ------------------------------
Jussi J. Saukkonen, M.D. Walden Laboratories, Inc.
Dean, College of Graduate 375 Park Avenue, Suite 1501
Studies & Vice President New York, N.Y. 10152
for Science Policy, Technology
Development, and
International Affairs
11/27/1995 11/20/95
- ------------------ ------------------
Date Date
35
EXHIBIT 11.1
AVAX TECHNOLOGIES, INC.
(FORMERLY WALDEN LABORATORIES, INC.)
COMPUTATION OF EARNINGS (LOSS) PER SHARE
<TABLE><CAPTION>
SIX SIX
MONTHS MONTHS
MONTH OF MONTHS O/S WEIGHTED YEAR YEAR ENDED ENDED
ISSUANCE FOR NUMBER OF EACH GIVE AVERAGE ENDED ENDED JUNE 30, JUNE 30,
F/S PURPOSES SHARES YEAR SHARES 1994 1995 1995 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
January '90 1,165,000 1,165,000 1,165,000 1,165,000 1,165,000
August '91 460,000 460,000 460,000 460,000 460,000
June '92 574,195 574,195 574,195 574,195 574,195
Series A Pref:
June '92 518,750
July '92 118,750
Sep '92 6,250
------------
643,750 (a) 643,750 (a) (a)
------------
July '93 14,718
November '93 2,717
------------
17,435 17,435 17,435 17,435 17,435
------------
July '94 7,500 5.5 3,438 3,438 7,500 7,500 7,500
April '95 (222,659) 8.5 (157,717) (157,717) (92,775)
May '95 (393,236) 7.5 (245,773) (245,773) (98,309)
September '95 804,979 3.5 234,786 (b)
November '95 2,749,457 2.5 572,804 (b)
------------ ---------
2,938,541 404,100 2,938,541
------------ ---------
March '96 (155,802) 3.5 (90,885)
May & June '96 643,750 1 107,292
May & June '96 258,198 1 43,033
June '96 1,000 0.5 83
------------ ---------
747,146 59,523 59,523
------------ ---------
Cheap shares:
September and
November '95 3,554,436
Treasury shares (3,627)
------------
3,550,809 3,550,809 3,550,809 3,550,809
------------
June '96 18,750
Treasury shares (191)
------------
18,559 18,559 18,559 18,559 18,559
------------
Cheap warrants (c) :
January and
February '96
and August 1995 240,000
Treasury shares (2,449)
------------
237,551 237,551 237,551 237,551 237,551
------------
Cheap Options:
May 1996 637,745
Treasury shares (162,690)
------------
475,055 475,055 475,055 475,055 475,055
------------
------------------------------------------------
Weighted Average shares 6,502,042 6,746,364 6,315,020 5,953,359
================================================
Net income (loss) attributable to common stockholders (781,221) 642,282 (200,140) (1,626,744)
Net income (loss per share) (0.12) 0.10 (0.03) (0.27)
</TABLE>
(a) - Not included because it would be dilutive.
(b) - See cheap shares.
(c) - Warrants issued in connection with private placement not included.
<PAGE>
AVAX TECHNOLOGIES, INC.
(FORMERLY WALDEN LABORATORIES, INC.)
COMPUTATION OF EARNINGS (LOSS) PER SHARE
<TABLE>
<CAPTION>
SIX SIX
MONTHS MONTHS
MONTH OF MONTHS O/S WEIGHTED YEAR YEAR ENDED ENDED
ISSUANCE FOR NUMBER OF EACH GIVE AVERAGE ENDED ENDED JUNE 30, JUNE 30,
F/S PURPOSES SHARES YEAR SHARES 1994 1995 1995 1996
- -------------------------------------------------------------------------------------------------------------
AVAX TECHNOLOGIES, INC.
(FORMERLY WALDEN LABORATORIES, INC.)
COMPUTATION OF SUPPLEMENTARY EARNINGS (LOSS) PER SHARE
<S> <C> <C> <C>
Net income (loss) attributable to common stockholders 642,282 (200,140) (1,626,744)
Interest on debt repaid 96,962 37,338 55,247
Deferred financing cost related to debt repaid 12,562 24,164
--------------------------------------
Supplementary net income (loss) 751,806 (138,638) (1,571,497)
--------------------------------------
Weighted average shares 6,746,364 6,315,020 5,953,359
Additional shares:
Conversion of Series A Preferred (d) 643,750 643,750
Common stock equivalents sold to retire debt 641,327 641,327 641,327
--------------------------------------
Supplementary weighted average shares 7,387,691 7,600,097 7,238,436
--------------------------------------
Supplementary net income (loss per share) 0.10 (0.02) (0.22)
(d) - Included in weighted average shares for primary calculation.
</TABLE>
Exhibit 20.1
STOCKHOLDER INFORMATION STATEMENT
WALDEN LABORATORIES, INC.
375 Park Avenue
Suite 1501
New York, New York 10152
June 15, 1995
<PAGE>
TABLE OF CONTENTS
INTRODUCTION ........................................................... 1
INFORMATION CONCERNING STOCKHOLDER CONSENT ............................. 1
PROPOSAL -- SALE OF NUTRIFEM PMS, AND ALL RELATED INTELLECTUAL
PROPERTY, TO INTERNUTRIA, INC., A SUBSIDIARY OF INTERNEURON
PHARMACEUTICALS, INC.
INTRODUCTION ................................................ 4
TERMS AND CONDITION OF THE SALE ............................. 6
CONSENT REQUIRED ............................................ 6
FEDERAL SECURITIES LAW CONSEQUENCES ......................... 7
INFORMATION REGARDING IPI ................................... 7
ACTION BY WRITTEN CONSENT OF STOCKHOLDERS OF
WALDEN LABORATORIES, INC. ......................... 8
ANNEX A: FORM OF PROPOSED AMENDMENT TO THE CERTIFICATE OF
INCORPORATION.
<PAGE>
INTRODUCTION
This Stockholder Information Statement (this "Information Statement") is
being sent to the holders of Common Stock, par value $.001 per share ("Common
Stock"), and Series A Convertible Preferred Stock, par value $.01 per share
("Preferred Stock") of Walden Laboratories, Inc., a Delaware corporation (the
"Company"), and provides information about the matters referred to in the
enclosed Action by Written Consent of Stockholders of the Company (the
"Consent") as to which stockholder consent is being solicited by the Company.
This Information Statement is being mailed on or about June 15, 1995 to
stockholders of record of the Company as of that date (the "Record Date").
Stockholders of the Company should carefully review the information
contained in this Information Statement before making a decision whether to
approve the proposal for which stockholder consent is solicited hereby (the
"Proposal"). The Company is not asking stockholders for a proxy and stockholders
are requested not to send the Company a proxy. No meeting of stockholders will
be held regarding the Proposal.
The Company's principal executive office is located at 375 Park Avenue,
Suite 1501, New York, New York 10152.
INFORMATION CONCERNING STOCKHOLDER CONSENT
The Company is seeking stockholder approval of the sale (the "Sale") of
NutriFem PMS, the leading product under development by the Company (the
"Product"), and all of the patents and other intellectual property rights
related to the Product, including know-how (the "Assets") to InterNutria, Inc.
("InterNutria"), currently a majority-owned subsidiary of Interneuron
Pharmaceuticals, inc. ("IPI"), for an aggregate purchase price of $2.4 million
payable in shares of common stock of IPI (the "Stock"). IPI's Common Stock is
currently traded on the Nasdaq National Market. The Stock will be paid to the
Company in two equal installments over the course of two years (each, an
"Installment"). At approximately the same time as each Installment is paid to
the Company, 95.85% of the Stock issued at the time of each Installment, i.e.,
Stock having a value of $1,150,200 per Installment, will be distributed by the
Company within a reasonable time of each Installment, to the Company's Preferred
Stockholders of record on the closing date of the Sale on a pro rata basis;
provided, however, that if at the time of each Installment, any of the Company's
presently existing indebtedness comprised of its Bridge Notes is then due and
payable, the Company will cause such indebtedness to be paid or provided for,
whether by use of available cash, refinancing or replacement proceeds, by
redirecting a portion of the Stock to satisfy such indebtedness or otherwise as
the Corporation shall determine to be in the best interest of the Corporation.
The remaining 4.15% of the Stock (or a cash payment equal to the value thereof)
will be distributed by the Company to Dayne Myers, the Company's former
President and Chief Executive Officer in partial consideration of his
resignation from the Company and the return to the Company of all his Common
Stock. The distribution to Mr.
<PAGE>
2
Myers will occur within 30 days of the receipt by the Company of each
Installment of the Stock.
Except for Mr. Myers, a former owner of Common Stock, NONE OF THE HOLDERS
OF COMMON STOCK WILL BE ENTITLED, AS SUCH A HOLDER, TO ANY DISTRIBUTION OF THE
STOCK.
The holders of the Stock will be granted certain registration rights
relating to the resale of the Stock. At the time of each Installment, the
liquidation preference of the Preferred Stock will be reduced by the value of
the Stock (and any cash in lieu of fractional shares) distributed to the
Preferred Stockholders at that time (i.e., $1,150,200 per Installment and
$2,300,400 in the aggregate). The reduction in the liquidation preference from
its existing $2.00 per share preference (approximately $2.6 million in the
aggregate for all of the approximately 1.3 million issued and outstanding shares
of Preferred Stock) will require an amendment (the "Amendment") to the Company's
Certificate of Incorporation substantially the form set forth in Annex A to this
Information Statement as to which the Company is also soliciting stockholder
approval pursuant to the Consent. If approved, the Amendment will be filed at or
near the same time as the effectiveness of the closing of the Sale. Currently it
is intended that none of the Stock will be used to repay approximately $550,000
of existing indebtedness of the Company. After consummation of the Sale, the
Company may seek other opportunities in the biotechnology industry, liquidate
or explore whatever other policies and strategies the Board of Directors, in the
exercise of its business judgment, considers to be in the best interest of the
Company, including, without limitation undertaking additional debt or equity
financing.
Lindsay A. Rosenwald, M.D., a substantial stockholder and director of the
Company is also a principal stockholder and Chairman of the Board of Directors
of IPI. Dr. Judith Wurtman, a former director and a principal stockholder of the
Company is a stockholder of IPI and her husband, Dr. Richard Wurtman, is a
principal stockholder and director of IPI. Accordingly, Drs. Rosenwald and
Wurtman did not participate in the vote of the Board of Directors approving the
Sale or the Amendment. Dr. Judith Wurtman has resigned as Chief Scientist and
director of the Company effective as of April 7, 1995, and is expected to become
a consultant to and stockholder of InterNutria. Subject to the requisite
approval of the Proposal by the stockholders of the Company, as consideration
for Dr. Wurtman's resignation and for her returning to the Company for
cancellation all of the stock and options in the Company owned by her and her
relatives and distributees, the Company will transfer to Dr. Wurtman all of the
intellectual property rights invented by her and owned by the Company, exclusive
of the Assets.
Dayne Myers has resigned as President, Chief Executive Officer and a
director of the Company. In exchange for Mr. Myers' resignation, and for the
return by him to the Company for cancellation of all of the stock and options in
the Company owned by him, the Company has agreed, subject to the performance of
certain covenants by Mr. Myers, to pay to Mr. Myers (i) $75,000, payable in
equal monthly Installments over a 12-month period, (ii) 4.15% of the Stock (or
at the Company's option, the value of such Stock payable in cash) and (iii)
certain other
<PAGE>
3
customary severance expenses such as continuing medical coverage for up to one
year, and a one-time reimbursement of up to $3,000 for documented moving
expenses.
The Company's Board of Directors which considered the Sale consisted of
five members. Dr. Jerry Weisbach, Mr. Edson de Castro and Mr. Dayne Myers were
the disinterested members of the Board of Directors that had no affiliation with
IPI. Dr. Weisbach and Mr. de Castro each sit on the Boards of Directors or act
as scientific advisors to several companies of which Dr. Rosenwald is a
principal stockholder. At a meeting of the Board of Directors, the foregoing
disinterested members of the Board of Directors approved the Sale by a vote of
two-to-one. Dayne Myers, the only dissenting member of the Board of Directors,
voted for the Myers Proposal (as defined below) in lieu of the Sale. The Board
of Directors has also voted in favor of the adoption of the Amendment.
Accordingly, for the reasons set forth herein, the Board of Directors believes
that the best interest of the Company and its stockholders will be served by
approving the matters referred to in the Consent. The Company requests that each
stockholder carefully review the matters set forth herein and approve such
matters by executing the enclosed consent and returning it in the enclosed,
self-addressed, stamped envelope provided with these materials.
A stockholder may revoke his or her Consent to the action described herein
by delivering to the Company a written notice of revocation at any time prior to
the time that the Company has received written Consents authorizing the actions
set forth in the Consent signed by the holders of (i) a majority of the
outstanding shares of Preferred Stock voting as a separate class together and
(ii) the holders of a majority of the aggregate disinterested holders' shares of
Common Stock and Preferred Stock taken together. The Company has determined that
none of the Preferred Stockholders are interested in this transaction for
purposes of calculating this vote. See "Consent Required" below.
Stockholders should note that because the Sale and the Amendment are
related transactions they are together the subject of a single Proposal.
Accordingly, the Company is seeking the Consent of each stockholder pursuant to
one Proposal. Delivery by each holder of his or her Consent will be deemed to an
authorization of both the Sale and the Amendment.
If the Proposal is approved by the stockholders of the Company, the
Company, InterNutria and IPI will negotiate an asset purchase agreement relating
to the Sale and if the Sale is consummated the Company will effect the Amendment
by filing it with the Secretary of State of the State of Delaware prior to or at
the closing date of the Sale. The Board of Directors reserves the right,
notwithstanding stockholder approval and without further action of the
stockholders, to determine not to proceed, in whole or in part, with the matters
set forth in the Consent if, in its sole discretion, it determines that such
actions are no longer in the best interest of the Company and its stockholders.
<PAGE>
4
PROPOSAL
THE SALE OF NUTRIFEM PMS, AND ALL RELATED INTELLECTUAL PROPERTY,
TO INTERNUTRIA, INC. A SUBSIDIARY OF INTERNEURON
PHARMACEUTICALS, INC.
INTRODUCTION
After an extensive evaluation of the Company's near and long term
prospects, the Company's Board of Directors has concluded that it is in the best
interests of the stockholders of the Company to sell the Assets, to InterNutria
for the Stock pursuant to an asset purchase agreement to be entered into by and
among the Company, IPI and InterNutria providing for the sale of the Assets to
InterNutria in exchange for $2.4 million payable in two equal Installments of
$1.2 million of Stock; provided, that to the extent IPI has insufficient
authorized stock, such consideration shall be paid in cash. The first
Installment will be paid to the Company on the first anniversary of the closing
date of the Sale. The second Installment will be paid to the Company on the
second anniversary of such closing date. The number of shares of Stock issued
will be determined on the basis of the average closing price of IPI common stock
for the twenty consecutive trading days immediately preceding the date set for
each Installment. Of the Stock distributed at the time of each Installment,
95.85% of the Stock, i.e., Stock having a value of $1,150,200 per Installment,
will be distributed within a reasonable time after each Installment, by the
Company to the Company's Preferred Stockholders of record on the closing date of
the Sale on a pro rata basis; provided, however, that if at the time of each
Installment, any of the Company's presently existing indebtedness comprised of
its Bridge Notes is then due and payable, the Company will cause such
indebtedness to be paid or provided for, whether by use of available cash,
refinancing or replacement proceeds, by redirecting a portion of the Stock to
satisfy such indebtedness or otherwise as the Corporation shall determine to be
in the best interest of the Corporation. No fractional shares of Stock will be
distributed. To the extent that any stockholder would receive a fractional share
of Stock at the time of either Installment, a cash payment equal to the value of
such fractional share.
At the time that each Installment is distributed to the Preferred
Stockholders, the liquidation preference of the Preferred Stock will be reduced
by the value of the Stock (and any cash in lieu of fractional shares) if any,
distributed to the Preferred Stockholders at that time (i.e., $1,150,200 per
Installment and $2,300,400 in the aggregate). The reduction in the liquidation
preference from its existing $2,000 per share preference (approximately $2.6
million in the aggregate for all of the approximately 1.3 million issued and
outstanding shares of Preferred Stock) requires the Amendment as to which the
Company is also soliciting stockholder approval pursuant to the Consent.
Delivery by each holder of his or her Consent will be deemed to an authorization
of both the Sale and the Amendment. Accordingly, the liquidation preference of
$2.00 per share of Preferred Stock shall be reduced to $1.1523 (rounded to the
nearest one-hundredth of a cent) at the time of the First Installment and shall
be further reduced to $0.2304 (rounded to the nearest one-hundredth of a cent)
at the time of the Second Installment. Simultaneously with the closing of the
Sale, IPI and the Company will also enter into a registration rights agreement
pursuant to which IPI will agree to file
<PAGE>
5
a registration statement covering the resale of the Stock distributed to the
Preferred Stockholders of the Company and Mr. Myers. The registration rights
will be subject to certain customary restrictions including black-our periods
and that the selling stockholders provide certain information for use in
connection with such registration and agree to provide certain customary
indemnification in connection therewith. Currently, it is intended that none of
the Stock will be used to repay existing outstanding indebtedness of the
Company, and except for Mr. Myers, a former owner of Common Stock, NONE OF THE
HOLDERS OF COMMON STOCK WILL BE ENTITLED, AS SUCH A HOLDER, TO ANY DISTRIBUTION
OF THE STOCK. After consummation of the Sale, the Company may seek other
opportunities in the biotechnology industry, liquidate or explore whatever other
policies and strategies the Board of Directors, in the exercise of its business
judgment, considers to be in the best interest of the Company including, without
limitation, undertaking additional debt or equity financing.
In connection with this decision to authorize the Sale, the Board of
Directors evaluated the Company's future prospects. The Board of Directors was
presented by management of the Company a report indicating that a diligent
search for other buyers of the Product and other corporate partnership
opportunities for marketing the Product had been conducted without obtaining a
more attractive offer than the offer of IPI regarding the Sale (the "IPI
Offer"). The Board of Directors was also presented with one alternative offer by
Dayne Myers, the Company's former President and Chief Executive Officer, which
entailed the formation of a joint marketing venture with Consumer Venture
Partners (the "Myers Proposal"). The Myers Proposal included a $300,000 cash
investment in the development of the Product, a $200,000 line of credit from
Abco Laboratories, Inc., and marketing support from Medical SelfCare, a direct
response marketing and distribution company. However, it was the business
judgment of the Board of Directors that the Myers Proposal was deficient in its
uncertainty regarding whether there would be any payments to any stockholders
arising thereby, as well as, limited financing, questionable returns to
stockholders and other factors deemed relevant by the Board of Directors. Based
upon the foregoing and the Company's need for and inability to raise any
additional capital, the Board of Directors concluded that the Company did not
have the requisite resources for the proper development and marketing of the
Product, and that under the present financial circumstances of the Company, the
Sale pursuant to the IPI Offer as described above, was the most attractive
opportunity the Company had received to date and could expect to find if the
search were continued.
Stockholders should be aware that the Board of Directors did not obtain any
fairness opinion in connection with its consideration of any of the proposals.
In addition, due to the fact that certain stockholders and officers and
directors of the Company are affiliated with IPI and InterNutria, including Drs.
Rosenwald and Wurtman and their respective families, the Sale may not be deemed
to be an arms' length transaction. However, the Sale was negotiated over an
extended period of time primarily by unaffiliated representatives of the parties
and, as mentioned above, it was the judgment of the disinterested members of the
Board of Directors that the IPI Offer and the Sale were in the best interest of
the Company and its stockholders and accordingly, it recommended that the
stockholders adopt the Consent. Stockholders who do not approve the Consent will
not be entitled to appraisal
<PAGE>
6
rights offered by Section 262 of the General Corporation Law of the State of
Delaware because such provisions are inapplicable to the Sale and the Amendment.
ALTHOUGH IT IS ANTICIPATED THAT THE RECEIPT OF IPI STOCK BY PREFERRED
STOCKHOLDERS WILL NOT BE A TAX FREE TRANSACTION, EACH STOCKHOLDER SHOULD REVIEW
THIS INFORMATION STATEMENT CAREFULLY AND CONSULT WITH ITS OWN ADVISORS,
INCLUDING ITS OWN COUNSEL AND ACCOUNTANTS REGARDING THE TAX AND OTHER
CONSEQUENCES OF THESE TRANSACTIONS TO SUCH STOCKHOLDER.
TERMS AND CONDITIONS OF THE SALE
The Sale and the Amendment are subject to the approval of the Company's
stockholders as set forth under "Consent Required", as well as the negotiations
and execution of an asset purchase agreement with IPI and InterNutria which will
include representations, warranties, conditions and covenants customarily
involved in a transaction of this type.
CONSENT REQUIRED
Under Delaware law, the written consent of a majority of the outstanding
Preferred Stock voting separately as a class and the written consent of a
majority of the aggregate outstanding Common Stock and Preferred Stock taken
together, is required for approval of the Sale and the Amendment. However, the
Company has also conditioned the Sale and the Amendment upon the written consent
of a majority of the aggregate shares held by the disinterested holders of
Common Stock and Preferred Stock, taken together.
For purposes of computing whether the Proposal has been approved by the
disinterested stockholders, the consents of Dr. Rosenwald and Dr. Wurtman and
any other stockholders of the Company that are affiliated with IPI (and their
respective family members) will be disregarded.
The total amount of outstanding Preferred Stock is 1,275,000 shares. The
total number of outstanding shares of Common Stock is 4,448,260 shares. The
Company has determined that holders of approximately 3,136,123 shares of Common
Stock (representing approximately 71.1% of the outstanding shares of Common
Stock) may be "interested" stockholders and accordingly, their votes will be
disregarded for purposes of calculating the vote of the disinterested
shareholders. All shares of Preferred Stock will be calculated for purposes of
the vote of disinterested shareholders.
<PAGE>
7
FEDERAL SECURITIES LAW CONSEQUENCES
The Stock will constitute "restricted securities" as defined under Rule 144
of the Securities Act of 1933, and the rules and regulations of the Securities
and Exchange Commission ("SEC") promulgated thereunder (the "Securities Act"),
and as such may not be transferred by the holder thereof except pursuant to an
effective registration statement under the Securities Act or an applicable
exemption from such registration. Accordingly, each certificate of Stock will
contain a legend substantially as follows:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO SUCH SECURITIES UNDER SUCH ACT
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE STATE
SECURITIES LAWS."
INFORMATION REGARDING IPI
Reference is hereby made to the following publicly available documents regarding
IPI which have been filed with the SEC and which accompany this Information
Statement:
1. Annual Report on Form 10-K for the Fiscal Year Ended September 30,
1994.
2. Proxy Statement for 1994 Annual Meeting of Stockholders held March 22,
1995.
3. Quarterly Report on Form 10-Q for the Quarter Ending March 31, 1995.
Such information regarding IPI is furnished solely for each stockholders'
ease of reference, and the Company shall have no liability for any statements
contained therein or omitted.
<PAGE>
8
ACTION BY WRITTEN CONSENT
OF STOCKHOLDERS OF
WALDEN LABORATORIES, INC.
Pursuant to Section 228 of the General Corporation Law of the State of
Delaware and the Bylaws of Walden Laboratories, Inc., a Delaware corporation
(the "Corporation"), the undersigned Stockholders of the Corporation hereby vote
all shares of Preferred Stock, par value $.001 per share, and all shares of
Common Stock, par value $.001 per share, held of record by them to approve and
adopt by written consent without a meeting the following resolutions, and the
actions to approve and adopt by written consent without a meeting the following
resolutions, and the actions described therein or contemplated thereby:
I. Approval of the sale of NutriFem PMS to InterNutria, Inc., a subsidiary of
Interneuron Pharmaceuticals, Inc. and Related Amendment to the Certificate
of Incorporation of the Corporation.
WHEREAS, the undersigned Stockholders have reviewed the Corporation's
Stockholder Information Statement dated June 12, 1995 (the "Information
Statement"), relating to the sale (the "Sale") of NutriFem PMS, and all of the
patents and other intellectual property rights related to the Product, including
know-how (the "Assets"), to InterNutria, Inc. ("InterNutria"), currently a
wholly owned subsidiary of Interneuron Pharmaceuticals, Inc. ("IPI"), for an
aggregate consideration of $2.4 million payable in installments in shares of
common stock of IPI, as well as all related matters including an amendment to
the Corporation's Certificate of Incorporation in substantially the form set
forth in Annex A to the Information Statement;
WHEREAS, the undersigned Stockholders have considered such other
information as each of them consider relevant to the proposed Sale and the
Amendment including such information regarding IPI as it considers necessary or
desirable (including the material accompanying the Information Statement);
WHEREAS, the undersigned Stockholders consider the Sale and Amendment to be
fair to, and in the best interest of, the Corporation and the Stockholders of
the Corporation;
NOW THEREFORE BE IT RESOLVED, that the undersigned Stockholders hereby
consents to and approves the Sale and the Amendment and the appropriate officers
of the Corporation be, and each of them hereby is, authorized to execute, and
enter into on behalf of the Corporation an asset purchase agreement with
InterNutria and IPI and such other requisite agreements and instruments as are
necessary or advisable to effectuate said Sale and to file with the Secretary of
State of the State if Delaware the Amendment; and be it further
RESOLVED, that the Board of Directors and the appropriate officer or
officers of
<PAGE>
9
the Corporation be, and each of them hereby is, authorized and directed in the
name and on behalf of the Corporation, to take any and all such further actions,
to execute, issue, verify, acknowledge, certify, file and deliver all such other
agreements, documents, certificates and instruments in the name and on behalf of
the Corporation, to incur and pay all such fees and expenses and to engage such
persons as they shall determine to be necessary, appropriate or desirable to
consummate the transactions contemplated by each of the foregoing resolutions
contained in these minutes, including, without limitation, the execution and
delivery of any amendment, restatement, supplement or modification to any of the
foregoing and otherwise to carry out fully the intent and purpose of the
foregoing resolution; and further
RESOLVED, that all actions previously taken by any officer or director of
the Corporation in connection with the transactions contemplated by and
consistent with each of the foregoing resolutions contained in these minutes be,
and they hereby are, adopted, ratified, confirmed and approved in all respects
as the acts and deeds of the Corporation.
This Action by Written Consent may be executed in counterparts, each of
which shall be deemed an original and all of which together shall constitute one
and the same Written Consent.
IN WITNESS WHEREOF, the undersigned Stockholders of the Corporation have
executed this Written Consent to be effective as of the date first above written
and have directed that the same be filed with the minutes of the proceedings of
the Stockholders of the Corporation.
_________________________________ ________________________________
Print Name Above Print Name Above
Holder of _____ Shares Preferred Holder of _____ Shares of Preferred
Stock Stock
By: _____________________________ By: _____________________________
Date: ___________________________ Date: ___________________________
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 20, 1996, except for Note 9, as to which the date
is June 11, 1996, in the Registration Statement (Form SB-2) and related
Prospectus of AVAX Technologies, Inc. (formerly Walden Laboratories, Inc.)
for the registration of 14,885,088 shares of common stock.
/s/ Ernst & Young LLP
----------------------
ERNST & YOUNG LLP
New York, New York
July 30, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27.1
This schedule contains summary financial information extracted from
the Financial Statements included in the Registration Statement.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<CASH> 503 20,968,831
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 908,503 21,952,624
<PP&E> 15,753 0
<DEPRECIATION> 6,789 0
<TOTAL-ASSETS> 1,973,568 23,084,002
<CURRENT-LIABILITIES> 1,569,717 1,209,231
<BONDS> 0 0
0 0
12,875 2,592
<COMMON> 10,325 11,857
<OTHER-SE> (632) 20,729,249
<TOTAL-LIABILITY-AND-EQUITY> 22,568 20,743,698
<SALES> 0 0
<TOTAL-REVENUES> 1,951,000 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 1,521,243 450,294
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 96,962 206,222
<INCOME-PRETAX> 1,380,571 (495,112)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,380,571 (495,112)
<EPS-PRIMARY> 0.10 (0.27)
<EPS-DILUTED> 0 0
</TABLE>
