<PAGE>2
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10SB
General Form for Registration of Securities of Small
Business Issuers
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
INFECTECH, INC.
(Exact name of Small Business Issuer in its charter)
DELAWARE 34-1760019
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
Suite Two, 87 Stambaugh Avenue, Sharon, PA 16146
(Address of principal executive offices) (Zip Code)
Registrant's Telephone number, including area code: (724) 346-1302
Securities to be registered pursuant to Section 12(b) of the Act:
None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
Forward-Looking Statements and Associated Risk. This Registration
Statement, including the information incorporated herein by reference,
contains forward-looking statements including statements regarding,
among
other items, the Company's growth strategies, and anticipated trends
in the Company's business and demographics. These forward-looking
statements are based largely on the Company's expectations and are
subject to a number of risks and uncertainties, certain of which are
beyond the Company's control. Actual results could differ materially
from these forward-looking statements.
<PAGE>3
ITEM 1. DESCRIPTION OF BUSINESS
A. The Company was incorporated in June 1989 under the laws of the
State of Delaware. On November 19, 1996, the Articles of
Incorporation were amended to increase the authorized shares from
120,000 to 20,000,000. In addition, a 50 to 1 stock split was
declared. The Company is a development stage company engaged in
research and development of diagnostic tests and therapeutics for
infectious human diseases. The Company's technology also has
veterinary applications.
The Infectech Method. The Company's research regarding paraffin
as a sole carbon source led to the concept that paraffin-coated glass
slides may be used to grow, identify and perform antibiotic sensitivity
assays on paraffinophilic bacteria. The Company then developed a
technology that employs a paraffin carbon source that enables viable or
living paraffinophilic organisms to be separated from viable non-
paraffinophilic bacteria and from non-viable or dead bacteria. In this
method only viable paraffinophilic bacteria are growing on the paraffin
coated glass slides. These living or viable bacteria found on the
surface of the paraffin coated slides may be stained and examined
microscopically to determine the presence of suspect pathogens.
Having identified the disease-causing bacterium, providing a patient
cure is the next step. In a manner similar to identification of the
pathogen, tests are conducted with a separate series of tubes
containing antibiotics. Macroscopic and microscopic examination of the
paraffin-coated slides indicate those tubes where there is an absence
of bacterial growth on the paraffin slide surface. Such absence means
that the antibiotic in question was able to kill the pathogen at a
particular concentration of antibiotic. The Company's patented
technology will enable the medical community to conduct antibiotic
sensitivity testing upon a pathogen once it has been identified,
thereby enabling a more rapid and effective treatment of bacterial
infections. The technology enables the user to determine the most
appropriate antibiotic to use as well as the most effective
concentration of such antibiotic. The Company's paraffin slide culture
technology provides a simple and inexpensive method for isolating,
identifying and performing antibiotic sensitivity testing of
paraffinophilic pathogens in markets ranging from large metropolitan
urban hospitals to modest third world field laboratories. Of
particular benefit to small hospitals, medical centers and third world
field laboratories is the potential of using a variety of body fluids
and fecal matter to provide samples for identification. The
convenience, efficiency, and safety of this method also provide
enhanced safety to the patient because of the non-intrusive nature of
gathering the samples.
The IDENTIKITTM process, from the perspective of the physician and the
patient, will operate relatively simply. For example, a patient enters
a hospital with serious burns. Since burn patients are at high risk
for bacterial infection, the physician will order a sample of blood or
sputum to be taken from the patient. The sample will then be added to
a series of test tubes containing the Company's patented growth media.
Paraffin slides are then added to the tube, and, with respect to
Pseudomonas, for example, within 24 hours (using the IDENTIKITTM) a
laboratory technician will be able to observe the growth of bacteria on
the paraffin and perform biochemical tests on it which will enable the
identification, specification and antibiotic sensitivity testing of the
patient's strain of Pseudomonas. The physician will then be able to
administer the most appropriate antibiotic treatment.
Products. IDENTIKITTM. The Company intends to offer two types of
IDENTIKITsTM, one utilizing nongenetic microbiology and one utilizing
genetic and amplification technology. Both types of IDENTIKITsTM will
be used for all applications outside of the body in a noninvasive
technique and may be used without additional specialized equipment.
Both types of IDENTIKITsTM can be used for identification, specification
and antibiotic sensitivity testing.
Both types of IDENTIKITsTM, nongenetic and genetic amplification
technology can be tailored with design, composition and instructions
intended to meet specific customer requirements in identifying one or
more of the paraffinophilic nonparaffinophilic and
nonparaffinophic/hydrophobic microorganisms. The price of each kit
will be dependent on the number of paraffinophilic microorganisms to be
tested by the kit. For example, the cost of a kit designed to identify
<PAGE>4
all known paraffinophilic microorganisms will exceed the cost of a kit
specifically designed to identify one microorganism (e.g. an MAI
IDENTIKITTM).
The Nongenetic Microbiology Identification (NMI) IDENTIKITTM is of a
standard design and suitable for identifying any number of
paraffinophilic, nonparaffinophilic or nonparaffinophilic/hydrophobic
microorganisms. This kit is suitable for 100 assays. The anticipated
list price of the kit for the identification of one of the disease
causing organisms is $200.00.
The Nongenetic Microbiology Antibiotic Sensitivity (NMAS) IDENTIKITTM is
designed for determining antibiotic sensitivity for a paraffinophilic
microorganism. any number of paraffinophilic microorganisms., up to a
total of all paraffinophilic microorganisms. This kit is also suitable
for 100 assays and can be shipped from stock. The anticipated list
price of the kit determining antibiotic sensitivity is approximately
$300.00.
The Nongenetic Microbiology Antibiotic Sensitivity for
NonParaffinophilic Organisms (NMAS) IDENTIKITTM is designed for
determining antibiotic sensitivity for a specific nonparaffinophilic
microorganism. This kit is also suitable for 100 assays and can be
shipped from stock. The anticipated list price of the kit determining
antibiotic sensitivity is approximately $300.00.
The Nongenetic Microbiology Antibiotic Sensitivity for
NonParaffinophilic Hydrophobic Organisms (NMAS) IDENTIKITTM is designed
for determining antibiotic sensitivity for a specific
nonparaffinophilic/hydrophobic microorganism. This kit is also
suitable for 100 assays and can be shipped from stock. The
anticipated list price of the kit determining antibiotic sensitivity is
approximately $300.00.
The Nongenetic Microbiology Antibiotic Sensitivity for Several
Organisms (Paraffinophilic, Nonparaffinophilic,
Nonparaffinophilic/hydrophobic) is designed for determining antibiotic
sensitivity for several organisms (user's choice of organism). This
kit is also suitable for 100 assays and will be approximately $500.00
list price.
No additional research or development is necessary to complete the
nongenetic paraffinophilic kits. Additional research is presently
ongoing for the nonparaffinophilic and nonparaffinophilic/hydrophobic
nongenetic kits. However, the manufacturing, marketing and sales will
need to occur through a relationship with a large international
corporation. See "Sales and Marketing." Once such relationship is
established, sales of the nongenetic kit can begin in overseas markets
and domestic experimental markets for use in laboratory research. With
the exception of experimental markets, sales in the U.S. cannot occur
until FDA approval is granted.
Genetic Based Probe/Amplification Technology for Identification (PATID)
is designed to rapidly identify specific microorganisms. The kit is a
genetic based system and components are specific for the type of
organisms to be scanned for. One kit is suitable for 100 assays.
Genetic Based Probe/ Amplification Technology for Antibiotic
Sensitivity (PATAS is designed to perform rapid antibiotic sensitivity
testing for specific microorganisms. The kit genetic based procedure
and components are specific for type of organism to be assayed for
antibiotic sensitivity testing. One kit is suitable for 100 assays.
By using the Company's non-genetic IDENTIKITsTM, physicians will be
given better data earlier about their patients' conditions, freeing
them to make more effective treatment decisions, as the following chart
illustrates:
<TABLE>
<S> <C> <C> <C> <C>
Infectech
Genetic
Infectech IDENTIKIT
Conventional Conventional Genetic Antibiotic
Method of Antibiotic IDENTIKIT Sensitivity
Identification Sensitivity Identification Testing
MAI 8-30 days An additional 18-25 days 4-21 days total 8 days
Pseudomonas 24-48 hours An additional 24-48 hours 24 hours total 24 hours
</TABLE>
<PAGE>5
The Company believes that its patented testing method may be the only
one available, which can be successfully used with amplification
techniques for rapid antibiotic sensitivity testing. As a result, the
Company is presently performing experimentation to combine its patented
method with amplification techniques in an easy-to-use amplification
IDENTIKITTM, resulting in even more accelerated identification and
antibiotic sensitivity testing, as the following chart illustrates:
<TABLE>
<S> <C> <C> <C> <C>
Infectech
Genetic
Infectech IDENTIKIT
Conventional Conventional Genetic Antibiotic
Method of Antibiotic IDENTIKIT Sensitivity
Identification Sensitivity Identification Testing
MAI 8-18 days An additional 18-25 days 48-96 hours 48-72 hours
Pseudomonas 24-48 hours An additional 24-48 hours 24 hours total 24 hours
</TABLE>
The Market. Markets for the IdentikitsTM include hospitals,
clinical laboratories, medical research institutions, medical schools,
pharmaceutical companies and physician's offices. There are over 9,000
hospitals and medical laboratories in the United States, all of which
are logical customers for the IdentikitTM products. It is anticipated
that the IdentikitTM can capture a large percentage of the worldwide
market for identification of paraffinophilic pathogens due to its low
cost and the rapidity with which an assay can be completed.
At present, before FDA approval, both the nongenetic and the
fluorescent amplification kit can be sold in overseas markets and in
domestic experimental markets for use in laboratory research.
Marketing and Sales. The Company is positioning itself to
capture the market for MAI and Tuberculosis bacteria diagnosis and
antibiotic sensitivity testing. Prior to the AIDS epidemic, MAI was a
rare disease. After the advent of widespread AIDS infection, MAI was
found to infect AIDS patients at a very high rate. World health
authorities have estimated that more than 70% of AIDS patients harbor
an MAI infection. MAI affects the bone marrow, spleen, liver and
lungs. It compromises the lymph nodes, thereby further destroying the
patient's immune system. It has been shown that MAI also causes
opportunistic infections among non-HIV infected pediatric and elderly
persons. MAI is believed to be a major contributor to AIDS wasting
syndrome. In addition to MAI, there are at least 20 other disease-
causing paraffinophilic bacteria for which the Company's
The Company initially plans to market its products through licensing
and distribution arrangements with large, well-established medical
diagnostic companies. The Company's markets will potentially include
hospitals, clinical laboratories, medical research institutions,
medical schools, pharmaceutical companies (antibiotic sensitivity
testing methodology can be used to create new drugs to treat
paraffinophilic microorganisms), and physicians' offices.
Any contractual arrangements with others concerning the marketing and
distribution of its products may result in a lack of control by the
Company over any or all of the marketing and distribution of such
products. Although the Company is currently engaged in preliminary
efforts to establish such marketing arrangements, there can be no
assurance that the Company will be able to enter into any such
arrangements on terms acceptable to the Company, or at all.
As part of its overall service to the technical medical community, the
Company is prepared to offer workshops and consultation in the general
area of medical diagnostics. While these two activities are not large,
they will produce minor amounts of revenue, but more importantly will
serve as the focal point for the dissemination of information and
training required for the Company's unique technology. The Company's
future growth and profitability will depend, in large part, on the
success of its personnel and others in fostering acceptance by the
medical community. Such acceptance will be substantially dependent on
educating the medical community as to the distinctive characteristics
and perceived benefits of the Company's proposed products. There can
be no assurance that the Company's efforts or those of others will be
successful, or that any of its products will receive the necessary
acceptance by the medical community.
<PAGE>6
Potential Markets for the Company's Technology.
Diagnostics. The Company believes that significant demand exists
for an inexpensive diagnostic test for pathogens that (i) does not need
highly skilled manpower or technology to isolate and distinguish deadly
bacteria (ii) produces results rapidly and accurately, (iii) limits
pre-preparation requirements, (iv) tests a broad range of specimens and
(v) assays for antibiotic sensitivity to determine the optimal
treatment method. The Company believes that its patented slide
culture technology meets these requirements.
The Company's technology provides for rapid and accurate identification
of at least 20 life threatening paraffinophilic pathogens. These
pathogens include Pseudomonas, the major cause of death in intensive
care and burn units and the second leading cause of death in cancer
patients, Mycobacterium Avium Intracellular ("MAI"), the bacterial
infection most often associated with AIDS in the developed word) and
Mycobacterium Tuberculosis, a non-paraffinophilic hydrophobic pathogen
that can be grown via the Company's technology. Mycobacterium
Tuberculosis is the causative agent of tuberculosis, the world's
deadliest infection). Each year in the United States alone, more than
10,000,000 tests are conducted for Mycobacterium Tuberculosis,
5,000,000 tests are conducted for Pseudomonas and more than 1,000,000
tests are conducted for MAI.
Using the Company's patented slide-culture technology in combination
with gene application methodologies, life-threatening bacteria can
rapidly be identified. Using the Company's proprietary baiting
technology, the efficacy of potentially appropriate antibiotics (e.g.,
penicillin) to treat for these bacteria can be tested through rapid,
inexpensive antibiotic sensitivity tests. The Company believes that
its patented testing method may be the only method available that can
be successfully used with amplification techniques for rapid antibiotic
sensitivity testing.
The Company is positioning itself to capture a significant share of the
market for MAI and tuberculosis bacteria diagnosis and bacteria
sensitivity. Historically, the search for MAI and other members of the
genus Mycobacterium Tuberculosis has been very difficult. These
organisms grow slowly, and specimens require rigorous preparation to
prevent overgrowth of other more rapidly growing organisms often found
co-existing in specimens. Handling of mycobacterial specimens has
required highly-trained technicians and specialized equipment. This is
not true of the Company's technology. In addition, the Company's
technology permits sampling of a variety of tissues, not just blood or
sputurn. Although MAI forms in the gastrointestinal tract, physicians
using conventional methods are unable to detect the bacteria until they
reach the bloodstream. Using the Company's technology, physicians will
be able to analyze fecal matter or urine to detect MAI where it begins,
in the gastrointestinal tract thereby leading to earlier treatment of
the disease. Management is of the opinion that the convenience,
efficiency and safety of the Company's patented slide culture
technology will provide enhanced safety for patients because of the
non-invasive nature of required procedures.
Management believes that its slide-culture technology also can be used
to detect the presence of non-paraffinophilic bacteria through use of
non-paraffin-based carbon coatings in a clean-room environment and
sampling of certain body fluids such as blood and spinal fluid.
Therapeutics. The Company is developing a bacterial vaccine
against Pseudomonas Aeruginosa under a research agreement with Brigham
and Women's Hospital, Inc., a teaching facility of Harvard Medical
School (the "Hospital"). Pseudomonas Aeruginosa, an opportunistic
pathogen found in patients suffering from compromised defense
mechanisms, is resistant to many antibiotics. The pathogen has the
ability to cause a chronic infection of the respiratory tract in
patients suffering from chronic obstructive pulmonary disease ("COPD"),
and is the direct cause of death of over 80% of cystic fibrosis
patients. The Hospital, in conjunction with Dr. Gerald Pier, has been
conducting ongoing research on a Pseudomonas Aeruginosa vaccine. Dr.
Pier has obtained United States patents (and related foreign patents)
on his vaccine and is obligated to assign the patents to the Hospital.
The Company has obtained an exclusive worldwide license to the
Hospital's interests in the patents and an option to obtain certain
rights to inventions that are developed during the course of research
funded by the Company. This vaccine based upon application of an
alginate compound on microorganisms cultured by the use of the
Company's slide-culture technology.
<PAGE>7
In addition, the Company has filed a patent for a method of inducing
apoptosis, controlled cell-death, with hydrophobic hydrocarbons,
notably paraffin. Many modalities for cancer therapy use drugs to kill
cells. The use of paraffin to induce cell death has important
advantages, since paraffin is non-toxic and its effect is local. Dr.
Richard A. Lockshin, Ph.D., of St. John's University, President of the
Cell Death Society, has agreed to collaborate with the Company on
electron microscopy work necessary on this project.
Bio-remediation of Chlorine-contaminated Aquifers, Air and Soil.
The Company believes that its utility patent for use of Compound C in
baiting paraffinophilic micro-organisms has broad application in
environmental bio-remediation of chlorine compounds such as
TriChloroEthylene. The Company has granted a world wide exclusive
license to use this technology for bio-remediation to a Pennsylvania-
based company. The company received a $250,000 grant from the state of
Pennsylvania to treat contaminated air streams containing styrene and
other hazardous air pollutants identified by the United States
Environmental Protection Agency, utilizing the Company's patented
technology.
Veterinary Applications. The Company intends to develop a kit to
test for Johne's Disease (caused by Mycobacterium Paratuberculosis) in
cattle. This organism has been cited as a possible cause of Crohn's
Disease in humans. Federal Drug Administration approval is not
required for this product.
Proprietary Side-culture Technology. The Company has found that
paraffin-coated slides can be used to grow, identify and perform
antibiotic sensitivity assays on paraffinophilic bacteria. The
Company has developed a technology utilizing a paraffin carbon source
that enables viable or living paraffinophilic organisms to be separated
from viable non-paraffinophilic bacteria grow on the paraffin-coated
glass slides. Living or viable bacteria can then be stained and
examined microscopically to determine the present of suspect pathogens.
Efficacy of an antibiotic can be tested on disease-causing bacteria in
a manner similar to identification of the pathogen. Test tubes in
which there is an absence of bacterial growth can be determined.
Absence of bacterial growth indicates that the antibiotic was able to
kill the pathogen at a particular concentration. Presence of bacterial
growth can indicate lack of effectiveness of the antibiotics to treat
for the pathogen. The technology also enables the user to determine
appropriate concentration of the antibiotic.
These features make the Company's technology ideal for markets ranging
from large urban hospitals to third-world field laboratories. The
Company believes that its technology can contribute to reducing
healthcare costs and significantly improving patient care.
Rapid Detection Advantage of the Company's Slide-culture
Technology. By using the Company's technology, laboratories will be
able to accurately identify and perform antibiotic sensitivity testing
for multiple pathogens in less time than conventional methods and with
greater accuracy. Using the Company's technology, management
anticipates that:
The Company's methods permit the sampling of a variety of tissue
samples (not just blood or sputum) with minimal preparation. The
significance of this may be seen, for example, in the current state of
the art in identifying and treating MAI, the bacterial infection most
often associated with AIDS patients in the developed world. Although
MAI forms in the gastrointestinal tract, physicians normally cannot
detect it until it reaches the bloodstream using conventional methods.
Through analyzing fecal matter or urine, physicians using the Company's
methods can detect MAI where it begins in the gastrointestinal tract,
leading to earlier treatment which can sometimes make the difference
between life and death in an AIDS patient.
The Company's methods do not require specialized equipment or highly
skilled personnel to perform the protocols, unlike the existing
conventional methodologies. In fact, the Company's methods may be
automated, resulting in a faster, more precise and cheaper diagnostic
process for the more than 9,000 hospitals and medical laboratories in
<PAGE>8
the United States, and similar customers throughout the world. The
Company's solution can contribute to reducing health care costs, which
are continually rising.
Manufacturing. Before any sales of the Genetic Based
Probe/Amplification Technology kits can occur, the Company must reach
an agreement with a large international corporation to manufacture,
market and sell the product. Once this occurs, sales of the Genetic
Based Probe/Amplification Technology kits can begin in overseas markets
and domestic experimental markets for use in laboratory research.
The Company has entered into an exclusive, worldwide license and
royalty agreement for the manufacture and distribution of the PARA
SL/CTM with Erie Scientific, Inc. ("Erie"). The PARA SL/CTM is the
paraffin-coated slide used solely as a central component of the
IDENTIKITTM. Erie is the largest manufacturer and distributor of medical
glass slides in North America, and a wholly owned subsidiary of Sybron
International Corporation. The license and royalty agreement calls for
a net royalty of 15% to be paid to the Company on all worldwide sales
of the PARA SL/CTM by Erie. In addition, the Company has agreed to
provide to Erie consulting services for the paraffin slide culture
technology.
In the event that the Company does not manufacture any of its proposed
products directly, it will have to rely on others to manufacture such
products. Although the Company is currently engaged in preliminary
efforts to establish other manufacturing arrangements with respect to
certain of its proposed products, there can be no assurance that the
Company will be able to enter into any such additional arrangements, on
acceptable terms or at all, or that any manufacturer will be able to
meet any demand for such products on timely basis.
Competition. The Company believes that most existing methodologies
for identification and antibiotic sensitivity testing of
paraffinophilic bacteria are expensive and time-consuming. The
Company further believes that there is limited competition in the field
of antibiotic sensitivity testing combined with amplification
techniques for paraffinophilic microorganisms. While the principal
components of the Company's technology are patented, there can be no
assurance that larger, better-financed companies will not enter the
market or that others will not develop competing technologies.
Currently, the market for manufacture and distribution of diagnostic
kits for each of these there pathogens is highly concentrated. The
competitors for manufacture and sale of kits for growing the pathogen
for tuberculosis on conventional solid media are Difco and Remel.
Difco recently was consolidated into Becton Dickinson, which holds the
majority of the market for diagnostic tests for tuberculosis using
continuous monitoring methods, which are utilized, extensively in major
urban U.S. areas. Similarly, the market for testing for Pseudomonas
and MAI is concentrated in Becton Dickinson, which sells petri-dish-
based diagnostic tests.
Licensing/Transactions. On June 11, 1998, the Company and
BioRemedial Technologies, Inc. (BRT) signed an investment and licensing
agreement for a proposed collaboration in the field of bioremediation.
BRT is a company, which specializes in the biodegradation of
chlorinated compounds and hydrocarbons. Unlike other bioremediation
companies, BRT uses specially prepared microbes to degrade volatile
organic compounds from air, ground water and soil.
The term of investment and licensing agreement with BRT is for a period
of ten years. BRT will utilize the Company's intellectual property
solely as it applies in the field of biomediation for the creation of
microbes for the specific task of bioremediation. The Company shall
receive a royalty of 10.5% to 13.5% per bioremediation project during
the licensing period. Under the letter of intent, BRT must pay a
royalty of at least $100,000 within a five-year period. The Company
shall allow BRT the ability to obtain intellectual property protection
for the methodology involved in degrading VOC air emission, and ground
water and solid remediation. The Company's management believes that
there will be a likelihood of success based upon early in-house
laboratory studies performed in conjunction with BRT which showed the
Company's methodology to be superior to any current competing procedure
in degrading trichloroethylene (TCE). TCE is the most abundant
groundwater contaminant in the United States. TCI is not utilized as
a food or energy source by the microorganisms in the soil or
<PAGE>9
groundwater. As a result, the chemical accumulated in the environment
and generates a public health risk. BRT will require EPA approval for
all site projects involving bioremediation.
Under the terms of the Letter of Intent, BRT, to the best of its
ability, shall provide funding through equity financing of $630,000.
Of this amount, $315,000 will be utilized to furnish patent protection
worldwide and $315,000 will be utilized for the further research and
development of the Company's intellectual property as it applies to the
field of bioremediation. Management of the Company does not believe
that this research and development could be pursued autonomously by the
Company as there are no personnel within the Company with expertise in
this area. Additionally, costs to obtain access to toxic waste sites
would be exorbitant. If BRT or its assigns do not obtain the full
$630,000, the Company will have the option of either terminating the
letter of intent or renegotiating the contractual relationship. All
funds must be utilized in a mutually agreed upon manner for the benefit
of the project.
The Company has entered into a letter of intent (LOI) on December 10,
1997 with Starplex Scientific of Canada for the manufacturing and sale
of an MAI/Tuberculosis media transport/isolator kit. Under the terms
of this LOI, Starplex Scientific has agreed to pay the Company a
royalty of 10% of its gross sales minus returns for full credit of the
device. Because this is an exclusive worldwide license for this
device, Starplex has agreed, subject to the completion of its due
diligence and the signing of a definitive licensing agreement, to the
following schedule of minimum royalties:
Agreement Year Minimum Royalty
1 $100,000
2 $250,000
3 and thereafter $500,000
On October 15, 1997 the Company signed a letter of intent (LOI) with
the Erie Scientific Company (a wholly owned subsidiary of Sybron
International) for the development of the Company's Paraffin Slide
Culture (Para SL/C) technology into a commercially marketable product
for the detection and susceptibility testing of pathogenic
Mycobacteria.
If development efforts are completed and all the requisite pre-
marketing regulatory approvals for any proposed products are obtained,
the Company will need to establish manufacturing and marketing
capabilities, either directly or through contractual arrangements with
others, such as joint venture, licensing or similar collaborative
agreements in order to commercialize any such products. The Company is
currently engaged in preliminary efforts to establish manufacturing and
marketing capabilities with respect to certain of its proposed
products; however, there can be no assurance that the Company will be
able to enter into such arrangements or that it will be able to obtain
the necessary financing to manufacture and market such products
directly.
Once a suitable manufacturing relationship is established, the
nongenetic and fluorescent amplification IDENTIKITsTM are essentially
ready for production.
The Company has signed a letter of intent (LOI) on September 8, 1997
with NEN Life Science Products for the combination of its patented
baiting technology with Tyramide Signal Amplification (TSA) for the
collaborative development of products pertaining to resistance genes in
bacterial pathogens.
On November 18, 1993, the Company entered into an exclusive worldwide
license and royalty agreement for the manufacture and distribution of
the PARA SL/CTM with Erie Scientific, Inc. The PARA SL/CTM is the
paraffin-coated slide used solely as a major component of the
IDENTIKITTM. Erie Scientific, Inc., is the largest manufacturer and
distributor of medical glass slides in North American, and is a wholly
owned subsidiary of Sybron International Corporation. The license and
royalty agreement calls for a net royalty of 15% paid to the Company of
all worldwide sales of the PARA SL/CTM Erie. In addition, the Company
has agreed to provide to Erie consulting services for the IDENTIKITTM.
Proposed Research Agreement. The Company signed, on August 31,
1998, a research agreement for the further development of a bacterial
vaccine against pseudomonas aeruginasa with The Brigham and Women's
<PAGE>10
Hospital, Inc., a not-for-profit corporation which is a teaching
facility of Harvard Medical School (the "Hospital"). The Hospital has
ongoing research conducted by Dr. Gerald Pier. Dr. Pier is named as
inventor on United States Patent 4,578,458 (and related foreign
patents) entitled "Mucoid Exopolysaccharide Vaccine Against Pseudomonas
Aeruginosa" issued March 25, 1986 and United States patent 5,502,039
entitled "O-Derivatized Alginic Acid Antigens" issued March 26, 1996.
Dr. Pier is obligated to assign his ownership interest in both patents
to the Hospital.
Pseudomonas aeruginosa is a gram-negative opportunistic pathogen that
colonizes patients suffering from compromised defense mechanisms. It
is resistant to many antibiotics. Pseudomonas aeruginosa has the
ability to cause a chronic infection of the respiratory tract in
patients suffering from chronic obstructive pulmonary disease (COPD),
and is the direct cause of death of 81% of cystic fibrosis (CF)
patients. Pseudomonas is a leading cause of death in patients with
CF, burn victims, individuals with cancer, AIDS, and patients in
surgical and intensive care units.
Pursuant to the Research Agreement, the Company obtained an option from
Hospital to acquire an exclusive worldwide license to Hospital's
interests in these patents and an option to obtain certain rights to
inventions that are developed during the course of research funded by
the Company. The Company will pay an option fee of $32,000. The
Company will also pay the ongoing patents costs for maintenance of the
above-described patents. The Company shall pay an upfront $40,000
license fee and an annual license maintenance fee ranging from $10,000
in the first year to $50,000 in the fifth and each following year
during the life of the patents. The Company shall pay $100,000 upon
each IND filing and $500,000 upon each FDA approval. Additionally,
the Company shall pay a royalty of 5% of net sales. The Company shall
pay 30% of all sublicensing income made by a sublicensee to the Company
or its affiliates in connection with technology licensed with Hospital.
The Company shall also pay Hospital 5% of research money received from
sublicensees.
Pursuant to the Research Agreement, the Company shall also subsidize
research and development of the Pseudomonas aeruginosa Vaccine under a
mutually agreed upon budget ranging from $100,000 in the first year up
to $250,000 in the fifth year and each year thereafter. Pursuant to
the Research Agreement, the Company must pay $200,000 to an escrow
account held by the Hospital prior to August 15, 1999. Such funds are
required to preserve the Company's rights to fund the research and will
be used to cover the budget for year 1 and 2 of the Company funded
research.
Patents and Proprietary Rights. The Company has been issued and
granted twenty-six (26) U.S. patents, respectively:
<TABLE>
<CAPTION>
Patent No. Issue Date Title
<S> <C> <C>
5,153,119* October 6, 1992 Method For Speciating
And Identifying MAI
(Mycobacterium Avium-
Intracellular)
5,316,918 May 31, 1994 Method and Apparatus For
Testing MAI (Mycobacterium
Avium-Intracellulare) For
Antimicrobial Agent
Sensitivity
5,472,877 December 5, 1995 Apparatus For Determining
The Presence Or Absence of
MAI (Mycobacterium Avium-
Intracellular)
<PAGE>11
5,569,592 October 29,1996 Apparatus For Testing MAI
(Mycobacterium Avium-
Intracellular) For
Antimicrobial Agent
Sensitivity
5,637,5011 June 10, 1997 Method And Apparatus For
Automatically Testing The
Antibiotic Sensitivity Of
A Paraffinophilic
Microorganism
5,639,675 June 17, 1997 A Method Of Identifying
A Nonparaffinophilic
Microorganism Using
Various Milieus And An
Associated Apparatus***
5,641,645 June 24, 1997 A Method For Determining
The Antimicrobial Agent
Sensitivity Of A
Nonparaffinophilic
Microorganism Using
Various Milieus And An
Associated Apparatus
5,654,194 August 5, 1997 A Method Of Identifying
A Nonparaffinophilic
Microorganism Using
Various Milieus And
An Associated Apparatus
5,663,0562 September 2, 1997 A Method For Determining
The Antimicrobial Agent
Sensitivity Of A
Nonparaffinophilic
Microorganism And An
Associated Apparatus***
5,668,010 September 16, 1997 A Method For Determining
The Antimicrobial Agent
Sensitivity Of A
Nonparaffinophilic
Microorganism Using
Various Milieus And An
Associated Apparatus
5,667,169 October 14, 1997 A Method For Determining
The Antimicrobial Agent
Sensitivity Of A
Nonparaffinophilic
Microorganism And An
Associated Apparatus
5,698,414 December 16, 1997 Method And Apparatus For
Testing Paraffinophilic
Microorganisms For
Antimicrobial Agent
Sensitivity
5,707,824 January 13, 1998 Method of Determining The
Presence Or Absence Of A
Paraffinophilic Microorganism***
5,721,112 February 24, 1998 A Method Of Determining The
Presence Or Absence Of A
Nonparaffinophilic Microorganism
In A Specimen And An Associated
Apparatus
5,726,030 March 10, 1998 Method for automatically testing
the antibiotic sensitivity of a
nonparaffinophilic microorganism
<PAGE>12
5,750,363 May 12, 1998 Method for determining the
antibiotic agent sensitivity
of a nonparaffinphilic
microorganism and an associated
apparatus
5,776,722 July 7, 1998 Method of testing a body specimen
taken from a patient for the presence
or absence of a microorganism and a
further associated method and associated
apparatus
5,801,009 September 1, 1998 Method for determining the antimicrobial
sensitivity of a paraffinophilic
microorganism using various milous and
an associated apparatus
5,804,406 September 8, 1998 Determing sensitivity of paraffinophilic
microorganisms to antimicrobials
5,846,760 December 8, 1998 Method for determining a presence of a
nonparaffinophilic hydrophobia microorganism
in a body specimen and an associated apparatus
5,854,013 December 29, 1998 Method of determining presence or absence of a
nonparaffinophilic microorganism in a specimen
5,854,014 December 29, 1998 Apparatus for testing paraffinophilic
microorganisms for antimicrobial sensitivity
5,882,919 March 16, 19993 Apparatus for determining the presence or
absence of a nonparaffinophilic microorganism in a
specimen
5,882,920 March 16, 19994 Apparatus for determining the presence or absence
of a nonparaffinophilic microorganism
5,891,662 April 6, 1999 Method for determining the antimicrobial agent
sensitivity of a nonparaffinophilic hydrophobic
microorganism
</TABLE>
* Corresponding patents in Australia (parent and divisional) and
Europe
(parent and divisional); corresponding application in Canada
*** Corresponding patent in South Africa as of November 27, 1996
1 Corresponding applications will be filed in
AU/BR/CA/CH/EP/JP/MX/NZ/RF/SK
2 Corresponding applications will be filed in
AU/BR/CA/CH/EP/JP/MX/NZ/RF/SK
3 Term of patent shall not extend beyond expiration of Patent
5,677,169
4 Term of patent shall not extend beyond expiration of Patent
5,654,194
The Company is presently allowing its patented technology to be used at
the VA Medical Center of New York to perform research confirming the
efficacy of the IDENTIKITTM and to perform additional research with
amplification techniques. It is anticipated that the technique will
increase the rapidity with which both bacterial identifications and
antibiotic sensitivities can be determined, reducing the time required
by one or two orders of magnitude.
The slide culture technology may be automated. The Company is
presently in negotiation with several diagnostic companies for the
automation of the paraffin baiting method. The company has been
granted a patent for the automation method. This will potentially
lower the cost for identification and antibiotic sensitivity testing
for MAI and for all other paraffinophilic microorganisms.
There can be no assurance that any issued patents will provide the
Company with significant competitive advantages, or that challenges
will not be instituted against the validity or enforceability of any
patent owned by the Company or, if instituted, that such challenges
will not be successful. The cost of litigation to uphold the validity
and prevent infringement can be substantial. Furthermore, there can be
no assurance that others will not independently develop similar
technologies or duplicate the Company's technologies or design around
the patented aspects of the Company's technologies. While obtaining
<PAGE>13
patents is deemed important to the Company, patents are not considered
essential to the success of its business. However, if further patents
do not issue from present or future applications, the Company may be
subject to greater competition.
The Company also relies on a combination of non-competition and
confidentiality agreements with its employees, licensing agreements,
trademarks and trade secret laws to establish and protect proprietary
rights to its technologies. There can be no assurance that trade
secrets will be established, that secrecy obligations will be honored,
or that others will not independently develop similar or superior
technologies.
Dependence on One or a Few Major Customers. The Company does not
expect that any single customer will account for more than ten percent
of its business.
Employees. The Company employs two full time persons and six part
time persons. The Company shall employ additional individuals as
required.
Governmental Regulation. In order to gain broad acceptance, the
Company's diagnostic kits will require approval from the United States
Food and Drug Administration ("FDA") and regulatory bodies outside of
the United States. The Company intends to apply for FDA approval
based upon clinical testing programs conducted at major medical centers
including the New York's VA Hospital, the University of West Virginia
School of Medicine and the State University of New York School of
Medicine. Data obtained from these institutions will enable the
Company to apply for FDA approval process testing kits through the 510-
K application process.. No assurance can be given that the Company
will successfully develop or commercialize any proposed applications of
its technology.
With the exception of experimental markets, sales in the United States
cannot occur until FDA approval is granted. FDA approval will take no
less than one year. This includes 4-5 months of research, 4-5 months
of clinical trials and the 2-3 months for review by the FDA. The
research associated with the FDA approval will cost approximately
$200,000.
In addition to working on obtaining the necessary governmental
approvals to bring the product to market and looking for additional
marketing arrangements through established distribution channels, the
Company plans to perform contract experimental work testing for the
efficacy of chemotherapeutic agents against paraffinophilic
microorganisms.
The Company expects to begin clinical trials of its slide-culture
technology in early 1999 and expects to receive approval of its
technology from the FDA before the summer of 2000 through the 510-K
application process. The Company expects to begin marketing its test
kits internationally during the third quarter of 1999.
Seasonal Nature of Business Activities. The Company's business
activities are not seasonal.
Item 2. Management's Discussion and Analysis or Plan of Operation
Trends and Uncertainties. Demand for the Company's products will be
dependent on, among other things, market acceptance of the Company's
concept, the quality of its products, government approval and general
economic conditions, which are cyclical in nature. Inasmuch as a major
portion of the Company's activities will be the receipt of revenues
from the sales of its products, the Company's business operations may
be adversely affected by the Company's competitors and prolonged
recessionary periods.
Capital and Source of Liquidity. The Company requires substantial
capital in order to meet its ongoing corporate obligations and in order
to continue and expand its current and strategic business plans.
Initial working capital has been obtained by the private sale of the
Company's Common Shares from November 1996 to present.
For the three months ended March 31, 1999, the Company had proceeds
from the issuance of common stock of $34 resulting in net cash provided
by financing activities of $34.
<PAGE>14
Net cash provided by financing activities includes proceeds from the
issuance of Common Stock totaling $270,5720 in fiscal 1998 and $626,940
for fiscal 1997. Fees in connection with the issuance of stock were
$41,148.
For the three months ended March 31, 1999, the Company incurred patent
costs of $11,253 and had an increase in deposits of $135. As a result,
the Company had net cash used in investing activities of $11,118 for
the three months ended March 31, 1999.
Capital expenditures, consisting primarily of patent costs and the
purchase of equipment, were $191,373 and $6,504, respectively for year
ended December 31, 1998 and $108 and $849, respectively for the year
ended December 31, 1997. The Company anticipates that costs associated
with product testing and development will continue to increase.
As of December 31, 1997, the Company had working capital of $483,690.
The Company expects to use this capital to continue research and
development of patents and for the costs associated with executing an
initial public stock offering. The Company believes that the net
proceeds from equity financing together with revenues from operations,
if any, will be sufficient to meet its anticipated cash needs for
working capital and capital expenditures until approximately December
1999. There can be no assurance, however, that the net proceeds from
equity financing will not be expended prior thereto due to
unanticipated changes in economic conditions or other unforeseen
circumstances. Unless growth in the Company's revenues from operations
substantially exceeds management's current expectations, by
approximately December 1999, the Company will be required to seek
additional equity or debt financing to fund the costs of its
operations, including continued development of its products. There can
be no assurance that additional financing will be available or that, if
available, such financing will be on acceptable terms to enable the
Company to complete development of or commercialize any of its proposed
products or technologies.
The Company has a $10,500 line of credit, all of which was available at
December 31, 1998. The line of credit is collateralized by the
personal guarantee of a stockholder.
On a long-term basis, liquidity is dependent on continuation and
expansion of operation and receipt of revenues, additional infusions of
capital and debt financing. The Company believes that additional
capital and debt financing in the short term will allow the Company to
increase its marketing and sales efforts and thereafter result in
increased revenue and greater liquidity in the long term. However,
there can be no assurance that the Company will be able to obtain
additional equity or debt financing in the future, if at all.
Results of Operations. Since inception, the Company has not received
any material revenues from operations.
For the three months ended March 31, 1999, the Company had operating
expenses of $51,505. These expenses consisted primarily of research
and development of $7,605, wages of $5,677, telephone of $889,
insurance of 51, legal and accounting of $441, travel of $777, payroll
taxes of $592, state and local taxes of $2,621, rent of $5,015,
consulting and professional fees of $11,610, depreciation and
amortization of $10,479, office expense of $2,990 and miscellaneous
operating expenses of $2,758.
Plan of Operation. The Company is in the development stage and has not
conducted any significant operations to date or received any operating
revenues. The Company may experience problems; delays, expenses and
difficulties sometimes encountered by an enterprise in the Company's
stage of development, many of which are beyond the Company's control.
These include, but are not limited to, unanticipated problems relating
to product development, testing, regulatory compliance, manufacturing
costs, production and marketing problems, additional costs and expenses
that may exceed current estimates and competition.
The Company is not delinquent in any of its obligations even though the
Company has generated limited operating revenues. However, the Company
is currently outside of normal vendor terms and continues to negotiate
with vendors while the management continues its efforts to raise
capital. The Company intends to market its products utilizing cash made
available from the private and public sale of its securities. The
Company's management is of the opinion that revenues from the sale of
<PAGE>15
its products and the proceeds of the sales of its securities will be
sufficient to pay its expenses until additional restaurants can be
added pursuant to the initial business plan.
GENERAL - YEAR 2000 ISSUES
The Company has conducted a comprehensive review of its computer
systems to identify any business functions that could be affected by
the "Year 2000" issue. As the millennium ("Year 2000") approaches,
businesses may experience problems as the result of computer programs
being written using two digits rather than four to define the
applicable year. The Company has conducted a comprehensive review of
its computer systems to identify those areas that could be affected by
the "Year 2000" issue. Any of the Company's programs that have time-
sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. If not corrected, this could result in
extensive miscalculations or a major system failure.
The Company relies on industry standard software. Certain
manufacturers have already provided the Company with upgraded software
to address the "Year 2000" issue and the Company believes that its
remaining software manufactures will modify their programs accordingly.
In the event the remaining manufacturers do not upgrade their software
packages, the Company will replace such software with programs that
address the "Year 2000" issue. The Company believes that by modifying
existing software and converting to new software, the "Year 2000" issue
will not pose significant operational problems and is not anticipated
to require additional expenditures that would materially impact its
financial position or results of operations in any given year.
Successful and timely completion of the Year 2000 project is based on
management's best estimates derived from various assumptions of future
events. These events are inherently uncertain, including the progress
and results of vendors, suppliers and customers Year 2000 readiness.
ITEM 3. DESCRIPTION OF PROPERTY
The Company will operate out of two locations. The corporate
headquarters will remain in Sharon, Pennsylvania and the clinical lab
will be in Milford, Pennsylvania. These offices consist of 3100 square
feet. The Company pays approximately $2,500 per month for use of
these two locations. The Company may consolidate operations to a
single location once clinical testing is successfully completed. Also,
the Company will use the offices of Dr. Felder as its corporate
headquarters. Dr. Felder will sublease a portion of his offices at a
rate of approximately $550 per month to partially cover the cost of
rent, office equipment, utilities and office personnel. The Company
retains the right to increase these payments in accordance with any
rental time and increased need for office equipment, utilities and
office personnel at both locations.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tabulates holdings of shares of the Company by each
person who, subject to the above, at the date of this prospectus, holds
of record or is known by Management to own beneficially more than 5.0%
of the Common Shares and, in addition, by all directors and officers of
the Company individually and as a group. Each named beneficial owner
has sole voting and investment power with respect to the shares set
forth opposite his name.
Shareholdings at Date of
This Prospectus
<TABLE>
<CAPTION>
Percentage of
Number & Class(1) Outstanding
Name and Address of Shares Common
Shares
<S> <C> <C>
Mitchell S. Felder, M.D. (2) (3) 2,252,589 31.75%
Suite 2
87 Stambaugh Avenue
Sharon, PA 16146
<PAGE>16
Robert Ollar, Ph.D. (2) 1,697,322 23.92%
122 Cornelia Lane
Milford, PA 18337
David Bernstein, Esq. (2) (3) 246,837 3.48%
33111 Seneca Drive
Solon, OH 44139
Susan Felder (2) 382,967 5.40%
Suite 2
87 Stambaugh Avenue
Sharon, PA 16146
Stephen Lewis 100,000 1.41%
112 Mehard Avenue
Greenville, PA 16125
Thomas Inman 0 0.00%
27 Garrett Lane
Mercer, PA 16137
All Directors & Officers
as a group (6 persons) 4,679,715 65.96%
(1)Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, beneficial ownership of a security consists of sole or shared
voting power (including the power to vote or direct the voting) and/or
sole or shared investment power (including the power to dispose or
direct the disposition) with respect to a security whether through a
contract, arrangement, understanding, relationship or otherwise.
Unless otherwise indicated, each person indicated above has sole power
to vote, or dispose or direct the disposition of all shares
beneficially owned, subject to applicable unity property laws.
(2)Assumes exercise of all outstanding stock options. Includes for
each of Dr. Felder, Dr. Ollar, Mr. Bernstein and Mrs. Felder, 42,535,
23,368, 37,978 and 29,167 shares, respectively, which such person has
the right to acquire under options issued to him/her under the 1996
Stock Option Plan at a purchase price of $1.20 per share.
(3)Includes for each of, Dr. Felder and Mr. Bernstein, 77,500 and
10,000 shares, respectively, for repayment of loans made to the
Company.
Stock Options. The Corporation has issued options for the purchase of
up to 828,852 shares of common stock to fourteen persons. The options
are "non-qualified stock options" which are not qualified for treatment
under Section 422 of the Internal Revenue Code of 1986, as amended.
The term of the options has generally been up to ten years from the
date of grant, and provide for vesting over a period of three years
from the date of grant.
The Corporation's 1996 Stock Option Plan provides for the issuance of
options for the purchase of 1,182,750 shares of the Corporation's
Common Stock to employees and consultants. In lieu of salary for past
services, certain employees have received stock options to purchase up
to 322,406 shares at a purchase price of $1.20 per share under the
Stock Option Plan. Of the total 322,406 shares eligible for purchase
pursuant to options, Dr. Felder, Dr. Ollar, Thomas Inman, William Moder
II, David Bernstein, Steve Lewis, and Susan Felder have options to
purchase a total of 227,200 shares. The remaining 95,116 shares
eligible for purchase pursuant to options were distributed among 8
other employees.
The Corporation's 1998 Stock Option Plan provides for the issuance of
options for the purchase of 1,200,000 shares of the Corporation's
Common Stock to employees and consultants. Currently no options have
been issued under the 1998 Stock Option Plan.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
Board of Directors. The following persons listed below have been
retained to provide services as director until the qualification and
election of his successor. All holders of Common Stock will have the
right to vote for Directors of the Company. The Board of Directors has
primary responsibility for adopting and reviewing implementation of the
business plan of the Company, supervising the development business
<PAGE>17
plan, review of the officers' performance of specific business
functions. The Board is responsible for monitoring management, and
from time to time, to revise the strategic and operational plans of the
Company. Directors receive no cash compensation or fees for their
services rendered in such capacity.
The Executive Officers and Directors are:
</TABLE>
<TABLE>
<CAPTION>
Name Position Term(s) of Office
<S> <C> <C>
Mitchell S. Felder, M.D.
age 45 CEO, President and Inception
Treasurer and Director to present
Robert A. Ollar, Ph.D.
age 50 Executive Vice President Inception
and Chief of Scientific to present
Affairs and Product Development
and Director
Susan Felder
age 44 General Manager and Director Inception
to present
David Bernstein, age 39 Corporate General Counsel
and Director
Stephen R. Lewis, age 38 Director 1995
to present
Thomas Inman, age 43 Secretary and Controller June 1995
to present
William J. Moder, III, age 46 Director Sept. 1998
to present
Resumes:
Mitchell S. Felder, M.D., is a co-founder of the Company, a founding
member of the Company's Scientific Advisory Board, and serves as Vice
Chairman of the Company's board of directors. Dr. Felder is a
contributor to certain of the patent applications for the Company's
products, and has worked in the Company's clinical medical effort. He
received his M.D. degree from the University of Rome, Italy in 1983,
and has been an attending Neurologist at the Horizon Hospital System in
Greenville, Pennsylvania since 1997. Dr. Felder is married to Susan
Felder and is a first cousin of Mr. Bernstein.
Robert A. Ollar, Ph.D. is a co-founder of the Company, a founding
member of the Company's Scientific Advisory Board, and has served as
Chairman of the board of directors of the Company since 1989. Dr.
Ollar received his Ph.D. degree from the University of Surrey, England,
United Kingdom in 1993. Prior to that, he received his Master of
Science Degree majoring in Microbiology in 1984 from the University of
Glasgow, Great Britain. Prior to that, he performed research at the
Institute Pasteur Du Brabant in Brussels, Belgium. Dr. Ollar is the
inventor of the Company's slide culture technology. Dr. Ollar is
presently an Assistant Professor of Neurology at the New York Medical
College.
Susan Felder has served as General Manager and director of the Company
since its inception in 1989. From 1978 to 1989 she had progressive
analyst responsibilities with the Insurance Services Office, Inc.
leading to the position of Computer Programmer which she held until
1989. From 1978 to 1979 she held the position of Marketing Research
Analyst for the Continental Insurance Company. She received her B.A.
in Economics from Rutgers College in 1976. She is the wife of Dr.
Felder.
David Bernstein, Attorney-at-Law, is one of the Corporate Counsel for
the Company and is a director of the Company. Mr. Bernstein is a sole
practitioner practicing law in Cleveland, Ohio. Prior to engaging in
sole practice, Mr. Bernstein was an attorney at Bekaert Corporation, a
manufacturing company. He received his Juris Doctor of Law from The
University of Akron in 1983 and his Bachelor's Degree in Accounting
from Kent State University in 1980. Mr. Bernstein is a first cousin of
Dr. Felder.
<PAGE>18
Stephen R. Lewis has served as a director of the Company since 1995.
Mr. Lewis is an investment broker with, and shareholder of Butler Wick
& Co., Inc. of Sharon, Pennsylvania since 1988. He received his
Bachelor's Degree in Finance from Indiana University of Pennsylvania in
1983.
Thomas L. Inman is the Corporate Controller for the Company, having
served since June 1995. Mr. Inman is the Secretary of the Company.
Since 1990, Mr. Inman has been employed as an internal auditor for the
County of Mercer in Pennsylvania.
William Moder, III is one of the Corporate Counsel for the Company and
has been a director of the Company since September, 1998. Mr. Moder
is an attorney engaged in private practice in Hermitage, Pennsylvania.
He has advised the Company as local counsel, primarily on contract
issues. Prior to entering private practice, Mr. Moder was corporate
counsel for First National Bank of Pennsylvania, a subsidiary of F.N.B.
Corporation, for 14 years. He is a 1974 graduate of Edinboro
University of Pennsylvania and earned his juris doctorate degree in
1980 from the University of Akron.
The Corporation has not established any committees, other than the
Compensation Committee and the Stock Option Plan Committee, which
administers the issuance of options under the Corporation's 1996 and
1998 Stock Option Plans. The Compensation Committee is composed of Dr.
Felder, Dr. Ollar, Mr. Shardy. and Mr. Moder. The Stock Option Plan
Committee consists of Dr. Felder and Dr. Ollar
Scientific Advisory Board. In July 1995 Dr. Ollar and Dr. Felder
founded the Corporation's Scientific Advisory Board, which in addition
to them consists of the following members:
Nancy D. Connell, Ph.D., Assistant Professor, Dept. Of Microbiology and
Molecular Genetics, UMDNJ/New Jersey Medical School
Carl Gene Coin, M.D., Department of Radiology, University of Miami
School of Medicine
Joseph Giordano, M.D., Attending Internist, Sharon Regional Health
System
Vincent LaBombardi, Ph.D. Chief of the Department of Microbiology, St.
Vincent's Hospital New York, New York; Assistant Professor of
Microbiology, New York Medical College.
Richard Steinfeld, M.D., Attending Internist, Sharon Regional Health
System
Benjamin M. Blumberg, Ph.D., Professor of Neurology, University of
Rochester Medical School
Joseph H. Kite, Jr., M.D., Professor of Microbiology; State University
at Buffalo School of Medicine and Biomedical Sciences
Jane Pascale, M.D., Assistant Professor of Microbiology; State
University at Buffalo, NY
Sheldon Brown, M.D., Assistant Professor of Medicine; Mt. Sinai School
of Medicine, NY, NY; Attending Physician Infectious Diseases; Bronx
V.A. Hospital
Dale Pokorney, M.D., Assistant Professor of Dermatology, Case Western
Reserve School of Medicine
Pattisapu R.J. Gangadharam, Ph.D., Professor of Medicine, Microbiology
and Pathology, Director of Mycobacteriology research, University of
Illinois at Chicago
Thomas Kelly, Ph.D., Professor of Microbiology Laboure College; Boston,
MA
David Sklansky, Author of seven books on probability theory and wagers
Each member of the Scientific Advisory Board has received an option to
purchase six hundred fifty (650) shares of stock at $4.50 per share.
Such options vest over a three-year period beginning on December 6,
1996, and expire without further vesting within ninety (90) days after
each member's termination of Scientific Advisory Board service.
<PAGE>19
ITEM 6. EXECUTIVE COMPENSATION
No executive officer of the Corporation, except for Dr. Robert Ollar,
received any cash compensation for the fiscal year ended December 31,
1997. Dr. Ollar received cash compensation of $23,333 during fiscal
year ended December 31, 1997. Upon completion of the offering of the
Shares made hereby, Dr. Ollar will receive a salary of $65,000 per year
based on his full time work at the Corporation's laboratory; Dr. Felder
will receive a salary of $65,000 per year based upon part-time work;
and Mr. Inman will receive $12,000 per year for part-time work. The
Corporation retains the right to increase or decrease the cash
compensation of its employees as necessitated by business conditions.
In lieu of salary for past services, certain employees have received
options to purchase up to 322,406 shares of the Corporation's common
stock at a price of $1.20 per share. See "Stock Options."
For the year ended December 31, 1998, Mr. Moder was paid $11,015 for
legal services provided to the Corporation.
Employment Agreements. Dr. Robert Ollar is employed under an
employment agreement for $20,000 per year. Other than the
Corporation's standard form of non-competition and confidentiality
agreement, the Corporation does not presently have any employment
contracts in effect with the named executive officers of the
Corporation, including any compensatory plans or arrangements resulting
from the resignation, retirement or other termination of the named
executive officers of the Corporation, other than the compensation
arrangements discussed above.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related Party Transactions. Prior to July 1995, all of the Company's
expenditures were funded by Dr. Mitchell Felder. Dr. Felder advanced
the Company $26,776 in 1993, $36,649 in 1994, $19,564 in 1995 and
$36,189 in 1996. Advances from inception of the Company to December
31, 1992 totaled $39,387. Under an agreement with the Company,
$64,833 of the amounts loaned were converted to common stock. At
December 31, 1995, $56,811 was payable to Dr. Felder.
In 1992, David Bertstein, a stockholder, provided legal services
amounting to $12,000 in exchange for a non-interest bearing note
payable due or before December 1, 1999. Mr. Bernstein has agreed to
accept 10,000 Common Shares of the Company as repayment of this debt
upon completion of this offering.
The Company entered into a consulting agreement with Steven Lewis, a
stockholder and director of the Company. The term of the consulting
agreement is one (1) year commencing May 18, 1998. The Company has
not extended the agreement and it expires May 18, 1999. Mr. Lewis
shall be paid a $4,000 per month payable quarterly under the terms of
the Agreement. Additionally, Mr. Lewis has received 30,000 stock
options with an option price of $1.20 per share. The agreement
provides that upon the Company receiving $300,000 during its term, that
Mr. Lewis shall receive an additional 30,000 stock options at the
option price of $1.20 per Common Share. During 1997 and 1996, Mr.
Lewis was paid $31,347 and $18,360, respectively for his prior services
to forfeiture, which number will be reduced by 16,137 Common Shares
ITEM 8. DESCRIPTION OF SECURITIES
Qualification. The following statements constitute brief
summaries of the Company's Certificate of Incorporation and Bylaws, as
amended. Such summaries do not purport to be complete and are
qualified in their entirety by reference to the full text of the
Certificate of Incorporation and Bylaws.
The Company is authorized to issue 20,000,000 shares of Common Stock,
par value $.02 per share. As of the date hereof, there are 6,265,588
shares of Common Stock outstanding, excluding shares reserved for
issuance upon the exercise of 828,852 issued and outstanding common
stock options.
The holders of the Common Stock are entitled to one vote per share with
respect to all matters on which holders of the Company's Common Stock
are entitled to vote. Holders of the Common Stock have the right to
dividends from funds legally available therefor, when, as and if
declared by the Board of Directors and re-entitled to share ratably, in
all of the assets of the Company available for distribution to holders
<PAGE>20
of shares of Common Stock upon liquidation, dissolution or winding up
of the affairs of the Company. Holders of Common Stock do not have
preemptive, subscriptive or conversion rights. The Common Stock does
not have cumulative voting rights and, therefore, holders of shares
entitled to exercise more than 50% of the voting power are able to
elect 100% of the Directors of the Company. As a result, the existing
shareholders of the Company have the power to retain control over the
Company, despite any accumulation of Common Stock pursuant to his
offering.
Transfer Agent. Florida Atlantic Stock Transfer shall act as
the Company's transfer agent.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
The Company has applied for trading in the over-the-counter market and
to be listed on the Over-The-Counter Pink Sheets.
The Company has never paid any cash dividends nor does it intend, at
this time, to make any cash distributions to its shareholders as
dividends in the near future.
As of May 30, 1999, the number of holders of Company's common stock is
77.
ITEM 2. LEGAL PROCEEDINGS
Merger With Regal One Corporation ("Regal"). On April 7, 1998, the
Corporation entered into a Plan and Agreement of Merger with Regal, a
Florida Corporation, whose shares are listed on the OTC Bulletin Board
under the symbol "RONE." Regal was to issue approximately 26,320,520
Common Shares to the Corporation's stockholders so that on the
effective date of the merger, the shareholders of the Corporation would
have owned in the aggregate 85% of the Common Shares of Regal, which
upon closing will change its name to Infectech. A condition of the
merger was that the Corporation raise a minimum of $300,000 prior to
June 30, 1998. This condition was not met and the Corporation
exercised its right to terminate the transaction.
The Corporation filed for arbitration in Pennsylvania (AAA Case No. 55-
136-0131-98) to recover $50,000 advanced to Regal One. The matter has
been amicable settled.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
During the Company's two most recent fiscal years or any later interim
period, there have been no changes in or disagreements with the
Company's principal independent accountant or a significant
subsidiary's independent accountant.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
During the third and fourth quarter of 1998, the Company issued 103,000
Common Shares for services valued at $.02 per Common Share
Mitchell Felder, M.D. - 2,500 Common Shares
Susan Felder - 100,000 Common Shares
Richard Steinfeld - 500 Common Shares
The Common Shares were issued to sophisticated investors who had access
to information on the Company necessary to make an informed investment
decision for cash consideration or services pursuant to an exemption
from registration under Section 4(2) of the Securities Act of 1933.
During fiscal year 1998, the Company issued the following Common Shares
for $1.20 per Common Share
Anthony Melaragno - 20,000 Common Shares
Carl Shardy - 27,000 Common Shares
Dale Pokorney - 10,000 Common Shares
John & Joyce Mackey, Custodians - 10,000 Common Shares
Marten C. Owens - 10,000 Common Shares
<PAGE>21
Peter Melaragno - 20,000 Common Shares
Victor Melaragno - 20,000 Common Shares
Ronald Campbell - 10,000 Common Shares
Victor Melaragno, Custodian - 10,000 Common Shares
Richard J. Donatelli - 10,000 Common Shares
Steve D. Gurrera - 3,000 Common Shares
Christine & David Kinla - 10,000 Common Shares
These issuances were made in compliance with Rule 505, Regulation D of
the Securities Act of 1933 by Registrant's management, consultants and
selected broker/dealers. No commissions or other remuneration was paid
to anyone. No general solicitation was utilized. The determination
of whether an investor was accredited or nonaccredited was based on the
responses in the subscription agreement filled out by each investor.
During the fourth quarter of 1998, the Company issued Common Shares for
option exercise as follows.
Thomas A. Kelly, Ph.D - 1,138 Common Shares
The Common Shares were issued to sophisticated investors who had access
to information on the Company necessary to make an informed investment
decision for cash consideration or services pursuant to an exemption
from registration under Section 4(2) of the Securities Act of 1933.
During the first quarter of 1999, the Company issued Common Shares at
$1.20 per Common Share cash payment (aggregate of $133,200) to the
following:
Robert Hudock 10,000 Common Shares
James A. Hudock 10,000 Common Shares
John Zullo 10,000 Common Shares
Frank Shardy 19,000 Common Shares
Victor Melaragno 10,000 Common Shares
Anthony Melaragno 10,000 Common Shares
Bruno Melaragno 20,000 Common Shares
Aurelio Berarolineli 10,000 Common Shares
John Demas, Sr. 12,000 Common Shares
These issuances were made in compliance with Rule 504, Regulation D of
the Securities Act of 1933 by Registrant's management, consultants and
selected broker/dealers. No commissions or other remuneration was paid
to anyone. The determination of whether an investor was accredited or
nonaccredited was based on the responses in the subscription agreement
filled out by each investor.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Indemnification. The Company shall indemnify to the fullest extent
permitted by, and in the manner permissible under the laws of the State
of Delaware, any person made, or threatened to be made, a party to an
action or proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that he is or was a director or
officer of the Company, or served any other enterprise as director,
officer or employee at the request of the Company. The Board of
Directors, in its discretion, shall have the power on behalf of the
Company to indemnify any person, other than a director or officer, made
a party to any action, suit or proceeding by reason of the fact that
he/she is or was an employee of the Company.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the
Company, 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 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 proceedings) is asserted by
such director, officer, or controlling person in connection with any
securities being registered, 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 whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issues.
<PAGE>22
INDEMNIFICATION OF OFFICERS OR PERSONS CONTROLLING THE CORPORATION FOR
LIABILITIES ARISING UNDER THE SECURITIES ACT OF 1933, IS HELD TO BE
AGAINST PUBLIC POLICY BY THE SECURITIES AND EXCHANGE COMMISSION AND IS
THEREFORE UNENFORCEABLE.
Limitation on Liability and Indemnification Matters. The Certificate
of Incorporation of the Corporation limits the liability of directors
of the Corporation to the Corporation or its stockholders to the
fullest extent permitted by Delaware law. Specifically, directors of
the Corporation will not be personally liable for money damages for
breach of a duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Act, which
relates to unlawful declarations of dividends or other distributions of
assets to stockholders or the unlawful purchase of shares of the
corporation, or (iv) for any transaction from which the director
derived an improper personal benefit.
PART F/S
The following financial statements required by Item 310 of Regulation
S-B are furnished below
Independent Auditor's Report dated March 24, 1999
Balance Sheet as of December 31, 1998 and 1997
Statement of Operations for the Years ended December 31, 1998, 1997 and
1996 and the period from June 21, 1989 (inception) to December 31, 1998
Statement of Stockholders' Equity for the Years ended December 31,
1998, 1997 and 1996 and for the period from June 21, 1989 to December
31, 1998
Statement of Cash Flows for the Years ended December 31, 1998, 1997 and
1996 and for the period from June 21, 1989 to December 31, 1998
Notes to Financial Statements
Balance Sheet as of March 31, 1999
Statement of Operations for the Three Months ended March 31, 1999
Statement of Cash Flows for the Three Months ended March 31, 1999
Notes to Financial Statements
<PAGE>23
March 24, 1999
Board of Directors
Infectech, Inc.
Sharon, Pennsylvania
Independent Auditors' Report
We have audited the accompanying balance sheets of Infectech, Inc. as
of December 31, 1998 and 1997 and the related statements of operations,
stockholders equity (deficit) and cash flows for each of the three
years in the period ended December 31, 1998 and for the period from
June 21, 1989 (inception) to December 31, 1998. 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 require that we plan and perform the audits
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.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Infectech,
Inc. as of December 31, 1998 and 1997 and the results of its operations
and its cash flows for each of the three years in the period ended
December 31, 1998 and for the period from June 21, 1989 (inception) to
December 31, 1998 in conformity with generally accepted accounting
principles.
Certified Public Accountants
- -1-
<PAGE>24
BALANCE SHEETS
INFECTECH, INC.
December 31, 1998 and 1997
DECEMBER 31,
1998 1997
A S S E T S
CURRENT ASSETS
Cash and cash equivalents $ 217,295 $ 295,489
Certificate of deposit 0 200,000
EQUIPMENT
Medical equipment 43,517 37,013
Less accumulated depreciation 16,078 10,192
---------- ---------
NET EQUIPMENT 27,439 26,821
----------- ---------
OTHER ASSETS
Deposit 1,669 1,456
Patent costs, net of accumulated amortization
of $82,442 in 1998 and $51,686 in 1997 522,092 361,475
---------- ---------
TOTAL OTHER ASSETS 523,761 362,931
$ 768,495 $ 885,241
========== ==========
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Accounts payable $ 33,006 $ 16,205
Accrued payroll taxes 522 363
Accrued state taxes 2,468 2,516
---------- ----------
TOTAL CURRENT LIABILITIES 35,996 19,084
---------- ----------
STOCKHOLDERS EQUITY - NOTES E, F, G AND H
Common stock - $.02 par value per share:
Authorized 20,000,000 shares; issued and
outstanding 6,366,450 shares in 1998
and 6,033,200 shares in 1997 127,329 120,664
Additional paid-in capital 1,853,546 1,446,993
Deficit accumulated during the
development stage (1,248,376) (701,500)
---------- ---------
TOTAL STOCKHOLDERS EQUITY 732,499 866,157
---------- ---------
$ 768,495 $ 885,241
========== ==========
See accompanying notes to financial statements
- -2-
<PAGE>25
STATEMENTS OF OPERATIONS
INFECTECH, INC.
Years ended December 31, 1998, 1997, 1996 and
period from June 21, 1989 (inception) to December 31, 1998
PERIOD FROM
JUNE 21, 1989
(INCEPTION)
YEAR ENDED TO
DECEMBER 31, DECEMBER 31,
1998 1997 1996 1998
----- ----- ----- ----
OPERATING INCOME
Sales $ 3,669 $ 0 $ 0 $ 3,669
OPERATING EXPENSES
Research and development 92,004 60,697 17,500 206,011
Wages 121,092 24,568 16,000 177,404
Telephone 7,592 9,955 3,595 29,255
Office expense 9,746 7,541 2,328 22,675
Insurance 5,536 5,066 6,765 17,692
Legal and accounting 61,556 60,938 80,711 234,743
Travel 11,467 27,053 9,310 68,416
Payroll taxes 3,185 2,268 1,573 8,627
State and local taxes 4,796 3,777 2,584 11,692
Amortization 30,756 20,669 14,194 85,282
Depreciation 5,886 5,288 4,410 16,079
Rent 28,212 26,713 19,808 74,733
Consulting and professional fees 183,466 104,971 43,360 331,797
Miscellaneous 6,656 8,355 956 17,526
------- ------- ------ --------
TOTAL OPERATING EXPENSES 571,950 367,859 223,094 1,301,932
-------- ------- ------- ----------
LOSS FROM OPERATIONS (568,281)(367,859)(223,094) (1,298,263)
-------- ------- ------- ---------
OTHER INCOME (DEDUCTION)
Interest expense 0 0 (661) (661)
Interest earned 21,405 21,634 2,833 50,548
-------- ------- ------- ----------
21,405 21,634 2,172 49,887
------- -------- ------ ---------
NET LOSS $(546,876)$(346,225)$(220,922) $(1,248,376)
========= ======== ======= =========
See accompanying notes to financial statements
- -3-
<PAGE>26
STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
INFECTECH, INC.
Years ended December 31, 1998, 1997, 1996
and the period from June 21, 1989 (inception) to December 31, 1998
</TABLE>
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
ADDITIONAL DURING RECEIVABLE
COMMON PAID-IN DEVELOPMENT FROM SALE
STOCK CAPITAL STAGE OF STOCK TOTAL
------ ---------- ----------- ------------ -------
<S> <C> <C> <C> <C> <C>
Balance June 21, 1989 (inception) $ 0 $ 0 $ 0 $ 0 $ 0
Net loss 0 0 (98) 0 (98)
-------- -------- ------- ------- -----
Deficit December 31, 1989 0 0 (98) 0 (98)
Net loss 0 0 (388) 0 0
-------- -------- ------- ------- -----
Deficit December 31, 1990 0 0 (486) 0 (486)
Net loss 0 0 (907) 0 (907)
-------- -------- ------- ------- -----
Deficit December 31, 1991 0 0 (1,393) 0 (1,393)
Issuance of 1,849,300 shares of stock in
exchange for $20,000 in long-term loans 20,000 0 0 0 20,000
Issuance of 1,811,100 shares of stock in
exchange for research and development 35,810 0 0 0 35,810
Issuance of 100,000 shares of
stock for organization costs 2,000 0 0 0 2,000
Issuance of 105,000 shares of stock
for out-of-pocket costs 2,100 0 0 0 2,100
Issuance of 134,600 shares of stock in
exchange for legal services 13,000 0 0 0 13,000
Net loss 0 0 (67,027) 0 (67,027)
------ ------ ------- -------- -------
Balance (deficit) December 31, 1992 72,910 0 (68,420) 0 4,490
Net loss 0 0 (7,993) 0 (7,993)
------ ------ ------- -------- ------
Balance (deficit) December 31, 1993 72,910 0 (76,413) 0 (3,503)
Net loss 0 0 (14,160) 0 (14,160)
------ ------ ------- -------- ------
Balance (deficit) December 31, 1994 72,910 0 (90,573) 0 (17,663)
Conversion of long-term debt to
additional paid-in capital 0 44,833 0 0 44,833
Transfer of costs in excess of
par value upon change to $1
par value from no par value 7,090 (7,090) 0 0 0
Private placement of 500,000 shares of
stock at $.20 per share 10,000 90,000 0 0 100,000
Private placement of 507,500 shares of
stock at $.40 per share 10,150 192,850 0 0 203,000
6,120 361,080 0 0 367,200
Costs relating to sale of stock 0 (36,000) 0 0 (36,000)
Net loss 0 0 (220,922) 0 (220,922)
------- ---------- --------- ----- --------
Balance (deficit) December 31, 1996 110,215 762,528 (355,275) 0 517,468
Private placement of 522,450
shares of stock at $1.20 per share 10,449 616,491 0 0 626,940
Expense relating to stock options 0 67,974 0 0 67,974
Net loss 0 0 (346,225) 0 (346,225)
--------- --------- --------- ----- ---------
Balance (deficit) December 31, 1997 120,664 1,446,993 (701,500) 0 866,157
Private placement of 225,000 shares
of stock at $1.20 per share 4,500 265,500 0 0 270,000
Issuance of 57,213 shares of stock
upon exercise of options at
$.01 per share 1,144 (572) 0 0 572
Issuance of 51,037 shares of
stock for services 1,021 65,372 0 0 66,393
Costs relating to sale of stock 0 (41,148) 0 0 (41,148)
Expense relating to stock options 0 117,401 0 0 117,401
Net loss 0 0 (546,876) 0 (546,872)
------ -------- ---------- ---- --------
Balance (deficit) December 31, 1998 $127,329 $1,853,546 $(1,248,376) $ 0 $ 732,499
========= ========== =========== ====== =========
</TABLE>
See accompanying notes to financial statements
<PAGE>27
STATEMENTS OF CASH FLOWS
INFECTECH, INC.
Years ended December 31, 1998, 1997, 1996
and the period from June 21, 1989 (inception) to December 31, 1998
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 21, 1989
(INCEPTION)
TO
DECEMBER 31,
1998 1997 1996 1998
----------- ---------- ---------- ---------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $(546,876) $(346,225) $(220,922) $(1,248,376)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Amortization 30,756 20,669 14,194 85,282
Depreciation 5,886 5,288 4,410 16,079
Increase (decrease) in payables 16,801 (60,867) 71,089 31,212
Increase in accrued expenses 111 2,132 412 4,052
Expenses exchanged for capital 183,794 67,974 0 302,678
--------- -------- -------- ---------
NET CASH USED IN
OPERATING ACTIVITIES (309,528) (311,029) (130,817) (809,073)
--------- -------- -------- ---------
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase (redemption) of
certificate of deposit 200,000 (200,000) 0 0
Purchase of equipment (6,504) (849) (22,328) (43,518)
Patent costs (191,373) (108,549) (119,572) (605,374)
Increase in deposits (213) (26) (1,430) (1,669)
--------- --------- --------- ---------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 1,910 (309,424) (143,330) (650,561)
--------- --------- --------- ---------
CASH FLOWS FROM
FINANCING ACTIVITIES
Fees in connection with
issuance of stock (41,148) 0 (36,000) (87,348)
Proceeds from issuance of
long-term debt 0 0 36,189 170,565
Proceeds from issuance of
common stock 270,572 626,940 373,200 1,593,712
---------- ---------- --------- ----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 229,424 626,940 373,389 1,676,929
---------- ---------- --------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (78,194) 6,487 99,242 217,295
CASH AND CASH EQUIVALENTS
Beginning of period 295,489 289,002 189,760 0
--------- --------- ---------- ---------
End of period $ 217,295 $ 295,489 $ 289,002 $ 217,295
========== ========= ========== ===========
CASH WAS PAID FOR
Interest $ 0 $ 0 $ 661 $ 661
========== ========= ========== ===========
</TABLE>
See accompanying notes to financial statements
-5-
<PAGE>28
NOTES TO FINANCIAL STATEMENTS
INFECTECH, INC.
December 31, 1998 and 1997
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations:
These financial statements are those of a development stage company,
Infectech, Inc., that was incorporated in 1989 to develop diagnostic
tests for infectious diseases. A paraffin slide technology has been
developed that greatly reduces the time required to identify bacteria
and diagnose disease. This technology has been patented in the United
States, major European countries and Australia.
The company's operations have consisted primarily of incurring legal
costs to obtain patents in the United States and foreign countries and
conducting research and development activities.
Cash and Cash Equivalents:
The company considers highly liquid debt instruments purchased with
maturity dates of three months or less to be cash equivalents.
The company maintains deposits in savings, checking and transfer
accounts in one bank located in Hermitage, Pennsylvania. Deposits at
times may exceed federally insured amounts.
Equipment:
Equipment is stated at cost. Depreciation is computed on the straight-
line method.
Patent Costs:
Patent costs are stated net of amortization. Amortization is computed
on the straight-line method over a 17 year period. The company has
capitalized only legal fees related to patent rights acquired; all
other such costs have been expensed as incurred.
Research and Development Costs:
Research and development costs not directly reimbursable by others,
totalling $35,810 in 1992, were charged to expense when stock was
issued in exchange for patent rights. Research and development costs
of $92,004 in 1998, $60,697 in 1997 and $17,500 in 1996 were charged to
expense when incurred.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
NOTE B - LINE OF CREDIT
The company has a $10,500 line of credit, all of which was available at
December 31, 1998. The line of credit is collateralized by the personal
guarantee of a stockholder.
NOTE C - LEASES WHERE COMPANY IS LESSEE
The company has a three year operating lease for laboratory space, with
a renewal option for an additional three years. Following is a summary
of future minimum lease payments as of the lease inception:
Year ending -
December 31, 1999 $ 3,602
<PAGE>29
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
INFECTECH, INC.
December 31, 1998 and 1997
NOTE D - INCOME TAXES
Following is a reconciliation between federal income taxes at statutory
rates and actual taxes based on income before income taxes:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Statutory taxes 35.0% (35.0%) (35.0%)
Effect of valuation reserve 35.0 35.0 35.0
------ ----- ------
.0% .0% .0%
======= ====== =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets are presented below:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------------------
1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Net operating loss $400,000 $215,000
Less valuation allowance (400,000) (215,000)
--------- ---------
NET DEFERRED TAX ASSETS $ 0 $ 0
</TABLE>
The company has no significant deferred tax liabilities.
At December 31, 1998, the company had unused net operating tax loss
carryovers of approximately $1,179,000 available for federal income tax
purposes for offset against future taxable income, $547,000 expiring in
2013, $325,000 expiring in 2012, $220,000 expiring in 2011, $43,800
expiring in 2010, $14,000 expiring in 2009, $8,000 expiring in 2008 and
the balance expiring in the years 2004 through 2008. The utilization
of the loss carryovers may be limited to a reduced annual amount after
an ownership change as defined by Section 382 of the Internal Revenue
Code.
NOTE E - STOCK OPTIONS
The company adopted a stock option plan, which provides for the
issuance of up to 1,182,750 shares of common stock to key employees and
directors and other individuals involved in the company. During 1998,
the plan was amended to increase the number of shares by 1,250,000.
A summary of the company's option plans at December 31, 1998 and
December 31, 1997 and changes during the periods ending on those dates
are shown below:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
---------------- ------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
--------------- ---------------
<S> <C> <C> <C> <C>
Outstanding at beginning of period 729,184 $4.50 225,096 $1.29
Granted 215,837 .79 504,088 2.03
Options exercised (57,213) .01 0 .00
------- ----- ------- ----
Outstanding at end of period 887,808 1.67 729,184 1.80
======== ==== ======= ====
Options exercisable at end of period 435,066 $1.41 53,492 $ .30
======== ===== ======= =====
</TABLE>
<PAGE>30
All shares issued before 1998 vest in equal installments over a three
year period on each anniversary date of the grant. The shares granted
in 1998 vest immediately. The terms of the options are generally for
10 years.
In addition, one consultant to the company was granted an option to
purchase $15,000 worth of stock at a price equal to one-half of the
price any stock is sold in an initial public offering.
Following is a summary on the status of options outstanding at December
31, 1998:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS EXERCISABLE OPTIONS
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
EXERCISE CONTRACTUAL EXERCISE EXERCISE
PRICE NUMBER LIFE PRICE NUMBER PRICE
<S> <C> <C> <C> <C> <C>
$ .01 78,750 10 years $ .01 75,416 $.01
.02 1,650 10 years .00 0 .00
.20 60,000 10 years .20 20,000 .20
1.20 438,308 10 years 1.20 233,150 1.20
3.00 300,000 10 years 3.00 100,000 3.00
4.50 9,100 9 years 4.50 6,500 4.50
</TABLE>
The fair value of each option granted is estimated on the grant date
using the Black-Scholes model. The following assumptions were made in
estimating fair value:
Dividend yield 0
Risk-free interest rate 5%
Expected life 10 years
Expected volatility None
The Company applies APB Opinion 25 in accounting for its stock options.
Accordingly, no compensation cost has been recognized only to the
extent that the market value at grant date exceeded the option price.
The amount of corporation cost recognized for 1998 was $83,300. No
compensation cost was recognized for the plan in 1997. Had
compensation cost been determined on the basis of fair value pursuant
to FASB Statement No. 123, net loss would have been increased as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Net loss -
As reported $(546,876) $(346,225) $(220,922)
========= ========= =========
Pro forma $(587,931) $(449,891) $(324,399)
========= ========= =========
</TABLE>
The independent contractors were granted options to purchase 57,459 and
60,146 shares from $.01 to $1.20 per share in exchange for services
rendered during 1998 and 1997, respectively. The company recognized an
expense of $34,667 for 1998 and $67,974 for 1997 equal to the value of
this option.
In addition, one independent contractor was granted 50,000 common
shares in exchange for services in 1998. The company recognized a
$60,000 expense for the value of the shares issued during 1998.
NOTE F - CONTROLLING INTEREST AND RELATED PARTY TRANSACTIONS
Controlling Interest:
Two individuals own 63.0% and 66.6% of the company's outstanding common
stock at December 31, 1998 and 1997, respectively.
Related Party Transactions:
Prior to July 1995, all of the company's expenditures were funded by a
loan from one of the controlling stockholders. The company also
utilizes office space provided by this stockholder at no charge to the
company.
<PAGE>31
The same stockholder advanced the company $26,776 in 1993, $36,649 in
1994, $19,564 in 1995 and $36,189 in 1996. Advances from inception of
the company to December 31, 1992 totaled $39,387.
Under an agreement with the company, $64,833 of the amounts loaned were
converted to common stock. At December 31, 1995, $56,811 was payable
to the stockholder.
One stockholder provided legal services in exchange for common stock.
This stockholder also provided legal services during 1992 in exchange
for a $12,000 note payable.
During 1996, $105,000 in loans from stockholders were converted to
87,500 shares of common stock.
The Company has entered into a two-year consulting agreement with a
stockholder and director of the company to provide consulting and
advisory services to the company in consideration for cash payments
equal to 5% of the gross proceeds to the company from a variety of
financial transactions in which they may engage. During 1998, 1997 and
1996, $32,000, $31,347 and $18,360, respectively, was expensed under
this agreement.
NOTE G - NONCASH OPERATING, INVESTING AND FINANCING ACTIVITIES
During the year ended December 31, 1992, the company issued common
stock in exchange for $13,000 in legal fees incurred and $35,810 in
research and development costs and $2,100 in organization costs. The
company also incurred $12,000 in long-term debt in exchange for legal
services. The company also converted $20,000 in long-term debt to
stock during 1992.
A stockholder paid company expenses or loaned amounts to the company on
a long-term basis as follows:
Year Amount
----- -------
1989 $ 2,522
1990 4,946
1991 8,914
1992 23,005
1993 26,776
1994 36,649
1995 19,564
1996 35,813
$158,189
========
During the year ended December 31, 1995, $44,833 in noninterest bearing
long-term debt was transferred to paid-in capital in exchange for a
transfer of stock among four stockholders.
During the year ended December 31, 1995, the Company issued common
stock to an individual in exchange for a $6,000 subscription
receivable, which was repaid during 1996.
During the year ended December 31, 1996, the company issued common
stock to two individuals in exchange for $105,000 in long-term debt.
NOTE H - STOCK SPLITS AND STOCK OFFERING
On November 19, 1996, the stockholders amended the articles of
incorporation increasing the authorized shares from 120,000 to
20,000,000. In addition, a 50 to 1 stock split was declared increasing
the outstanding shares to 5,117,250.
On June 1, 1995, the stockholders amended the articles of incorporation
increasing the authorized shares from 3,000 to 120,000 shares. In
addition, a 40 to 1 stock split was declared increasing the outstanding
shares to 120,000. At this time, the stockholders contributed 40,000
shares of stock back to the company. All per share amounts and number
of shares have been restated to reflect the stock splits.
On November 27, 1996, the company offered for sale 1,000,000 shares of
common stock under a private placement. As of December 31, 1998,
903,450 shares have been issued.
<PAGE>32
NOTE I - TERMINATION OF MERGER AGREEMENT
On April 7, 1998, the company signed a merger agreement with Regal One
Corporation, an inactive public company located in Las Vegas, Nevada.
The agreement called for each share of Infectech, Inc. to be exchanged
for 3.8483 shares of Regal One Corporation subject to adjustment for
stock options and any additional shares issued under the private
placement. After the merger, Infectech, Inc. stockholders would have
owned approximately 85% of the combined company. The agreement was
terminated in 1998. The company incurred approximately $56,000 in
expenses in connection with this failed merger which were charged to
operations during 1998.
<PAGE>33
Infectech, Inc.
Balance Sheet (Unaudited)
As of March 31, 1999
<TABLE>
<CAPTION>
Assets
<S> <C>
Current Assets
Cash and cash equivalents 168,328
Due from Employee 104
--------
Total Current Assets 168,432
Equipment
Medical Equipment 42,917
Office equipment 600
Less accumulated depreciation (17,632)
--------
25,885
Other Assets
Patent Costs 607,444
Less accumulated amortization (91,367)
--------
Net patent costs 516,077
Organization costs 2,841
Less accumulated amortization (2,841)
-------
Net organization costs 0
Trademarks 8,343
Security deposits 1,430
-------
TOTAL ASSETS 720,167
Liabilities and Stockholders Equity (Deficit)
Current Liabilities
Accounts payable 33,557
Accrued expenses 3,519
-------
Total Current Liabilities 37,076
LONG-TERM DEBT 0
STOCKHOLDERS EQUITY (DEFICIT)
Common stock - $.02 par value
Authorized 20,000,000 shares;
issued and outstanding
6,369,784 shares 127,396
Additional paid-in-capital 1,853,513
Deficit accumulated during
the development stage (1,297,818)
---------
TOTAL STOCKHOLDERS EQUITY (DEFICIT) 720,167
=========
</TABLE>
<PAGE>34
Infectech, Inc.
Statement of Operations - (Unaudited)
For the Period January 1, 1999 through March 31, 1999 and
The Period June 21, 1989 (inception) to March 31, 1999
<TABLE>
<CAPTION>
Period
Period From June 21, 1989
January 1, 1998 (Inception)
To To
March 31, 1999 March 31, 1999
<S> <c. <C>
Operating Income
Sales $ 0 $3,669
Operating Expenses:
Research and development 7,605 $213,616
Wages 5,677 183,081
Telephone 889 30,144
Office expense 2,990 25,665
Insurance 51 17,743
Legal and Accounting 441 235,184
Travel 777 69,193
Payroll taxes 592 9,219
State and local taxes 2,621 14,313
Amortization 8,925 94,207
Depreciation 1,554 17,633
Rent 5,015 79,748
Consulting & professional fees 11,610 343,407
Misc. operating expense 2,758 20,284
------- ---------
Total Operating Expenses 51,505 1,353,437
------- ---------
Loss from Operation (51,505) (1,349,768)
------- ---------
Other Income (Deduction)
Interest expense 0 (661)
Interest earned 2,063 52,611
------- ----------
Total Other Income (Deduction) 2,063 51,950
------- ----------
Net Loss ($49,442) ($1,297,818)
</TABLE>
<PAGE>35
Infectech, Inc.
Statement of Cash Flows (Unaudited)
For the Period January 1, 1999 to march 31, 1999 and
The Period June 21, 1989 *Inception) to March 31, 1999
<TABLE>
<CAPTION>
Period From
Period From June 21, 1989
January 1, 1999 (Inception)
To To
March 31, 1999 March 31, 1999
<S> <C> <C>
Cash Flows from Operating Activities
Net loss ($49,422) ($1,297,818)
Adjustments to reconcile net loss to net
Cash used in operating activities:
Amortization 8,925 94,207
Depreciation 1,554 17,633
Increase (decrease) in payables 551 31,763
Increase (decrease) in accrued expenses 529 4,581
Expenses exchanged for capital 0 302,678
-------- ----------
Net Cash Used in Operating Activities ($37,883) ($846,956)
-------- ----------
Cash Flows From Investing Activities
Redemption (Purchase) of
certificate of deposit 0 0
Purchase of equipment 0 (43,518)
Patent costs (11,253) (616,627)
Increase (decrease) in deposits 135 (1,534)
-------- ---------
Net Cash Ued in Investing Activities ($11,118) ($661,679)
-------- ---------
Cash Flows From Financing Activities
Legal fees in connection with
issuance of stock 0 (87,348)
Proceeds from issuance of long-term debt 0 170,565
Proceeds from issuance of common stock 34 1,593,746
-------- ---------
Net Cash Provided By Financing Activities $34 $1,676,963
-------- ----------
Net Increase in Cash and Cash Equivalents ($48,967) $158,328
Cash and Cash Equivalents
Beginning of period $217,295 $0
-------- ----------
End of period $168,328 $168,328
</TABLE>
<PAGE>36
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations:
These financial statements are those of a development stage company,
Infectech, Inc., that was incorporated in 1989 to develop diagnostic
tests for infectious diseases. A paraffin slide technology has been
developed that greatly reduces the time required to identify bacteria
and diagnose disease. This technology has been patented in the United
States, major European countries and Australia.
The Company's operations have consisted primarily of incurring legal
costs to obtain patents in the United States and foreign countries and
conducting research and development activities.
Cash and Cash Equivalents:
The company considers highly liquid debt instruments purchased with
maturity dates of three months or less to be cash equivalents.
The Company maintains deposits in savings, checking and transfer
accounts in one bank located in Hermitage, Pennsylvania. Deposits at
times may exceed federally insured amounts.
Equipment:
Equipment is stated at cost. Depreciation is computed on the straight-
line method.
Patent Costs:
Patent costs are stated net of amortization. Amortization is computed
on the straight-line method over a 17 year period. The company has
capitalized only legal fees related to patent rights acquired; all
other such costs have been expensed as incurred.
Research and Development Costs:
Research and development costs not directly reimbursable by others,
totaling $35,810 in 1992, were charged to expense when stock was issued
in exchange for patent rights. Research and development costs are
charged to expense when incurred.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
NOTE B - LINE OF CREDIT
The company has a $10,500 line of credit, all of which was available at
March 31, 1999. The line of credit is collateralized by the personal
guarantee of a stockholder.
<PAGE>37
PART III
ITEM 1. INDEX TO EXHIBITS
(2) Charter and by-laws
(3) Instruments defining the rights of security holders
(5) Voting Trust Agreement - Not Applicable
(6) Material Contracts
(7) Material Foreign Patents - Not Applicable
(12) Additional Exhibits
ITEM 2. DESCRIPTION OF EXHIBITS
(2.1) Articles of Incorporation
(2.1.1) Amendment to Articles of Incorporation dated July 4, 1995
(2.1.2) Amendment to Articles of Incorporation dated November 21,
1996
(2.2) Bylaws
(3.1) Common Stock Certificate - to be filed by amendment
(3.2) Preferred Stock Certificate - to be filed by amendment
(6.1) License Agreement dated October 4, 1993, between the Company
and Erie Scientific Company
(6.2) Investment and Licensing Agreement dated June 11, 1998
between the Company and BioRemedial Technologies, Inc.
(6.3) Consulting Agreement dated July 8, 1998, between the Company
and Breakthru Technologies, L.L.C.
(6.4) Consulting Agreement dated September 24, 1998, between the
Company and Timothy Miles d/b/a/ Little Pond Enterprises
(6.5) Letter agreement together with Option Agreement and Research
Agreement exhibits dated August 19, 1998, between the Company and
Brigham and Women's Hospital
(6.6) Consulting Agreement dated September 15, 1998, between the
Company and Merrill Weber & Co., Inc.
(6.7) Letter Agreements dated April 14, 1997 ad may 14, 1997
between the Company and NEN Life Science, Inc.
(6.8) Letter Agreement dated november 19, 1997, between the Company
and Starplex Scientific
<PAGE>38
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the
registrant caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
INFECTECH, INC.
Mitchell Felder, M.C.
Date: June 14, 1999 -------------------------------
- -
By: Mitchell Felder, President
<PAGE>39
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 incorporation of "Infectech, Inc.", filed in this office
on the twenty-first day of June, A.D. 1989, at 9:00 O'clock A.M.
Edward J. Freel, Secretary of State
Authentication:7793038
Date: 01-17-96
Certificate of Incorporation of Infectech, Inc.
Filed June 21, 1989 at 9:00 A.M.
779172003
First: The name of the corporation is Infectech, Inc.
Second: The address of its registered office in the State of Delaware
is Coffee Run Professional Centre, Lancaster Pike and Loveville Road,
City of Hockessin, County of New Castle. Its registered agent at such
address is The Incorporators Ltd.
Third: the purpose of the Corporation is to engage in any lawful act
of activity for which corporations may be organized under the General
Corporation Law of Delaware.
Fourth: the corporation shall have the authority to issue three
thousand shares of common stock without par value.
Fifth: the Board of Directors is expressly authorized to adopt, amend,
or repeal the By-Laws of the corporation.
Sixth: The stockholders and directors may hold their meetings and keep
the books and documents of the corporation outside the State of
Delaware, at such places from time to time designated by the By-Laws,
except as otherwise required by the laws of Delaware.
Seventh: The corporation is to have perpetual existence.
Eighth: the name and mailing address of the incorporator is Patricia
L. Ryan, Coffee Run Professional Centre, Lancaster Pike and Loveville
Road, Hockessin, DE 19707.
Ninth: The number of directors of the corporation shall be fixed from
time to time by its By-Laws and ma be increased or decreased.
Tenth: the Board of Directors is expressly authorized and shall have
such authority as set forth in the By-Laws to the extent such authority
would be valid under Delaware law.
Eleventh: No director of the corporation shall have personal liability
to the corporation or its shareholders for monetary damages for breach
of fiduciary duty as a director, provided that this provision shall not
eliminate or limit the liability of a director (a) for any breach of
the director's duty or loyalty to the corporation or its stockholders,
(b) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) under Section
174 of the Delaware Corporation Law, or (d) for any transaction from
which the director derived an improper personal benefit.
The undersigned Incorporator for the purpose of forming a corporation
pursuant to the laws of the State of Delaware, does make this
Certificate, hereby declaring and certifying that the facts herein
stated are true.
June 21, 1989
By: Patricia L. Ryan
<PAGE>40
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 incorporation of "Infectech, Inc.", filed in this office
on the fourteenth day of July, A.D. 1995, at 4:30 O'clock P.M.
Edward J. Freel, Secretary of State
Authentication:7793038
Date: 01-17-96
<PAGE>41
State of Delaware
Secretary of State
Division of Corporations
Filed 4:30 P.M. 07/14/95
950158600-2199945
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
Infectech, Inc. a corporation organized and existing under and by
virtue of the General Corporation Las of the State of Delaware,
Does hereby certify
First: That at a meeting of the Broad of Directors of Infectech, Inc.
resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of said corporation, declaring said
amendment to be advisable and calling a meeting of the stockholders of
said corporation for consideration thereof. The resolution setting
forth the proposed amendment is as follows:
Resolved, that the Certificate of Incorporation of this corporation be
amended by changing the Article thereof numbered "fourth" so that,
amended, such Article shall be and read as follows: The Corporation
shall have the authority to issue 120,000 shares of common stock at
$1.00 par value. The 3,000 original shares shall be split 40 to 1.
Second: That thereafter, pursuant to resolution of its Broad of
Directors, a special meeting of the stockholders of said corporate was
duly called and held, upon notice in accordance with Section 222 of the
General Corporation Law of the State of Delaware at which meeting the
necessary number of shares as required by stature were voted in favor
of the amendment.
Third: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the state
of Delaware.
Fourth: That the capital of said corporation shall not be reduced
under or by reason of said amendment.
In Witness Whereof, Infectech, Inc. has caused this certificate to be
signed by Mitchell s. Felder, M.D. its President, and Susan Felder its
Secretary, this Fourteenth day of July, 1995.
By: Mitchell S. Felder, M.D., President
Attest: Susan Felder, Secretary
<PAGE>42
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 incorporation of "Infectech, Inc.", filed in this office
on the twenty first day of November, A.D. 1996 at 1:30 O'clock P.M.
A Certified copy of this certificate has been forwarded to the New
Castle County Recorder of Deeds for recording.
Edward J. Freel, Secretary of State
Authentication: Date: 8205642
11-22-96
<PAGE>43
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
Infectech, Inc. a corporation organized and existing under and by
virtue of the General Corporation Las of the State of Delaware,
Does hereby certify
First: That at a meeting of the Broad of Directors of Infectech, Inc.
resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of said corporation, declaring said
amendment to be advisable and calling a meeting of the stockholders of
said corporation for consideration thereof. The resolution setting
forth the proposed amendment is as follows:
Resolved, that the Certificate of Incorporation of this corporation be
amended by changing the Article thereof numbered "fourth" so that,
amended, such Article shall be and read as follows: "The Corporation
shall have the authority to issue 20,000,000 shares of common stock at
$0.02 par value. The 20,000 authorized shares result from the
following: (I)a 50 to 1 stock split of the previously authorized
120,000 shares resulting in 6,000,000 shares authorized followed by
(ii) an increase in authorized common stock of 14,000,000 shares
resulting in a total of 20,000,000 shares of authorized common stock."
Second: That thereafter, pursuant to resolution of its Broad of
Directors, a special meeting of the stockholders of said corporate was
duly called and held, upon notice in accordance with Section 222 of the
General Corporation Law of the State of Delaware at which meeting the
necessary number of shares as required by stature were voted in favor
of the amendment.
Third: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the state
of Delaware.
Fourth: That the capital of said corporation shall not be reduced
under or by reason of said amendment.
In Witness Whereof, Infectech, Inc. has caused this certificate to be
signed by Mitchell s. Felder, M.D. its President, this 21th day of
November, 1996.
By: Mitchell S. Felder, M.D., President
<PAGE>44
By-Laws of Infectech, Inc.
1. Offices. Infectech, Inc. (hereinafter the "Corporation") may have
offices and places of business at such places, within or without the
State of Delaware, as the Board of Directors may from time to time
determine or the business of the Corporation may require.
2. Meeting of Stockholders.
2.1 Place of Meeting. All meetings of the stockholders for the
election of directors shall beheld at such place as may be fixed from
time to time by the Board of Directors, or at such other place either
within or without the State of Delaware as shall be designated from
time to time by the board of directors and stated in the notice of the
meeting. Meetings of stockholders for any other purpose may be held at
such time e and place, within or without the State of Delaware, as
shall be stated in the notice of the meeting or in a duly executed
waiver thereof.
2.2 Annual Meeting. Annual meetings of stockholders commencing with
the year 1995 shall be held on the date and time as shall be designated
from time to time by the Board of Directors and stated in the notice of
the meeting or in a duly executed waiver thereof.
2.3 Special Meetings. Special Meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the President or Board
of Directors and shall be called by the President or Secretary at the
request in writing of stockholders owning not less than one-fifth of
the entire capital stock of the Corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of
the proposed meeting.
2.4 Notice. Written notice of each meeting of stockholders shall be
given in the manner prescribed in Article IV of these By-laws which
shall state the place, date and hour of the meeting and, in the case of
a special meeting, shall state the purpose or purposes for which the
meeting is called. In the case of a meeting to vote on a proposed
merger or consolidation, such notice shall state the purposed of the
meeting and shall contain a copy of the agreement or brief summary
thereof and, in the case of a meeting to vote on a proposed sale, lease
or exchange of all of the Corporation's assets, such notice shall
specify that such a resolution shall be considered. Such notice shall
be given to each stockholder of record entitled to vote a the meeting
not less than ten (10) nor more than sixty (60) days prior to the
meeting, except that where the matter to be acted on is a merger or
consolidation of the Corporation or a sale, lease or exchange of all or
substantially all of its assets, such notice shall be given not less
than twenty (20) nor more than sixty days prior to such meeting. If
mailed, notice is given when deposited in the United States mail,
postage prepaid, directed to the stockholder at his address as it
appears on the records of the corporation.
2.5 Nominations. Nominations of candidates for election to the Board
of Directors may be made by the Board of Directors or by any
stockholder of the Company entitled to notice of, and to vote at, any
meeting called for the election of directors. Nominations, other than
those made by or on behalf of the Board of Directors of the Company,
shall be made in writing and shall be received by the Secretary of the
Company not later than (I), with respect to an election of directors to
be held at an annual meeting of stockholders, ninety (90) days prior to
the anniversary date of the Immediately preceding annual meeting and
(ii), with respect to an election of directors to be held at a special
meeting of stockholders, the close of business on the tenth (10th) day
following the date on which notice of such meeting is first given to
stockholders or public disclosure of the meeting is made, whichever is
earlier. Such notification shall contain the following information to
the extent known to the notifying stockholder: (a) the name, age
business address, and residence address of each proposed nominee and of
the notifying stockholder; (b) the principal occupation of each
proposed nominee; (c) a representation that the notifying stockholder
intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (d) the class and total
number of shares of the Company that are beneficially owned by the
notifying stockholder and, if known, by the proposed nominee; (e) the
total number of shares of the Company that will be voted by the
notifying stockholder for each proposed nominee; (f) a description of
all arrangements or understandings between the notifying stockholder
and each nominee and any other person or persons (naming such person or
persons) pursuant to which the nomination or nominations are to be made
by the notifying stockholder; (g) such other information regarding each
nominee proposed by such stockholder as would be required to be
included in a proxy statement filed with the Securities and Exchange
<PAGE>45
commission pursuant to Rule 14(a) under the Securities Exchange Act of
1934, as amended, had the nominee been nominated, or intended to be
nominated, by the Board of Directors; and (h) the consent of each
nominee to serve as a director of the Company if so elected. Nominees
of the Board of Directors shall to the extent appropriate, provided the
same information about themselves as in 9a) through (a) above to the
Secretary of the Company. The Company may request any proposed nominee
to furnish such other information as may reasonably be required by the
Company to determine the qualifications of the proposed nominee to
serve as a director of the Company. Within fifteen (15) days following
the receipt by the Secretary of a stockholder notice of nomination
pursuant hereto, the Board Development and Nominating Committee shall
instruct the Secretary of the Company to advise the notifying
stockholder of any deficiencies in the notice as determined by the
Committee. The notifying stockholder shall cure such deficiencies
within fifteen (15) days of receipt of such notice. No persons shall
be eligible for election as a director of the Company unless nominated
in accordance herewith. Nominations not made in accordance herewith
may, in discretion of the presiding officer at the meeting and with the
advice of the Nominating committee, if any, be disregarded by the
presiding officer and, upon his or her instructions, all votes cast for
each such nominee may be disregarded. The determinations of the
presiding officer at the meeting shall be conclusive and binding upon
all stockholders of the Company for all purposes.
2.6 Business. Business transacted at any special meeting of
stockholders shall be limited to the purpose or purposes stated in the
notice
2.7 Quorum and Adjournment. Except as otherwise provided by statute or
the Certificate of Incorporation, the holders of a majority of the
shares of the Corporation issued and outstanding and entitled to vote
thereat, present in person or represented by proxy, shall be necessary
to and shall constitute a quorum for the transaction of business at
each meeting of stockholders but in no event shall a quorum consist of
less than one-third of the shares entitled to vote at the meeting. If
a quorum shall not be present at the time fixed for any meeting, the
stockholders present, in person or by proxy, and entitled to vote
thereat shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting,, until a quorum
shall be present. At such adjourned meeting at which a quorum shall be
present, any business may be transacted which might have been
transacted at the meeting as originally notified. 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.
2.8 Voting. Unless otherwise provided in the Certificate of
Incorporation and subject to the provisions of these By-laws, each
stockholder shall be entitled to one vote, in person or by proxy, for
each share of capital stock held by such stockholder. If the
Certificate of Incorporation provides for more or less than one vote
for any share, on any matter, every reference in these By-laws to a
majority or other proportion of stock shall refer to such majority or
other proportion of the votes of the votes of such stock.
2.9 Vote Required. When a quorum is present at any meeting, in all
matters other than the election of directors, the vote of the holders
of a majority of the shares present in person or represented by proxy
and entitled to vote on the subject matter shall decide any question
brought before such meeting, unless the question is one upon which by
express provisions of the statutes or of the Certificate of
Incorporation, a different vote is required in which case such express
provision shall govern and control the decision of such question.
Directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled
to vote of the election of directors.
2.10 Voting Lists. The officer who has charge of the stock ledger of
the Corporation shall prepare and make, at least ten (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 ten
(10) days prior to the meeting, either at a place within the city where
the meeting is to be held, which place shall be specified in the notice
of the meeting, or in not so specified, at the place where the meeting
is to be held. 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.
<PAGE>46
2.11 Proxy. Each stockholder entitled to vote at a meeting of
stockholder or to express consent or dissent to corporate action in
writing without a meeting may authorize another person or persons to
act for him by proxy, but no such proxy shall be voted or acted upon
after three (3) years from its date, unless the proxy provides for a
longer period.
A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled
is an interest in the stock itself or an interest in the Corporation
generally.
2.12 Consents. Any action required or permitted to be taken at any
annual or special meeting of the stockholders may be taken without a
meeting, without prior notice and a vote, if a consent or consents in
writing, setting for 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 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
the Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. Where corporate action is
taken in such manner by less than unanimous written consent, prompt
written notice of the taking of such action shall be given to all
stockholders who have not consented in writing thereto.
Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall be
effective to take the corporate action referred to therein unless,
within sixty days of the earliest dated consent delivered in the manner
required by statute to the Corporation, written consents signed by a
sufficient number of holders to take action are delivered to the
Corporation by delivery to its registered office in 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 the Corporation's
registered office shall be by hand or by certified or registered mail,
return receipt requested.
3. Directors
3.1 Board of Directors. The business and affairs of the Corporation
shall be managed by or under the direction of its Board of Directors,
which may exercise all such powers of the Corporation and do all such
lawful acts and things, except as provided in the Certificate of
Incorporation. The Chairman of the Board shall preside at all meetings
of the board of Directors, shall have general and active management of
the business of the corporation and shall see that all orders and
resolutions of the board of Directors are carried into effect. The
Chairman of the board shall name a Vice Chairman who shall preside at
all meetings of the Board and of the stockholders in the absence of the
Chairman of the Board.
3.2 Number, Election and Tenure. The number of directors which shall
constitute the whole Board shall be not less than three (3) nor more
than nine (9). The exact number of directors shall be determined from
time to time by resolution of the board of Directors adopted b a
majority vote of the directors then in office. The directors shall be
elected at the annual meeting of the stockholders, except as provided
in Section 3 of this Article, and each director elected shall hold
office until his successor is elected and qualified or until his
earlier resignation or removal. Any director may resign at any time
upon written notice to the Corporation. Directors need not be
stockholders.
3.3 Classes. The directors shall not be classified in respect to the
time for which they shall severally hold office. At each annual
meeting, the successors to the entire board directors whose terms shall
expire each year shall be elected to hold office for the term of one
year.
3.4 Vacancies. Vacancies in the Board of Directors and newly created
directorships resulting from any increase in the authorized number of
directors may be filled by a majority of the directors then in office,
although less than quorum, or by a sole remaining director, and the
directors so chosen shall hold office until the next annual election
and until their successors are duly elected and shall qualify, or until
his earlier resignation or removal. If at any time, by reason of death
or resignation or other cause, the Corporation should have no directors
<PAGE>47
in office, then any officer or any stockholder or an executor,
administrator, trustee or guardian of a stockholder, may call a special
meeting of stockholders in accordance with the provisions of the
Certificate of Incorporation or the By-laws or may apply to the court
of Chancery for a decree summary ordering an election as provided by
statute.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a
majority of the whole Board (as constituted immediately prior to any
such increase), the Court of Chancery may, upon application of any
stockholder or stockholders holding at least ten percent of the total
number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any
such vacancies or newly created directorships, or to replace the
directors chosen by the directors then in office.
3.5 Meetings. The Board of Directors of the Corporation may hold it
meetings and have an office or offices, within or without the State of
Delaware.
3.6 Annual Meeting. The Board of Directors shall hold an annual
meeting, without notice, immediately following the annual meeting of
the stockholders. No notice of such meeting shall be necessary in
order to legally constitute notice of such meeting. At each annual
meeting, the Board of Directors shall elect a Chairman of the Board, a
President, such number of Vice-Presidents as the Board may deem
advisable, a Secretary, a Treasurer and such Assistant Secretarys and
Assistant Treasurers as the Board may deem advisable. The Board shall
also, from time to time, elect such other officers and agents as its
deems advisable. The Chairman of the Board and the President must be
selected from the members of the Board of Directors, but the other
officers may but need not be directors.
3.7 Notice. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to
time be determined by the Board. A special meeting of the Board may be
called by the President or any two Vice-Presidents and a special
meeting shall be called by the President on the written request of two
directors. Notice of each special meeting of the Board of Directors,,
specifying the place, day and hour of the meeting, shall be given in
the manner prescribed in Article IV of these By-Laws and in this
Section 6, either personally or by mail, by courier, telex or telegram
to each director, at the address or the telex number supplied by the
director to the Corporation for the purpose of notice, at least 48
hours before the time set for the meeting. Neither the business to be
transacted at, nor the purpose of any meeting of the Board, need be
specified in the notice of the regular meeting.
3.7 Quorum and Voting. Except as may be other wise specifically
provided by statute or by the Certificate on Incorporation, a majority
of the total number of directors shall constitute a quorum for the
transaction of business. The vote of the majority of the directors
present at any meeting at which a quorum is present shall be the act of
the Board of Directors. In the event that the vote of the directors
ends in a tie, the Chairman of the board of Directors, or the Vice
Chairman in the Chairman's absence, shall have the power and authority
to cast an additional vote to break the tie.
Members of the Board or members of any committee designated by the
Board may participate in meetings of the Board or of such committed by
means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each
other, and participation is such meeting shall constitute presence in
person at such meeting.
3.8 Consents. Unless otherwise restricted by the Certificate of
Incorporation, any action required or permitted to be taken at any
meeting of the Board of Directors, 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 proceedings of the Board or committee.
3.9 Committees. The Board of Directors may, by resolution passed by
a majority of the whole Board, designate one or more committees, each
committee to consist of two or more 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 all the powers and
authority of the Board of Directors 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; but no
such committee shall have the power or authority in reference to
amending the Certificate of Incorporation, adopting an agreement of
merger or consolidation, recommending to the stockholders the sale,
<PAGE>48
lease or exchange of all or substantially all of the Corporation's
property and assets, recommending to the stockholders a dissolution of
the Corporation or a revocation of a dissolution, or amending By-laws
of the Corporation; and unless the resolution, By-laws or Certificate
of Incorporation provides, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock.
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 of
Directors to act at the meeting in the place of any such name or names
as may be determined from time to time by resolution adopted by the
Board of Directors.
3.10 Committee Minutes. Each committee shall keep regular minutes of
its meetings and report the same to the Board of Directors when
required.
3.11 Compensation of Directors. The directors as such, and as members
of any standing or special committee, may receive such compensation for
their services as may be fixed from time to time by resolution of the
board. Nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and
receiving compensation therefor.
The directors may be paid their expenses, if any, for attendance at
each meeting of the Board of Directors and may be paid a fixed sum for
attendance at each meeting of the Board of Directors or a stated salary
as director. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
3.12 Removal of Directors. Any director or the entire Board of
Directors may be removed, with or without cause, by the holders of a
majority of the shares then entitled to vote at an election of
directors.
4. Notices
4.1 Form of Notice. Whenever, under the provisions of the Delaware
General Corporation Law or of the Certificate of Incorporation or of
these By-laws, notice is required to be given to any director or
stockholder, it shall not be construed to mean personal notice, but
such notice may be given in writing, by first class or express mail,
addressed to such director or stockholder, at his address as it appears
on the records of the Corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall
be deposited in the United States mail, except that, in the case of
directors, notice sent by first class mail shall be deemed to have been
given forty-eight hours after being deposited in the United States
mail. Whenever, under these By-laws, notice may be given by telegraph,
courier or telex, notice shall be deemed to have been given when
deposited with a telegraph office or courier service for delivery or,
in the case of telex, when dispatched.
4.2 Waiver of Notice. Whenever notice is required to be given under
any provisions of the Delaware general Corporation Law or the
Certificate of Incorporation or these By-laws, a written waiver, signed
by the person or persons entitled to notice, whether before or after
the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called
or convened. Neither the business to be transacted at, nor the purpose
of, any regular of special meeting of the stockholders, directors, or
members of a committee of directors need be specified in any written
waiver of notice unless so required by the Certificate of Incorporation
or the By-laws.
5. Officers
5.1 The officers of the Corporation shall be chosen by the directors.
A failure to elect officers shall not dissolve or otherwise affect the
Corporation. Any two or more offices may be held by the same person
except the offices of President and Secretary.
5.2 Term of Office, Removal and Vacancies. Each officer of the
Corporation shall hold his office until his successor is elected and
qualifies or until his earlier resignation or removal. Any officer may
resign at any time upon written notice to the Corporation. Any officer
elected or appointed by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors.
Any vacancy occurring by death, resignation, removal or otherwise, in
any office of the Corporation, shall be filed by the Board of Directors
5.3 Compensation. The salaries of the officers of the Corporation may
be fixed by the Board of Directors.
5.4 Bond. The Corporation may secure the fidelity of any or all of its
officers or agents by bond or otherwise.
<PAGE>49
5.5 Chairman of the Board. The Chairman of the Board of Directors
shall preside at all meetings of the stockholders and the Board of
Directors at which he or she is present and shall have such authority
and perform such duties as the Board of Directors may from time to time
designate.
5.5 The President. The President shall be the chief executive officer
of the Corporation and shall have general and active management of the
business of the Corporation and shall see that all orders and
resolutions of the Board of Directors are carried into effect. He
shall have the power to appoint and remove such subordinate officers
and agents other than those actually appointed or elected by the Board
of Directors as the business of the Corporation may require.
5.6 Vice President. Each Vice President, if any, shall perform such
duties as shall be assigned to him by the Board of Directors or
President, and, in the absence or disability of the President, the most
senior rank of the Vice Presidents shall perform the duties of the
President.
5.7 Secretary. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the
proceedings of the meeting so the Board of Directors and the
stockholders in a book to be kept for that purpose and shall perform
like duties for the standing committees when required. He shall give,
or cause to be given, notice of all meetings of the stockholders and
special meetings of the Board of Directors, and shall perform such
other duties as may be prescribed by the Board of Directors or
President. He shall be the custodian of the seal of the Corporation
and he, or an assistant secretary, shall have authority to affix the
same to any instrument requiring it, and when so affixed, it may be
attested by his signature or by the signature of such assistant
secretary. The Board of Directors may give general authority to any
other officer to affix the seal of the Corporation and to attest the
affixing by his signature.
5.8 Assistant Secretary. The Assistant Secretary, if any, or assistant
secretaries, if more than one, shall perform the duties of the
secretary in his or her absence and shall perform such other duties as
the Board of Directors, the President or the Secretary may from time to
time designate.
5.9 Treasurer. The Treasurer shall have custody of the corporate funds
and securities shall keep, or cause to be kept, full and accurate
amounts of receipts and disbursements in books kept for that purpose.
He shall deposit all monies, and other valuable effects, in the name
and to the credit of the Corporation, in such depository as the Board
of Directors shall designate. As directed by the Board of Directors or
the President, he shall disburse monies of the Corporation, taking
proper vouchers for such disbursements and shall render tot he
President and directors an account of all his transactions as Treasurer
and of the financial condition of the Corporation. In addition, he
shall perform all the usual duties incident to the office of Treasurer.
6. Certificates of Stock and Transfers
6.1 Certificates of Stock; Uncertificated Shares. The shares of the
Corporation shall be represented by certificates, provided that the
Board of Directors may provide by resolution or resolutions that some
or all of any or all classes or series of its stock shall be
uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to
the corporation. Notwithstanding the adoption of such a resolution by
the Board of Directors, every holder of stock represented by
certificates and upon request every holder of uncertificated shares
shall be entitled to have a certificate signed by, or in the name of
the Corporation by, the President or any Vice President, and
countersigned by the Secretary or any Assistant Secretary or the
Treasurer, representing the number of shares registered in certificate
form. Any or all the signatures on the certificate may be a facsimile.
In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent or registrar at
the date of issue.
6.1 Lost, Stolen or Destroyed Stock Certificates; Issuance of new
Certificate or Uncertificated Shares. The Board of Directors may issue
a new certificate of stock or uncertificated shares in place of any
certificate therefore issued by it, alleged to have been lost, stolen
or destroyed, and the Corporation may require the owner of the lost,
stolen or destroyed certificate, or his legal representative to give
the Corporation a bond sufficient to indemnify it against any claim
<PAGE>50
that may be made against it on account of the alleged loss theft or
destruction of any such certificate or the issuance of such new
certificate or uncertificated shares.
6.2 Record Date. In order that the Corporation may determining the
stockholders entitled to notice of, or to vote at, any meeting of
stockholders or at any adjournment thereof in respect of which a new
record date is not fixed, or to consent to corporate action 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 of Directors may fix
a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of
Directors and which date shall not be more than sixty (60) nor less
than ten (10) days before the date of any such meeting, nor more than
ten (10) days after the date on which the date fixing the record date
for the consent of stockholders without a meeting is adopted by the
Board of Directors, nor more than sixty (60) prior to any other such
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 of
Directors may fix a new record date for the adjourned meeting.
6.3 Registered Stockholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as of
any record date fixed or determined pursuant to Section 3 of this
Article as the owner of shares to receive dividends, and to vote as
such owner, and to hold liable for calls and assessments a person
registered on its books as the owner of shares, and shall not be bound
to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person, regardless of whether it
shall have express or other notice thereof, except as otherwise
provided by the laws of the State of Delaware.
7. General Provisions
7.1 Dividends. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any,
may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property,
or in shares of the Corporation's capital stock, subject to the
provisions of the Certificate of Incorporation.
7.2 Liability of Directors as to Dividends or Stock Redemption. A
member of the board of directors, or a member of any committee
designated by the board of directors, shall be fully protected in
relying in good faith upon the records of the Corporation and upon such
information, opinions, reports or statements presented to the
Corporation by any other person as to matters the director reasonably
believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or on
behalf of the Corporation, as to the value and amount of the assets,
liabilities and/or net profits of the Corporation, or any other facts
pertinent to the existence and amount of surplus or other funds from
which dividends might properly be declared and paid, or with which the
Corporation's stock might properly be purchased or redeemed.
7.3 Reserve for Dividends. Before declaring any dividend, there may be
set aside out of any funds of the Corporation available for dividends
such sum or sums as the directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or for such other purpose
as the directors shall think conducive to the interest of the
Corporation, and the directors may modify or abolish any such reserve
in the manner in which it was created.
7.4 Annual Statement. The Board of Directors shall present at each
annual meeting, and at any special meeting of the stockholders when
called for by vote of the stockholder, a full and clear statement of
business and condition of the Corporation.
7.5 Signing Checks, Notes, etc. All checks or other orders for the
payment of money and all notes or other instruments evidencing
indebtedness of the Corporation shall be signed on its behalf by such
officer or officers or such other person or persons as the Board of
Directors may from time to time designate, or, if not so designated, by
the President or nay Vice President of the Company.
7.6 Fiscal year. The fiscal year of the Corporation shall end on
December 31, of each year or as otherwise determined by resolution of
the Board of Directors.
7.7 Seal. The corporate seal shall have inscribed thereon the name of
the Corporation, the year of its organization and the words "Corporate
Sea, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or otherwise reproduced.
<PAGE>51
7.8 Voting of Securities of Other Corporations. In the event that
the Corporation shall, at any time or from time to time, own and have
power to vote any securities (including but not limited to shares of
stock or partnership interests) of any other issuer, they shall be
voted by such person or persons, to such extent and in such manner, as
may be determined by the Board of Directors or, if not so determined,
by any duly elected officer of the Corporation.
8. Amendments. These By-laws may be altered, amended or repealed, and
new by-laws may be adopted, by the stockholders, or by the Board of
Directors when such power is conferred upon the Board of Directors by
the Certificate of Incorporation.
Dated: June 1, 1995
<PAGE>52
License Agreement
THIS AGREEMENT entered into this fourth day of October, 1993, by and between
Erie Scientific Company, ("Erie"), a corporation organized under the laws of the
State of Delaware, a wholly owner subsidiary of Sybron, Corporation, with
offices locate at Portsmouth Industrial Par, Portsmouth new Hampshire 03801-5691
and Infectech, Inc. ("Infectech"), a corporation organized under the laws of the
State of Delaware, with offices located at 1125 Cornelia Lane, Milford,
Pennsylvania 18337, and at Suite 2, 87 Stambaugh Ave., Sharon, Pennsylvania
16146.
WITNESSETH
WHEREAS, a letter of patent of the United States No. 5,153,119 for a
specialized method of speciating and identifying Mycoacterium avium-
inracellulare (MAI) via paraffin slides PAEA/SI.C(tin) was issued to
Robert Ollar on October 6, 1992 along with other U.S. and foreign
patents and patent applications, developed by Infectech and/or Robert
Ollar and Mitchell Felder, which are now pending (the foregoing patents
and applications are collectively referred to hereinafter as the
"Patents"); and
WHEREAS, Robert Ollar and Mitchell Felder assigned all right, title and
ownership of such letter patents and patent applications, granted or
now pending, to Infectech on October 17, 1992; and
WHEREAS Erie desires to manufacture, use and sell substrates coated
with paraffin on an exclusive worldwide basis.
WHEREAS, the parties have entered into a Consulting Agreement for
Erie's commercial development.
It is therefore agreed
1. Executive license. Infectech hereby grants to Erie the exclusive
right and license, worldwide, to manufacture, use nd sell paraffin
coated slides for use in practicing the invention disclosed and claimed
in the patents (hereinafter referred to as the "Licensed Products").
Erie shall use its best efforts to promote and sell Licensed Product
slides.
2. Royalties. Erie shall pay to Infectech a royalty of 15%
(fifteen percent) of all gross sales ("gross sales" shall mean the
total amount invoiced by Erie for the sale of a licensed Product less
any returns and allowances, sales taxes and foreign taxes except
foreign or United States income taxes, transportation expenses directly
incurred in the shipment of Licensed Product including transportation
insurance) of the Licensed Product when the manufacture, sale, use or
intended use of the Licensed Product would otherwise be an infringement
of at least one valid and enforceable claim of the Patents. No more
than one royalty payment shall be due for each Licensed Product. Erie
shall keep an accurate account of the Licensed Products manufactured,
sold or used under the scope of the license granted hereunder and shall
render a statement in writing to Infectech within 30 days after the end
of each calendar quarter. Infectech shall have the right, at its own
expense and not more often than twice each calendar year, to have the
books and records of Erie examined by a Certified Public Accountant to
verify the royalty statement and royalties due Infectech pursuant to
this Agreement. If the accountant discovers that Erie has underpaid
the royalties owed Infectech by more than five percent (5%) of the
total royalty due, Erie shall reimburse Infectech for the fees paid to
the accountant to examine Erie's books and records. Other than
informing Infectech of the information needed by Infectech to determine
the proper royalty payment and amount of royalties Erie should pay to
Infectech, the accountant shall not disclose and information obtained
from the examination of Erie's book and records. The accountant shall
be required to sign a confidentiality agreement prior to any review.
3. Business Expenses. Erie shall be responsible for payment of all
costs, fees and any other expense incurred by it related to the
development, manufacture, sale marketing and any other expenses
associated with the Licensed Product.
<PAGE>53
4. Government Expenses. Erie shall be responsible for payment of all
costs, fees and any other expense related to the regulatory approval by
the U.S. Government and any of it agencies, or any agency or government
or regulatory body which requires approval before, during or after the
sale of the Licensed Product.
5. Indemnification.
a) Erie agrees to defend, indemnify and hold harmless Infectech, it
directors, officers, and employees from and against any liability,
loss, damage, cost or expense (including attorney fees) by reason of
any act or omission by Erie for any matter related to this Agreement.
b) Nothing contained in this Article shall be deemed to create any
rights in any person or entity that is not a party to this Agreement.
6. Quality Assurance. Infectech shall have the right to determining
the suitability and quality of any supplier and/or subcontractor
providing any service related to this Agreement. In the event that
Infectech finds the suitability and/or quality or any supplier and/or
subcontractor to be objectionable, then Infectech shall notify Erie, in
writing, after such determination. Erie shall then have 30
(thirty)days to provide to Infectech written notice of its intent to
cure any such defect. In the event that Erie shall not be able or
willing to cure such defect under the above provisions then this
Agreement, shall, at the sole and exclusive option of Infectech,
terminate in accordance with the provisions of 8(a).
7. Press Releases and Public Announcement. Infectech shall have the
right to approve the timing and content of any press releases or public
announcements of the existence of this Agreement.
8. Term. This Agreement shall terminate upon the expiration of the
last of the Patents to expire or on the date the 1st of the Patents is
declared unenforceable or invalid by a court or other body of competent
jurisdiction and such declaration has become final and binding and
Infectech has ceased to pursue an appeal of the declaration. This
Agreement may also terminate in accordance with the following.
a) Abandonment. If after completion of the clinical trials, which
event shall occur sixty (60) days following the notification, in
writing, by Infectech to Erie that the testing of the slides is
complete, Erie shall abandon the exploitation of the Licensed Product
by failing for a period of one calendar quarter to sell a minimum of
100,000 (one hundred thousand) Licensed Product slide, Infectech may
on 30 days' written notice to Erie terminate this License Agreement and
the license granted hereunder without prejudice, however to the
royalties due to Infectech hereunder. Erie can not sell licensed
Product inventory in its possession in the event of agreement
termination except to Infectech at Infectech's request.
b) Other Termination for Cause. In the event that Erie shall breach
or fail to comply with any provision of this Agreement, for any reason
whatever except for Force Majeure (as described in paragraph 14,
below), and such default shall continue for a period of thirty (30)
days after the giving of written notice thereof by Infectech to the
Erie, specifying the default, or in the event that Erie shall commence
a voluntary bankruptcy case concerning itself, or an involuntary
bankruptcy case is commenced against Erie and the petition is not
controverted within ten (10) days or is not dismissed within sixty (60)
days after the commencement of the case, or a custodian is appointed
for or takes charge of all or substantially all of the property of
Erie, then, and in any one of such events, Infectech shall be entitled
to terminate this Agreement, by giving notice thereof by telex or
telefax, confirmed by registered prepaid mail or courier mail,
addressed to Erie, such termination to be effective upon the giving of
such notice with prejudice, however, to the royalties due to Infectech
hereunder.
9. Arbitration. All disputes, controversies or differences arising
out of or in connection with this agreement shall be finally settled
under the Arbitration Rules of the American Arbitration Association by
one arbitrator appointed in accordance with such Rules. The
arbitration proceedings shall be held in Pittsburgh, Pennsylvania.
10. Assignments. This Agreement shall not be assignable by Erie to
any third party except with the prior written consent of Infectech.
<PAGE>54
11. Binding nature. The provisions of this Agreement shall be binding
upon and inure to the benefit of each of the parties hereto and their
respective successors and assigns.
12. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all which
together shall constitute one and the same instrument.
13. Entire Agreement. This document is the complete and exclusive
agreement between the parties. It supersedes all oral or written
proposal and all other communications between the parties regarding the
subject of this Agreement.
14. Force Majeure. Neither party shall be liable to the other party
for any failure of or delay in performance of any of its duties
hereunder due to any cause or circumstance which is beyond its control,
including but without limiting the generality of the foregoing any such
failure or delay as is caused by strikes, lockouts, fires explosions,
shipwreck, Act of God or the public enemy, wars, riots, interference by
military authorities and/or compliance with the orders of any relevant
government authority.
15. Governing Law. This Agreement shall be governed by and construed
in accordance with the orders of any relevant government authority.
16. Headings: The headings of the Articles of this Agreement are for
the convenience of reference only and shall not define or limit the
provisions thereof.
17. Joint Venture not Formed by this Agreement. This Agreement does
not constitute an agreement for a partnership or joint venture between
the parties. All expenses and costs incurred by Erie in meetings its
obligations under this Agreement shall be solely those of Erie, and
Infectech shall not be liable for their payment. Erie can make no
commitment with third parties that are binding upon Infectech without
Infectech's written consent and Erie in no way shall hold itself out as
having that power.
18. Confidentiality. Erie, its agents, servants, representatives and
employees shall treat all work product in accordance with the
Confidential Disclosure Agreement previously signed by the parties.
This paragraph shall survive the expiration, termination, or
cancellation of this Agreement.
19. Third party beneficiaries. Except for their proper heirs,
successors, and assigns, the parties hereto intend that no third party
shall have any rights or claims by reason of this contract.
20. Amendments. Amendments or additions to this Agreement shall not
be valid unless made in writing and executed by both parties.
21. Notices. Each notice, request or demand given or required to be
given pursuant to this Agreement shall be in writing and shall be
deemed sufficiently given (a) when mailed if deposited in the United
States mail, certified, return receipt requested and addressed to the
address of the intended recipient set forth on the first page hereof or
to such address as may be specified in writing by the parties hereto or
(b) when actually received if given by other means, whichever is
earlier.
IN WITNESS WHEREOF and intending to be legally bound the parties hereto
have executed this Agreement below.
INFECTECH, INC.
By: Mitchell S. Felder, M.D.
Title: Executive V.P. -Infectech, Inc.
Date: 11/12/93
ERIE SCIENTIFIC COMPANY
By: Mark F. Stuppy
Title: Vice President-Marketing
Date: 11/18/93
<PAGE>55
INVESTMENT AND LICENSING AGREEMENT
This Investment and Licensing Agreement ("Agreement") is made as of
this 11th day of June, 1998, by and between:
BioRemedial Technologies, Inc., a corporation organized and existing
under the laws of the Commonwealth of Pennsylvania, with its principal
office located at 2700 Kirila Drive, Hermitage, Mercer County,
Pennsylvania ("BRT")
AND
Infectech, Inc., a corporation organized and existing under the laws of
the State of Delaware, with its principal office located at 87
Stambaugh Avenue, Sharon, Mercer County, Pennsylvania ("Infectech").
RECITALS:
A. BRT is actively engaged in the business of Environmental
Bioremediation for third parties.
B. Infectech is actively engaged in the development of certain
processes and intellectual property having applications in the medical,
biological and veterinary field and is the owner of certain
intellectual property and patents relating to same.
C. BRT and Infectech believe that certain of the Infectech intellectual
property and applications may be of use in the field of Environmental
Bioremediation.
D. In order to explore the use of Infectech intellectual property in
the field of Environmental Remediation, BRT is willing to provide or
arrange for an investment in Infectech in the amount of Six Hundred
Thirty Thousand Dollars ($630,000.00), which investment shall be
earmarked and placed into escrow for the collaborative efforts of
Infectech and BRT in the field of Environmental Remediation in
conjunction with the same.
E. The parties hereto desire that the results of said efforts shall be
licensed both domestically and worldwide by Infectech exclusively to
BRT, and BRT agrees to pay royalties to Infectech for the license of
same.
WITNESSETH:
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
promises and covenants set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do agree and hereby agree as follows:
1. Incorporation of Recitals. The Recitals set forth above are hereby
expressly and totally incorporated herein by reference as if set forth
in full.
2. The Investment. BRT shall provide or arrange for an investment into
Infectech in the amount of Six Hundred Thirty Thousand Dollars
($630,000.00) ("Investment"). The Investment shall be held by
Infectech in a separate account escrowed with the attorney for
Infectech ("Escrow Account").
(A) Funds in the Escrow Account shall be utilized solely for the
research and development, protection of, or costs directly associated
with the intellectual property as it relates to Environmental
Bioremediation. The parties agree that approximately 50% of the
Investment Account will be utilized for research and development of the
intellectual property, and that approximately 50% of the Investment
Account will be utilized to obtain patent protection of same.
(B) Funds in the Escrow Account shall be used solely for the aforesaid
purposes unless the parties mutually agree otherwise.
<PAGE>56
(C) No funds from the Escrow Account shall be expended until Infectech
shall achieve $1,200,000.00 of equity capitalization from its current
public offering. Upon Infectech obtaining $1,200,000.00 of equity
investment, monies may be disbursed from the Escrow Account with
Infectech matching any amount(s) disbursed in an equal amount, with all
such monies being expended for the purposes set forth herein, subject
to (D) below.
(D) Infectech agrees that funds from the Escrow Account attributable
to the Investment, may be utilized for the purposes set forth in (B),
prior to the $1,200,000.00 capitalization, PROVIDED that BRT submit to
Infectech an itemization of uses of the funds and the payees and
purposes for which the same are to be applied, and with the prior
written consent of Infectech which shall not be unreasonably withheld.
3. Commencement Date. BRT shall use its best efforts to cause the
Investment to be made in full on or before May 1, 2001. Infectech will
recognize, on a mutually negotiated basis, the financial contributions
made by BRT in further developing the Infectech intellectual property
and application solely in further developing the Infectech intellectual
property solely in the field of Environmental Bioremediation from the
time of the letter of intent (LOI) (March 6, 1998) until the
commencement of this Investment and Licensing Agreement. Should BRT
fail to fulfill this condition precedent to this Agreement, then both
parties (BRT and Infectech, Inc.) Will renegotiate the contract to the
best of their abilities in good faith. The date on which the Investment
is made into Infectech shall be the "Commencement Date".
4. License to BRT. For a period of Ten (10) years after the
Commencement Date, Infectech agrees to grant BRT the exclusive
worldwide license to the following:
(a) the application of Infectech intellectual property as listed in
Schedule "A" attached hereto which is incorporated herein by reference
as if set forth in full, which application shall be limited solely to
application and use in activities directly involved in the field of
Environmental Bioremediation.
(b) BRT hereby agrees that the Infectech intellectual property shall
not be used, owned, licensed or sub-licensed by BRT for any other use
or purpose outside of the specific field of environmental
bioremediation, and BRT shall not use the Infectech intellectual
property for any other purposes or uses, including, without limitation,
medical, clinical, veterinary or any other use foreseen or unforeseen.
BRT shall have no licensee claim upon the Infectech intellectual
property for any use other than that of environmental bioremediation
without the express written permission of Infectech.
(c) The license of BRT granted hereunder shall cease to be exclusive
outside of the United States of America, at the option of Infectech,
upon the first to occur of the following:
(i) BRT has not, within a period of three (3) years from the date of
this Agreement obtained a sub-license to utilize the Infectech
intellectual property outside of the United States of America; or (ii)
BRT advises Infectech it no longer desires the exclusive license
outside of the United States of America. Nothing herein shall be
construed to terminate the BRT license outside of the United States of
America and the effect of such termination shall be as to the
exclusivity of such license only.
5. Royalties to be Paid for License. During the term hereof, and in
consideration of the License set forth in 4, BRT agrees to pay
Infectech a royalty per project which shall be not less than 14% nor
more than 18% of each project undertaken by BRT, the actual percentage
to be mutually agreed upon by the parties for each individual project.
All royalty payments hereunder shall be based exclusively upon the
mutually agreed biological components of each project. Should the
parties be unable to mutually agree upon the royalty, then the parties
agree that the allocation shall be decided by Sally Giordano, PhD, or
such other individual upon whom the parties mutually agree.
6. Early Termination: Royalty Payments. Infectech shall have the right
on the Fifth (5th) anniversary of the Commencement Date to terminate
this Agreement should BRT not have paid royalties hereunder in an
amount in excess of $100,000 during the previous Sixty (60) month
period just elapsed. The notice of early termination by Infectech
shall be made in writing not later than Forty-Five (45) days after the
Fifth (5th) anniversary.
<PAGE>57
7. Early Termination: BRT Sale and Other. Further, Infectech shall have
the right to terminate this Agreement upon any of the following:
(a) The assets or stock of BRT is acquired in whole or a controlling
interest of BRT is acquired by any third-party person or entity not a
party to this Agreement or by a person or entity who is not currently a
shareholder of BRT.
(b) BRT attempts to assign, sub-license, lease or otherwise transfer
its exclusive license set forth in this Agreement, without the express
prior written permission of Infectech;
(c) BRT shall have a proceeding in bankruptcy or reorgan-ization filed,
either voluntarily or involuntarily, shall make an assignment for the
benefit of its creditors, or shall become the subject of an insolvency
or conservator proceedings.
(d) BRT shall become disqualified to do business in the Commonwealth of
Pennsylvania or any other state in which it had been formerly qualified
to do business.
(e) A material adverse change, financial or otherwise, shall have
occurred in the affairs or business of BRT, which shall be determined
in the sole and absolute discretion of Infectech, subject, however, to
Generally Accepted Accounting Principles (GAAP) with respect to
financial changes.
8. Confidentiality. Except as otherwise agreed in writing by
Infectech, BRT shall not appropriate, use or disclose, directly or
indirectly, for its own benefit or otherwise, any information,
materials, trade secrets, documents, correspondence, or other property
of Infectech in whatever form or media, to which it shall have obtained
access hereunder or in contemplation of this Agreement, or which shall
otherwise in any way shall relate to Infectech or the Infectech
Property, which has not been publicly disclosed prior thereto. Any of
the aforesaid which is or comes into the possession of BRT shall be
held in Trust for Infectech and remain the sole and exclusive property
of Infectech, subject to the rights of License by BRT as provided
herein.
9. Representations and Warranties. The parties hereto each represent
and warrant respectively as follows:
(a) Each is a corporation duly-organized, validly existing and in good
standing in the state of incorporation, the Commonwealth of
Pennsylvania and in all jurisdictions in which the ownership of its
properties or the nature of its business makes such qualification
necessary.
(b) Each has the requisite corporate power and authority to conduct its
business as presently conducted and to execute, deliver and perform
this Agreement and the transactions contemplated hereby.
(c) This Agreement has been duly executed by the proper officers of
each party who are incumbent in their respective positions and fully
able to bind the party for the purposes herein contained. Further on
the Commencement Date this Agreement shall constitute a legal, valid
and binding obligation of the party enforceable in accordance with its
terms.
(d) The execution, delivery and performance of this Agreement and the
transactions contemplated hereby do not and will not:
(1) violate the party's charter or by-laws;
(2) breach or result in a default under (or an event which, with the
giving of notice or passage of time, or both, would constitute a
default hereunder), require any consent, or give to others any rights
of termination, acceleration, suspension, revocation, cancellation with
regard to this Agreement;
(3) breach or otherwise violate any Governmental Rule or Governmental
Order; or
(4) require any consent, authorization, approval, exemption or other
action by, or any filing, registration or qualification with, any
person or entity.
(e) There is no litigation threatened or pending which relates to this
Agreement or to the to the ability of the respective parties to perform
hereunder.
10. No Joint Venture. The parties hereto acknowledge that nothing set
forth in this Agreement nor the transactions contemplated herein shall
constitute a joint venture, partnership, agency or any relationship
other than BRT as an investor and licensee and Infectech as a Licensor
entitled to royalty payments as provided hereunder.
11. Notices. All notices, requests, demands and other communications
required to be made under the terms of this Agreement shall be made in
writing and delivered personally, or sent by certified or registered
mail, or a recognized overnight or courier provider, and shall be
deemed given when delivered to the other, if delivered personally, or
<PAGE.58
two (2) days after deposit with the United States Postal Service or
overnight or courier provider. Such notices shall be delivered as
follows (or to such other address as a party may have specified by
notice given to the other pursuant to this provision:
If to BRT:
Donald F. Perry
CEO and President
Bioremedial Technologies, Inc.
2700 Kirila Drive
Hermitage, PA 16148
If to Infectech:
Mitchell S. Felder, M.D.
CEO and President
Suite Two, 87 Stambaugh Avenue
Sharon, PA 16146
With a copy to:
William J. Moder, III, Esquire
2500 Highland Road, Suite 104
P.O. Box 1071
Hermitage, PA 16148
12. Maintenance and Examination of Books and Records. BRT shall
maintain its books and records to clearly and accurately reflect its
net revenues per project and consolidated. The books and records of BRT
shall be preserved for a period of not less than three (3) years after
the close of BRT's fiscal year to which they relate. BRT's books and
records shall be open to inspection and verification by Infectech or
any of its representatives at all reasonable times. Infectech, its
accountants Hill, Barth & King, or Infectech's designees shall be
entitled at any time to have BRT's books and records relating to the
Licensing and Royalties examined or audited and BRT shall cooperate
fully with the party or parties making any examination or audit on
behalf of Infectech. Should any examination or audit of BRT's records
be necessitated by BRT's failure to submit information or to maintain
the books and records as required by this Agreement, then BRT shall be
liable for any such costs thereof.
13. Counterparts. This Agreement may be executed in one or more
counterparts as the parties shall deem desirable, each of which shall
be deemed an original, but all of which shall constitute the same
instrument, however, in any action to enforce or with regard to this
Agreement, it shall not be necessary to produce all such counterparts.
14. Draftsmanship. This Agreement has been drafted by Infectech for
the convenience of the parties hereto, and such fact shall be
irrelevant in the construction and interpretation of the same; nor
shall any inference or presumption be made in favor of or against any
party hereto based upon the identity of the draftsman hereof.
15. Headnotes. The headnotes appearing at the beginning of each
paragraph are for the convenience of reference only and shall not be
construed to limit or otherwise affect the provisions set forth
therein.
16. Telefacsimile Execution. The parties agree that this Agreement
shall be fully binding upon the execution of same by counterparts
and/or facsimile and shall be effective when fully executed by same,
however all such counterparts and facsimiles shall constitute one and
the same instrument.
IN WITNESS WHEREOF, and intending to be legally bound in accord with
the Uniform Written Acknowledgments Act (33 P.S- 1 et seq), the
parties hereto have set their respective
hands and seals the date first above written.
ATTEST:.
Janet Mozzorio
Secretary
BIOREMEDIAL TECHNOLOGIES, INC
By:/S/ Donald F. Perry 6/11/98
Donald F. Perry, President & CEO
<PAGE.59
ATTEST:
Carol Surrena
Secretary 6/11/98
INFECTECH, INC.
By:/S/ Mitchell S. Felder, M.D. 6/11/98
Michael S. Felder, M.D., President & CEO
<PAGE>60
Consulting Agreement
THIS AGREEMENT is made and entered into this 8th day of July, 1998,
between INFECTECH, INC. ("Company"), and BREAKTHRU TECHNOLOGIES,
L.L.C., a limited liability company, with an office located in
Bethesda, Maryland (''Consultant''). In consideration of the mutual
agreements contained in this document, the parties, intending to be
legally bound, agree as follows:
RECITALS
A. Consultant is a public relations and financial consulting and
advisory company which specializes in the public relations and
financial consulting industry; and
B. Company is a private company which desires to enter into the public
market; and
C. Company also desires to publicize itself in order to make its name
and business better known in the industry, to its shareholders,
investors and brokerage houses;
D. Company desires to enter into this Agreement with Consultant to
provide public relations and financial consulting services on a non-
exclusive basis; and
E. Consultant is willing to accept Company as a client upon the terms
and conditions set forth hereunder.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, it is agreed:
1. Recitals Incorporated. The Recitals set forth in Paragraphs A
through E above are incorporated herein by reference as though fully
set forth herein.
2. Company's Disclosure. Company shall furnish an Information Package
to Consultant including disclosure and filing materials, financial
statements, business plans, promotional materials, annual reports and
press releases ("Information Package"). Consultant may rely on, and
assume the accuracy of the Information Package.
The Company shall also be obligated to provide copies of the Company's
finan-cial statements for the last three years or from its inception
date, whichever is less.
The Company agrees to notify Consultant immediately of any changes in
the status or nature of its business, the possibility of any litigation
or any other developments that may require further disclosure in the
offering documents or render the Information Package to be materially
false or misleading.
3. Services to be Provided by Consultant. Consultant will provide
various public relations and financial consulting services in an effort
to expose the Company to the brokerage community. Such services may
include organizing road shows and speaking engagements, press and news
releases, broker packages, mail outs and broker and market maker
follow-up.
(a) Consultant will assist the Company in the coordination of a
private and/or public offering of its securities utilizing equity,
warrant or debt instruments.
(b) Consultant will aid the Company in the obtainment of investors for
any proposed private or public offering. Consultant makes no
guarantees as to the success or failure of his efforts in this matter.
(c) Consultant will aid the Company in the obtainment of investment
opportunities, grant providers and equity candidates, as well as other
possible business combinations or financial transactions which infuse
capital, revenues or assets into the Company.
(d) Consultant shall assist in arranging the preparation of such
packaging and promotional materials as Consultant and the Company shall
deem necessary. The Company and securities counsel shall approve all
materials prior to completion.
<PAGE>61
(e) Consultant agrees to use its expertise and business contacts to
arrange for the continued promotion of the Company's securities. This
promotion may be evidenced by the implementation of a financial
relations program created by the Company with the advice from
Consultant.
(f) Consultant agrees to assist in establishing relationships between
the Company and licensed securities broker/dealers for the purpose of
completing the initial capitalization as a public company.
(g) Consultant shall make itself available to render advice to the
Company concerning shareholders relations, market strategy, broker
relations and additional capitalization.
(h) Company will utilize Consultant's interest and expertise in this
regard, and Consultant will accept such assignments for the period of
One (1) year from the date hereof (the ''Consulting Term'') to
undertake such duties and to perform such services as reasonably may be
assigned to it by the Board of Directors of Company or by its officers.
(i) Consultant shall be an independent contractor and not an employee,
joint venturer, partner or other business relationship of Company and
will determine his own methods of operation in accomplishing such tasks
as may be assigned.
Consultant will not be entitled to receive any compensation or benefits
other than those expressly provided in this Agreement.
(j) Nothing herein shall be interpreted or construed to prohibit
Company from utilizing the services of others for the same or similar
services, including other consultants, nor from soliciting or obtaining
equity investments in the Company on a commissioned or non-commissioned
basis or otherwise. The services of others, including other
consultants, shall not be of no consequence to nor need be considered
by Company when evaluating the performance or compensation of
Consultant under this Agreement.
4. Time of Performance. Services to be performed under this Agreement
shall commence upon execution of this Agreement and shall continue for
a period of one year from the date of this Agreement, unless terminated
hereunder or unless extended for an additional one year period by the
mutual written agreement of both parties.
5. Compensation and Expenses. In consideration of the services to be
performed by Consultant, Company agrees to pay compensation to
Consultant in the amount set forth below, time being of the essence:
(a) In connection with Consultant providing its public relations and
financial consulting services, Consultant shall receive a fee of
$1,000.00 per month to be paid to Consultant on a monthly basis or if
not paid, to be accrued and payable if not actually so paid. The term
of this Agreement is for twelve (12) months, unless terminated earlier
as provided herein.
(b) The Company, in addition to the fee described above shall also pay
to Consultant reasonable expenses in the amount of $500.00 per month.
These expenses typically include, telephone, copying, facsimile,
overnight service, cost and expenses for travel, hotel accommodations,
meals and miscellaneous costs and expenses actually incurred by
Consultant in performing the services described above. These costs and
expenses in excess of the per month payments shall be paid by the
Company upon presentation of a bill by Consultant. All such expenses,
in excess of $500.00 per month, if any, shall be subject to pre-
approval by the Company.
(c) ''Reasonable and appropriate expenses'' include those expenses
incident to completion of an assignment, including any travel expenses
to and from assignments that are distant from Company's principal
office or other location, lodging and meal expenses, and all other
expenses reasonably related to completion of the task, subject to prior
approval by the Company. However, for any consulting assignment
requiring Consultant to travel to the consulting location in no event
will Company be required to pay travel expenses greater than the then
prevailing tourist class round-trip airfare from Washington, D.C. to
the consulting location. Further, Company reserves the right to make
air travel arrangements for Consultant. Consultant will advise Company
in advance of any trips he may make to locations proximate to Company's
<PAGE>62
headquarters so that, if convenient to both parties, consulting
assignments in the headquarters area may be arranged that involve less
travel expense to Company than travel from Washington, D.C. Upon
request, Consultant must document to the satisfaction of Company his
consulting expenses to Company including, when feasible, receipts for
travel, lodging and meals.
6. Representations.
A. The Company represents warrants and covenants the following:
(a) The Company will cooperate fully with Consultant in performing the
work the Company is required to perform in supplying information to
Consultant so that Consultant may perform its services under this
Agreement.
(b) The Company agrees to refrain from engaging in any activity scheme
or plan to circumscribe, prevent or refuse to pay the compensation
discussed above in Paragraph 5. In addition, Company agrees not to
circumvent this Agreement either directly or indirectly nor will it
interfere with, impair, delay or cause Consultant to perform work not
described in this Agreement.
(c) The Company and each of its subsidiaries is a corporation duly
organized and existing under the laws of its state or incorporation and
is in good standing with the jurisdiction of its incorporation in each
state where it is required to be qualified to do business.
(d) The Company will disclose to Consultant all material facts and
circumstances which may affect the decisions or course of conduct of
Consultant and the Company will be ultimately responsible for the
veracity of all disseminated information.
B. Consultant represents, warrants and covenants the following:
(a) Consultant will devote its energies and resources toward the
obtaining of investment through a public offering or otherwise as
contemplated in this Agreement.
(b) Consultant will disclose to Company all material facts and
circumstances which may affect its ability to perform its undertaking
herein.
(c) Consultant will cooperate in a prompt and professional manner with
the Company, its attorneys, accountants and agents in the performance
of the under-taking under this Agreement.
7. Confidentiality. Consultant agrees that all information received
from the Company shall be treated as confidential information and
Consultant shall not disclose, share or otherwise disseminate or permit
to be disseminated such information with any other person or entity,
except the S.E.C., and/or attorneys and accountants for the Company,
without the prior express written consent of the Company.
8. Notices. Any notice from either party in the other shall be deemed
received on the date such notice is personally delivered. Any notice
sent by fax transmission shall be deemed received by the other party on
the next business day after it has been transmitted. Any notice sent
by mail by either party to the other shall be deemed received on the
third business day after it has been deposited at a United States Post
Office. For purposes of delivering or sending notice to the parties to
this Agreement such notices shall be delivered or sent as follows:
If notice is delivered to Consultant to:
Breakthru Technologies, LLC
3 Democracy Center
6908 Rockledge Drive, Suite 600
Bethesda, MD 20517
If notice is delivered to the Company to:
Infectech, Inc.
ATTN: Robert A. Ollar, Chairman
c/o 87 Stambaugh Avenue, Suite 2
Sharon, PA 16146
<PAGE>63
and a copy to its attorney:
William J. Moder, III, Esquire
III, Esquire Road, Suite 104
Kerrwood Place, P.O. Box 1071
Hermitage, PA 16148
9. Validity. If for any reason any provision of this Agreement will
be determined to be invalid or unenforceable, the validity and effect
of the other provisions will not be affected.
10. Waiver of Breach. The waiver by Company or by Consultant of a
breach of any provision of this Agreement by the other party will not
operate, or be construed, as a waiver of any other breach of such other
party, or a subsequent breach of the same provision nor shall the same
be in any way construed or interpreted to be a modification or
amendment of this Agreement.
11. Termination Circumstances. This Agreement will terminate
immediately upon the death of Consultant during the Consulting Term.
Further, Company shall have the right to terminate this Agreement, with
or without cause, by providing thirty (30) days prior written notice to
Consultant. Consultant shall have the right to terminate this
Agreement upon written notice to Company. Should Consultant or Company
elect to terminate this Agreement then such termination shall terminate
the obligations of Company and Consultant hereunder and any right of
Consultant to any sums payable hereunder after the effective date of
the termination.
12. Assignment. This Agreement will inure to the benefit of, and be
binding upon, Company, its successors and assigns. This Agreement will
be binding on Consultant, Consultant's heirs, executors or
administrators, and legal representatives. However, this Agreement will
not be assignable by Consultant nor shall the obligations of Consultant
be delegated, without express written consent of the Company.
13. Entire Agreement. This Agreement represents the entire
understanding of the parties and there are no other outstanding
agreements or, provisions, except as set forth herein. This Agreement
may not be amended except by a writing signed by the party against whom
enforcement of any amendment is sought.
14. Applicable Law. The parties agree that this Agreement will be
construed and enforced pursuant to the laws of the Commonwealth of
Pennsylvania, and venue and jurisdiction will lie within said
Commonwealth, subject to the arbitration provisions set forth herein,
notwithstanding the principles of conflicts of laws.
15. Construction. This Agreement shall be construed as if both
parties participated equally in its negotiation and drafting. This
Agreement shall not be construed against one party over another party
due to the identity of the draftsman.
16. No Representation, Warranty or Guarantee of Success. Consultant
provides no representation, warranty or guarantee of success in the
capitalization of the Company.
17. Arbitration. The parties hereby agree that any dispute, claim or
controversy arising out of the construction, interpretation or
application of this Agreement and its provisions shall be decided by
mandatory arbitration conducted under the Rules of the American
Arbitration Association to be decided in Pittsburgh, Pennsylvania.
Enforcement and collection of any award made hereunder, however, shall
be available to the prevailing party in any court of competent
jurisdiction.
<PAGE>64
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
in accord with the provisions of the Uniform Written Acknowledgements
Act (33 P.S. 1, et seq) have set their hands as of the day and year
first above written.
WITNESS/ATTEST:
CONSULTANT
Breakthru Technologies, L.L.C.
/S/ Webster Hubbell
Print Name/Title:
WITNESS/ATTEST:
COMPANY:
Infectech, Inc.
Mitchell S. Felder, MD
Print Name/Title:
Mitchell S. Felder, M.D.
Title: President & CEO
<PAGE>65
CONSULTING AGREEMENT
This Consulting Agreement is entered into between Timothy Miles DBA
Little Pond Enterprises (LPE) and Infectech, Inc. (Client) (the
"Agreement") with reference to the following facts.
Client has expressed a desire to enter into this Agreement with LPE for
LPE to provide consulting services through which Client will become a
publicly traded company (the "Services") LPE is in the business of
providing such services and desires to enter into an Agreement with
Client to provide such "Services". This Agreement is for the purpose
of defining the services provided and the rights and responsibilities
of both parties.
1. SERVICES PROVIDED BY LPE
1. LPE will recommend a structure for Client' entry into the public
market. This structure will be approved by Client. The structure will
include distribution to shareholders, creditors, and other parties and
will include agreed upon capital formation requirements of Client.
2. LPE will, if requested, arrange to be provided, such accounting
services as necessary to complete audits of Client's books in order to
proceed with the preparation and filing of this registration.
3. LPE will interact with Clients securities attorney for the
preparation and filing of a Registration Statement on Form SB2 with the
Securities and Exchange Commission (SEC) Securities to be registered in
said registration include the stock issued to LPE, and other such stock
as agreed upon by both parties.
4. LPE will use its contacts and expertise to locate a suitable
inventor relations firm to represent client and will interact with the
firm to cause to be prepared such packaging and promotional materials
as LPE, the investor relations firm and Client deem necessary.
5. LPE will prepare, with Client's securities attorney, a form 15c2-11
and coordinate its distribution to the brokerage community at its own
expense for the purpose of opening a market for the stock and arrange a
listing on the Over the Counter Market.
6. LPE agrees to use its expertise and business contacts to locate a
suitable financial and broker relations firms to represent Client.
7. LPE agrees to interact with the Client's investment relations
coordinator and to advise said coordinator as necessary.
8. LPE agrees to arrange for the inclusion of the Company in Moody's
company listing services or another comparable service for the purpose
of expanding the marketability of the stock LPE will obtain the
application for the Client and assist the Client in preparing the
application.
9. LPE agrees to provide consulting services on an as needed basis to
Client for a period of 1 year from this Agreement LPE and will make
itself available to render advice to Client concerning but not limited
to shareholder relations, market strategy, broker relations and
additional capitalization and any other subjects as may fall under the
services provided within this contract.
2. RESPONSIBILITY OF CLIENT
1. Client agrees to provide LPE such financial, business and other
material and information about Client, its products, services,
contracts, litigation, patients, trademarks and other such business
matters which LPE may request and which LPE may request and which LPE
considers to be important and material information for the completion
of this contract.
2. Client agrees to provide LPE and/or Client's attorneys and
accountants all material requested in order to prepare the registration
documents. These materials include but are not limited to articles of
incorporation and all amendments thereto, by laws of the corporation,
its minutes and resolutions of all shareholders and board of directors
<PAGE>66
meetings, a copy of the share register showing the names, addresses and
social security number of shareholders and the dates of issuance and
the numbers of shares owned by each shareholder; the names and
addresses of all officers and directors of the corporation, a resume
for each officer and director of the corporation and audited financial
statements providing balance sheets for the two previous years and
Statement of Operations for the three previous years.
3. Client agrees to provide LPE with monthly financial statements
containing Balance Sheets and Profit and Loss statements utilizing
"GAP" accounting until the effective date of the registration and the
Client also agrees to notify LPE of any changes in the status or nature
of its business, any litigation, or any other developments that may
require further disclosure in the registration or other documents.
4. Client agrees to prepare and file an SB2 registration within 90
days of a public market being established. If Client is unable to file
an SB2 or similar registration within 90 days, Client agrees to file a
Form 10SB within the same 90 days.
3. CASH COMPENSATION
LPE will receive a total fee of $0 for the above services rendered.
Fee does not include any preapproved expenses incurred by LPE.
4. EQUITY COMPENSATION
Client agrees to pay LPE a total of 50,000 shares of common stock, in
advance for the services to be rendered. Said shares will be included
in any subsequent registrations filed by the Client. If client fails
to file a registration within 90 days, shares will be registered
through an registration within 14 days of the effective date of the
SB10 which the company agrees to file.
5. REPRESENTATIONS BY LPE
LPE represents warrants and covenants the following:
1. LPE will disclose to Client all material facts and
circumstances which may affect its ability to perform its undertaking
herein.
2. LPE will cooperate in a prompt and professional manner with
Client, its attorneys, accountants nd agents in the performance of this
Agreement.
6. REPRESENTATIONS OF CLIENT
Client represents warrants and covenants the following:
1. Corporation will cooperate fully with LPE in executing the
responsibilities required under this contract so that LPE may fulfill
its responsibilities in a timely manner.
2. Client will not circumvent this Agreement either directly or
indirectly nor will it interfere with, impair, delay or cause LPE to
perform work not described in this Agreement.
3. Client and each of its subsidiaries is a corporation d uly
organized and existing under the laws of its state of incorporation and
is in good standing with the jurisdiction of its incorporation in each
state where it is required to be qualified to do business.
4. Client's articles of incorporation and bylaws delivered
pursuant to this Agreement are true and complete copies of same nd have
been duly adopted.
5. Client will cooperate in a prompt and professional manner with
LPE, its attorneys, accountants and agents during the performance of
the obligations due under this Agreement.
6. Client represents that no person has acted as a finder or
investment advisor in connection with the transactions contemplated in
this letter other than those listed on Exhibit A, and Client will
indemnify LPE with respect to any claim for a finders fee in connection
with this Agreement. Client represents that no officer, director or
stockholder of the company is a member of the NASD, an employee or
<PAGE>67
associated member of the NASD, or an employee or associated person or
member of the NASD. Client represents that is separately has disclosed
to LPE all potential conflicts of interest involving officers,
directors, principal stockholders and/or employees.
7. CONFIDENTIALITY
LPE agrees that all information received from Client shall be treated
as confidential information and LPE shall not share such information
with any other person or entity, except the SEC, attorneys and
accountants, without the express written consent of Client, unless such
disclosure clearly will not cause damages to Client.
Client agrees not to divulge each and any named source (lending,
institutions, investors, individuals, Brokers, etc.) which have been
introduced by LPE for a period of one year from the execution of this
Agreement. Furthermore, Client agrees not to circumvent, either
directly or indirectly, the relationship that each LPE ha with said
sources.
8. NOTICES
Any notices from either party to the other shall be deemed received on
the date such notice is personally delivered. Any notice sent by fax
transmission shall be deemed received by the other party on the day it
has been transmitted. Any notice sent by mail by either party to the
other shall be deemed received on the third business day after is has
been deposited at a United States Post Office. For purposes of
delivering or sending notice to the parties to this Agreement such
notices shall be delivered or sent as follows.
If notice is delivered to LPE
Little Pond Enterprises
Carolina Bldg. Suite 222
10 Office Park Rd
PO Box 7571
Hilton Head Island, SC 29938
Phone 803-686-5590
Fax #803-686-5595
Or
1921 South Downing Street
Denver, CO 80210
If notice is to be delivered to Client
Infectech, Inc.
Suite 2
87 Stambaugh Avenue
Sharon, PA 16146
Phone #724-346-1302
Fax #724-346-9596
9. ENTIRE AGREEMENT
Neither party has made any representations to the other which are not
specifically set forth in this Agreement. There are no oral or other
agreements between the parties which have been entered into prior or
contemporaneously with the formation of this Agreement. All oral
promises, agreements, representations, statements and warranties
hereinafter asserted by one party against the other shall be deemed to
have been waived by such party asserting that they were made and this
Agreement shall supersede all prior negotiations, statements
representations, warranties and agreements made or entered into between
the parties to this Agreement.
10. NO ASSIGNMENT
Neither party may assign any benefit due or delegate performance under
this Agreement without the express written consent of the other party.
11. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of South Carolina. It shall also be construed as
if the parties participated equally in its negotiation and drafting.
The Agreement shall not be construed against one party over another
party.
<PAGE>68
Should a dispute arise, both parties agree to submit to binding
arbitration under the guidelines of the American Arbitration
Association or some other mutually agreeable Arbitration Association.
12. WAIVER
The waiver of any provision of this Agreement by either party shall not
be deemed to be a continuing waiver or a waiver of any other provisions
of this Agreement by either party.
13. SEVERABILITY
If any provision of this Agreement or any subsequent modification
hereof are found to be unenforceable by a court of competent
jurisdiction, the remaining provisions shall continue to remain in full
force and effect.
14. AUTHORITY TO ENTER INTO AGREEMENT
The individuals signing this Agreement below represent to each other
that they have the authority to bind their respective corporations to
the terms and conditions of this Agreement. The individuals shall not,
however have personal liability by executing this Agreement and sign
this Agreement only in their representative capacities as authorized
officers of the Client and LPE respectively.
Dated this 24th of September, 1998 Dated this 24th of September, 1998
Little Pond Enterprises Infectech, Inc.
by by
Timothy Miles Mitchell S. Felder, President
<PAGE>69
OPTION AGREEMENT
THIS OPTION AGREEMENT is made and is effective as of September 1, 1998,
by and between the Brigham and Women's Hospital, having administrative
offices at 75 Francis Street, Boston, MA 02115 ("Brigham"), and
Infectech, Inc. a for-profit corporation having its principal offices
at 87 Stambaugh Ave., Sharon, PA 16146 ("Company").
WITNESSETH
WHEREAS, Dr. Gerald Pier is named as inventor on United States Patent
4,578,458 (and related foreign patents) entitled "Muciod
Exopolysaccharide Vaccine Against Pseduomanas Aeruginosa" issued March
25, 1986, and United States Patent 5, 502,039 entitled "o-Derivatized
Alginic Acid Antigens" issued March 26, 1996, both are described in
Appendix A ("Inventions"). Dr. Pier is obligated to assign his
ownership interest in both patents to Hospital.
WHEREAS, Company is desirous of considering a license from the Brigham
for the commercial development, use and sale of the Inventions; and to
facilitate this consideration, Company is serious of obtaining an
Option to such license from the Brigham for an agreed-upon period of
time; and
WHEREAS, Brigham is willing to grant such an Option;
NOW THEREFORE, in consideration of the covenants and undertakings
hereinafter set forth, it is agreed by and between the parties as
follows:
1. OPTION
1.1 Brigham hereby grants to Company the right to obtain a worldwide
license to manufacture, use sell or lease products and/or processes
incorporated in the Inventions. The license contemplated by this
Paragraph 1.1 will be exclusive, royalty-bearing, subject to Due
Diligence requirements and subject to a License Issue Fee upon
execution.
1.2 The Option granted in Paragraph 1.1 shall exist and be exercisable
by written notice to the Brigham for one year from the effective date
of this Option Agreement, after which is shall automatically expire.
2. OPTION FEE
2.1 In consideration of the Option being granted, Company will pay an
Option Fee of ten thousand dollars ($10,000) immediately upon execution
of this Agreement. The Company will also pay the ongoing patent costs
for maintenance of the following patents and any of their foreign
counterparts as listed in the attached Appendix A: (1) Mucoid
Exopolysaccharide Vaccine Against Pseudomonas Aeruginosa U.S. Patent
4,578,458 issued 3/25/86 and any corresponding international
equivalents and (2) O-Derivatized Alginic Acid Antigens U.S. Patent No.
5,502,039 issued 3/26/94.
3. LICENSE
3.1 If Company elects to exercise its right under Paragraph 1.1,
Brigham agrees to meet with Company within thirty (30) days of receipt
of written notice of such exercise, and the parties shall thereupon
negotiate in good faith to arrive at mutually agreeable, reasonable
nonfinancial terms and conditions for the appropriate license, such
license shall include the financial terms and conditions set forth in
Appendix B which is incorporated herein by reference.
Notwithstanding the foregoing, if the Brigham reasonably determines
prior to entering into a license agreement for Inventions that the
royalty rates set forth in Appendix B as applied to the Inventions so
licensed would be uncompetitive and fail to reflect the market value of
the Inventions at the effective time of the license agreement, the
Brigham shall grant and Company shall accept a royalty rate that fairly
and reasonably reflects the fair market value of the Inventions so
licensed.
4. Notices
<PAGE>70
4.1 Any payment, notice or other communication required or authorized
to be given hereunder shall be deemed to have been properly given and
to be effective: (a) upon delivery if delivered in person, or (b) Five
(5) days after mailing if mailed by first-class, certified mail,
postage paid, to the respective addressed given below, or to such other
address as either party shall designate by written notice given to the
other party as follows:
In the case of Brigham:
Brigham and Women's Hospital
Attn: Director, Ventures
75 Francis Street
Boston, MA 02115
With a copy to:
Brigham and Women's Hospital
Attn: Office of General Counsel
10 Vining Street
Boston, MA 02115
In the case of the Company:
Infectech, Inc.
Attn: Mitchell S. Felder, MD, CEO
87 Stambaugh Ave., Suite 2
Sharon, PA 16146
5. ASSIGNEMENT
5.1 This Agreement is binding upon and shall inure to the benefit of
the Brigham, its successors and assigns, but shall be personal to
Company and may not be assigned without the consent of Brigham.
6. GOVERNING LAWS
6.1 This Agreement shall in interpreted and construed in accordance
with the laws of State of Massachusetts.
IN WITNESS WHEREOF, the parties have executed this Agreement in
duplicate originals by their respective duly authorized officers on the
date hereinafter written.
THE BRIGHAM AND WOMEN'S HOSPITAL
By (signature)
Name: Brian N. Hicks
Title: Director, Venture Department
Date: 8/25/98
INFECTECH, INC.
By (signature)
Name: Mitchell S. Felder, M.D.
Title: CEO & President
Date: 8/31/98
Agreed to and Accepted
Name: Gerald Pier Date: 8/27/98
(investigator)
<PAGE>71
APPENDIX A
I. Mucoid Exopolysaccharide Vaccine Against Pseudomonas Aeruginosa
(BWH#0091)
COUNTRY PATENT NO. ISSUE DATE EXPIRATION DATE FILING DATE
USA 4,578,458 3/25/86 3/25/2003 3/23/83
Australia 571495 4/21/88 3/9/2000 3/9/84
Canada 1226543 9/9/87 9/9/2004 3/22/84
Denmark 1587/84 5/16/90 3/15/2004 3/19/84
EPC/Austria AT0120532 5/16/90 3/15/2004 3/15/84
EPC/Belgium BE0120532 5/16/90 3/15/2004 3/15/84
EPA/Switzer. PO120532-8 5/16/90 3/15/2004 3/15/84
EPC/Germany P3482241-0 5/16/90 3/15/2004 3/15/84
EPC/France FR0120532 5/16/90 3/15/2004 3/19/84
EPC GreatBrt.GB0120532 5/16/90 3/15/2004 3/15/84
EPC/Italy IT0120532 5/16/90 3/15/2004 3/15/84
II. O-Derivatized Alginic Acid Antigens (BWH#0095)
COUNTRY PATENT ISSUE DATE EXPIRATION DATE FILING DATE
USA 5,502,039 3/26/94 3/26/2013 7/11/94
APPENDIX B
LICENSE AGREEMENT TERMS
LICENSED PATENTS: (1) Mucoid Exopolysaccharide Vaccine Against
Pseudomonas Aeroginosa U.S. Patent No. 4,578,458 issued 3/25/86 and any
corresponding international equivalents and (2) O-Derivatized Alginic
Acid Antigens U.S. Patent No. 5,502,039 issued 3/26/94.
INVENTOR:. Gerald Pier
EXCLUSIVITY: Exclusive
TERRITORY: Worldwide
TERM: Life of the Patent
FIELD OF USE: Therapeutic purposes only
LICENSE FEES: upfront: $40K ($20K to be paid upon the effective date,
$20K to be paid upon November 1, 1999)
License maintenance fee:
$10K YEAR 1
$20K YEAR 2
$30K YEAR 3
$40K YEAR 4
$50K YEAR 5 and each year thereafter
Milestone payments:
$100K upon each IND filing
$500K upon each FDA approval
ROYALTY: Company shall pay 5% of net sales.
PATENT FEES: Company shall be responsible for ongoing expenses for the
licensed Hospital Technology.
SUBLICENSING: Company shall pay to Hospital 30% of all sublicensing
income (e.g. royalties, success fees, license issue fees, milestone
payments, license maintenance fees, patent annuity fees, and other
payments) made by a licensee to Company or its affiliates in connection
with a sublicense to the Hospital Technology. Company shall pay to
Hospital 5% of research money received from sublicensees.
If sponsored research is mutually agreed upon in writing, it shall
include the following financial arrangements:
YEAR 1 $60K ($0 to be credited against license maintenance fees)
YEAR 2 $140K ($10K to be credited against license maintenance fees)
YEAR 3 $200K ($20K to be credited against license maintenance fees)
YEAR 4 $250K ($30K to be credited against license maintenance fees)
YEAR 5 $300K ($30K to be credited against license maintenance fees)
<PAGE>72
MERRILL WEBER & CO., INC.
Member NASD, SIPC
770 FRONTAGE ROAD
SUITE 134
NORTHFIELD, IL 60093
Tel: (847) 784-1530
Fax: (847) 784-1540
September 15, 1998
Mitchell Felder, M.D.
Infectech, Inc.
87 Stambaugh Avenue, Suite 2
Sharon, PA 16146
Dear Dr. Felder:
This will confirm the understanding and agreement (the "Agreement")
between Merrill Weber & Co., Inc. ("MWC") and Infectech, Inc. (The
"Company") as follows:
1. Scope of Engagement
The Company hereby engages MWC as its advisor in assisting the Company
to establish an identity in the investment community and to raise funds
for corporate purposes. Specifically, the Company has requested that
MWC:
(a) Act on behalf of the Company in obtaining the services of a
qualified market maker to commence making a market for the Company's
common stock in the OTC Bulletin Board ("OTCBB").
(b) Assist, if requested in preparation and review of the Company's
documentation prepared in connection with Rule 15c2-11 promulgated
under the Securities Exchange Act of 1934, as amended.
(c) Assist the Company in selecting a financial public relations firm
to disseminate information about the Company to news media and the
investment community.
(d) Review proposed additions to the Company's scientific advisory
board.
(e) Act as the Company's exclusive agent in the private placement of
securities of the Company (the "Placement Transaction") to financial
investors, strategic corporate investors, individual investors and/or
others that are directly solicited by MWC (collectively, the "MWC
Investors"), as more fully described in Section 8 hereof, in the form
of common stock, convertible preferred stock, convertible debt
securities or any equity-linked securities, including high-yield notes
issued in connection with the issuance by the Company of equity-linked
securities (collectively, the "Securities").
2. Term of Engagement
The term of MWC's exclusive engagement as provided in Section 1 hereof
shall be for a period that ends six months from the date hereof, unless
extended by mutual agreement of the parties, provided, that if the
Company's stock is not first listed for trading on the OTCBB on or
prior to November 15, 1998, then the Company may terminate this
Agreement at any time on or after that date.
3. Offering Process
MWC hereby accepts the engagement and, in connection with items (a)
through (d) of paragraph (1), above, agrees to perform such actions as
shall be reasonably requested by the company. With respect to item (e)
of the paragraph (1) above, MWC agrees to:
(a) obtain and review sufficient information about the Company
to enable MWC to introduce the Company to MWC Investors,
(b) use its best efforts to privately place the Securities,
<PAGE>73
(c) if appropriate, prepare, with the assistance and approval
of the Company, and disseminate any other communications to be used in
placing the Securities, whether in the form of a letter, circular,
notice or otherwise; and
(d) assist with negotiation of the final terms and conditions
for the sale of the Securities to the MWC Investors.
4. Company's Responsibilities, Representations and Warranties
In connection with MWC's engagement, the Company will furnish MWC on a
confidential basis with any information concerning the Company that MWC
reasonably deems appropriate and will provide MWC with access to the
Company's officers, directors, accountants, counsel and other advisors.
The Company represents and warrants to MWC that, to the best of the
Company's knowledge, all such information concerning the Company is and
will be true and accurate in all material respects and does not and
will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein
not misleading in light of the circumstances under which such
statements are made. The Company acknowledges and agrees that MWC will
be using and relying upon such information supplied by the Company and
its officers, agents and others and any other publicly available
information concerning the Company without any independent
investigation or verification thereof or independent appraisal by MWC
of the Company or its business or assets. The company can accept or
reject any investment at its sole discretion.
5. Compensation
As compensation for the services to be rendered by MWC hereunder, the
Company shall pay MWC as follows:
(a) Upon execution of this Agreement, the Company shall pay to
MWC $5,000 in cash, by wire transfer of immediately-available funds.
Thereafter, the Company shall pay to MWC $5,000 on the 15th day of
October, November and December 1998 and January 1999.
(b) Upon commencement of display of real-time quotes on the
OTCBB, the Company shall issue to MWC warrants for a nominal price to
purchase 60,000 shares of common stock of the Company, exercisable for
a period of five years from the date of commencement of such trading,
at an exercise price per share equal to the bid price initially shown
on the OTCBB for such securities. The terms of the warrants shall be
set forth in a warrant agreement in form and substance reasonably
satisfactory to MWC and the Company, which shall contain terms
reasonably equivalent to those applicable to the Securities issued in
the Placement Transaction, including, without limitation, anti-dilution
provisions, piggy-back registration rights and cashless exercise
provisions.
(c) At any closing of any Placement Transaction, a cash fee
equal to 6% of the aggregate consideration paid for the Securities by
MWC Investors, and
(d) At any closing of any Placement Transaction, the Company
shall issue to MWC warrants for a nominal price to purchase such number
of shares of common stock of the Company equal to 6% of the aggregate
number of fully diluted and/or converted shares of common stock as are
purchased or ultimately received by MWC Investors, exercisable for a
period of five years from the date of such closing, at an exercise
price per share equal to that paid b the MWC Investors in the Placement
Transaction. The terms of the warrants shall be set forth in a warrant
agreement, in form and substance reasonably satisfactory to MWC and the
Company, which shall contain terms reasonably equivalent to those
applicable to the Securities issued in the Placement Transaction,
including, without limitation, anti-dilution provisions, piggy-back
registration rights and cashless exercise provisions.
6. Reimbursable Expenses
The Company shall reimburse MWC for its out-of-pocket and incidental
expenses incurred during the term of its engagement hereunder including
fees and expenses of its legal counsel and those of any advisor(s)
retained by MWC. MWC shall bill the company monthly for expenses, and
the Company shall reimburse MWC for such expenses within 30 days of
receiving a bill.
<PAGE.74
7. Indemnification (See Attached Letter)
Since MWC will be acting on behalf of the Company in connection with
its engagement hereunder, the Company agrees to indemnify MWC as set
forth in a separate letter agreement, dated the date hereof, between
MWC and the Company.
8. Exclusive Assignment
The Company and MWC agree that this engagement is exclusive, and that
(a) any investment in securities issued by the Company, other than in
open market purchases, while this Agreement remains in effect, shall be
deemed a Placement Transaction, and (b) any investment in securities
issued by the company, other than in open market purchases, during the
twelve months following termination of this Agreement, by an MWC
Investor who is shown documentation relating to the Company during
effectiveness of this Agreement, shall be deemed a Placement
Transaction, for which MWC shall be entitled to receive compensation
pursuant to Paragraph 5 hereof.
9. Advertisements
The Company agrees that following the closing of a Placement
Transaction, MWC has the right to place advertisements in financial and
other newspapers and journals at its own expense describing its
services to the Company hereunder, subject to the prior approval of the
Company, such approval not to be unreasonably withheld.
10. Survival of Terms of Agreement
The provisions of Sections 4 through 7 and 9 through 13 shall survive
termination of this Agreement.
11. Disclosure to Third Parties
The information to be provided by MWC under this Agreement shall not be
publicly disclosed or made available to third parties, except to the
Company's directors, employees, accountants and attorneys, without
MWC's prior consent, nor may MWC be otherwise publicly referred to
without its prior consent.
12. Successors and Assigns
The Company represents and warrants to MWC that no brokers,
representatives or other persons have an interest in compensation due
to MWC from any Placement Transaction with an MWC Investor contemplated
herein.
13. Other Terms and Conditions
The Company represents and warrants to MWC that this Agreement does not
breach or conflict with any other agreement to which the Company is a
party.
This Agreement may not be assigned by either the Company or MWC without
the consent of the other. The benefits of this Agreement shall,
together with the separate indemnity letter, inure to the benefit of
the respective successors and permitted assigns of the parties hereto
and of the indemnified parties hereunder and thereunder and their
successors and permitted assigns and representatives, and the
obligations and liabilities assumed in this Agreement by the parties
hereto shall be binding upon their respective successors and permitted
assigns.
(a) This Agreement may not be amended or modified except
in writing signed by the party against which enforcement is sought and
shall be governed by and construed in accordance with the laws of the
State of Illinois, without regard to principles of conflicts of laws.
(b) EACH OF MWC AND THE COMPANY (ON ITS OWN BEHALF AND, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF ITS SHAREHOLDERS)
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) RELATED
TO OR ARISING OUT OF THE ENGAGEMENT OF MWC PURSUANT TO, OR THE
PERFORMANCE BY MWC OF, THE SERVICES CONTEMPLATED BY THIS AGREEMENT.
ANY CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE ALLEGED BREACH THEREOF, SHALL BE SETTLED AND DECIDED BY
ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE
<PAGE>75
AMERICAN ARBITRATION ASSOCIATION OR THE NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC., AND ANY JUDGMENT UPON THE AWARD RENDERED BY
THE ARBITRATORS MAY BE ENTERED IN ANY COURT HAVING JURISDICTION
THEREFOR.
MWC is delighted to accept this engagement and looks forward to working
with the Company on this engagement. Please confirm that the foregoing
correctly sets forth our agreement by signing the enclosed duplicate of
this letter in the space provided and returning it, whereupon this
letter shall constitute a binding agreement as of the date first above
written.
MERRILL WEBER & CO., INC.
By: ________________________________
Name: Merrill Weber
Title: President
Agreed:
INFECTECH, INC.
By: _________________________________
Name: Mitchell S. Felder, M.D.
Title: CEO and President (9/17/98)
September 15, 1998
MERRILL WEBER & CO., INC.
770 Frontage Road, Suite 134
Northfield, IL 60093
In connection with the engagement letter (the "Engagement
Agreement"), dated September 15, 1998, between Merrill Weber & Co.,
Inc. ("MWC") and Infectech, Inc. (the "Company"), the Company hereby
agrees to indemnify and hold harmless MWC and its affiliates, their
respective directors, officers, controlling persons (within the meaning
of Section 15 of the Securities Act of 1933 or Section 20(a) of the
Securities Exchange Act of 1934), if any, agents and employees of MWC
or any of MWC's affiliates (collective, "Indemnified Persons" and
individually, an "Indemnified Person") from and against any and all
claims, liabilities, losses, damages and expenses incurred by any
Indemnified Person (including fees and disbursements of MWC and an
Indemnified Person's counsel) which (A) are related to or arise out of
(i) actions taken or omitted to be taken (including any untrue
statements made or any statements omitted to be made) by the Company or
(ii) actions taken or omitted to be taken by an Indemnified Person with
the Company's consent or in conformity with the Company's instructions
or the Company's actions or omissions, or (B) are otherwise related to
or arise out of MWC's engagement, and will reimburse MWC and any other
Indemnified Person for all costs and expenses, including fees of MWC or
counsel, as they are incurred, in connection with investigating,
preparing for or defending any action, formal or informal claim,
investigation, inquiry or other proceeding, whether or not in
connection with pending or threatened litigation, caused by or arising
out of or in connection with MWC acting pursuant to the engagement,
whether or not MWC or any Indemnified Person is named as a party
thereto and whether or not any liability results therefrom. The
Company will not, however, be responsible for any claims, liabilities,
losses, damages or expenses pursuant to clause (B) of the preceding
sentence which are finally judicially determined to have resulted
primarily from MWC's bad faith or negligence. The Company also agrees
that neither MWC nor any other Indemnified Person shall have any
liability to the Company for or in connection with such engagement
except for any such liability for claims, liabilities, losses, damages
or expenses incurred by the Company which are finally determined
(whether judicially or pursuant to the arbitration provisions set forth
in Paragraph 13 of the Engagement Agreement) to have resulted primarily
from MWCs bad faith or negligence. The Company and MWC further agree
that each will not, without the prior written consent of the other,
settle or compromise or consent to the entry of any judgment in any
<PAGE>76
pending or threatened claim, action, suit or proceeding in respect of
which indemnification may be sought hereunder (whether or not MWC or
any Indemnified Person is an actual or potential party to such claim,
action, suit or proceeding) unless such settlement, compromise or
consent includes an unconditional release of the other and each other
Indemnified Person thereunder from all liability arising out of such
claim, action, suit or proceeding.
In order to provide for just and equitable contribution, if a claim for
indemnification is made pursuant to these provisions but it is found in
a final judgment by a court of competent jurisdiction (not subject to
further appeal) that such indemnification is not available for any
reason (except with respect to indemnification sought solely pursuant
to clause (B) of the first paragraph hereof, for the
reasons specified in the second sentence thereof), even though the
express provisions hereof provide for indemnification in such case,
then the Company, on the one hand, and MWC, on the other hand, shall
contribute to such claim liability, loss, damage or expense for which
such indemnification or reimbursement is held unavailable in such
proportion as is appropriate to reflect the relative benefits to the
Company, on the one hand, and MWC on the other hand, in connection with
the transactions contemplated by the engagement.
The foregoing right to indemnity and contribution shall be in addition
to any rights that MWC and/or any other Indemnified Person may have at
common law or otherwise and shall remain in full force and effect
following the completion or any termination of your engagement. The
Company and MWC hereby consent to personal jurisdiction and to service
and venue in any court in which any claim which is subject to this
agreement is brought against MWC or any other Indemnified Person.
EACH OF MWC (ON ITS OWN BEHALF AND, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, ON BEHALF OF THE INDEMNIFIED PERSONS) AND THE COMPANY
(ON ITS OWN BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON
BEHALF OF ITS SHAREHOLDERS) WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT
OR OTHERWISE) RELATED TO OR ARISING OUT OF THE ENGAGEMENT OF MWC
PURSUANT TO, OR THE PERFORMANCE BY MWC OF, THE SERVICES CONTEMPLATED BY
THIS AGREEMENT AND TO THE ARBITRATION PROVISIONS SET FORTH IN PARAGRAPH
13 OF THE ENGAGEMENT AGREEMENT.
It is understood that, in connection with MWC's engagement, MWC may
also be engaged to act for the Company in one or more additional
capacities, and that the terms of this engagement or any such
additional engagement may be embodied in one or more separate written
agreements. This indemnification shall apply to said engagement, any
such additional engagement(s) (whether written or oral) and any
modification of said engagement or such additional engagement(s) unless
expressly agreed otherwise therein, and shall remain in full force and
effect following the completion or termination of said engagement or
such additional engagement.
Very truly yours,
Infectech, Inc.
By: ______________________________
Title: _____________________________
AGREED AND ACCEPTED:
Merrill Weber & Co., Inc.
By: ____________________________
Title: __________________________
<PAGE>77
May 14, 1997
James J. Gooch, DrPH
Business Director
NEN Life Science, Inc.
549 Albany Street
Boston, MA 02118
Letter of Intent
Confidential
Re:
NEN Life Science, Inc.,
a subsidiary of E.I. DuPont De Nemours & Co. (Inc.) ("NEN")
and Infectech, Inc. ("Infectech")
Joint Collaboration
Dear Dr. Gooch:
Thank you for the April 25, 1997 letter in response to my letter dated
April 14, 1997. We fully agree with your comments that our mutual
efforts shall focus on how useful Tyramide Signal Amplification ("TSA")
is with the Infectech baiting technology. Therefore, we agree with you
that more discussions and commitments on additional R&D, product
development, initiatives (regulatory approvals, market research),
marketing/sales, manufacturing, joint equity investments should be
discussed in further detail after completion of Phase II. Thus, I
would like to use this letter to set forth some firm commitments for
Phases I and II, and leave more detailed discussions of Phases III and
IV to such time as when Phase II is completed.
With this overall structure in mind, Infectech proposes the following:
PHASE I: TECHNOLOGY REVIEW
NEN and Infectech will review the technology potential of TSA combined
with the baiting technology of Infectech. The purpose of this initial
technology assessment will give the scientists of both parties a
greater insight into the synergistic potential of the collaboration.
It is contemplated that at least a full day, personal, face-to-face,
meeting between appropriate Infectech and NEN scientific personnel will
take place at a mutually convenient time and place. A key objective of
this meeting will be to define the research objectives, time tables and
costs for Phase II.
Please note that the Confidentiality Agreement dated February 3, 1994
(a copy of which is attached
hereto) shall be in effect for all confidential disclosures made at
the meeting.
PHASE II: PRELIMINARY R&D
Once Phase I is completed and appropriate and feasible research
objectives, time tables and costs for Phase II are set, the parties
will carry out diligently their respective tasks. Infectech will bear
its own costs for performing tasks assigned to it. Infectech will also
compensate NEN at NEN's standard rates for work performed, materials
used and equipment purchased in order for NEN to perform its tasks. It
is contemplated that the budget for Phase II will be about $500,000 and
that Phase II will last approximately nine (9) months from beginning to
end.
It is contemplated that Infectech's work in Phase II will be performed
at Infectech's laboratory in Milford, Pennsylvania, but also may be
performed at any one or more of four (4) venues at which Infectech has
ongoing research (i.e., (1) VA Medical Center in Boston with Robert
Arbeit, M.D. for M. Avium; (2) VA Medical Center in New York with
Sheldon Brown, M.D. for Tuberculosis; (3) Northeastern Ohio
Universities College of Medicine with Sally Giordano, M.D. for
Pseudomonas; and (4) University of Medicine and Dentistry of New Jersey
with Nancy Connell, Ph.D. for bacterial cloning). The location, time
<PAGE>78
commitment and identification of NEN personnel working on Phase II as
well as NEN's standard labor, materials and equipment charge will be
mutually agreed upon by the parties before entering into Phase II.
The results of the Phase II work will be summarized by each party in a
final report. This final report and the work performed under Phase II
will be covered under the Confidentiality Agreement dated February 3,
1994.
POST PHASE II: PRODUCT/PROTOTYPE DEVELOPMENT
AND MARKETING/MANUFACTURING/SUPPLY SALES
After Phase II, the parties will meet to discuss the results of Phase
II and the feasibility of product/prototype development as well as
commercialization. At that time, appropriate agreements will be
discussed and entered into by the parties.
In summary, we are very excited about working with such a prestigious
and respected company as NEN. We believe that our joint work truly has
the capability of revolutionizing medical care for millions of
patients. In order for us to get started quickly, would you please
signify NEN's agreement to the terms set forth above by signing and
dating both enclosed copies of this letter and returning one fully
executed original to me. Please keep the other fully executed original
for your files.
Please call me if you have any questions.
Best wishes.
Yours truly,
INFECTECH, INC.
By:
Mitchell S. Felder, M.D.
CEO and President
MSF:cjs
Enclosures
Agreed to and accepted
this day of
, 1997
NEN LIFE SCIENCE, INC.
By:
<PAGE>79
November 19, 1997
Mr. Terry Macartney
President
Starplex Scientific
50 Steinway Boulevard
Etobicoke
Ontario, CANADA M9W 6Y3
Re: Agreement between Starplex Scientific ("Starplex") and
Infectech, Inc. ("Infectech")
Dear Mr. Macartney:
Thank you for your letter of October 20, 1997 to Dr. Robert Ollar.
Infectech is very excited about its collaborative effort with Starplex
to develop, market, manufacture and sell a transport/isolator device.
This letter agreement ("Agreement") will set forth our mutual
understanding regarding the development and, potentially, manufacturing
and sale of a transport/isolator device for (i) identifying
microorganisms and (ii) determining the antibiotic sensitivity of
microorganisms to antimicrobial agents (the "Device"). The Device is
covered by United States Patent Application Serial No. 08/936,924 filed
September 25, 1997 (hereinafter "Infectech Technology").
It is contemplated that the project will have two phases. Phase I will
be a study by Starplex (at its own expense) to determine the product's
effectiveness and market acceptability. It is agreed that this study
will be completed by June 30, 1998. The completion date can be
extended by Infectech.
If at the end of the study period, Starplex decides not to go forward
with the project, the Infectech Disclosure Agreement which was signed
on May 12, 1997, will still be in force and Starplex will receive no
rights under the Infectech Technology or any other technology currently
or in the future owned by Infectech.
If Starplex decides to go forward with the project, Phase II of the
project will commence. For Phase II, Starplex agrees to an exclusive,
worldwide license to make, have made, use and sell the Device covered
by Infectech Technology. A definitive license agreement will be
entered into between the parties which will include the following
terms:
1. Starplex agrees to purchase all of its coated slides for the Device
from Erie Scientific.
2. Starplex agrees to pay Infectech a royalty of 10% of its net sales
(gross sales minus returns for full credit) of the Device.
3. Because this is an exclusive worldwide license, Starplex agrees to
the following schedule of minimum royalties subject to review before
signing a definative licensing agreement and commencing on Phase II:
Agreement Year Minimum Royalty
1 $100,000
2 250,000
3 and thereafter 500,000
4. Infectech will grant Starplex an exclusive license to any
Improvements on the Device. Improvements" are defined as any
modification of the Device that is covered by the claims of the
Infectech Technology.
5. The exclusive license will have a term that expires on the last to
expire patent issuing on the Infectech Technology, on a country-by-
country basis.
6. Infectech will be responsible for all patent costs and patent
enforcement.
<PAGE>80
If you agree to the above, please sign and date both copies of this
letter and return one to me, keeping one for your records.
Sincerely,
Mitchell S. Felder, M.D.
CEO and President
Accepted and Agreed to
this ________ day of _________________, 1997
Terry Macartney
President
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