<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 11, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AYURCORE, INC.
(Name of Small Business Issuer in Its Charter)
------------------------------
<TABLE>
<S> <C> <C>
DELAWARE 2834 77-0341892
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
------------------------
1737 N. FIRST STREET, SUITE 290
SAN JOSE, CALIFORNIA 95112
(408) 441-6380
(Address, including zip code, and telephone number, including area code, of
registrant's executive offices)
------------------------------
DEEPA CHITRE, M.D.
CHIEF EXECUTIVE OFFICER
AYURCORE, INC.
1737 N. FIRST STREET, SUITE 290
SAN JOSE, CALIFORNIA 95112
(408) 441-6380
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
With copies to:
<TABLE>
<S> <C>
IRWIN M. ROSENTHAL, ESQ. ROBERT J. MITTMAN, ESQ.
Rubin Baum Levin Constant & Friedman Tenzer Greenblatt LLP
30 Rockefeller Plaza The Chrysler Building
New York, New York 10112 405 Lexington Avenue
Telephone: (212) 698-7700 New York, New York 10174-0208
Facsimile: (212) 698-7825 Telephone: (212) 885-5000
Facsimile: (212) 885-5001
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
--------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act Registration Statement number of the earlier
effective Registration Statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier registration statement for the same
offering. / /
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED PRICE(1) REGISTRATION FEE
<S> <C> <C>
Common Stock (par value $.001 per share)....................................... $10,062,500(2) $2,968.44
Common Stock................................................................... $ 1,012,500(3) $ 298.69
Total registration fee......................................................... $3,267.13
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act.
(2) Includes the offering price of shares of Common Stock subject to an
over-allotment option granted to LT Lawrence & Co., Inc.
(3) Represents the offering price of shares of Common Stock underlying warrants
granted to LT Lawrence & Co., Inc. Pursuant to Rule 416, there are also
being registered such additional shares as may become issuable pursuant to
the anti-dilution provisions of such warrants.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL SUCH REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER 11, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
1,250,000 SHARES
AYURCORE, INC.
COMMON STOCK
All of the shares of Common Stock, par value $.001 per share (the "Common
Stock"), offered hereby (the "Offering") are being issued and sold by AyurCore,
Inc. (the "Company").
Prior to the Offering, there has been no public market for the Common Stock
and there can be no assurance that any such market will develop. The Company has
applied for quotation of the Common Stock on the Nasdaq SmallCap Market
("Nasdaq") under the proposed symbol "AYUR." It is currently anticipated that
the initial public offering price of the Common Stock will be between $5.00 and
$7.00 per share. For a discussion of the factors considered in determining the
initial public offering price, see "Underwriting."
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK
AND IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK FACTORS" BEGINNING ON
PAGE 8 AND "DILUTION" ON PAGE 19.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Share................................................ $ $ $
Total(3)................................................. $ $ $
</TABLE>
(1) In addition, the Company has agreed to pay to LT Lawrence & Co., Inc., the
representative (the "Representative") of the several underwriters (the
"Underwriters"), a 3% nonaccountable expense allowance, to grant to the
Representative warrants (the "Representative's Warrants") to purchase up to
125,000 shares of Common Stock, and to retain the Representative as a
financial consultant. The Company has also agreed to indemnify the
Underwriters against certain civil liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company, estimated
at $630,000 (including the Representative's nonaccountable expense
allowance). See "Underwriting."
(3) The Company has granted the Representative an option, exercisable during the
45 days following the date of this Prospectus, to purchase up to 187,500
additional shares of Common Stock on the same terms and conditions as set
forth above, solely for the purpose of covering over-allotments, if any. If
the Representative's over-allotment option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions and Proceeds to
Company will be $ , $ and $ , respectively. See
"Underwriting."
------------------------
The shares of Common Stock are being offered, subject to prior sale, when,
as and if delivered to and accepted by the Underwriters, and subject to approval
of certain legal matters by counsel and certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify the Offering and to
reject any order in whole or in part. It is expected that delivery of
certificates representing the shares of Common Stock offered hereby will be made
against payment therefor at the offices of the Representative, 3 New York Plaza,
New York, New York, 10004, on or about , 1998.
------------------------
LT LAWRENCE & CO., INC.
The date of this Prospectus is , 1998
<PAGE>
AYURCORE, INC.
Discovery & Development of Novel Phyto-Pharmaceuticals
- --------------------------------------------------------------------------------
* Targeting difficult-to-treat human diseases-Designed to save time-
(Picture of four plants used to make (Picture of Company's laboratory in
ARTREX-TM-) India)
Identification of Non-Toxic Medicinal Leading to Standardization
Plants Optimization and Clinical Testing
(Picture of two ARTREX boxes w/pills)
Resulting in Novel Proprietary Phyto-Pharmaceuticals
While two of the Company's products are currently being marketed in India, none
of them have yet received United States FDA approval, and the Company does not
expect to receive any such approval until, at the earliest, the year 2001.
AVAILABLE INFORMATION
As of the date of this Prospectus, the Company will become subject to the
reporting requirements of the Securities and Exchange Act of 1934, as amended
(the "Exchange Act"), and, in accordance therewith, will file reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). The Company intends to furnish its stockholders with annual
reports containing audited financial statements and such other periodic reports
as the Company deems appropriate or as may be required by law.
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF THE COMMON
STOCK, INCLUDING PLACING STABILIZING BIDS OR EFFECTING PURCHASES OF THE COMMON
STOCK IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION, INCLUDING THE COMBINED
FINANCIAL STATEMENTS AND NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS.
EXCEPT AS OTHERWISE INDICATED HEREIN, THE INFORMATION IN THIS PROSPECTUS,
INCLUDING PER SHARE DATA AND INFORMATION RELATING TO THE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING: (i) GIVES RETROACTIVE EFFECT TO THE RECLASSIFICATION
OF THE COMPANY'S CLASS A COMMON STOCK AND CLASS B COMMON STOCK INTO ONE CLASS OF
COMMON STOCK, AN INCREASE IN THE COMPANY'S AUTHORIZED CAPITAL STOCK, AND AN
18,333.486-FOR-1 SPLIT OF THE COMMON STOCK, EACH OF WHICH WAS EFFECTED ON
NOVEMBER 26, 1997, AND (ii) ASSUMES NO EXERCISE OF THE REPRESENTATIVE'S
OVER-ALLOTMENT OPTION TO PURCHASE UP TO 187,500 ADDITIONAL SHARES OF COMMON
STOCK. SEE "UNDERWRITING" AND NOTE J OF NOTES TO COMBINED FINANCIAL STATEMENTS.
THE COMPANY
The Company is engaged primarily in the discovery, development, clinical
testing and marketing of proprietary plant-based pharmaceuticals
(phyto-pharmaceuticals) for the treatment of chronic, difficult-to-treat human
diseases. The Company currently has three phyto-pharmaceutical products in
various stages of clinical and preclinical development. RA-11, the Company's
lead phyto-pharmaceutical, is currently being test-marketed in India for the
treatment of arthritis; IM-10, which is undergoing preclinical animal
pharmacology testing in India, has been indicated for the stimulation and
restoration of bone marrow and the immune system in cancer patients being
treated with chemotherapy; and HP-11, an early-stage product candidate, is
undergoing laboratory testing in India for the treatment of hepatitis. The
Company has an exclusive license under a United States patent relating to RA-11
and its use in treating degenerative musculoskeletal diseases. In addition, the
Company has a patent application pending relating to BV-6, a pharmaceutical
derived from a single animal cell component, which is undergoing early
pharmacological studies at Emory University for the treatment of degenerative
diseases of the central nervous system.
A key element of the Company's strategy is to apply the principles of
Ayurveda, an ancient science native to India, to reduce the time and costs
associated with the drug discovery process. Generations of Ayurveda scholars
have studied and documented the uses and efficacy of specific plants as
medicinal therapies over a period of several hundreds of years. Their findings,
preserved and detailed in Ayurvedic literature, provide valuable information for
modern day scientists. Through the study of Ayurveda, the Company's scientific
team seeks to rapidly identify plants, or combinations of plants, that have been
successfully used to treat symptoms and ailments characteristic of the diseases
targeted by the Company. In addition, because Ayurvedic literature has also
documented the safety of over 300 plant extracts for human use, once an
Ayurvedic plant candidate has been identified by the Company's researchers, they
are, in many instances, able to conduct early development activities in
parallel, rather than sequentially, when determining the candidate's safety and
efficacy. The Company believes that focusing its screening process on plants
whose safety and efficacy in medicinal use have been documented in Ayurvedic
literature will result in faster and more effective screening methods for the
discovery of new phyto-pharmaceuticals. The Company further believes that, based
on their long histories of safe use, these phyto-pharmaceuticals will have a
greater potential for safety and, as a result, may achieve more rapid regulatory
approval.
The Company's research and development activities are primarily conducted by
the Company's Indian subsidiary at laboratories located in Pune, India, which
are staffed with 15 full time employees and 12 consultants. There, the Company's
India-based scientists are able to study the Ayurvedic literature (primarily
written in the ancient Sanskrit language) to accelerate the plant screening
process. In addition, by conducting operations in India, the Company is able to
access highly skilled scientific talent and other resources at an estimated
one-tenth of the cost of comparable labor and resources in the United States.
Although the Company's clinical trials to date have only been conducted in
India, they have been administered in accordance with protocols designed to be
consistent with the standards of the United States Food and Drug Administration
(the "FDA") and in laboratories that operate in accordance with FDA Good
Laboratory Practices ("GLP") guidelines. In addition, the Company's proprietary
plant extraction process is conducted for it by Kancor Flavours & Extracts Pvt.
Ltd., a third-party Indian supplier with an ISO-9000 certification (a worldwide
industry manufacturing standard). The Company has thus
3
<PAGE>
established, and continues to enhance, a network infrastructure in India
designed to identify phyto-pharmaceuticals through an accelerated process and in
a low-cost, high quality environment.
RA-11, the Company's lead product, has been derived, initially through
Ayurvedic studies, from a combination of four different plant species. The
Company holds an exclusive license on two Indian patents relating to its
proprietary plant extraction and RA-11 formulation processes, as well as a
United States patent relating to RA-11 and its use in treating degenerative
musculoskeletal diseases, such as rheumatoid arthritis and osteoarthritis.
Incidence of rheumatoid arthritis is reported to be approximately 2% of the
world population and the incidence of clinically symptomatic osteoarthritis is
reported to be between 10-15% worldwide. Moreover, in 1996, arthritis in general
was reported by the American College of Rheumatology ("ACR") to be the number
one cause of disability in the United States and the total market for
prescription arthritis drug therapy was estimated to be over $6 billion. Based
on clinical trials conducted in India (where RA-11 has been approved for
commercial sale by India's FDA equivalent) under protocols consistent with FDA
guidelines and ACR criteria, the Company believes that RA-11 may prove to be an
effective and safe drug for long-term treatment of osteoarthritis and may be
classified as a disease modifying, anti-rheumatic drug for the long-term
treatment of rheumatoid arthritis.
Effective September 1997, the Company entered into a three-year distribution
agreement with a Singapore-based pharmaceutical marketing and distribution
company, MD Pharmaceuticals Laboratories Ltd., for the distribution of RA-11 in
certain Pacific Rim countries and expects marketing to commence under such
agreement during the first half of 1998. In addition, RA-11 is currently being
test-marketed in India under an agreement with Alembic Chemical Works Co.
Limited, an Indian pharmaceutical company. The Company intends to file an
investigational new drug ("IND") application for RA-11 with the FDA in the
United States during the first quarter of 1998. Subject to approval of its IND
application, of which there can be no assurance, the Company will seek to
by-pass Phase I clinical trials (preliminary trials which focus on healthy human
subjects) in the United States, proceeding directly to Phase II clinical studies
(intermediate level trials, focused on a limited target patient population),
since it has already conducted two large, well-documented efficacy and safety
Phase II level clinical trials in India using protocols consistent with FDA
guidelines. The Company does not, however, anticipate completing clinical trials
or filing a new drug application ("NDA") with the FDA for RA-11 (approval of
which must be obtained prior to the commencement of its commercial sale in the
United States) until, at the earliest, the year 2001.
The Company is in the development stage and has not yet had any of its
products approved by the FDA. The Company's long-term viability, profitability
and growth will depend upon successful commercialization of products resulting
from its research and development activities. To date, the Company has recorded
only limited product sales revenues ($83,000 as of September 30, 1997), and
these have been derived primarily from sales in India of SA-12, a proprietary
anti-bacterial surgical scrub acquired by the Company from its inventor in 1995.
As a result, the Company has incurred significant operating losses since its
inception, including operating losses of $1,146,000, $1,245,000 and $596,000 for
the years ended December 31, 1995 and 1996 and the nine months ended September
30, 1997, respectively. The Company expects that its losses will increase as the
Company expands its product development activities and that they will continue
until such time, if ever, as the Company is able to generate sufficient revenues
to support its operations. The Company believes that its ability to generate
sufficient revenues primarily depends on the success of the Company in
completing development, and obtaining regulatory approvals for the commercial
sale, of RA-11 and other product candidates. There can be no assurance that any
of such events will occur or that the Company will ever achieve profitable
operations. See "Risk Factors."
The Company is a Delaware corporation which was organized on January 11,
1993 under the name Bio-Ved, Inc. The Company changed its name to AyurCore, Inc.
on September 27, 1995. The Company has one substantially wholly-owned
subsidiary, BIO-VED Pharmaceuticals Private Limited, a company organized in
India ("Bio-Ved"). Unless the context otherwise requires, all references herein
to the "Company" shall be deemed to include and refer to AyurCore, Inc. and
Bio-Ved. The Company's principal executive office is located at 1737 N. First
Street, Suite 290, San Jose, California 95112 and its telephone number is (408)
441-6380.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered......................... 1,250,000 shares
Common Stock to be outstanding after the
Offering................................... 3,459,702 shares (1)
Use of Proceeds.............................. The Company intends to use the net proceeds
of the Offering for research and development,
repayment of indebtedness, manufacturing and
marketing, and working capital.
Risk Factors................................. The Company is a development stage company
and has incurred substantial losses since
inception. An investment in the securities
offered hereby is speculative in nature and
involves a high degree of risk and immediate
substantial dilution. See "Risk Factors" and
"Dilution."
Proposed Nasdaq symbol....................... "AYUR"
</TABLE>
- ------------------------
(1) Includes 209,708 shares of Common Stock issued as of October 31, 1997 upon
conversion of $700,000 principal amount of, and $138,830 in accrued interest
on, certain of the Company's outstanding notes (the "Note Conversion"). Does
not include: (i) 45,000 shares of Common Stock reserved for issuance upon
exercise of stock options granted, and 182,986 shares of Common Stock
reserved for issuance upon exercise of stock options available for future
grant, under the Company's 1997 Stock Option Plan (the "Option Plan"); (ii)
315,970 shares of Common Stock reserved for issuance upon exercise of
currently outstanding non-Option Plan options; (iii) 350,000 shares of
Common Stock reserved for issuance upon exercise of currently outstanding
warrants, including 100,000 warrants issued as of October 31, 1997 (the
"October 1997 Warrants"); and (iv) 125,000 shares of Common Stock reserved
for issuance upon exercise of the Representative's Warrants. See "Plan of
Operation--Liquidity and Capital Resources," "Management--Stock Options,"
"Certain Transactions," "Description of Securities" and "Underwriting."
5
<PAGE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
The following sets forth certain summary historical financial data for the
Company as of December 31, 1996 and for each of the years in the two-year period
ended December 31, 1996, which has been derived from the consolidated financial
statements of the Company included elsewhere in this Prospectus. The summary
historical financial data set forth as of September 30, 1997 and for the
nine-month periods ended September 30, 1996 and 1997 and for the period from
January 11, 1993 (inception) through September 30, 1997, has been derived from
the unaudited consolidated financial statements of the Company included
elsewhere herein. The summary historical financial data should be read in
conjunction with such combined financial statements and the notes thereto.
Operating results for interim periods are not necessarily indicative of results
for the full fiscal year.
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED JANUARY 11, 1993
DECEMBER 31, SEPTEMBER 30, (INCEPTION)
---------------------- -------------------------- THROUGH SEPTEMBER 30,
1995 1996 1996 1997 1997
---------- ---------- ------------ ------------ ---------------------
<S> <C> <C> <C> <C> <C>
Revenue:
Net product sales............................ $ 83 $ 83
Royalty income............................... 12 12
Government grant............................. 100 100
------ -------
Total revenue.................................. 195 195
------ -------
Costs and expenses:
Cost of sales................................ 83 83
Research and development..................... $ 318 $ 401 $ 297 228 1,268
General and administrative................... 828 844 593 480 2,757
---------- ---------- ------ ------ -------
Total operating expenses....................... 1,146 1,245 890 791 4,108
---------- ---------- ------ ------ -------
Loss from operations........................... (1,146) (1,245) (890) (596) (3,913)
Net interest income (expense)................ (17) (82) (59) (108) (212)
---------- ---------- ------ ------ -------
Net loss..................................... $ (1,163) $ (1,327) $ (949) $ (704) $ (4,125)
---------- ---------- ------ ------ -------
---------- ---------- ------ ------ -------
Net loss per share(1).......................... $ (.57) $ (.64) $ (.46) $ (.34)
---------- ---------- ------ ------
---------- ---------- ------ ------
Weighted average number of shares
outstanding(1)............................... 2,051,939 2,065,827 2,065,827 2,065,827
---------- ---------- ------ ------
---------- ---------- ------ ------
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-------------------------------------------
PRO FORMA
DECEMBER 31, 1996 ACTUAL PRO FORMA(2) AS ADJUSTED(2)(3)
----------------- --------- ------------- -----------------
<S> <C> <C> <C> <C>
Working capital (deficit)......................... $ (1,524) $ (2,207) $ (1,129) $ 5,016
Total assets...................................... 216 303 303 5,753
Total current liabilities......................... 1,658 2,401 1,323 653
Long-term debt.................................... -- -- 251 251
Deficit accumulated during development stage...... (3,421) (4,125) (4,215) (4,215)
Total stockholders' equity (capital deficiency)... (1,442) (2,098) (1,271) 4,849
</TABLE>
(FOOTNOTES APPEAR ON FOLLOWING PAGE)
6
<PAGE>
- ------------------------
(1) Net loss per share is computed based upon the weighted average number of
shares of Common Stock outstanding during the periods. Pursuant to the
requirements of the Commission, all Common Stock and Common Stock
equivalents issued within the 12 months immediately preceding the initial
filing of the Registration Statement of which this Prospectus forms a part,
at a price below the assumed offering price of $6.00 per share (the midpoint
of the currently anticipated range of the initial public offering price per
share), have been included in the weighted average number of shares
outstanding for all periods presented, utilizing the "treasury stock
method."
(2) Gives effect to (i) the Note Conversion which was effected as of October 31,
1997 (including the conversion of interest accrued in October 1997), (ii)
the issuance of the October 1997 Warrants, and (iii) the modification,
effective December 1, 1997, of the terms of approximately $230,000 in
principal amount of short-term debt, plus accrued interest thereon ($21,000
as of September 30, 1997), resulting in its reclassification as long-term
debt. See "Plan of Operation--Liquidity and Capital Resources."
(3) As adjusted to give effect to the sale of the 1,250,000 shares of Common
Stock offered hereby at an assumed price of $6.00 per share (the midpoint of
the currently anticipated range of the initial public offering price) and
the anticipated application of the estimated net proceeds therefrom,
including repayment of certain indebtedness (approximately $670,000 in
outstanding principal and interest as of September 30, 1997). See "Use of
Proceeds."
7
<PAGE>
RISK FACTORS
THE SECURITIES BEING OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND SHOULD
BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT.
THE FOLLOWING RISK FACTORS, IN ADDITION TO THE OTHER INFORMATION AND FINANCIAL
DATA SET FORTH IN THIS PROSPECTUS, SHOULD BE CONSIDERED CAREFULLY IN EVALUATING
THE COMPANY AND ITS BUSINESS BEFORE MAKING AN INVESTMENT IN THE SHARES. THE
RISKS DESCRIBED BELOW AND ELSEWHERE IN THIS PROSPECTUS ARE NOT INTENDED TO BE AN
EXHAUSTIVE LIST OF THE GENERAL OR SPECIFIC RISKS INVOLVED, BUT MERELY IDENTIFY
CERTAIN RISKS THAT ARE NOW FORESEEN BY THE COMPANY. IT MUST BE RECOGNIZED THAT
OTHER RISKS, NOT NOW FORESEEN, MIGHT BECOME SIGNIFICANT IN THE FUTURE AND THAT
THE RISKS WHICH ARE NOW FORESEEN MIGHT AFFECT THE COMPANY TO A GREATER EXTENT
THAN IS NOW FORESEEN OR IN A MANNER NOT NOW CONTEMPLATED.
EARLY STAGE OF PRODUCT DEVELOPMENT; NO ASSURANCE OF SUCCESSFUL PRODUCT
DEVELOPMENT. None of the Company's products or product candidates have been
approved for sale in the United States or Europe or in other countries with
comparable regulatory approval processes. The Company's products and product
candidates are in various stages of development and will require significant
additional development, clinical testing and investment prior to
commercialization in the United States and other countries. Products for use in
human healthcare must be evaluated in extensive human clinical trials to
determine their safety and efficacy as part of a lengthy process to obtain
government approval. Clinical trials may be terminated at any time for many
reasons, including safety or lack of efficacy. There can be no assurance that
the Company will not encounter problems in clinical trials that will cause the
Company to delay or suspend any trials which it may conduct. Further, there can
be no assurance that the Company's research and development efforts will be
successful or that any products developed will be safe, effective, capable of
being manufactured in commercial quantities at an economical cost, approved by
appropriate regulatory authorities, accepted for coverage and reimbursement by
third party payers or successfully marketed in quantities sufficient to generate
operating revenue. Failure of any of the Company's product candidates to
successfully complete any of the steps necessary for their successful
commercialization would have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business."
DEVELOPMENT STAGE COMPANY; HISTORY OF SIGNIFICANT LOSSES; ANTICIPATED FUTURE
LOSSES; ACCOUNTANT'S EXPLANATORY PARAGRAPH REGARDING THE COMPANY'S ABILITY TO
CONTINUE AS A GOING CONCERN. The Company is in the development stage and, as
such, has generated only limited revenue and has incurred significant operating
losses, including operating losses of $1,146,000, $1,245,000 and $596,000 for
the years ended December 31, 1995 and 1996 and the nine months ended September
30, 1997, respectively. As of September 30, 1997, the Company had an accumulated
deficit of $4,125,000. The Company expects to incur operating losses and
negative cash flow for the next several years and that its losses will increase
as the Company expands its research and development activities. The likelihood
of the Company's success must be considered in light of the problems, delays,
expenses and difficulties frequently encountered by enterprises in the early
stage of development, many of which may be beyond the Company's control. These
include, but are not limited to, unanticipated problems relating to product
development, preclinical and clinical testing, the obtainment of regulatory
approvals for the manufacture and sale of products, competition, manufacturing,
marketing, and the political, economic and regulatory problems associated with
engaging in business in India and other countries. These and other problems may
result in additional costs and expenses that exceed current estimates. There can
be no assurance that the Company will ever achieve significantly increased
revenues or profitable operations. In addition, the Company's independent
auditors have included an explanatory paragraph in their report stating that the
Company's accumulated deficit and its dependence, to date, upon advances and
loans from stockholders raise substantial doubts about the Company's ability to
continue as a going concern. The Offering is an integral part of the Company's
plan to continue as a going concern. See "Plan of Operation" and Combined
Financial Statements.
8
<PAGE>
SIGNIFICANT CAPITAL REQUIREMENTS; DEPENDENCE ON OFFERING PROCEEDS; WORKING
CAPITAL DEFICIT; NEED FOR ADDITIONAL FINANCING. The Company's capital
requirements have been and will continue to be significant. To date, the Company
has been dependent primarily upon advances and loans from, or guaranteed by,
stockholders to fund its capital requirements. As of September 30, 1997, the
Company had a working capital deficit of $2,207,000, and it is dependent upon
the proceeds of the Offering to fund its continuing research and development and
other working capital requirements. The Company anticipates, based on its
currently proposed plans and assumptions relating to its operations (including
assumptions regarding the nature and extent of research and development required
in connection with the regulatory approval process, the timing of obtaining
regulatory approvals, if any, market acceptance, the competitive position of the
Company's products, and the ability of the Company to continue to secure
adequate manufacturing and distribution relationships) that the net proceeds of
the Offering will be sufficient to fund the Company's contemplated capital
requirements for at least 12 months following the consummation of the Offering.
In the event the Company's plans change or its assumptions change or prove to be
incorrect, the Company could be required to seek additional financing sooner
than currently anticipated. In addition, the Company will need to raise
substantial additional capital to fund its future operations. There can be no
assurance that additional financing will be available when needed on terms
acceptable to the Company, or at all. Any inability to obtain additional
financing when needed would have a material adverse effect upon the Company and
could prevent it from implementing its business strategy and require it to
significantly curtail its operations. In addition, if additional funds are
raised by issuing equity securities, dilution to then existing stockholders will
result and future investors may be granted rights superior to those of existing
stockholders. See "Use of Proceeds" and "Plan of Operation."
DEPENDENCE UPON KEY PERSONNEL AND CONSULTANTS. The Company's success
depends in large part on the continued services of its executive management team
and other key personnel. The Company's success also depends on its ability to
retain and attract highly skilled personnel, both in the United States and
India. There can be no assurance that the Company will be able to continue to
attract or retain such persons. In addition, the Company relies to a large
extent on scientific consultants to assist it in the drug discovery and
development process. The Company's success is substantially dependent upon the
efforts of these third parties and the continued availability of their services
to the Company. Many of the Company's arrangements with its consultants are
relatively short-term or are informal. There is, therefore, no assurance that
the Company will be able to retain or continue to retain such consultants or
other qualified consultants on commercially reasonable terms, or at all. In
addition, the time and resources devoted to the Company's business by its
consultants will generally be controlled by them and not by the Company, and
many of these consultants may have commitments to other entities that could
limit their availability to the Company. Some of these consultants may also
provide consulting services to companies that may be competitors of the Company.
The loss of existing executive management or key personnel, or the failure to
recruit additional highly skilled personnel, could significantly impede the
Company's attainment of its objectives and have a material adverse effect on the
Company's business, financial condition and result of operations. See
"Business--Consultants" and "Management."
UNCERTAINTY REGARDING PATENTS AND PROPRIETARY RIGHTS. The Company's success
depends in part on its ability to obtain patent protection for its products and
to preserve its trade secrets. The Company holds an exclusive license on the
United States patent relating to RA-11 and its use in treating degenerative
musculoskeletal diseases, including rheumatoid arthritis and osteoarthritis. The
Company also holds an exclusive license on two Indian patents, one of which
relates to the Company's proprietary plant extraction process and other to the
Company's proprietary process for formulating RA-11, both of which patents
expire in 2001. In addition, the Company has a pending United States patent
application related to BV-6. No assurance can be given that the Company's patent
applications will issue as patents, that any patents will provide the Company
with competitive advantages for its products or that they will not be
successfully challenged or circumvented by the Company's competitors. The
Company has not conducted an exhaustive patent search and no assurance can be
given that patents do not exist or could not be filed which would have an
adverse effect on the Company's ability to market its products. If other
companies were to
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successfully bring legal actions against the Company claiming patent or other
intellectual property right infringements, then, in addition to any potential
liability for damages, the Company could be required to obtain a license in
order to continue to use the affected process or to manufacture or use the
affected product and, if enjoined by a court, the Company could be required to
cease using such process or product. There can be no assurance that the Company
would prevail in any such action or that any license required under any such
patent would be made available on acceptable terms, or at all. There is
significant litigation in the pharmaceutical industry regarding patent and other
intellectual property rights. If the Company becomes involved in such
litigation, it could consume a substantial portion of the Company's financial
and other resources, regardless of the outcome of such litigation. There can be
no assurance that the Company will have the financial or other resources
necessary to enforce or defend a patent infringement action. The Company also
relies on trade secrets and proprietary know-how which it seeks to protect, in
part, by confidentiality agreements with its employees and consultants. There
can be no assurance that these agreements will not be breached, that the Company
would have adequate remedies for any breach or that the Company's trade secrets
will not otherwise become known or independently developed by competitors. See
"Business--Patents, Licenses, and Proprietary Rights."
At present, India only grants process patents for pharmaceutical products.
Although India is not a signatory of the Paris Convention, it is a member of the
World Trade Organization ("WTO"). As a signatory of WTO, India is required to
comply with its obligations under Trade-Related Aspects of Intellectual Property
Rights ("TRIPS"). TRIPS requires India to grant product patents for
pharmaceutical products after a certain transition period. During the transition
period, participating countries must establish a means for filing patent
applications relating to pharmaceutical products and agricultural chemicals and
also grant exclusive marketing rights for certain periods. In response to claims
raised by other countries, WTO ruled that India has not been abiding by its
transition period commitments under TRIPS. As of the date of this Prospectus, it
is expected that India will appeal the WTO decision. In addition, as an
aftermath of the Convention on Biological Diversity, India is planning to enact
a law on national bio-diversity. This law may place restrictions and/or
conditions for obtaining patents or other intellectual property relating to
biological material or products derived therefrom. See "Business--Patents,
Licenses and Proprietary Rights."
NO ASSURANCE OF REGULATORY APPROVALS. The Company's research, preclinical
development, clinical trials, and manufacturing and marketing of its products in
the United States and other countries are subject to extensive regulation by
numerous governmental authorities including, but not limited to, the FDA. The
Company has no products approved by the FDA and does not expect to achieve
profitable operations until products receive FDA approval, are commercialized
successfully, and become eligible for reimbursement by third party payers. Any
potential therapeutic product developed by the Company will be subject to
rigorous preclinical and clinical testing and approval pursuant to regulations
administered by the FDA and comparable agencies in other countries. The approval
process for the Company's drug candidates is lengthy and is likely to involve
significant expenditures. No assurance can be made that the Company will be able
to file any NDAs or that any such filings will result in FDA approval.
Furthermore, the Company cannot predict with any degree of certainty when it
might be in a position to file any NDA or the length of time involved between
the filing of an NDA and obtaining FDA approval, if at all. The cost to the
Company of conducting human clinical trials for any potential product can vary
dramatically based on a number of factors, including the order and timing of
clinical indications pursued and the extent of development and financial
support, if any, from corporate partners. The Company may have difficulty
obtaining sufficient patient populations, clinicians or support to conduct its
clinical trials as planned and may have to expend substantial additional funds
to obtain access to such resources, or delay or modify its plans significantly.
The effect of government regulation may be to delay marketing of the
Company's proposed products for a considerable period of time, to impose costly
procedures upon the Company's activities and to furnish a competitive advantage
to companies that compete with the Company. There can be no assurance that
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FDA or other regulatory authority approval for any product candidates developed
by the Company will be granted on a timely basis or at all. Any delay in
obtaining or any failure to obtain such approvals would materially and adversely
affect the marketing of the Company's drug candidates and the Company's
business, financial position and results of operations. In addition, legislation
may be enacted in the future which might adversely affect the Company's ability
to develop, manufacture or market its drug candidates. Any FDA approvals that
may be granted will be subject to continual review, and later discovery of
previously unknown problems may result in withdrawal of products from marketing.
Moreover, if and when such approval is obtained, the marketing and manufacture
of the Company's products would remain subject to extensive regulatory
requirements administered by the FDA and other regulatory bodies. Failure to
comply with these regulatory requirements could, among other things, result in
fines, suspensions or withdrawal of regulatory approvals, operating restrictions
and criminal prosecution. The Company intends, either on its own or in
collaboration with others, to market its products in major markets outside of
the United States. There can be no assurance that the Company will be successful
in establishing marketing relationships, conducting clinical testing in foreign
countries or obtaining required foreign regulatory approvals in a timely manner,
if at all. To market its products abroad, the Company must comply with numerous
and varying foreign regulatory requirements implemented by foreign health
authorities, governing, among other things, the design and conduct of clinical
trials, pricing regulations and marketing approval. The approval procedure may
vary among countries and can involve, for example, additional testing, and the
time required to obtain approval may differ from the time required to obtain FDA
approval. The foreign regulatory approval process includes all of the risks
associated with obtaining FDA approval. However, approval by the FDA of any drug
candidate does not ensure approval by the regulatory agencies of other
countries. See "Business--The Regulatory Approval Process" and "--Products and
Product Candidates."
OPERATIONS CONDUCTED IN INDIA AND DEPENDENCE ON POLITICAL AND ECONOMIC
STABILITY OF INDIA. Substantially all the Company's research and development
operations are currently conducted in India. To effectively manage its
operations in India, the Company requires, and will continue to require, the
engagement of persons with appropriate managerial skills and the implementation
of an effective supervisory program which will include a continual and current
flow of reliable information to the Company's officers in the United States and
frequent reports from, and visits to, its operations in India. Additional
administrative costs and greater security and operational risks, accordingly,
will be incurred than if the operations were conducted solely in the United
States. No assurance can be given that persons with the required managerial
skills can continue to be located and employed by the Company in India or that
an effective supervisory program can be maintained. Furthermore, the Company's
operations are, and will be, dependent on the political and economic stability
of India, as well as its laws, rules and regulations, particularly with respect
to licenses, permits, government controls, investments and conduct of operations
by foreign-owned entities, patents and other intellectual property protections,
taxes, customs, trade restrictions and exchange and currency controls. These
considerations may also apply to each of the individual states within India in
which the Company conducts or may conduct its operations.
INABILITY TO REPATRIATE CERTAIN FUNDS. Foreign investments in India are
subject to regulation under the Foreign Exchange Regulation Act, 1973. Under
existing Indian law, foreign investments in Indian companies can either be made
on a repatriation or non-repatriation basis. Investments made on a repatriation
basis permit repatriation out of India of the full capital amount invested,
together with interest, dividends and other amounts earned thereon. Investments
made on a non-repatriation basis do not permit repatriation out of India of any
of the capital amount invested. Interest, dividends and other income earned on
the capital amount, however, are currently repatriable out of India. Foreign
investments made on a repatriation basis require prior approval of the Foreign
Investment Promotion Board ("FIPB"), Government of India and Reserve Bank of
India ("RBI"). Investments made on a non-repatriation basis require no
governmental approval if made by non-resident Indians or overseas corporate
bodies owned at least 60% by nonresident Indians (collectively, "NRIs").
However, these investments are required to be declared in a filing made with the
RBI. Prior to the Offering, the Company has been considered an NRI.
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As of September 30, 1997, an aggregate of approximately $688,000 had been
provided by the Company to fund the Company's operations in India, approximately
$268,000 of which was provided to Bio-Ved, and was registered or is being
registered, as a contribution to Bio-Ved's capital on a non-repatriation basis.
Since these funds have been invested on a non-repatriation basis, they cannot be
repatriated from India. The Company has submitted an application to the FIPB to
permit future investment in Bio-Ved on a repatriation basis. There can be no
assurance that the Company's application will be approved. See "Plan of
Operation."
DEPENDENCE ON SOURCES OF SUPPLY. The plant materials from which the
Company's products are being developed are currently located primarily in India.
The ability of the Company to secure an adequate supply of cultivated plant
materials will be affected by factors such as location, seasonality and weather.
Plant materials used in the production of RA-11 are purchased from one supplier,
Kancor Flavours & Extracts Pvt. Ltd. ("Kancor"), a supplier of plant extracts
located in India. Although the Company has entered into a supply agreement with
Kancor, there can be no assurance that this supplier will continue to be able to
supply the Company with all of the Company's requirements. The Company is also
dependent on Kancor and another supplier for plant materials used in connection
with the Company's other phyto-pharmaceutical research and development
activities. In addition, a continued source of plant supply is subject to the
risks inherent in international trade. Those risks include unexpected changes in
regulatory requirements, exchange rates, tariffs and barriers, difficulties in
coordinating and managing foreign operations, potentially adverse tax
consequences and disruptions in the political and economic stability of India
and other regions in which the plants are grown. The Indian government presently
prohibits the export of certain plants, plant portions and their derivatives and
extracts. Although none of the Company's products or product candidates are
produced utilizing any of these plant materials, there can be no assurance that
the Indian government will not, in the future, prohibit the export of plant
materials used in the Company's products. There can be no assurance of a
continual source of supply of plant materials. Interruptions in supply or
material increases in the cost of the supply could have a material adverse
affect on the Company's business, financial condition and results of operations.
See "Business--Manufacturing and Supply."
LIMITED MANUFACTURING CAPACITY. The Company does not have the staff or
facilities necessary to manufacture its products on a commercial scale. The
Company has entered into a manufacturing agreement with a pharmaceutical company
located in India for the production of RA-11, and the Company will seek similar
manufacturing agreements as additional products are developed and
commercialized. SA-12 is manufactured under an arrangement with another
pharmaceutical company located in India, although no formal agreement has yet
been entered into with this manufacturer. Although the Company intends to
monitor production at its manufacturers' facilities to assure their compliance
with the Company's product specifications, the Company will be dependent upon
its manufacturers to, among other things, satisfy performance and quality
specifications and dedicate sufficient production capacity to meet scheduled
delivery times. There can be no assurance that any manufacturer will devote the
resources necessary to meet any demand for the Company's products. Failure or
delay by the Company's manufacturers in supplying products would adversely
affect the Company's ability to deliver products on a timely and competitive
basis. Moreover, to the extent the Company engages manufacturers to manufacture
products to be sold in the United States, such manufacturers must comply with
the FDA's current good manufacturing practice ("cGMP") regulations and pass
pre-approval inspections by the FDA and periodic cGMP inspections. In the
future, the Company may decide to manufacture certain of its proposed products
on its own. This will require extensive investment in facilities and equipment
and will require experienced personnel. There can be no assurance that the
Company will be able to obtain the funds or other resources necessary to
establish its own manufacturing capabilities. See "Business--The Regulatory
Approval Process" and "--Manufacturing and Supply."
LIMITED MARKETING CAPABILITIES AND EXPERIENCE. The Company currently has no
marketing or sales staff and does not have the resources necessary to undertake
extensive marketing activities. Achieving
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market acceptance for the Company's products will require substantial marketing
efforts and the expenditure of significant funds to inform potential customers
of the perceived benefits of the Company's products and proposed products.
Accordingly, the Company currently intends to rely on others for the sale and
marketing of its products. RA-11 is currently being test-marketed in India under
a memorandum of understanding with Alembic Chemical Works Co. Limited
("Alembic"), an Indian pharmaceutical company. The test-marketing is scheduled
to conclude in March 1998, at which time, subject to satisfactory test results,
the parties contemplate entering into a marketing agreement. There can be no
assurance that the test-marketing will be successful or that, even if
successful, a marketing agreement will be entered into with Alembic. Effective
September 1997, the Company entered into a distribution agreement with MD
Pharmaceuticals Laboratories Ltd., a Singapore-based pharmaceutical company,
covering the sale and marketing of RA-11 in certain Pacific Rim countries. The
Company has also entered into a distribution agreement covering the sale and
marketing of SA-12 in India. The Company will continue to seek to market and
distribute its products through others pursuant to contractual arrangements,
such as distribution agreements, joint ventures or other strategic arrangements.
To the extent the Company relies on the efforts of others to market and
distribute its products, the Company will lose a degree of control over an
important aspect of its business. While the Company believes that third party
distributors with which it enters into distribution agreements will have an
economic motivation to commercialize the Company's products, the time and
resources devoted to these activities will generally be contributed and
controlled by such entities and not by the Company. A decline in the financial
prospects of particular distributors could have an adverse effect on the
Company. There can be no assurance that the Company will be able to maintain its
relationships with existing distributors or enter into additional distribution
arrangements or that any such arrangements will result in the successful
commercialization of any of the Company's products. See "Business--Business
Strategy" and "--Marketing."
RISKS RELATING TO LICENSED OR PURCHASED TECHNOLOGIES. The Company has
entered into license agreements pursuant to which it acquired exclusive
worldwide rights to RA-11. One agreement relates to India and the other
agreement relates to the rest of the world. However, the Company's licensor does
not have any patent rights relating to RA-11 outside of the United States and
India. The Company has also entered into a license agreement pursuant to which
it acquired the exclusive worldwide rights to IM-10. The Company's rights under
these agreements are dependent upon its paying royalties at agreed upon rates
and commencing marketing within agreed upon periods of time. Although the
Company is presently in compliance with its obligations under the agreements,
there can be no assurance that it will continue to be able to comply with such
obligations. The Company has also entered into an agreement pursuant to which it
has been assigned a United States patent application related to BV-6, in
exchange for royalties. Failure by the Company to comply with the terms of any
of these agreements could result in the forfeiture by the Company of the
technologies. Such forfeiture could have a material adverse effect upon the
Company's business, financial condition and results of operations. See
"Business--Patents, Licenses and Proprietary Rights."
RAPID TECHNOLOGICAL CHANGE AND SUBSTANTIAL COMPETITION. The pharmaceutical
industry is subject to rapid and substantial technological change. Technological
competition from pharmaceutical companies, biotechnology companies and
universities is intense and is expected to increase. Many of these entities have
significantly greater research and development capabilities, as well as
substantial marketing, manufacturing, financial and managerial resources, and
represent significant competition for the Company. Some of the major
pharmaceutical companies, as well as several smaller companies, are seeking to
develop pharmacological products from plant derivatives. There can be no
assurance that developments by others will not render the Company's products or
technologies noncompetitive or that the Company will be able to keep pace with
technological developments. In addition, competitors have developed or are in
the process of developing technologies that are, or in the future may be, the
basis for competitive products. Some of these products may have an entirely
different approach or means of accomplishing the desired therapeutic effect and
may be more effective and less costly than the products developed by the
Company.
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Other forms of medical treatment may also offer competition to the Company's
products. There can be no assurance that the Company will be able to compete
successfully. See "Business--Competition."
PRODUCT LIABILITY EXPOSURE. The Company faces an inherent risk of exposure
to product liability claims in the event that the investigation or use of
products manufactured by the Company results in illness or injury. While the
Company will continue to attempt to take appropriate precautions, there can be
no assurance that it will avoid significant product liability exposure. The
Company currently has product liability insurance coverage in India, the only
country in which its products are currently being marketed. As its products
achieve wider-spread commercialization, the Company intends to seek product
liability insurance in amounts consistent with industry practice in the
countries in which its products are to be marketed. There can be no assurance
that the Company's current insurance coverage is adequate or that adequate
insurance coverage will be available at an acceptable cost, if at all. In the
event of a partially or completely uninsured successful claim against the
Company, the business and financial condition of the Company could be materially
adversely affected. See "Business--Product Liability."
COMPLIANCE WITH ENVIRONMENTAL REGULATIONS. In connection with the
performance of its research and development activities and the manufacturing of
materials for its clinical trials, the Company is subject to standards imposed
by India and, to the extent the Company conducts operations or maintains
facilities in the United States, the Company will be subject to United States
federal, state and local laws, rules, regulations and policies governing the
use, generation, manufacture, storage, air emission, effluent discharge,
handling and disposal of certain materials and wastes (which activities involve
the controlled handling and disposal of hazardous and regulated materials such
as tissue samples, live viruses and chemicals). Although the Company believes
that its safety procedures comply with applicable standards in India and, when
performed in the United States, will comply with standards prescribed by United
States federal, state and local regulations, the risk of accidental
contamination or injury from these materials cannot be completely eliminated. In
the event of such an accident, the Company could be held liable for the damages
that result and any such liability could exceed the resources of the Company.
Moreover, there can be no assurance that the Company will not be required to
incur significant costs to comply with environmental and health and safety
regulations in the future. See "Business--Other Government
Regulation--Environmental Regulation."
UNCERTAINTY OF HEALTHCARE REIMBURSEMENT; PRICING. In both domestic and
foreign markets, sales of the Company's products, if any, will be dependent in
part on coverage and reimbursement by third party payers, such as government and
private insurance plans. Third party payers are increasingly challenging the
prices charged for pharmaceutical products and services. There can be no
assurance that the Company's products will be considered cost effective, that
reimbursement will be available, or if available, that the payer's reimbursement
policies will not adversely affect the Company's ability to sell its products
with an appropriate return on its investment. See "Business--Other Government
Regulation--Coverage and Reimbursement by Third Party Payers."
FOREIGN TRADE RISKS. To date, all of the Company's sales have been made in
India and the Company intends to continue to rely on sales to foreign markets
for a significant portion of its revenues. If, and to the extent that, the
Company is able to successfully market its products in foreign markets, the
Company will become increasingly subject to the risks inherent in foreign trade,
including shipping delays, increased collection risks, trade restrictions,
export duties and tariffs, fluctuations in foreign currencies and international
political, regulatory and economic developments, all of which could have an
adverse effect on the Company's operating margins and results of operations and
exacerbate the risks inherent in the Company's business. While the Company
believes that the products it currently markets have all necessary governmental
clearances required for the importation and sale of such products in the foreign
countries in which its products are currently marketed, there can be no
assurance that this is actually the case or that governmental authorities in
such foreign countries will not, in the event of noncompliance, suspend
distribution of the Company's products. See "Business--Marketing."
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CONTROL BY EXISTING STOCKHOLDERS; POSSIBLE DEPRESSIVE EFFECT ON THE
COMPANY'S SECURITIES. Immediately following the consummation of the Offering,
the Company's existing stockholders will, in the aggregate, beneficially own
approximately 69% of the outstanding Common Stock (including 553,427 shares
underlying currently exercisable options and warrants). As a result, the
Company's existing stockholders will be able to elect all of the Company's
directors, dissolve, merge or sell all of the Company's assets and otherwise
control the Company. Such concentration of control of the Company may also have
the effect of delaying, deferring or preventing a third party from acquiring
control of the Company, may discourage bids for the Company's Common Stock at a
premium over the market price and may adversely affect the market price of the
Common Stock. See "Principal Stockholders."
POSSIBLE ADVERSE EFFECT OF INVESTIGATION BY SECURITIES AND EXCHANGE
COMMISSION OF REPRESENTATIVE CONCERNING COMPLIANCE WITH THE FEDERAL SECURITIES
LAWS. The Securities and Exchange Commission (the "Commission") is conducting
an investigation concerning various aspects of the Representative's compliance
with the Federal securities laws. The Representative cannot predict whether this
investigation will ever result in any type of action against the Representative,
or, if so, whether any such action might have an adverse effect on the
Representative or the securities offered hereby. The Company has been advised
that the Representative intends to make a market in the securities following the
Offering. An unfavorable resolution of the Commission's investigation could have
the effect of limiting the Representative's ability to make a market in the
Company's securities, which could affect the liquidity or price of such
securities. See "Underwriting."
IMMEDIATE AND SUBSTANTIAL DILUTION. A purchaser in the Offering will
experience immediate and substantial dilution of approximately $4.60 per share
or 76.7% from the initial public offering price per share (based on an assumed
offering price of $6.00 per share, the midpoint of the anticipated range of the
initial public offering price per share). See "Dilution."
BENEFITS OF THE OFFERING TO CURRENT STOCKHOLDERS. Upon the consummation of
the Offering, the current stockholders of the Company will receive substantial
benefits, including the creation of a public trading market for their securities
and the corresponding facilitation of sales by such stockholders of their shares
of Common Stock in the secondary market (although most of such shares are
subject to 12-month "lock-up" agreements with the Representative and to certain
limitations on resale imposed upon officers, directors and affiliates of the
Company under the Federal securities laws), as well as an immediate increase in
net tangible book value of $1.98 per share to such stockholders based upon the
adjusted net tangible book value per share after the consummation of the
Offering and the application of the estimated net proceeds of the Offering
(based upon an assumed offering price of $6.00 per share, the midpoint of the
currently anticipated range of the initial public offering price per share). If,
at the time the existing stockholders are able to sell their shares of Common
Stock in the public market, the market price per share remains at the initial
public offering price, of which there can be no assurance, such stockholders
would realize an average gain of $4.96 per share on the sale of their existing
shares (again, based upon an assumed offering price of $6.00 per share). In
addition, the Company intends to use proceeds from the Offering to repay its
outstanding bank debt, all of which is personally guaranteed by Sanjeev and
Deepa Chitre, each a principal stockholder, director and officer of the Company,
and secured by collateral pledged by a trust for the benefit of their daughter.
This repayment will result in a benefit to such individuals, as their guarantees
and security will be released. See "Use of Proceeds," "Dilution," "Plan of
Operation--Liquidity and Capital Resources," "Principal Stockholders," "Certain
Transactions," "Shares Eligible for Future Sale" and "Underwriting."
NO DIVIDENDS ANTICIPATED. The Company has never paid any dividends on its
securities and does not anticipate the payment of dividends in the foreseeable
future. See "Description of Securities--Dividend Policy."
ANTI-TAKEOVER PROVISIONS; POSSIBLE ADVERSE EFFECTS OF AUTHORIZATION OF
PREFERRED STOCK. The Company's Certificate of Incorporation and By-Laws and
Delaware's General Corporation Law contain certain
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provisions that could have the effect of making it more difficult for a third
party to acquire, or of discouraging a third party from attempting to acquire,
control of the Company. Such provisions could limit the price that certain
investors might be willing to pay in the future for shares of the Common Stock.
Certain of such provisions impose various procedural and other requirements
which could make it more difficult for stockholders to effect certain corporate
actions. Furthermore, the Company's Certificate of Incorporation authorizes the
issuance of up to 5,000,000 shares of preferred stock on terms which may be
fixed by the Company's Board of Directors without further stockholder action.
The terms of any series of preferred stock, which may include priority claims to
assets and dividends and special voting rights, redemption rights and terms and
liquidation preferences could adversely affect the rights of holders of the
Common Stock. The issuance of preferred stock could make the possible takeover
of the Company or the removal of management of the Company more difficult,
discourage hostile bids for control of the Company in which stockholders may
receive premiums for their shares of Common Stock or otherwise dilute the rights
of holders of Common Stock and the market price of the Common Stock. See
"Description of Securities."
NO ASSURANCE OF PUBLIC MARKET; NEGOTIATED OFFERING PRICE; POSSIBLE
VOLATILITY OF MARKET PRICE OF COMMON STOCK. Prior to the Offering, there has
been no public market for the Common Stock. There can be no assurance that any
trading market for the Common Stock will develop or that, if any such market
develops, it will be sustained. The initial public offering price of the Common
Stock will be established by negotiation between the Company and the
Representative and may not necessarily bear any relationship to the Company's
book value, assets, past operating results, financial condition or other
established criteria of value. The market price of the Common Stock following
the Offering may be highly volatile as has been the case with the securities of
other development stage companies and many emerging companies. Factors such as
the Company's operating results, announcements by the Company or its competitors
of technological innovations or new products, and various factors affecting the
pharmaceutical industry generally, may have a significant impact on the market
price of the Company's securities. In addition, in recent years, the stock
market has experienced a high level of price and volume volatility and market
prices for the stock of many companies, particularly of small and emerging
growth companies, the common stock of which trade in the over-the-counter
market, have experienced wide price fluctuations which have not necessarily been
related to the operating performance of such companies. Accordingly, purchasers
of the Common Stock may experience difficulty selling or otherwise disposing of
their Common Stock. See "Underwriting."
POSSIBLE NASDAQ DELISTING; LOW STOCK PRICE. It is currently anticipated
that the Common Stock will be eligible for listing on Nasdaq upon the
consummation of the Offering. However, to maintain eligibility for trading on
Nasdaq following the Offering, the Company will be required to, among other
things, maintain net tangible assets of at least $2,000,000 and a minimum bid
price of $1.00 per share and adhere to certain corporate governance provisions.
If, in the future, the Company should fail any of these maintenance tests or
requirements, the Common Stock could be delisted from trading on Nasdaq and
trading, if any, in the Common Stock would thereafter be conducted in the
non-Nasdaq over-the-counter market. The effects of delisting include the limited
release of the market prices of the Company's securities and limited news
coverage of the Company. Delisting may restrict investors' interest in the
Company's securities and materially adversely affect the trading market and
prices for such securities and the Company's ability to issue additional
securities or to secure additional financing. In addition to the risk of
volatile stock prices and possible delisting, low price stocks are subject to
the additional risks of federal and state regulatory requirements and the
potential loss of effective trading markets. In particular, if the Common Stock
were delisted from trading on Nasdaq and the trading price of the Common Stock
was less than $5.00 per share, the Common Stock could be subject to Rule 15g-9
under the Exchange Act which, among other things, requires that broker/dealers
satisfy special sales practice requirements, including making individualized
written suitability determinations and receiving purchasers' written consent,
prior to any transaction. If the Company's securities were also deemed penny
stocks under the Securities Enforcement and Penny Stock Reform Act of 1990, this
would require additional disclosure in connection with trades in the Company's
securities, including the delivery of a disclosure schedule explaining the
nature
16
<PAGE>
and risks of the penny stock market. Such requirements could severely limit the
liquidity of the Company's securities and the ability of purchasers in the
Offering to sell their securities in the secondary market.
FUTURE SALES OF RESTRICTED SECURITIES; REGISTRATION RIGHTS. Upon the
consummation of the Offering, the Company will have 3,459,702 shares of Common
Stock outstanding, of which the 1,250,000 shares of Common Stock offered hereby
will be freely tradable by persons other than affiliates of the Company, without
restriction or further registration under the Securities Act of 1933, as amended
(the "Securities Act"). The remaining 2,209,702 shares of Common Stock (the
"Restricted Shares") outstanding were sold by the Company in reliance on
exemptions from the registration requirements of the Securities Act and are
"restricted securities" as defined in Rule 144 promulgated under the Securities
Act and may not be sold in the absence of registration under the Securities Act
unless an exemption therefrom, including an exemption afforded by Rule 144, is
available. Under Rule 144 (and subject to the conditions thereof), 619,850 of
the Restricted Shares are eligible for sale as of the date of this Prospectus,
1,380,144 of the Restricted Shares will become eligible for sale beginning 90
days after the date of this Prospectus, and substantially all of the remaining
209,708 Restricted Shares will become eligible for sale as of October 31, 1998.
The Company's officers, directors and existing stockholders have entered into
agreements which prohibit them from selling any securities of the Company
without the prior written consent of the Representative for a period of 12
months following the date of this Prospectus. The holders of the
Representative's Warrants and October 1997 Warrants will also be entitled to
certain registration rights with respect to such securities. The sale of a
substantial number of shares of Common Stock or the availability of Common Stock
for sale could adversely affect the market price of the Common Stock prevailing
from time to time. See "Shares Eligible for Future Sale" and "Underwriting."
EFFECT OF PREVIOUSLY ISSUED OPTIONS AND WARRANTS AND OF THE REPRESENTATIVE'S
WARRANTS ON STOCK PRICE. The Company has reserved from the authorized, but
unissued, Common Stock 710,970 shares of Common Stock for issuance upon exercise
of outstanding options and warrants (390,970 of which have exercise prices of
$4.00 or less) and 182,986 shares of Common Stock for issuance upon exercise of
options available for future grant under the Option Plan. In addition, upon the
consummation of the Offering, the Company will sell to the Representative, for
nominal consideration, the Representative's Warrants to purchase an aggregate of
125,000 shares of Common Stock at a price per share equal to 135% of the initial
offering price per share. The existence of these options and warrants may prove
to be a hindrance to future financings, since the holders of such securities may
be expected to exercise them at a time when the Company would otherwise be able
to obtain additional equity capital on terms more favorable to the Company. In
addition, the holders of the Representative's Warrants will have certain
registration rights, and the sale of the shares issuable upon exercise of such
securities or the availability of such shares for sale could adversely affect
the market price of the Common Stock. See "Description of Securities" and
"Underwriting."
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained or incorporated by reference in this
Prospectus, including without limitation, statements containing the words
"believes," "anticipates," "intends," "expects," "plans" and words of similar
import, constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties, assumptions and other
factors which may cause the actual results, performance or achievements of the
Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the risks
identified above under "Risk Factors." Given these uncertainties, prospective
investors are cautioned not to place undue reliance on such forward-looking
statements. The Company disclaims any obligation to update any such factors or
to publicly announce the result of any revision to any of the forward-looking
statements contained herein to reflect future events or developments.
17
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
1,250,000 shares of Common Stock offered hereby are estimated to be
approximately $6,120,000 (approximately $7,098,750 if the Representative's
over-allotment option is exercised in full), assuming an initial public offering
price of $6.00 per share (the midpoint of the currently anticipated range of the
initial public offering price) and after deducting underwriting discounts and
estimated offering expenses. The Company expects to use the net proceeds as
follows:
<TABLE>
<CAPTION>
APPROXIMATE
APPROXIMATE PERCENTAGE OF
ANTICIPATED USE OF NET PROCEEDS DOLLAR AMOUNT NET PROCEEDS
- ---------------------------------------------------------------- -------------- ---------------
<S> <C> <C>
Research and development(1)..................................... $ 4,400,000 71.9%
Repayment of indebtedness(2).................................... 676,000 11.0
Manufacturing and marketing(3).................................. 300,000 4.9
Working capital(4).............................................. 744,000 12.2
-------------- -----
Total......................................................... $ 6,120,000 100.0%
-------------- -----
-------------- -----
</TABLE>
- ------------------------
(1) Includes estimated costs and expenses relating to (i) filing an IND and, if
IND approval is obtained, commencing a Phase II clinical trial in the United
States and a Phase III clinical trial in India, all relating to RA-11; (ii)
continued preclinical testing of IM-10, BV-6 and HP-11 and, subject to
obtaining successful preclinical results, the commencement of clinical
trials for IM-10 and HP-11 in India; and (iii) establishing and equipping
additional laboratory facilities in India. Also includes $140,000
representing accounts payable related to research and development
activities. See "Business--Products and Product Candidates" and
"--Facilities."
(2) Includes $500,000 aggregate principal amount borrowed at various times from
November 1996 through September 1997 from the Atlantic Bank of New York
under three-month term notes at prime plus 2% per annum. The notes have been
consolidated and are presently due on February 2, 1998. Also includes
$150,000 principal amount borrowed from two individual investors in March
and July 1996 (plus accrued interest at prime plus 2% per annum estimated
through the anticipated consummation of the Offering). The proceeds of all
such loans were used for research and development and marketing. See "Plan
of Operation--Liquidity and Capital Resources."
(3) Represents manufacturing expenditures relating to RA-11 and SA-12 for the
build-up of product inventory and marketing expenditures relating to RA-11
and SA-12 for promotional materials and samples, medical symposia, product
educational programs and various related activities. See
"Business--Marketing."
(4) Working capital will be used for general corporate purposes, including
approximately $330,000 in aggregate annual base compensation for the
Company's three executive officers. Also includes costs for (i) seeking
collaborative arrangements with pharmaceutical companies, (ii) establishing
and enhancing management and information systems needed to monitor, control
and coordinate the Company's activities and (iii) patent and trademark
filings. See "Plan of Operation" and "Management."
The foregoing represents the Company's best estimate of the allocation of
the net proceeds of the Offering during the next 12 months. This estimate is
based on certain assumptions, including that development, testing and regulatory
requirements relating to the Company's products can be completed at budgeted
costs and that commercial sales of the Company's products will increase
significantly from results previously achieved by the Company. Projected
expenditures are estimates or approximations only. Future events, including the
problems, delays, expenses, difficulties and complications frequently
encountered by companies in an early stage of development, changes in economic,
regulatory or competitive conditions or
18
<PAGE>
in the Company's planned business, and the success or lack thereof of the
Company's development and sales and marketing efforts during the 12-month period
following the consummation of the Offering may make shifts in the allocation of
funds and curtailment of certain planned expenditures necessary or desirable.
Any such shifts will be at the discretion of the Company. See "Plan of
Operation."
If the Representative exercises the over-allotment option in full, the
Company will realize additional net proceeds of $978,750 (assuming an initial
public offering price of $6.00 per share). Such additional proceeds are expected
to be added to the Company's working capital.
Proceeds not immediately required for the purposes described above will be
invested principally in short-term interest bearing securities, money market
funds, certificates of deposit or direct or guaranteed obligations of the United
States government.
DILUTION
The difference between the initial public offering price per share of Common
Stock and the net tangible book value per share of Common Stock after the
Offering constitutes the dilution to investors in the Offering. Net tangible
book value per share on any given date is determined by dividing the net
tangible book value of the Company (total tangible assets less total
liabilities) on such date by the number of then outstanding shares of Common
Stock.
At September 30, 1997, net negative tangible book value of the Company was
$(2,098,000), or $(1.05) per share. After giving pro forma effect to the Note
Conversion (including the conversion of interest accrued in October 1997), the
pro forma net negative tangible book value of the Company at September 30, 1997
would have been $(1,271,000), or $(.58) per share. After also giving retroactive
effect to the sale of the 1,250,000 shares of Common Stock offered hereby at an
assumed price of $6.00 per share (the midpoint of the currently anticipated
range of the initial public offering price) and the receipt and anticipated
application of the estimated net proceeds therefrom, the as adjusted net
tangible book value of the Company at September 30, 1997 would have been
$4,849,000 or $1.40 per share, representing an immediate increase in net
tangible book value of $1.98 per share to existing stockholders and an immediate
dilution of $4.60 (76.7%) per share to investors in the Offering.
The following table illustrates the foregoing information with respect to
dilution to new investors on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price........................ $ 6.00
Net negative tangible book value before pro forma
adjustments.............................................. $ (1.05)
Increase attributable to pro forma adjustments............. .47
---------
Pro forma net negative tangible book value before the
Offering................................................. (.58)
Increase attributable to investors in the Offering......... 1.98
---------
Adjusted net tangible book value after the Offering.......... 1.40
---------
Dilution to investors in the Offering........................ $ 4.60
---------
---------
</TABLE>
19
<PAGE>
The following table sets forth, with respect to existing stockholders (after
giving effect to the Note Conversion) and the investors in the Offering, a
comparison of the number of shares of Common stock purchased from the Company,
the percentage ownership of such shares, the aggregate consideration paid, the
percentage of total consideration paid, and the average price paid per share.
<TABLE>
<CAPTION>
SHARES ACQUIRED TOTAL CONSIDERATION
----------------------- -------------------------
<S> <C> <C> <C> <C> <C>
AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ----------- ------------ ----------- -------------
Existing stockholders................................ 2,209,702 63.9% $ 2,304,000 23.5% $ 1.04
Investors in the Offering............................ 1,250,000 36.1% 7,500,000 76.5 $ 6.00(1)
---------- ----- ------------ -----
3,459,702 100.0% $ 9,804,000 100.0%
---------- ----- ------------ -----
---------- ----- ------------ -----
</TABLE>
- ------------------------
(1) Based on the midpoint of the currently anticipated range of the initial
public offering price.
The foregoing table assumes no exercise of the Representative's
over-allotment option. If such option is exercised in full, the new investors
will have paid $8,625,000 (based on an assumed price of $6.00 per share, the
midpoint of the currently anticipated range of the initial public offering
price) for 1,437,500 shares of Common Stock, representing approximately 78.9% of
the total consideration for 39.4% of the total number of shares outstanding. In
addition, computations set forth in the above table exclude an aggregate of
710,970 shares of Common Stock reserved for issuance upon the exercise of
currently outstanding stock options and warrants, at various prices ranging from
$.34 per share to 130% of the initial public offering price per share, and
125,000 shares of Common Stock reserved for issuance upon the exercise of the
Representative's Warrants. See "Management--Stock Options," "Description of
Securities" and "Underwriting."
20
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt and capitalization of the
Company as of September 30, 1997: (i) on a historical or actual basis; (ii) on a
pro forma basis to reflect the Note Conversion effected as of October 31, 1997
(including the conversion of interest accrued through October 31, 1997), the
issuance of the October 1997 Warrants, and the modification, effective December
1, 1997, of the terms of approximately $230,000 in principal amount of
short-term debt, plus accrued interest thereon ($21,000 as of September 30,
1997), resulting in its reclassification as long-term debt; and (iii) on a pro
forma basis, as further adjusted, to reflect the issuance and sale of the
1,250,000 shares of Common Stock offered hereby at an assumed price of $6.00 per
share (the midpoint of the currently anticipated range of the initial public
offering price) and the anticipated application of the estimated net proceeds
therefrom.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-------------------------------------------
<S> <C> <C> <C>
PRO FORMA AS
ACTUAL PRO FORMA(2) ADJUSTED(2)
------------- ------------- -------------
Short-term debt:
Bank debt.......................................................... $ 500,000 $ 500,000 $ --
Notes payable to stockholders...................................... 780,000 50,000 --
Other notes payable (net of debt discount of $6,000)............... 294,000 100,000 --
Accrued interest................................................... 174,000 20,000 --
------------- ------------- -------------
Total short-term debt............................................ $ 1,748,000 $ 670,000 $ --
------------- ------------- -------------
------------- ------------- -------------
Long-term debt....................................................... $ -- $ 251,000 $ 251,000
------------- ------------- -------------
Stockholders' equity:
Preferred Stock, $.001 par value; 5,000,000 shares authorized; none
issued........................................................... -- -- --
Common Stock, $.001 par value: 25,000,000 shares authorized;
1,999,994 shares issued and outstanding actual, 2,209,702 shares
issued and outstanding pro forma, and 3,459,702 shares issued and
outstanding pro forma as adjusted (1)............................ 2,000 2,000 3,000
Additional paid-in capital........................................... 2,089,000 3,006,000 9,125,000
Unearned compensatory stock options.................................. (64,000) (64,000) (64,000)
Deficit accumulated during development stage......................... (4,125,000) (4,215,000) (4,215,000)
------------- ------------- -------------
Total stockholders' equity (capital deficiency).................. (2,098,000) (1,271,000) 4,849,000
------------- ------------- -------------
------------- ------------- -------------
Total capitalization........................................... $ (2,098,000) $ (1,020,000) $ 5,100,000
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
- ------------------------
(1) Does not include: (i) 45,000 shares of Common Stock reserved for issuance
upon exercise of stock options granted, and 182,986 shares of Common Stock
reserved for issuance upon exercise of options available for future grant,
under the Option Plan; (ii) 315,970 shares of Common Stock reserved for
issuance upon exercise of outstanding non-Option Plan options; (iii) 350,000
shares of Common Stock reserved for issuance upon exercise of outstanding
warrants, including the October 1997 Warrants; and (iv) 125,000 shares of
Common Stock reserved for issuance upon exercise of the Representative's
Warrants. See "Plan of Operation--Liquidity and Capital Resources,"
"Management--Stock Options," "Certain Transactions," "Description of
Securities" and "Underwriting."
(2) Includes a non-recurring, non-cash charge to operations of approximately
$78,000 representing the interest expense allocable to 45,000 of the October
1997 Warrants issued in connection with the Note Conversion. See "Plan of
Operation--Liquidity and Capital Resources," "Certain Transactions" and Note
N of Notes to Combined Financial Statements.
21
<PAGE>
SELECTED COMBINED FINANCIAL DATA
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
The following selected combined financial data should be read in conjunction
with the combined financial statements included elsewhere in this Prospectus.
The statement of operations data as set forth below for each of the years in the
two-year period ended December 31, 1996 and for the period from January 11, 1993
(inception) through December 31, 1996 and the balance sheet data as of December
31, 1996, are derived from the combined financial statements of the Company,
which have been audited by Richard A. Eisner Company, LLP, independent auditors.
The statement of operations data set forth below for the nine-month periods
ended September 30, 1996 and 1997 and for the period from January 11, 1993
(inception) through September 30, 1997 and the balance sheet data as of
September 30, 1997 have been derived from the Company's unaudited combined
financial statements which have been prepared on the same basis as the audited
financial statements and, in the opinion of management, include all adjustments
which are necessary for a fair statement of the results of the interim period,
and all such adjustments are of a normal and recurring nature. The selected
financial data for the nine months ended September 30, 1997 are not necessarily
indicative of the results to be expected for the full year.
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
JANUARY 11, 1993
YEAR ENDED JANUARY 11, 1993 NINE MONTHS ENDED (INCEPTION)
DECEMBER 31, (INCEPTION) SEPTEMBER 30, THROUGH SEPTEMBER
-------------------- THROUGH DECEMBER 31, -------------------- 30,
1995 1996 1996 1996 1997 1997
--------- --------- --------------------- --------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Net product sales................. $ 83 $ 83
Royalty income.................... 12 12
Government grant.................. 100 100
--------- -------
Total revenue....................... 195 195
--------- -------
Costs and expenses:
Cost of sales..................... 83 83
Research and development.......... $ 318 $ 401 $ 1,040 $ 297 228 1,268
General and administrative........ 828 844 2,277 593 480 2,757
--------- --------- ------- --------- --------- -------
Total operating expenses............ 1,146 1,245 3,317 890 791 4,108
--------- --------- ------- --------- --------- -------
Loss from operations................ (1,146) (1,245) (3,317) (890) (596) (3,913)
Net interest income (expense)..... (17) (82) (104) (59) (108) (212)
--------- --------- ------- --------- --------- -------
Net loss.......................... $ (1,163) $ (1,327) 3,421 $ (949) $ (704) $ (4,125)
--------- --------- ------- --------- --------- -------
--------- --------- ------- --------- --------- -------
Net loss per share(1)............... $ (.57) $ (.64) $ (.46) $ (.34)
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average number of shares
outstanding(1).................... 2,051,939 2,065,827 2,065,827 2,065,827
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------------------------------
<S> <C> <C> <C> <C>
PRO FORMA
DECEMBER 31, 1996 ACTUAL PRO FORMA(2) AS ADJUSTED(2)(3)
------------------- --------- ------------- -------------------
Working capital (deficit)........................... $ (1,524) $ (2,207) $ (1,129) $ 5,016
Total assets........................................ 216 303 303 5,753
Total current liabilities........................... 1,658 2,401 1,323 653
Long-term debt...................................... -- -- 251 251
Deficit accumulated during development stage........ (3,421) (4,125) (4,215) (4,215)
Total stockholders' equity (capital deficiency)..... (1,442) (2,098) (1,271) 4,849
</TABLE>
(FOOTNOTES APPEAR ON FOLLOWING PAGE)
22
<PAGE>
- ------------------------
(1) Net loss per share is computed based upon the weighted average number of
shares of Common Stock outstanding during the periods. Pursuant to the
requirements of the Commission, all Common Stock and Common Stock
equivalents issued within the twelve months immediately preceding the
initial filing of the Registration Statement relating to the Offering, at a
price below the assumed offering price of $6.00 per share (the midpoint of
the currently anticipated range of the initial public offering price per
share), have been included in the weighted average number of shares
outstanding for all periods presented, utilizing the "treasury stock
method."
(2) Gives effect to (i) the Note Conversion which was effected as of October 31,
1997 (including the conversion of interest accrued in October 1997), (ii)
the issuance of the October 1997 Warrants, and (iii) the modification,
effective December 1, 1997, of the terms of approximately $230,000 in
principal amount of short-term debt, plus accrued interest thereon ($21,000
as of September 30, 1997), resulting in its reclassification as long-term
debt. See "Plan of Operation -- Liquidity and Capital Resources."
(3) As adjusted to give effect to the sale of 1,250,000 shares of Common Stock
offered hereby at an assumed price of $6.00 per share (the midpoint of the
currently anticipated range of the initial public offering price) and the
anticipated application of the estimated net proceeds therefrom, including
repayment of certain indebtedness (approximately $670,000 in outstanding
principal and interest as of September 30, 1997).
23
<PAGE>
PLAN OF OPERATION
HISTORY
The Company was organized in January 1993. The Company's initial efforts
were focused on assembling a high quality and diverse network of scientists and
institutions in the United States and India to support the Company's drug
discovery and development efforts in India. In 1994 and 1995, the Company
entered into license agreements pursuant to which it acquired exclusive
worldwide rights to RA-11 and IM-10, respectively. In 1995, the Company also
obtained exclusive licenses under a United States patent and two Indian patents
related to RA-11 and acquired SA-12 and a pending United States patent
application related to BV-6. The Company's research efforts led to the
identification of HP-11. The Company has been engaged in the development and
testing of all of these products. The Company has also devoted significant
resources to securing intellectual property protection with respect to certain
of these products. The Company began selling SA-12 through a distributor in
India in early 1997. In October 1997, the Company launched a test-marketing
program of RA-11 in India.
The Company's initial activities in India were conducted through a liaison
office in India. In November 1995, Bio-Ved was formed to facilitate the
Company's activities in India. Since the formation of Bio-Ved, substantially all
of the Company's India-based activities have been conducted by Bio-Ved under the
direction of the Company. As of September 30, 1997, the Company had provided an
aggregate of approximately $688,000 in connection with its operations in India.
Of such amount, approximately $268,000 was provided to Bio-Ved, and was
registered or is being registered, as a contribution to Bio-Ved's capital on a
non-repatriation basis. The Company expects to continue to devote significant
financial and other resources to its research and development and other
operations. See "--Research and Development."
As a development stage company, the Company has generated only limited
revenue and has incurred significant operating losses since its inception,
including operating losses of $1,146,000, $1,245,000 and $596,000 for the years
ended December 31, 1995 and 1996 and the nine months ended September 30, 1997,
respectively. As a result, as of September 30, 1997, the Company had an
accumulated deficit of $4,125,000. The Company expects to incur operating losses
and negative cash flow for the next several years and that its losses will
increase as the Company expands its research and development activities. In
addition, the Company's independent auditors have included an explanatory
paragraph in their report stating that the Company's accumulated deficit and its
dependence, to date, upon advances and loans from stockholders raise substantial
doubts about the Company's ability to continue as a going concern. The Offering
is an integral part of the Company's plan to continue as a going concern. See
Combined Financial Statements.
PLAN OF OPERATION
During the 12-month period following the Offering, the Company intends to
focus its research and development efforts (i) with respect to RA-11, on filing
an IND with the FDA, and if IND approval is obtained, commencing a Phase II
clinical trial in the United States and a Phase III clinical trial in India,
(ii) with respect to IM-10 and HP-11, on continued preclinical testing in India
and the United States and, subject to obtaining successful results, the
commencement of clinical trials in India, and (iii) with respect to BV-6, on
continued preclinical studies in the United States. The proceeds of the Offering
will not be sufficient to complete development efforts of any of these proposed
products and the Company will require substantial additional financing to
further development efforts in these areas.
During such 12-month period, the Company will also devote efforts to (i)
seeking collaborative arrangements with pharmaceutical companies which could
assist in product development as well as with manufacturing and marketing
activities, (ii) establishing and enhancing management and information
24
<PAGE>
systems needed to monitor, control and coordinate the Company's activities and
(iii) securing additional patent and trademark protection.
During such 12-month period, the Company expects to hire additional
employees in the area of research and development in the United States and
India, including research and development directors in both countries, and
phytochemists, ethnobotanists and other scientists in India. The Company also
intends to hire additional personnel for manufacturing and marketing activities.
See "Business."
RESEARCH AND DEVELOPMENT
The goal of the Company's research and development activities is to conduct
research at a level that is acceptable to the FDA and other regulatory bodies,
as well as global markets. With the exception of BV-6, substantially all of the
Company's research and development activities are presently conducted through
Bio-Ved in India. The Company funds most of Bio-Ved's research activities and
all ownership rights automatically vest in the Company. Bio-Ved currently has
three operational laboratories integrated at one site in India. These
laboratories are staffed with Bio-Ved's research and development scientists and
are also utilized by scientific consultants in connection with the Company's
activities. The Plant Screening Laboratory has the responsibility for analyzing
potential plant candidates and for the fractionation/ standardization of new and
existing products. The Formulations Laboratory has the primary mission of
developing the appropriate dosage forms for phyto-pharmaceuticals and quality
control and analytical procedures. The Animal Pharmacology Laboratory has the
responsibility for the study of pharmacological activity and mechanisms of
actions and for monitoring biochemical reactions in animal models. The Company
will seek to expand these laboratories to include other chemistry and
pharmacology activities. The Company, either directly or through Bio-Ved, also
has relationships with scientific institutions in India and elsewhere with whom
the Company has engaged and expects to continue to engage in joint research
activities.
Research and development activities with respect to BV-6 are currently
conducted at Emory University in the United States.
During the years ended December 31, 1995 and 1996 and the nine months ended
September 30, 1997, the Company expended $318,000, $401,000 and $228,000,
respectively, in connection with its research and development activities. In
September 1996, the Company received a Small Business Innovative Research
("SBIR") grant in the amount of $100,000 from the National Institutes of Health
in connection with its BV-6 research activities. In April 1997, the Company
applied for an additional SBIR grant relating to its BV-6 research in the amount
of $750,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements have been and will continue to be
significant. As of September 30, 1997, the Company had a working capital deficit
and accumulated deficit of $2,207,000 and $4,125,000, respectively, and the
Company is dependent upon the proceeds of the Offering to fund its continuing
research and development and other working capital requirements. The Company
anticipates, based on its currently proposed plans and assumptions relating to
its operations (including assumptions regarding the nature and extent of
research and development required in connection with the regulatory approval
process, the timing of obtaining regulatory approvals, if any, market
acceptance, the competitive position of the Company's products, and the ability
of the Company to secure adequate manufacturing and distribution relationships)
that the net proceeds of Offering will be sufficient to fund the Company's
contemplated capital requirements for at least 12 months following the
consummation of the Offering. In the event the Company's plans change or its
assumptions change or prove to be incorrect, the Company could be required to
seek additional financing sooner than currently anticipated. In addition, the
Company
25
<PAGE>
will need to raise substantial additional capital to fund its future operations.
There can be no assurance that additional financing will be available when
needed on terms acceptable to the Company, or at all.
The Company's operations have been funded primarily through a combination of
approximately $1,500,000 in equity and $1,600,000 in debt. In addition, the
Company has received an aggregate of $100,000 through SBIR grant funding from
the National Institutes of Health. See "Business--Products and Product
Candidates--BV-6."
At various times from June 1993 through February 1995 the Company sold an
aggregate of 412,866 shares of Common Stock to a limited number of investors for
an aggregate purchase price of $1,465,000. These shares were sold at varying
valuations ranging from $.55 to $6.00 per share. In addition, in connection with
the Note Conversion, effective October 31, 1997, $700,000 principal amount of,
and $138,830 in accrued interest on, certain of the Company's then outstanding
notes were converted into Common Stock at the rate of $4.00 per share.
As of the date of this Prospectus, the Company has $879,700 in principal
amount of loan obligations outstanding, all of which is currently due and
payable on demand, except for $229,700, which is scheduled to become due and
payable on demand commencing one year following the consummation of the
Offering. Other than such $229,700, all presently outstanding loans are
anticipated to be repaid from the proceeds of the Offering.
The approximately $1,600,000 of debt incurred by the Company since its
inception includes the following:
In October 1994, the Company borrowed $250,000 from Fred Kassner, a
principal stockholder of the Company, under a two-year convertible promissory
note bearing interest at prime plus 2% per annum convertible into 61,050 shares
of Common Stock. In April 1996, the Company borrowed an additional $250,000 from
this stockholder under a 90-day promissory note bearing interest at prime plus
2% per annum. In connection with the April 1996 loan, Mr. Kassner was granted
two-year warrants to purchase up to 125,000 shares of Common Stock at 130% of
the initial public offering price per share. Effective October 31, 1997,
pursuant to the Note Conversion, all principal and accrued interest owing under
these notes (a total of $619,868) were converted by Mr. Kassner into 154,967
shares of Common Stock at the rate of $4.00 per share. In connection with this
transaction, Mr. Kassner was also granted October 1997 Warrants to purchase up
to 45,000 shares of Common Stock at the initial public offering price per share.
See "Certain Transactions."
At various times from January 1996 through July 1997, the Company borrowed
an aggregate principal amount of $204,700 from Sanjeev Chitre, Chairman of the
Board of Directors and a principal stockholder of the Company, under a
promissory note bearing interest at prime plus 2% per annum payable semi-
annually. Originally, the note was to become due on demand, in stages, at
various times from January 1997 to July 1998. In December 1997, the terms of the
loan were revised to provide that no amounts would become due and payable
thereunder until one year following the consummation of the Offering. The
Company has allocated no proceeds of the Offering to repayment of the loan. See
"Certain Transactions."
In January 1996, the Company borrowed $25,000 from Irwin Rosenthal, the
Secretary of the Company and husband of a director of the Company, under a
promissory note bearing interest at prime plus 2% per annum. Originally, the
note was to become due on demand commencing January 1997. Mr. Rosenthal was a
director of the Company at the time of the loan. In December 1997, the terms of
the loan were revised to provide that no amounts would become due and payable
thereunder until one year following the consummation of the Offering. The
Company has allocated no proceeds of the Offering to repayment of this loan. See
"Certain Transactions."
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In March 1996, the Company borrowed $50,000 from a stockholder and former
director of the Company under a promissory note bearing interest at prime plus
2% per annum. The note is currently due and payable on demand and is anticipated
to be repaid out of the proceeds of the Offering. In connection with the loan,
the Company granted the individual two-year warrants to purchase up to 25,000
shares of Common Stock at 130% of the initial public offering price per share.
In each of March 1996 and August 1997, the Company borrowed $100,000 from
Michael Splinter, who subsequently became a director of the Company, and his
wife, under promissory notes each bearing interest at prime plus 2% per annum.
In connection with the loans, these individuals were granted two-year warrants
to purchase up to 100,000 shares of Common Stock at 130% of the initial public
offering price per share. Effective October 31, 1997, pursuant to the Note
Conversion, all principal and accrued interest owing under these notes were
converted by the holder into 54,741 shares of Common Stock at the rate of
$4.00 per share. See "Certain Transactions."
In July 1996, the Company borrowed $100,000 from an unrelated individual
under a promissory note bearing interest at prime plus 2% per annum. The note is
currently due and payable on demand and is anticipated to be repaid out of the
proceeds of the Offering. See "Use of Proceeds."
At various times from November 1996 through September 1997, the Company
borrowed an aggregate principal amount of $500,000 from the Atlantic Bank of New
York ("Atlantic Bank") under three-month term notes bearing interest at Atlantic
Bank's prime rate plus 2% per annum, payable monthly. The notes have been
consolidated and are presently due on February 2, 1998. The Atlantic Bank loan
is guaranteed by Sanjeev and Deepa Chitre and secured by a pledge of common
stock of another company, which stock is owned by the Avantika Sanjeev Chitre
Irrevocable Trust, dated July 8, 1991, Bruce W. McRoy, trustee (the "Avantika
Trust"), a trust for the benefit of Sanjeev and Deepa Chitre's minor daughter.
See "Certain Transactions."
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BUSINESS
GENERAL
The Company is engaged primarily in the discovery, development, clinical
testing and marketing of proprietary plant-based pharmaceuticals
(phyto-pharmaceuticals) for the treatment of chronic, difficult-to-treat human
diseases. The Company currently has three phyto-pharmaceutical products in
various stages of clinical and preclinical development. RA-11, the Company's
lead phyto-pharmaceutical, is currently being test-marketed in India for the
treatment of arthritis; IM-10, which is undergoing preclinical animal
pharmacology testing in India, has been indicated for the stimulation and
restoration of bone marrow and the immune system in cancer patients being
treated with chemotherapy; and HP-11, an early-stage product candidate, is
undergoing laboratory testing in India for the treatment of hepatitis. The
Company has an exclusive license under a United States patent relating to RA-11
and its use in treating degenerative musculoskelatal diseases. In addition, the
Company has a patent application pending relating to BV-6, a pharmaceutical
derived from a single animal cell component, which is undergoing early
pharmacological studies at Emory University for the treatment of degenerative
diseases of the central nervous system.
A key element of the Company's strategy is to apply the principles of
Ayurveda, an ancient science native to India, to reduce the time and costs
associated with the drug discovery process. Generations of Ayurveda scholars
have studied and documented the uses and efficacy of specific plants as
medicinal therapies over a period of several hundreds of years. Their findings,
preserved and detailed in Ayurvedic literature, provide valuable information for
modern day scientists. Through the study of Ayurveda, the Company's scientific
team seeks to rapidly identify plants, or combinations of plants, that have been
successfully used to treat symptoms and ailments characteristic of the diseases
targeted by the Company. In addition, because Ayurvedic literature has also
documented the safety of over 300 plant extracts for human use, once an
Ayurvedic plant candidate has been identified by the Company's researchers, they
are, in many instances, able to conduct early development activities in
parallel, rather than sequentially, when determining the candidate's safety and
efficacy. The Company believes that focusing its screening process on plants
whose safety and efficacy in medicinal use have been documented in Ayurvedic
literature will result in faster and more effective screening methods for the
discovery of new phyto-pharmaceuticals. The Company further believes that, based
on their long histories of safe use, these phyto-pharmaceuticals will have a
greater potential for safety and, as a result, may achieve more rapid regulatory
approval.
The Company's research and development activities are primarily conducted by
the Company's Indian subsidiary at laboratories located in Pune, India, which
are staffed with 15 full time employees and 12 consultants. There, the Company's
India-based scientists are able to study the Ayurvedic literature (primarily
written in the ancient Sanskrit language) to accelerate the plant screening
process. In addition, by conducting operations in India, the Company is able to
access highly skilled scientific talent and other resources at an estimated
one-tenth of the cost of comparable labor and resources in the United States.
Although the Company's clinical trials to date have only been conducted in
India, they have been administered in accordance with protocols designed to be
consistent with the standards of the United States Food and Drug Administration
(the "FDA") and in laboratories that operate in accordance with FDA Good
Laboratory Practices ("GLP") guidelines. In addition, the Company's proprietary
plant extraction process is conducted for it by a third-party Indian supplier
with an ISO-9000 (a worldwide industry manufacturing standard) certification.
The Company has thus established, and continues to enhance, a network
infrastructure in India designed to identify phyto-pharmaceuticals through an
accelerated process and in a low-cost, high quality environment.
The Company is in the development stage and does not anticipate completing
clinical trials or filing a new drug application ("NDA") with the FDA for any of
its products (approval of which must be obtained prior to the commencement of
their commercial sale in the United States) until, at the earliest, the year
2001. The Company's long-term viability, profitability and growth will depend
upon successful commercialization of products resulting from its research and
development activities. To date, the Company has
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recorded only limited product sales revenues, and these have been derived
primarily from sales in India of SA-12, a proprietary anti-bacterial surgical
scrub acquired by the Company from its inventor in 1995. The Company believes
that its ability to generate sufficient revenues to support its operations
primarily depends on the success of the Company in completing development, and
obtaining regulatory approvals for the commercial sale, of RA-11 and other
product candidates. There can be no assurance that any of such events will occur
or that the Company will ever achieve profitable operations.
INDUSTRY OVERVIEW
According to an industry survey published in May 1997, the total worldwide
sales of prescription and over-the-counter pharmaceutical products in 1996 were
over $285 billion, of which the United States market represented over 33%.
Although growth in pharmaceutical sales has generally remained constant over the
past few years, future growth rates are expected to rise due to projected
population trends. Because a disproportionately large amount of pharmaceuticals
are prescribed for middle-aged and elderly people, expansion in these
demographic sectors bodes well for drug companies. Based on estimates by the
United States Department of Commerce, the over-65 segment and the 45- to
64-year-old segment of the population is expected to expand 16% and 46%,
respectively, from 1996 through 2010 as the baby boomers age. The influence of
these demographic trends should be especially pronounced for treatments
targeting chronic conditions that often afflict people as they age, such as
hypertension and arthritis.
Currently, the incidence of rheumatoid arthritis is reported to be
approximately 2% of the world population and the incidence of clinically
symptomatic osteoarthritis is reported to be between 10-15% worldwide. Moreover,
in 1996, arthritis in general was reported by the American College of
Rheumatology ("ACR") to be the number one cause of disability in the United
States and the total market for prescription arthritis drug therapy was
estimated to be over $6 billion. For arthritis and other chronic,
difficult-to-treat conditions, such as viral hepatitis (of major medical
importance worldwide today and yet the only available treatments for which are
usually symptomatic and involve costly injectibles with numerous side effects),
plant-based pharmaceuticals with their natural attributes have potential to be
an efficient and cost-effective therapy.
Plant-based pharmaceuticals have historically been a significant source of
therapy in Europe and other countries outside of the United States. In 1993, as
estimated by the Herbal Medical database, the phyto-pharmaceutical market was
approximately $12.4 billion worldwide of which $6.5 billion was attributed to
Europe. According to that publication, the industry had grown at an approximate
annual rate of 10-15% from 1985 through 1993, and it was estimated that such
growth rate would continue through at least 1998.
BUSINESS STRATEGY
The Company's business strategy is to capitalize on what it perceives to be
an ever growing market for phyto-pharmaceutical therapies by developing (using
Ayurvedic principles as a means of potentially accelerating both the discovery
and the regulatory approval processes) and commercializing safe and effective
plant-based pharmaceuticals for the treatment of difficult-to-treat, chronic
diseases in humans. In furtherance of its strategy, the Company intends to:
- OBTAIN FDA APPROVAL FOR RA-11 -- The Company intends to file an
investigational new drug ("IND") application with the FDA in the United States,
relating to the use of RA-11 for the treatment of rheumatoid arthritis,
osteoarthritis and other forms of non-infectious, inflammatory arthritis, during
the first quarter of 1998. The Company has already completed two large, double
blind, placebo controlled Phase II clinical trials in India relating to RA-11
and based upon the results of such trials, the Company believes that RA-11 may
prove to be an effective and safe drug for long-term treatment of osteoarthritis
and may be classified as a disease modifying anti-rheumatic in the long-term
treatment of rheumatoid arthritis. Subject to approval of its IND application,
of which there can be no assurance, the Company will
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seek to by-pass Phase I clinical trials (preliminary trials which focus on
healthy human subjects) in the United States, proceeding directly to Phase II
clinical studies (intermediate level trials, focused on a limited target patient
population), since it has already conducted two large, well-documented efficacy
and safety Phase II level clinical trials in India using protocols consistent
with FDA guidelines, and to conduct a Phase III clinical trial concurrently in
India. Subject to successful results, the Company would then conduct a Phase III
clinical trial in the United States. The Company does not anticipate completing
clinical trials or filing an NDA until, at the earliest, the year 2001. See
"--The Regulatory Approval Process" and "-- Products and Product Candidates --
RA-11."
- EXPAND INTERNATIONAL MARKETING EFFORTS FOR RA-11 AND SA-12 -- The Company
has begun to recognize early revenue from sales of SA-12 in India. In addition,
limited sales of RA-11 commenced in India in November 1997 under a
test-marketing program. The Company anticipates the commencement of marketing of
both RA-11 and SA-12 in certain countries in the Pacific Rim through a
pharmaceutical distributor in Singapore during the first half of 1998. The
Company is also in discussions with marketing companies for both products in
Indonesia and Korea. Pending regulatory approval of RA-11 by the FDA, the
Company will continue to target national pharmaceutical marketing companies in
markets outside Japan, Europe and the United States. See "--Marketing."
- ESTABLISH CORPORATE PARTNERSHIPS WITH MULTI-NATIONAL PHARMACEUTICAL
COMPANIES -- To assist the Company in conducting clinical trials, the Company is
actively seeking collaborations or partnerships with major pharmaceutical
companies or research companies whereby such strategic partners would provide
the resources to continue clinical trials, obtain regulatory approvals and
provide marketing capabilities relating to a particular product candidate, in
exchange for the receipt of exclusive marketing rights to the product in
designated geographical areas or for designated therapeutic uses. The Company
would retain proprietary rights to the product and receive royalties based on
sales. As of the date hereof, however, the Company has not entered into any such
agreements or arrangements, and no assurance can be given that the Company will
be able to successfully negotiate collaborative agreements or that if concluded,
they will not eliminate or substantially reduce the Company's proprietary rights
in the applicable product. In addition to providing financing, the Company
believes such strategic partners could be instrumental in promoting product
penetration in key markets such as Europe, the United States and Japan, if and
when applicable regulatory approvals are received. See "--Marketing."
- CONTROL MANUFACTURING -- For the foreseeable future, the Company intends
to have its products manufactured on a contract basis. All agreements will
contain provisions enabling the Company to maintain quality control over the
extraction, formulation and manufacturing processes (most of which are
proprietary to the Company). The Company's principal supplier of plant extracts
and raw material has achieved ISO-9000 certification (a worldwide industry
manufacturing standard), and the two formulation and finished product
manufacturers used by the Company in India have applied for GMP-certification
from the World Health Organization. The Company provides personnel to each of
the foregoing to support and supervise the extraction and manufacturing
processes. In connection with United States clinical trials, the Company intends
to import active plant ingredients in bulk and contract with third-party
manufacturers who have obtained GMP-certification from the FDA to produce the
finished and packaged product necessary for clinical trials. There are fewer
requirements applicable to the importation of bulk substances than to finished
pharmaceutical products. The Company's long-term goal is to operate its own FDA
GMP-certified manufacturing facilities in India. See "--Manufacturing and
Supply."
- EXPAND PIPELINE OF PHYTO-PHARMACEUTICALS -- The Company has a number of
products in various stages of research and development. The Company will
continue to apply the principles of Ayurveda in an effort to discover and
develop new phyto-pharmaceuticals for the treatment of chronic,
difficult-to-treat diseases. The Company believes that the application of such
principles will enable it to rapidly identify new phyto-pharmaceuticals for
potential new applications. The Company's goal is to screen many sources through
an accelerated development process in a low-cost, high-quality location. See
"--The AyurCore Model of Drug Discovery and Development."
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THE AYURCORE MODEL OF DRUG DISCOVERY AND DEVELOPMENT
AYURVEDA
Ayurveda is a medical science whose literature documents the study and use
of plants for medicinal purposes. Ayurveda comes from one of the most advanced
civilizations of the ancient world, India. In Sanskrit, the language in which
Ayurveda is documented, AYUR means life and VEDA means knowledge. Treatises,
written as early as 4,000 years ago, give essential information on the use,
safety and efficacy of certain medicinal plants for specific therapies. Safety
parameters were a primary goal in Ayurvedic medicine. Considerable work has been
done over the centuries in this science to define specific therapies for
specific symptoms and ailments. However, even with a documented history of
safety and efficacy, very little Ayurveda testing has been conducted in
accordance with United States standards in the past.
The Company believes that by applying the knowledge gained from the study of
Ayurveda, it can rapidly identify the specific plant species to be utilized for
targeted indications. Because the safety and efficacy of the plants included in
Ayurveda have been documented, the Company believes it can make a significant
leap in the early drug discovery process, thereby accelerating the entire
development cycle and reducing pre-clinical costs.
DRUG DISCOVERY & DEVELOPMENT PROCESS
The Company has focused its efforts on several difficult-to-treat
disease/treatment areas. In India, the Company has assembled a multidisciplinary
team of scientists which plays an important role in the Company's drug discovery
and development process. These scientists include, but are not limited to,
biochemists, ethnobotanists, phytochemists, toxicologists, pharmacologists,
immunologists, and pharmaceutical chemists.
This scientific team, along with Ayurveda specialists, search the Ayurvedic
literature to identify potential plant applications. The results of the search
are compared to modern medicine parameters, in terms of both diagnosis and
treatment. Once an Ayurveda/modern medicine interface is established, a plant
species is recommended for further evaluation in the treatment of a specific
disease condition. Identification of a plant lead is confirmed through the
testing of the plant's pharmacological activities, and subsequent investigation
of Ayurvedic and other scientific literature determines whether phytochemical
analysis of the plant has been undertaken by others previously. Based upon these
findings, purified extracts of the plant species are completed for
phyto-pharmaceutical applications. The resulting phyto-pharmaceutical candidate
must retain the desired characteristics of the original plant, yet be purified
and standardized to the level of pharmaceutical preparation quality. Once this
is accomplished, animal and human pharmacological screens are developed and
implemented using these standardized extracts or fractions thereof to establish
the efficacy of the drug for human therapeutic use.
The Company's research and development team conducts activities consisting
of, but not limited to: (i) toxicology studies; (ii) further phytochemical
analysis/fractionation; (iii) any other applicable preclinical studies; (iv)
Phase I pharmacokinetic and pharmaco-dynamic studies in human volunteers; and
(v) Phase II-type dose ranging/efficacy studies. Given the history of use of
ayurvedic treatments in humans, these activities can, in some instances, be
conducted in parallel.
Results of the above activities form the basis of the data required to file
an IND application with the FDA. With this approach, the Company believes it can
significantly reduce both the discovery and development time of
phyto-pharmaceuticals in the treatment of difficult-to-treat diseases.
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THE REGULATORY APPROVAL PROCESS
GENERAL
Pharmaceutical products, including phyto-pharmaceuticals, are significantly
regulated by a number of governmental entities, especially by the FDA in the
United States and by comparable authorities in other countries. These entities
regulate, among other things, research and development activities and the
testing, manufacture, safety, effectiveness, labeling, storage, record keeping,
approval, advertising, promotion, distribution and sale of such products.
Product development and approval within this regulatory framework takes a number
of years and involves the expenditure of substantial resources. Many products
that initially appear promising ultimately do not reach the market because they
are found to be unsafe or do not demonstrate efficacy during the testing
required by the regulatory process. In addition, there can be no assurance that
this regulatory framework will not change or that additional regulation will not
arise at any stage of a product's development that may affect approval, delay an
application or require additional expenditures. Moreover, even if approval is
obtained, failure to comply with present or future regulatory requirements, or
new information adversely reflecting on the safety or effectiveness of the
approved product, can lead to the FDA's withdrawal of approval to market the
product or other sanctions, including fines, recall or seizure of products,
injunctions and criminal prosecutions.
UNITED STATES REGULATION
In the United States, plant-derived pharmaceuticals are subject to FDA
review and approval as "drugs" under the Federal Food, Drug, and Cosmetic Act.
In most cases, the steps required before a new pharmaceutical can be
commercially distributed in the United States include: preclinical laboratory
and animal studies; the filing of an investigational new drug application, or
IND, with the FDA summarizing preclinical development work; controlled clinical
trials in humans to determine safety and efficacy; filing a new drug
application, or NDA, with the FDA; and FDA approval of the product for
commercial sale and of the product manufacturing facility for commercial
manufacturing.
PRECLINICAL STUDIES AND GLP. The initial testing of a pharmaceutical
product before it may be marketed in the United States is called preclinical
testing. Preclinical tests include formulation development, laboratory
evaluation of product chemistry and other end points and animal studies to
assess the potential safety and efficacy of the product as formulated. Many
preclinical studies are regulated by the FDA under a series of regulations
called the "Good Laboratory Practice" regulations. Violations of GLP regulations
can, in some cases, lead to invalidation of the studies, requiring them to be
replicated. The results of preclinical trials are submitted to the FDA as part
of the IND and are reviewed by the FDA prior to authorizing the sponsor to
conduct clinical trials in human subjects.
THE IND. FDA regulations provide that human clinical trials may begin 30
days following the submission and receipt of an IND, unless the FDA advises
otherwise or requests additional information, clarification or additional time
to review the IND submission. There is no assurance that the submission of an
IND will eventually allow a company to commence clinical trials. Once trials
have commenced, the FDA may stop the trials, or particular types of trials, by
placing a "clinical hold" on such trials because of concerns about, for example,
the safety of the product being tested or the adequacy of the trial design. Such
holds can cause substantial delay and in some cases may require abandonment of a
product. There can be no assurance that the FDA's acquiescence in an IND
constitutes any indication that the FDA will find the protocol satisfactory for
a clinical trial or that authorization of one phase of clinical trials will
result in authorization of other phases or that the FDA will accept any data
generated from a clinical trial.
CLINICAL TRIALS. Clinical trials involve the administration of the
investigational drug product to human subjects. Each protocol indicating how the
clinical trial will be conducted must be submitted for review to the FDA. The
FDA's review of a study protocol does not necessarily mean that, if the study is
successful, it will constitute proof of efficacy or safety. Further, each
clinical trial must be conducted under the auspices of an institutional review
board ("IRB"), which must be constituted and operated in conformance with FDA
regulations. The IRB considers, among other factors, ethical concerns and
informed consent
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requirements. The FDA or the IRB may require changes in a protocol both prior to
and after the commencement of a trial.
Clinical trials are typically conducted in three sequential phases, although
in certain cases, the phases may overlap. In Phase I trials (which constitute
the initial introduction of the pharmaceutical into human subjects) the
pharmaceutical is tested in healthy subjects, as opposed to patients, primarily
for safety (adverse effects), side effects, metabolism, clinical pharmacology
and optimal dosage. Phase II trials involve studies in a limited target patient
population to (i) further evaluate optimal dosage, (ii) identify possible
adverse effects and safety risks and (iii) determine the efficacy of a drug for
a specific indication. These can be further classified into Phase IIa trials,
which study dose ranging and schedule optimization from the perspective of
efficacy, and Phase IIb trials, which study (in parallel or individually) one
dose and one schedule (the frequency of dose administration) to determine length
of therapy and safety versus efficacy. When a product is found to have an
acceptable safety profile in Phase II evaluation, Phase III clinical trials are
undertaken to evaluate clinical efficacy and to further test for safety within
an expanded target patient population at geographically dispersed multiple
clinical study sites. The FDA may order the temporary or permanent
discontinuation of a clinical trial at any time for any reason. There can be no
assurance that Phase I, Phase II or Phase III testing will be completed
successfully within any specified time period, if at all, with respect to any of
the Company's products.
THE NDA. Upon completion of clinical trials, the results of the preclinical
studies and the human clinical trials are submitted to the FDA in an NDA,
approval of which must be obtained prior to commencement of commercial sales.
The NDA also includes information pertaining to the preparation of drug
substances, analytical methods, drug product formulation, details on the
manufacture of finished product and proposed product packaging and labeling. The
interval between the filing of the IND and the filing of an NDA application can
be lengthy. In general, the FDA requires at least two properly conducted and
well-controlled Phase III clinical trials demonstrating efficacy. The FDA may
deny an NDA if, among others reasons, clinical trial protocols are not adequate
or appropriate. The FDA also may deny an NDA or require additional testing or
information to assess the safety of the product if the FDA does not view the NDA
as containing adequate evidence of the product's safety and efficacy.
Notwithstanding the submission of such data, the FDA may ultimately decide that
the application does not satisfy its regulatory criteria for approval and, even
if the NDA is approved, the product may be required to undergo post-licensure
testing and surveillance to continue to monitor its safety and effectiveness
(Phase IV studies).
POST-MARKETING APPROVAL REQUIREMENTS. Once an NDA has been approved, the
NDA applicant remains subject to post-marketing requirements. These include
manufacturing, record keeping, and reporting obligations. For instance, any
adverse experiences relating to the use of the product must be reported to the
FDA. Failure to comply with the FDA's post-marketing obligations can result in
the FDA's withdrawal of approval, seizures, injunctions, and/or civil or
criminal penalties.
In the United States, in addition to patent protection, drug products
containing new chemical entities ("pioneer drugs") approved through the NDA
process may be subject to periods of marketing exclusivity. After the applicable
patents and periods of exclusivity expire, however, those pioneer drugs are
subject to competition from generic versions (duplicate or related versions) of
themselves. The FDA may approve an abbreviated NDA for the marketing of a
generic drug (I.E., a duplicated or related version of an approved pioneer drug)
that has been shown to be as safe and effective as a pioneer drug whose patents
have expired, without requiring the submission of "full reports" of safety and
effectiveness.
MANUFACTURING REGULATIONS. The FDA mandates that drugs be manufactured in
conformity with current Good Manufacturing Practice ("cGMP") regulations. In
complying with the cGMP regulations, manufacturers must continue to expend time,
money and effort in production, record keeping and quality control to ensure
that the product meets applicable specifications and other requirements. The FDA
periodically inspects drug manufacturing facilities to ensure compliance with
applicable cGMP requirements. Failure to comply subjects the manufacturer to
possible FDA action, such as suspension of
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manufacturing, seizure of the product, voluntary recall of a product, fines,
injunctions, failure to approve a product, or withdrawal of approval of a
product.
FOREIGN REGULATIONS
To market its products abroad, the Company is also subject to numerous and
varying foreign regulatory requirements, implemented by foreign health
authorities, governing, among other things, the design and conduct of human
clinical trials, product pricing and reimbursement, and marketing approval
criteria. The approval procedure currently varies among countries and can
involve additional testing. As a result the time required to obtain foreign
approvals may differ from that required to obtain FDA approval. At present,
foreign marketing authorizations are applied for at a national level, although
within the European Union certain uniform registration procedures are available
to companies wishing to market a product in more than one member country. The
foreign regulatory approval process includes all of the risks associated with
obtaining FDA approval set forth above. However, approval by the FDA does not
ensure approval by other countries. RA-11 has been approved for commercial sale
in India by the Indian FDA-equivalent.
PRODUCTS AND PRODUCT CANDIDATES
RA-11
GENERAL. RA-11, the Company's lead phyto-pharmaceutical, is derived from a
combination of four different plant species. The Company holds an exclusive
license on two Indian patents relating to its proprietary plant extraction and
RA-11 formulation processes, as well as a United States patent relating to RA-11
and its use in treating degenerative musculoskeletal diseases, such as
rheumatoid arthritis and osteoarthritis. Incidence of rheumatoid arthritis is
reported to be approximately 2% of the world population and the incidence of
clinically symptomatic osteoarthritis is reported to be between 10-15%
worldwide. Based on clinical trials conducted in India under protocols
consistent with FDA guidelines and ACR criteria, the Company believes that RA-11
may prove to be an effective and safe drug for long-term treatment of
osteoarthritis and may be classified as a disease modifying, anti-rheumatic drug
for the long-term treatment of rheumatoid arthritis. The Company plans to file
an IND application with the FDA during the first quarter of 1998. See "--The
Regulatory Approval Process" and "--Patents, Licenses and Proprietary Rights."
RHEUMATOID ARTHRITIS. Rheumatoid arthritis is an immunological disease
characterized by inflammatory arthritis of peripheral joints and associated with
a number of other manifestations. Treatments available today include steroids,
non-steroidal anti-inflammatory drugs ("NSAIDs")(eg. Diclofenac and Naproxen),
and disease modifying anti-rheumatic drugs (E.G. Methotrexate and gold salts).
All of these treatments can be accompanied by serious side effects, and the
duration of the therapeutic effects associated with steroid and NSAID treatment
is relatively brief. Newer agents under development include specific
target-oriented monoclonal antibodies and the cyclo-oxygenase-2 inhibitors.
RA-11 was initially evaluated for use in treating rheumatoid arthritis in a
small clinical trial in India. During 1994 and 1995, the Company conducted a
large Phase IIb trial in India of RA-11's efficacy and safety using ACR criteria
and FDA guidelines. This study was comprised of two parts: a 16 week, double-
blind, placebo-controlled, parallel trial, followed by a crossover study in
these patients. Out of a total of 1,445 arthritis patients screened, 182
patients participated in the study. Of these 182 patients, 165 patients
completed the full 16 weeks of the study. The treatment groups were matched with
respect to demographics at study entry. The protocol for both the double-blind
phase and the 16-week open label phase of the trial were prepared for the study
by Dr. Richard Polisson, the Clinical Director of Massachusetts General
Hospital's arthritis unit; statistics were performed by Boston Biostatistics,
Inc.; and Dr. Arvind Chopra, a rheumatologist associated with the
Interdisciplinary School of Health Sciences at the University of Pune, served as
the Chief Investigator for the trial. See "--Consultants."
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Results obtained at the conclusion of the 16-week study, indicated that
patients on the drug did better than the placebo group in several clinical and
lab parameters. Statistical significance, however, as defined by the ACR and
FDA, was obtained in only two important clinical parameters--joint count and
score for swelling--and two lab indicators--rheumatoid factor and hemoglobin
count.
After 32 weeks of participation in the study, however, patients showed
statistically significant improvements from baseline, as defined by the ACR and
FDA, in all clinical criteria and, most importantly, in the latest laboratory
blood testing criteria: Interleukin-6, C-Reactive protein and Erythrocyte
sedimentation rate. These patients were further followed for 54 weeks in an open
label phase and RA-11 continued to have persistent efficacy results in both
clinical and lab criteria. The Company believes that the safety of RA-11 is
demonstrated by the fact that the incidence of minor side effects was similar in
placebo and active groups through the course of the study. Based on the data
obtained from the study, the Company believes that RA-11 has shown promising
results as a safe disease-modifying anti-rheumatic drug which can be indicated
in the long-term therapy of rheumatoid arthritis. A total of 111 patients from
the original study have now been followed for more than 3 1/2 years, and all
have remained in clinical remission (free from clinical signs and symptoms of
arthritis), free of significant side effects and with stable, normal blood
counts, serum electrolytes, and renal and liver function tests.
Concurrent with the clinical trials, the Company completed acute, subacute
and chronic toxicity studies in albino rats. These studies were not performed in
a United States GLP-certified laboratory. The animals were tested for all
typical potential toxic effects such as gastrointestinal, central nervous
system, respiratory, food consumption, abnormal secretions and alteration of
fur. The drug was administered in several multiples of therapeutic doses. In the
chronic model (6 months) there was mild incidence of bronchopneumonia (which the
Company believes can be explained by force feeding of drug/placebo and hence
aspiration) equal in both active and placebo groups. Also noted were mild,
cloudy changes in the kidneys of certain of the animals, in both placebo and
active groups, and which the Company does not believe is significant. Part of
the proceeds of the Offering will be used to repeat these studies as well as
carcinogenicity and mutagenicity studies at a United States GLP-certified and
AALAC (American Association for Laboratory Animal Certification) accredited
laboratory.
OSTEOARTHRITIS. Osteoarthritis, also known as degenerative joint disease,
is believed to be the most common human joint disease. With the significant
increase in age expectancy in both developed and developing countries, it is
anticipated that the incidence of osteoarthritis will increase significantly
over the next decade.
Therapy in osteoarthritis is primarily with NSAIDs, but limited due to lack
of efficacy over long periods of time and/or side effects and toxicity. Steroid
injections provide temporary relief, and may be used in conjunction with
physical therapy. The patient may require surgical replacement of the affected
joints as a last resort.
During 1995 and 1996, the Company conducted a large 32-week Phase IIb
double-blind, placebo-controlled clinical trial using patients with established
osteoarthritis of the knee. As in the rheumatoid arthritis trial, the protocol
and study design were prepared by Dr. Polisson, statistics were performed at
Boston Biostatistics, Inc., and Dr. Chopra served as the Chief Investigator. The
drug dosing was twice that of the rheumatoid arthritis trial. Patients in this
trial were also matched with respect to demographic characteristics at study
entry. At the end of the study, patients receiving RA-11 performed better with
respect to almost all of the parameters used in this trial. Statistical
significance, as determined by the ACR and FDA, was achieved in several
important efficacy variables including scientific standards or criteria for
stiffness, pain and difficulty and scores for pain. Low incidence of minor side
effects was equal in the treatment and placebo groups.
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IM-10
IM-10 is an oral phyto-pharmaceutical candidate derived from a single plant.
Extracts of this plant have demonstrated both immunosuppressive and
immunostimulatory properties. IM-10 is comprised of the immunostimulatory
compounds found in the plant extract and is currently undergoing preclinical
animal pharmacology testing for the stimulation and restoration of bone marrow
and the immune system in cancer patients being treated with chemotherapy. Due to
the high toxicity of chemotherapeutic agents, patients undergoing chemotherapy
often suffer compromised immune systems and significant drops in blood cell
counts. The Company has an exclusive worldwide license to IM-10. See "--Patents,
Licenses and Proprietary Rights."
In preliminary animal studies conducted by the Company in India, IM-10
showed an ability to restore to normal levels the immune system of animals
exposed to anti-cancer agents. Animals were given known anti-cancer agents which
severely depress the immune system and cause a significant drop in blood cell
counts (red blood cells, white blood cells and platelets). When IM-10 was
administered in the presence of the known anti-cancer agents, it restored the
immune system back to normal or baseline levels and increased blood cell counts.
The Company is currently conducting a much larger animal study with IM-10 in
India and similar pharmacological studies for efficacy are scheduled to start in
the first quarter of 1998, at the Veteran's Administration Hospital in Palo
Alto, California. Subject to satisfactory animal pharmacology testing, the
Company plans to determine human dosing and develop a large-scale, dose-ranging,
tolerance and efficacy trial for IM-10 in human patients undergoing cancer
chemotherapy. This study would be a placebo controlled, double-blind clinical
trial at Tata Memorial Cancer Research Center and Hospital, a cancer treatment
and research facility in Mumbai (previously known as Bombay), India. Using
protocols consistent with FDA guidelines, the Company anticipates beginning this
trial during the first quarter of 1998.
The competition in this area consists of cell stimulating drugs such as
Leukine, Neupogen and Alpha Interferon. Besides being very expensive, all of
these are currently available only in injectable forms and can potentially have
serious side effects. IM-10 is formulated in an oral capsule form, and in prior
testing by other investigators, the plant extract from which IM-10 is derived
has been shown to be safe in multiples of IM-10's intended therapeutic range.
HP-11
HP-11, an oral phyto-pharmaceutical candidate derived from a single plant
species, has demonstrated an ability to protect and regenerate destroyed liver
cells in preliminary testing. Other species of the same plant have been
evaluated and found to have hepato-protective (protection of liver tissue) and
hepato-regenerative (regeneration and repair of liver tissue) properties.
However, the Company believes that these other species have significant toxic
effects at relatively low therapeutic doses. The Company believes that the plant
species used in HP-11 has a much broader therapeutic index, with very high
safety margins. HP-11 was identified through the research efforts of the
Company's scientific team in India.
The goal of the Company's research and development activities with respect
to HP-11 is to demonstrate hepato-protective as well as hepato-regenerative
activity in the prevention and treatment of all forms of hepatitis, especially
hepatitis A, hepatitis B, hepatitis C and chemically induced (such as with
toxins, alcohol or drugs) hepatitis. Hepatitis is a disease of the liver
characterized by inflammation and damage of liver cells and loss of all
important liver functions. Viral hepatitis is of major medical importance
worldwide today. Very little treatment exists today for hepatitis. The only
treatment is usually symptomatic, for general management of the patient's
clinical condition and improving general nutrition. In very advanced cases,
interferon offers a general palliative therapy. Recently, the FDA approved a new
bioengineered interferon, Infergen, in the treatment of hepatitis C. Both forms
of therapy are injectables with side effects and are costly. The Company's
immediate plans for HP-11 include fractionation to isolate the most active
compounds and in-vitro activity evaluation on human liver cells. Fractionation
would be
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followed by trials to determine bioavailability (the rate and extent to which
the active compounds enter the general circulation).
BV-6
BV-6 is a naturally-occurring, biological, single molecule. BV-6, which is
derived from an animal cell component, is undergoing testing for the treatment
of degenerative diseases of the central nervous system, including seizure
disorders, strokes, multiple sclerosis and Alzheimer's disease. BV-6 has been
tested in cultured central nervous system neurons and in animals. BV-6 appears
to act by bypassing certain receptors in the brain that cause degeneration of
the brain tissue and, to date, has exhibited no toxicity over the entire
physiologically effective concentration range.
The National Institutes of Health awarded an SBIR grant in the amount of
$100,000 to the Company in September 1996. Those studies have been successfully
completed, confirming the previous findings and a report has been submitted. An
additional SBIR grant application for $750,000 was submitted in April 1997 for
further animal studies. In 1995, the Company was assigned a pending United
States patent application related to BV-6. See "Patents, Licenses and
Proprietary Rights."
SA-12
SA-12, a non-plant based, proprietary antibacterial surgical scrub and
general disinfectant (not a pharmaceutical) for use on the hands or other skin
surfaces, was acquired by the Company from the product's inventor in 1995.
SA-12 is a scented, fast drying liquid, requiring no wipe-off, and it leaves
no oily feel after evaporation. SA-12 does not appear to irritate the skin. The
Company has tested the skin of SA-12 treated subjects for the presence of common
pathogens (streptococcus, staphylococcus, etc.) and has found no measurable
concentrations of microbial content for over two hours on the treated skin
(hands). Similar results were also obtained for highly virulent but less common
organisms such as Pseudomonas, E. coli and Candida Albicans. In a comparative
study, SA-12 was superior in terms of spectrum, speed and duration of activity
to the most widely used and known antibacterial agents currently available such
as Betadine, PhisoHex, Hibiclens and Sterillium.
SA-12 is comprised of ingredients listed in the United States Pharmacopeia
and can be produced at a cost which the Company believes will enable it to
compete effectively in developing countries, in very price sensitive healthcare
sectors, such as hospitals, and the food industry.
The product was launched in India in the second quarter of 1997 under the
brand name Multicidal-Registered Trademark- and is in the process of being
introduced in Pacific Rim countries and elsewhere under the brand name
Periban-TM-. The initial introduction has been targeted at hospitals, clinics
and physician offices. After an initial period, the Company may consider
promoting the product directly to consumers in the over-the-counter market. The
Company has no present intention of marketing SA-12 in the United States. See
"--Marketing" and "--Patents, Licenses and Proprietary Rights."
Currently, the Company is marketing 500 ml and 200 ml plastic dispenser
bottles, as well as pump dispensers. Additional consumer line extensions which
the Company may explore include small towel wipes in unit packages, soaps, body
lotions and other convenient applications.
MANUFACTURING AND SUPPLY
The Company currently relies on Kancor Flavours & Extracts Pvt. Ltd.
("Kancor") located in Southern India to provide all of the plant extracts used
in the production of RA-11. Kancor's production facility is ISO-9000 certified.
Kancor and the Company have entered into a five-year renewable agreement
covering the supply of these plant extracts. Plant extracts used in the
production of IM-10 and HP-11 for testing purposes are purchased on an
order-by-order basis. The Company has been and expects to continue
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to be able to obtain plant extracts in quantities sufficient for its testing and
commercial production purposes for at least the next 12 months without any
significant interruption or sudden price increase, although there can be no
assurance thereof. Even though all plants used in the production of the
Company's phyto-pharmaceuticals are commercially cultivated, no assurance can be
given of continual sources of supply of required materials or that reasonable
arrangements can be made for their supply. Supply risks include unexpected
changes in regulatory requirements, exchange rates, tariffs and barriers,
difficulties in coordinating and managing foreign operations, potentially
adverse tax consequences and disruptions in the political and economic stability
of India and the other regions in which the Company's source plants are grown as
well as seasonality and weather factors. Interruptions in supply or material
increases in the cost of the supply could have a material adverse effect on the
Company's financial condition and results of operations. Kancor has indicated
that it intends to build a stand alone facility which would be designed to meet
the FDA's GMP requirements for bulk active pharmaceutical ingredients. The
Company is in preliminary discussions with Kancor regarding utilization of such
facility to produce bulk ingredients for the Company's phyto-pharmaceuticals.
In October 1997, the Company entered into an agreement with Eisen
Pharmaceutical Co. (Pvt.) Ltd. of Pune, India ("Eisen"), for the manufacture of
RA-11. The agreement has a five-year term and is terminable by either party upon
three months' notice. Pursuant to the terms of the agreement, the Company
supplies the manufacturer with the raw materials used in, and retains a
supervisory role over, the manufacturing process. The Company operates under a
similar arrangement with S.P.B. (Inc.) of Pune, India for the manufacture of
SA-12, although no formal agreement has yet been entered into. Each of S.P.B.
(Inc.) and Eisen has applied for a GMP approval rating for finished formulations
from the World Health Organization. The loss of the manufacturing capacitates of
either S.P.B. (Inc.) or Eisen would cause an interruption in the supply of
products produced by the respective manufacturer. This could, in turn, have a
material adverse effect on the Company's financial condition and results of
operations.
To provide the Company's requirements of RA-11 for United States clinical
trials, the Company intends to import active ingredients in bulk into the United
States. The United States has fewer requirements for import of active
ingredients and formulations than for finished formulations. The Company would
seek to enter into arrangements with third-party manufacturers which are United
States GMP-certified to supply finished product. The Company's long-term goal is
to build or acquire a United States GMP-certified manufacturing base in India to
produce the products sold by the Company in India and other countries.
MARKETING
The Company has no marketing or sales staff and currently intends to rely on
third-party distributors for the sale and marketing of all products it may
develop.
In April 1996, the Company entered into a memorandum of understanding with
Blue Cross Laboratories Ltd, of Mumbai (previously known as Bombay), India
("Blue Cross"), in connection with the distribution in India of SA-12 (the "BCL
Agreement"). Pursuant to the BCL Agreement, the Company is obligated to cause
S.P.B. (Inc.) to manufacture and deliver SA-12 to Blue Cross for distribution.
In addition to a negotiated sales price, Blue Cross will pay the Company a
percentage of all sales of SA-12 made by Blue Cross through March 31, 2001, the
expiration date of the BCL Agreement.
Effective September 1997, the Company entered into a distribution agreement
(the "MD Agreement") with MD Pharmaceuticals Laboratories Ltd. for the marketing
of RA-11 and SA-12 in Singapore, Thailand and other Pacific Rim countries. The
MD Agreement is a three-year renewable direct marketing supply and distribution
agreement pursuant to which the Company sells finished product at an agreed upon
price.
In September 1997, the Company entered into a memorandum of understanding
with Alembic Chemical Works Co. Limited ("Alembic") of Baroda, India for the
distribution in India of RA-11 (the
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"Alembic Agreement"). Pursuant to the Alembic Agreement, the Company's
subsidiary will manufacture and package RA-11 and sell it to Alembic at an
agreed upon price. Initially, Alembic is only required to test market RA-11 in
the State of Maharashtra, during which time an assessment regarding the
acceptance and effectiveness of RA-11 will be made. Alembic will be required to
implement a national launch of RA-11 by April 1, 1998, subject to satisfactory
results obtained during test marketing. If no definitive agreement is entered
into between the parties before March 31, 1998, neither party will have any
continuing obligation to the other. RA-11 will be marketed under the trade name
ARTREX-TM-.
The Company will continue to seek distribution arrangements with national
pharmaceutical distributors in countries other than the United States, Europe
and Japan. For products that may be sold in the United States and other large
markets, the Company will seek alliances or collaborative arrangements with
pharmaceutical companies that have established sales forces as well as the
ability and expertise to conduct clinical trials and finished product
manufacturing. The Company may license the products to such an entity or
entities in exchange for licensing and/or royalty payments. In any such
relationship, the Company's goal would be to supply the active raw material in
bulk to such entities who would then be responsible for finished product
manufacture and marketing. The Company cannot assure that it will be able to
enter into any such arrangements on terms acceptable to the Company, or at all.
COMPETITION
Competition in the pharmaceutical industry is extremely intense. The
principal factors upon which such competition is based include the following:
marketing, distribution, price, therapeutic efficacy, side effect profile, ease
of use, safety, physician acceptance and patient compliance. Many pharmaceutical
companies have significantly greater research and development capabilities, as
well as substantially greater marketing, financial and human resources than the
Company. In addition, many of these competitors have significantly greater
experience than the Company in undertaking preclinical testing and human
clinical trials of new pharmaceutical products and obtaining regulatory
approvals of such products. These companies may represent significant long-term
competition for the Company.
There can be no assurance that developments by other pharmaceutical
companies will not render the Company's products or technologies obsolete or
noncompetitive or that the Company will be able to keep pace with technological
developments of its competitors. Many of the Company's competitors have
developed or are in the process of developing technologies that are, or in the
future may be, the basis for competitive products. Some of these products may
have an entirely different approach or means of accomplishing the desired
therapeutic effect than products being developed by the Company. These competing
products may be more effective and less costly than the products developed by
the Company.
PATENTS, LICENSES AND PROPRIETARY RIGHTS
TECHNOLOGY AGREEMENTS
The Company has entered into license agreements with Dr. Bhushan Patwardhan
pursuant to which the Company acquired exclusive worldwide rights to RA-11. One
agreement relates to the rights to commercialize RA-11 in India and the other
agreement relates to similar rights throughout the rest of the world. To
maintain its rights under the RA-11 agreements, in addition to paying royalties
on sales, the Company must commence marketing in India by January 1998 and
commence marketing outside India by 2003. The Company is currently in compliance
with its obligations under the agreements. The Company has also entered into a
license agreement with Dr. Patwardhan pursuant to which the Company acquired
exclusive worldwide rights to IM-10. To maintain its rights under the agreement,
in addition to paying royalties on sales, the Company must commence marketing in
India within one year of clinical confirmation and approval by the Drug
Controller of India (India's FDA equivalent) and commence marketing in at least
one country outside India within seven years of its initial marketing in India.
See "--Consultants."
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In December 1995, the Company entered into an agreement with Dr. Abraham
Rosenberg pursuant to which the Company was assigned a United States patent
application related to BV-6, in exchange for royalties. See "--Consultants."
In June 1995, the Company entered into an agreement with S.V. Karnataki
pursuant to which the Company purchased SA-12 and related technology for an
initial signing fee and limited manufacturing and marketing milestone payments.
PATENTS AND PROPRIETARY RIGHTS
The Company's policy is to protect its technology by filing patent
applications. In addition to intending to file patent applications in the United
States, the Company has filed, and intends to file, patent applications in
foreign countries on a selective basis. The Company also relies on trade
secrets, unpatented know-how and technological innovation to develop and
maintain its competitive position.
The Company is the exclusive licensee under an issued United States patent,
which expires in 2014, relating to RA-11 and its use in treating degenerative
musculoskeletal disorders, including rheumatoid arthritis and osteoarthritis.
The Company also holds an exclusive license on two Indian patents, one of which
relates to the Company's proprietary plant extraction process and the other to
the Company's proprietary process for formulating RA-11, which expire in 2001.
However, the Company's licensor does not have any patent rights relating to
RA-11 outside of the United States and India. In addition, the Company has a
United States patent application pending for the use of BV-6 in the treatment of
degenerative diseases of the central nervous system.
Although a patent has a statutory presumption of validity in the United
States, the issuance of a patent is not conclusive as to such validity or as to
the enforceable scope of the claims of the patent. There can be no assurance
that the Company's issued patent or any patents subsequently issued to or
licensed by the Company will not be successfully challenged in the future. The
validity or enforceability of a patent after its issuance by the patent office
can be challenged in litigation. If the outcome of the litigation is adverse to
the owner of the patent, third parties may then be able to use the invention
covered by the patent without payment. There can be no assurance that the
Company's patents will not be infringed or successfully avoided through design
innovation.
There can be no assurance that patent applications owned by or licensed to
the Company will result in patents being issued or that, if issued, the patents
will afford protection against competitors with similar technology. It is also
possible that third parties may obtain patent or other proprietary rights that
may be necessary or useful to the Company. In cases where third parties are
first to invent a particular product or technology, it is possible that those
parties will obtain patents that will be sufficiently broad so as to prevent the
Company from using certain technology or from further developing or
commercializing certain product candidates. If licenses from third parties are
necessary but cannot be obtained, commercialization of the product candidates
would be delayed or prevented.
There may be patent applications and issued patents belonging to competitors
that may require the Company to alter its product candidates, pay licensing fees
or cease certain activities. If the Company's products or product candidates
conflict with patents that have been or may be granted to competitors,
universities or others, such other persons could bring legal actions against the
Company claiming damages and seeking to enjoin manufacturing and marketing of
the affected products. If any such actions are successful, in addition to any
potential liability for damages, the Company could be required to obtain a
license in order to continue to manufacture or market the affected products.
There can be no assurance that the Company would prevail in any such action or
that any license required under any such patent would be made available on
acceptable terms or at all. The Company believes that there may be significant
litigation in the industry regarding patent and other intellectual property
rights. If the Company becomes involved in such litigation, it could consume
substantial resources.
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The enactment of the legislation implementing the General Agreement on Trade
and Tariffs has resulted in certain changes to United States patent laws that
became effective on June 8, 1995. Most notably, the term of patent protection
for patent applications filed on or after June 8, 1995 is no longer a period of
seventeen years from the date of grant. The new term of United States patents
will commence on the date of issuance and terminate twenty years from the
earliest effective filing date of the application. Because the time from filing
to issuance of patent applications is often more than three years, a twenty-year
term from the effective date of filing may result in a substantially shortened
term of patent protection, which may adversely impact the Company's patent
position. If this change results in a shorter period of patent coverage, the
Company's business could be adversely affected in the future, to the extent that
the duration and level of the royalties it is entitled to receive from its
potential collaborators is based on the existence of a valid patent. None of the
issued patents currently owned or licensed by the Company are adversely affected
by these changes in the term of patent protection.
At present, India only grants process patents for pharmaceutical products.
Although India is not a signatory of the Paris Convention, it is a member of the
World Trade Organization ("WTO"). As a signatory of WTO, India is required to
comply with its obligations under Trade-Related Aspects of Intellectual Property
Rights ("TRIPS"). TRIPS requires India to grant product patents for
pharmaceutical products after a certain transition period. During the transition
period, participating countries must establish a means for filing patent
applications relating to pharmaceutical products and agricultural chemicals and
also grant exclusive marketing rights for certain periods. In response to claims
raised by other countries, WTO ruled that India has not been abiding by its
transition period commitments under TRIPS. As of the date of this Prospectus, it
is expected that India will appeal the WTO decision. In addition, as an
aftermath of the Convention on Biological Diversity, India is planning to enact
a law on national bio-diversity. This law may place restrictions and/or
conditions for obtaining patents or other intellectual property relating to
biological material or products derived therefrom.
The Company also relies on unpatented technology, trade secrets and
information and no assurance can be given that others will not independently
develop substantially equivalent information and techniques or otherwise gain
access to the Company's technology or disclose such technology, or that the
Company can meaningfully protect its rights in such unpatented technology, trade
secrets and information. The Company requires each of its employees, consultants
and advisors to execute a confidentiality agreement at the commencement of an
employment or consulting relationship with the Company. The agreements generally
provide that all inventions conceived by the individual in the course of
employment or in providing services to the Company and all confidential
information developed by, or made known to, the individual during the term of
the relationship shall be the exclusive property of the Company and shall be
kept confidential and not disclosed to third parties except in limited specified
circumstances. There can be no assurance, however, that these agreements will
provide meaningful protection for the Company's information in the event of
unauthorized use or disclosure of such confidential information.
TRADEMARKS
The Company seeks to file trademark applications on major products before
the products are publicly available. The following table reviews the Company's
current trademark filings:
<TABLE>
<CAPTION>
PRODUCT UNITED STATES INDIA
- -------------------------- ----------------------------------- --------------------------------------
<S> <C> <C>
RA-11 MENDAR-TM- RADICURE-TM- ARTREX-TM-
SA-12 PERIBAN-TM- MULTICIDAL-Registered Trademark-MICROCIDAL-TM-
HP-11 MODALEX-TM- Not yet filed
</TABLE>
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OTHER GOVERNMENT REGULATION
COVERAGE AND REIMBURSEMENT BY THIRD PARTY PAYERS
The ability of the Company to successfully commercialize any products that
receive FDA approval will depend, in part, on coverage and reimbursement of such
products by third-party payers, such as government health care programs,
indemnity insurers, and managed care organizations. Significant uncertainty
exists as to the coverage and reimbursement status of pharmaceuticals and other
products following approval by the FDA. Government and other third-party payers
are increasingly attempting to contain costs by limiting both coverage and
reimbursement for pharmaceuticals and products approved for marketing by the FDA
and by refusing, in some cases, to provide coverage of approved pharmaceuticals
and products for disease indications for which the FDA has not granted marketing
approval. Payers are also increasingly applying cost effectiveness criteria to
new therapies for which alternatives exist. There can be no assurance that the
Company's products will be deemed cost effective compared to other alternative
therapies, or that adequate third-party coverage and reimbursement will be
available for the Company to realize an appropriate return on its investment. If
adequate coverage and reimbursement is not provided by government and other
third-party payers for uses of the Company's products, the market acceptance of
these products could be adversely affected.
HEALTH CARE "FRAUD AND ABUSE"
Once the Company's products are marketed in the United States, the Company
(and other entities marketing, purchasing, or seeking reimbursement for the
Company's products), will be subject to various federal and state laws
pertaining to health care "fraud and abuse," including anti-kickback laws and
false claims laws. Anti-kickback laws make it illegal to solicit, offer,
receive, or pay any remuneration in exchange for, or to induce, the referral of
business, including the purchase or prescription of a particular drug. False
claims laws prohibit anyone from knowingly and willfully presenting, or causing
to be presented, claims for payment to third party payers (including Medicare
and Medicaid) that are false or fraudulent, for items or services not provided
as claimed, or for medically unnecessary items or services. Thus, the Company's
activities relating to sale and marketing of its products, including any advice
that might be given concerning billing or reimbursement, would be subject to
scrutiny under these laws. Violations of fraud and abuse laws are punishable by
criminal and/or civil sanctions, including in some instances imprisonment and
exclusion from participation in federal health care programs, such as Medicare
and Medicaid. The Company intends to structure its sales, marketing and other
activities to comply with these and other laws. However, given the broad reach
of these laws, there can be no assurance that the Company's future activities
would not be subject to scrutiny and/or challenge at some time in the future.
ENVIRONMENTAL REGULATION
In connection with its research and development activities and its
manufacturing of clinical trial materials, the Company is subject to laws and
standards prescribed by the Indian government, and will be subject to United
States federal, state and local laws, rules, regulations and policies governing
the use, generation, manufacture, storage, air emission, effluent discharge,
handling and disposal of certain materials and wastes. There can be no assurance
that the Company will not be required to incur significant costs to comply with
environmental and health and safety regulations in the future. The Company's
research and development involves the controlled use of hazardous materials,
chemicals, viruses and animal tissues. Although the Company believes that its
safety procedures for handling and disposing of such materials comply with the
standards prescribed by state and federal regulations, the risk of accidental
contamination or injury from these materials cannot be completely eliminated. In
the event of such an accident, the Company could be held liable for any damages
that result and any such liability could exceed the resources of the Company.
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OTHER REGULATION
The Company is also subject to laws of more general applicability dealing
with issues such as occupational safety, employment, medical leave, and civil
rights and discrimination. In the United States, federal, state and local
governments in many instances are expanding the regulatory requirements on
businesses, and the imposition of these regulatory requirements may have the
effect of increasing operating costs and reducing the profitability of the
Company's operations.
HEALTH CARE REFORM
In the past several years there have been numerous initiatives in the United
States on the federal and state government levels for comprehensive or
incremental reforms affecting the payment for health care services and products,
including a number of proposals that would significantly limit reimbursement
under the Medicare and Medicaid programs. The Company anticipates that federal
and state governments will continue to review and assess alternative health care
delivery systems and payment methodologies. It is not clear at this time what
existing or future proposals, if any, will be adopted or, if adopted, what
effect such proposals would have on the Company's business. Aspects of certain
of these health care proposals, such as cutbacks in Medicare and Medicaid
coverage and reimbursement for pharmaceuticals, could adversely affect the
Company. There can be no assurance that past, present or future proposals for
health care reform, or other changes in the administration or interpretation of
governmental health care programs, will not have an adverse effect on the
Company.
PRODUCT LIABILITY
The testing and marketing of pharmaceuticals entail an inherent risk of
product liability attributable to unwanted and potentially serious health
effects. The Company intends to obtain clinical trial liability insurance
coverage in an amount consistent with industry practice. However, there can be
no assurance that such insurance coverage is or will continue to be adequate. In
addition, the Company has product liability insurance in India, the only country
in which its products are currently being marketed. As its products achieve
wider-spread commercialization, the Company intends to seek product liability
insurance coverage in amounts consistent with industry practice in those
countries in which its products are to be marketed. There can be no assurance,
however, that insurance will be available at all or in sufficient amounts to
protect the Company at a reasonable cost.
FACILITIES
The Company currently leases approximately 2,000 square feet of office space
in San Jose, California. The lease has a three-year term, which commenced in
October 1995, and provides for a monthly rental payment of approximately $3,200.
Bio-Ved leases approximately 1,550 square feet of office space in Pune, India
under a three-year lease expiring in May 1999. The annual rental payment is
approximately $15,000. In addition, Bio-Ved currently utilizes approximately
4,000 square feet of laboratory space provided by the Bharati Vidyapeeth's Pune
College of Pharmacy. The laboratory space is provided pursuant to a five-year
agreement which expires in 1999 under which the Company has agreed to pay an
aggregate of approximately $7,000 annually to fund research fellowships and as a
grant to the College. The Company intends to use proceeds from the Offering to
establish and equip additional laboratory facilities for its research and
development activities in India and believes that there is an adequate supply of
suitable space in the Pune region for its expansion needs.
EMPLOYEES
As of September 30, 1997, the Company had 22 employees, 15 of whom were
engaged in research and development activities and seven are in executive
management and marketing. The Company's employees
43
<PAGE>
are not governed by any collective bargaining agreement and the Company believes
that its relationship with its employees is good.
MEDICAL/SCIENTIFIC ADVISORY BOARD
The Company intends to form an Advisory Board from a multidisciplinary group
of distinguished scientists representing different fields closely associated
with the Company's business. Most of the prospective members will come from the
existing consultants to the Company and will be supplemented by one or more
representatives yet to be recruited.
CONSULTANTS
The Company utilizes various consultants in India and in the United States
for research and development of drug candidates, as well as for discovering
potential new drug candidates. The Company confers with such consultants as
necessary to discuss details of specific projects. Certain of the listed
consultants have entered into agreements specifying the terms and scope of their
individual consulting relationship with the Company. The Company does not
believe that termination of any individual agreement would materially adversely
affect its business. Although all these consultants have entered into
confidentiality agreements, none of these individuals is employed by the Company
and, therefore, they may have commitments to, or consulting contracts with,
other entities which may compete with their obligations to the Company. The
Company's consultants are:
ARVIND CHOPRA, M.D. (Rheumatologist) received his M.D. from the Armed Forces
Medical College at Pune, India, in 1977. He is a fellow of the American College
of Rheumatology and a lifetime member in the Association of Physicians in India,
Cardiological Society of India, Indian Rheumatology Association and the
Interdisciplinary School of Health Sciences at the University of Pune. Dr.
Chopra has numerous papers and publications to his credit and has organized many
professional conferences in India.
GEORGE EHRLICH, M.D. (Medical Affairs) is the Master of the American College
of Rheumatology and the Arthritis Foundation of North America. He currently is a
professor of medicine at New York University and the University of Pennsylvania.
In addition, Dr. Ehrlich is the Chairman of the Export Advisory Panel on Chronic
Degenerative Diseases of the World Health Organization. He has been in teaching
and academic positions at various institutions, including Tufts University,
Cornell University, Temple University and Hahnemann University School of
Medicine. He retired as Vice President of Medical Affairs for Ciba Geigy Ltd.
Worldwide. He was Chairman of the Arthritis Advisory Committee, FDA council
1993-1996, among other noted positions. Dr. Ehrlich is considered a world expert
in inflammatory, arthritic and rheumatic diseases. He has written more than 200
publications, 55 abstracts, 60 book chapters and 11 books.
PHILIP LAVIN, PH.D (Biostatistics) founded Boston Biostatistics, Inc. in
1983. He has been a statistical consultant for industry since 1976, member of
the Harvard Medical School faculty since 1977, and has served on FDA advisory
panels since 1983. He has co-authored over 150 publications in biostatistics and
medicine. He is a recognized authority in clinical, regulatory, and
biostatistical issues relating to drugs, devices, biologics, and cosmetics.
Under his direction, Boston Biostatistics has grown into a mid-size contract
research organization offering expert services in study and case report file
design, site recruitment and monitoring, medical affairs, regulatory affairs,
database development, data management and biostatistics, report writing, and
regulatory submissions.
KALINDI PHADKE, PH.D. (BioChemistry) has a Ph.D. in BioChemistry from the
University of Bombay. She has held research positions in large multi-national
pharmaceutical companies in the United States. Recently, she was Senior Research
Scientist at Eli Lilly and Company, in Indianapolis. A United States citizen,
she moved to India for family reasons where she was Deputy Director of the
National Cell Sciences Center at the University of Pune. She has a special
research fellowship from the National Institutes of
44
<PAGE>
Health. She has more than 50 publications, including original work in arthritis
pharmacology models which are the standard of research in this area worldwide
today.
BHUSHAN PATWARDHAN, PH.D (Interdisciplinary Health Sciences) received his
Ph.D. from the University of Pune, India. He is currently Dean of the
Interdisciplinary School of Health Sciences University of Pune. In 1993, Dr.
Patwardhan was selected as Co-Chairman of the 5th Annual INWIN and World Health
Organization Interscience World Congress in Geneva, Switzerland. Dr. Patwardhan
is a lifetime member of the Indian Medical Association, Indian Drug Research
Association and the Indian Society for Cancer Research. He is the founding
member of Ayurvedic International Diffusing Association, Science and Technology
Park Society and Indian Society for Clinical Pharmacology and Therapeutics.
RICHARD P. POLISSON, M.D., M.H.S. (Rheumatologist) was the Clinical
Associate Professor, Immunology Branch, National Cancer Institute, National
Institutes of Health in Bethesda, Maryland from 1978 through 1980. Later, he has
held a number of academic appointments at Massachusetts General Hospital,
Harvard Medical School and Duke University. He has been the principal
investigator on a number of research projects and co-investigator on several
others. The National Institutes of Health and many foundations and
pharmaceutical companies have funded his projects. Since 1994, Dr. Polisson has
held the position of Clinical Director, Arthritis Unit, and Director of all
Clinical Research at Massachusetts General Hospital. Very recently, he has been
named the Medical Director of Genzyme Tissue Repair (Genzyme, Corp.).
SUSAN A. RICE, PH.D., D.A.B.T. (Toxicologist and Pharmacologist) received
her Ph.D. in Comparative Pharmacology and Toxicology from the University of
California at Davis. She has held numerous appointments, most recently as Senior
Managing Scientist at Failure Analysis Associates, Inc. in California, and in
the Department of Anesthesia at Stanford University School of Medicine from 1976
to the present. Dr. Rice is a member of the American Society of Anesthesia,
American Society for Pharmacology and Experimental Therapeutics, the California
Society of Anesthesiologists and the Northern California Chapter, Society of
Toxicology. Her experience includes review and analysis studies for IND and pre-
marketing approval applications.
ABRAHAM ROSENBERG, PH.D. (Biochemistry and Neurochemistry) has a Ph.D. in
Biochemistry from Columbia University College of Physicians and Surgeons. He was
both a Fullbright Scholar and a Fullbright Senior Lecturer early in his career.
He has been in academics and research most of his life. His positions include
Professor, Biochemistry, Pennsylvania State University; Chief, Division of
Molecular Biology, New York University and Professor, Brain Research and
Neuropsychiatric Institutes, UCLA. Currently he is Professor, Psychiatry and
Behavioral Sciences at Emory University. He has published more than 80 papers
and served on the Editorial Boards of several reputed journals. He received the
National Institutes of Health James A. Shannon Director's Award in 1996 for his
work in neurochemistry.
SUBRAMANIAM S. SHASTRI, PH.D., M.B.A. (Pharmaceutical Sciences) received
both his Ph.D. in Pharmacy and M.B.A. from the University of Iowa. He has 28
years of experience in the broad spectrum of pharmaceutical product development,
including multidisciplinary project team management practices and is well-versed
with the relevant regulatory requirements. Dr. Shastri has held several
positions with Syntex Corporation since 1969, including management of the
Research Pharmaceutical Operations from 1979 to 1993, during which sales nearly
quadrupled. Dr. Shastri has received two patents from the United States.
45
<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY PERSONNEL OF THE COMPANY
The Company's directors, executive officers and key personnel are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Sanjeev Chitre(1)(2)................................. 44 Chairman of the Board of Directors
Deepa Chitre, M.D.(1)(2)............................. 40 President, Chief Executive Officer and Director
Barry Wald........................................... 60 President, International Operations
Nina Renaud.......................................... 46 Chief Financial Officer and Treasurer
Cynthia R. May....................................... 45 Director
Suzanne Rosenthal.................................... 62 Director
Michael Splinter..................................... 47 Director
Ajit Chitre.......................................... 53 Managing Director--Bio-Ved
</TABLE>
- ------------------------
(1) Sanjeev Chitre and Deepa Chitre are married.
(2) May be considered a founder of the Company as that term is defined under the
Securities Act.
SANJEEV R. CHITRE has served as Chairman of the Board of Directors of the
Company since inception. In 1989, Mr. Chitre founded Integrated Process
Equipment Corp., a publicly traded semiconductor equipment manufacturer, and has
served as its chairman since its inception in 1989 and as its chief executive
officer from inception until August 1997. Mr. Chitre was a vice president of
marketing and sales of Superwave Technology, Inc., a manufacturer of automated
in-line systems for the semiconductor industry, from 1984 through 1989.
DEEPA CHITRE, M.D. has served as a director of the Company since inception,
as its Chief Executive Officer since October 1996 and as its President since
October 1997. From 1993 to 1996, Dr. Chitre practiced pediatric medicine in
private practice. From November 1990 to August 1996, Dr. Chitre served on the
academic teaching faculty of Santa Clara Valley Medical Center, Stanford
University Medical Center and Lucille Packard Children's Hospital. During this
time, she was active in and chaired a number of committees involved in health
care, scientific research, clinical management, hospital administration and
medical teaching standards.
BARRY WALD has served as President, International Operations of the Company
since October 1997. From April 1994 until October 1997, Mr. Wald served as
President and a Director of the Company. From 1991 to March 1994, he served as a
consultant to the pharmaceutical drug delivery and biotechnology industry in
marketing, business development and strategic planning. From 1976 to 1990, he
was employed in various capacities, including Vice President, Marketing from
1981 until 1990, by Syntex Corporation, a pharmaceutical company. Mr. Wald
played a significant role in the launches of several major products by Syntex
Corporation, including a leading analgesic with worldwide sales reported to
exceed $400 million. From 1968 to 1975, Mr. Wald was employed in various
capacities by Merck Sharpe & Dohme.
NINA RENAUD has served as Chief Financial Officer of the Company since
September 1997. From July 1995 to September 1997, Ms. Renaud was Senior Vice
President--Finance and Chief Operating Officer of Corporate Golf, a San
Francisco-based marketing company. From October 1992 until December 1994, she
was Vice President, Finance and Chief Financial Officer of Harris Moran Seed
Company, a joint venture of Rhone-Poulenc and Lefarge-Coppee. From November 1990
until October 1992, Ms. Renaud served as Director of Finance and Development for
Rhone-Poulenc's Seed Technology Unit. Ms. Renaud has also served as a divisional
chief financial officer, and as a director responsible for international
licensing and export operations, for Pioneer Hi-Bred International and CBS, Inc.
CYNTHIA R. MAY has served as a director of the Company since August 1995.
Since 1981, Ms. May has been employed by Saginaw Controls & Engineering Corp., a
private manufacturing company, most
46
<PAGE>
recently as vice president. Since July 1997, Ms. May has been a director and
chief operating officer of
Graminex USA L.L.C., a manufacturer and processor of agricultural products
including herbs for the food and pharmaceutical industry. Since 1994, Ms. May
has been treasurer of Marathon Investments L.L.C. and vice president and
treasurer of GRQ, L.L.C., two private investment and financing entities.
SUZANNE ROSENTHAL has served as a director of the Company since October
1997. Ms. Rosenthal is currently Chairman of the Board Emeritus of the Crohn's &
Colitis Foundation of America, Inc. ("CCFA"), a position she has held since
1987. She served as CCFA's National President and its Executive Vice President
for over 30 years since its founding in 1967. Ms. Rosenthal helped to establish
70 affiliate CCFA chapters throughout the United States and has helped to raise
$15 million in annual funding for research and education. Ms. Rosenthal has
served as a member of a number of National Institutes of Health advisory boards,
councils and committees, and since 1993 has served on the Advisor Council of the
National Institute of Diabetes, Digestive and Kidney Diseases. Ms. Rosenthal is
the Founder and past President of the Digestive Disease National Coalition, a
consortium of lay and medical professional organizations that educates the
public regarding the need for increased research and improved health care for
patients with digestive diseases.
MICHAEL SPLINTER has served as a director of the Company since October 7,
1997. Mr. Splinter has been employed in various capacities with Intel
Corporation ("Intel"), semiconductor chip manufacturer, since approximately
1984. He is currently a corporate Vice President and co-manages Intel's
Technology and Manufacturing group, which is responsible for Intel's process
development and worldwide manufacturing network. Mr. Splinter has authored
numerous technical and management papers and holds two patents.
AJIT CHITRE has served as Managing Director of Bio-Ved since September 1996
and as a consultant to the Company from April 1994 to August 1996. From May 1993
to August 1996 he was a consultant in marketing and new business development in
the biotechnology and pharmaceutical industry including AyurCore. From 1988 to
May 1993 he was Managing Director of Atija Corporation, a company involved in
direct sales and marketing of equipment in the semiconductor and biotechnology
industries. Mr. Ajit Chitre is a brother-in-law of Mr. Sanjeev and Dr. Deepa
Chitre.
All directors of the Company are elected by the stockholders, or in the case
of a vacancy, by the directors then in office, to hold office until the next
annual meeting of stockholders of the Company and until their successors are
elected and qualified or until their earlier resignation or removal.
In connection with the Offering, the Company has agreed, subject to certain
exceptions, that it will, for a period of five years from the date of this
Prospectus, upon the written request of the Representative, nominate and use its
best efforts to elect a designee of the Representative (which designee may
change from time to time) to serve as a director of the Company, or at the
Representative's option, appoint such designee as a non-voting advisor to the
Company's Board of Directors. The Representative has not yet exercised its right
to designate such a person. See "Underwriting."
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has established an Executive Committee, a Compensation and Stock
Option Committee, and an Audit Committee. The Executive Committee, consisting of
Messrs. Sanjeev Chitre and Michael Splinter and Dr. Deepa Chitre, exercises all
the power and authority of the Board of Directors in the management and affairs
of the Company between meetings of the Board of Directors, to the extent
permitted by law.
The Compensation and Stock Option Committee, consisting of Ms. Cynthia May
and Mr. Michael Splinter, makes recommendations to the Board of Directors
concerning compensation, including incentive arrangements, of the Company's
officers and key employees and others and administers the Company's Option Plan
and determines the officers, key employees and others to be granted options
under the Option Plan and the number of shares subject to such options.
47
<PAGE>
The Audit Committee, consisting of Ms. Suzanne Rosenthal and Mr. Michael
Splinter, reviews the engagement of the Company's independent auditors and the
independence of the accounting firm, the audit and non-audit fees of the
independent accountants and the adequacy of the Company's internal control
procedures.
DIRECTOR COMPENSATION
Directors who are employees of the Company receive no compensation, as such,
for service as members of the Board. All directors are reimbursed for expenses
incurred in connection with attendance of Board and committee meetings. On
November 18, 1997, the Company granted options under the Option Plan to purchase
15,000 shares of Common stock at the initial public offering price per share to
each of Cynthia May, Suzanne Rosenthal and Michael Splinter. See "--Stock
Options--1997 Option Plan."
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the aggregate compensation paid or accrued by
the Company for services rendered in all capacities to the Company during the
fiscal year ended December 31, 1996 by Dr. Deepa Chitre, its President and Chief
Executive Officer, and by Mr. Barry Wald, the only executive officer whose
compensation exceeded $100,000 during the fiscal year ended December 31, 1996
(together, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
--------------------------------------
ANNUAL COMPENSATION NUMBER OF SHARES OF
COMMON STOCK
----------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY BONUS OPTIONS COMPENSA- TION
- --------------------------------------------- ------------- ---------- ----------- ----------------------- -------------
<S> <C> <C> <C> <C> <C>
Deepa Chitre, Chief Executive Officer and
President.................................. 1996 $ 42,000(1) $ -0- -0- $ -0-
Barry Wald, President, International
Operations................................. 1996 $ 125,000(2) $ -0- -0- $ -0-
</TABLE>
- ------------------------
(1) Of such amount, $28,000 has been deferred.
(2) Of such amount, $48,753 has been deferred.
No stock options were granted to the executive officers named in the Summary
Compensation Table during the fiscal year ended December 31, 1996. See "--Stock
Options."
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth certain information for the Named Executive
Officers with respect to the exercise of options to purchase Common Stock during
the fiscal year ended December 31, 1996 and the number and value of securities
underlying unexercised options held by the Named Executive Officers as of
December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES DECEMBER 31, 1996 AT DECEMBER 31, 1996(1)
ACQUIRED VALUE -------------------------- --------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------- --------------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Deepa Chitre....................... -0- -0- -0- -0- -0- -0-
Barry Wald......................... -0- -0- 68,567 68,934 $ 216,672 $ 217,831
</TABLE>
- ------------------------
(1) Calculated on the basis of the fair market value of the Common Stock at
December 31, 1996 of $3.50 per share, as determined by the Company's Board
of Directors, minus the per share exercise price multiplied by the number of
shares underlying the option.
48
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each of Dr. Deepa
Chitre and Mr. Barry Wald, effective as of the date of this Prospectus, pursuant
to which such individuals are employed as (i) President and Chief Executive
Officer, and (ii) President, International Operations, respectively, of the
Company. Each agreement expires three years following the date of this
Prospectus. Under the agreements (i) each executive has agreed to devote full
time to the business of the Company, (ii) Dr. Chitre and Mr. Wald are to be paid
annual salaries of $140,000 and $130,000, respectively, and each executive may
be entitled to annual bonuses, at the sole discretion of the Company, of $35,000
and $30,000, respectfully and (iii) each executive is entitled to fringe
benefits (such as paid vacation, disability insurance and participation in
medical insurance and employee benefit plans) as are generally available to
employees of the Company as well as such other benefits as may from time to time
be authorized by the Company. Each agreement includes provisions restricting
competitive activities and disclosure of confidential information, as well as
provisions relating to ownership of inventions.
The Company has obtained key-person life insurance coverage in the face
amount of $2,000,000 on the life of Dr. Deepa Chitre naming the Company as
beneficiary under such policy. The Company has agreed with the Representative to
maintain such a policy in force for a minimum period of three years from the
date of this Prospectus or the respective term of the employment agreement
between the Company and such officer, whichever period is longer.
STOCK OPTIONS
1997 STOCK OPTION PLAN
In November 1997, the Board of Directors adopted and the stockholders
approved the 1997 Stock Option Plan (the "Option Plan"). The Option Plan
provides for the grant of incentive stock options ("ISOs") (within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"))
and non-qualified stock options ("NQSOs") to certain directors, officers,
employees and consultants of the Company. The purpose of the Option Plan is to
attract and retain exemplary employees, agents, consultants and directors.
Options granted under the Option Plan may not be exercisable for terms in excess
of 10 years from the date of grant. In addition, no options may be granted under
the Option Plan later than 10 years after the Option Plan's effective date.
Pursuant to the terms of the Option Plan, 227,986 shares of Common Stock have
been reserved for issuance upon the exercise of options granted or available for
grant under the Option Plan. Any shares subject to an option that terminates,
expires or lapses for any reason, and any shares purchased pursuant to an option
and subsequently repurchased by the Company pursuant to the terms of the option,
shall again be available for grant under the Option Plan. As of the date of this
Prospectus, a total of 45,000 options under the Option Plan, or 15,000 options
per director, have been granted to three of the Company's non-employee
directors, which options will be exercisable, at a price equal to the Offering
price, for a period of five years (vesting at the rate of one-third per year),
commencing as of November 25, 1997. No other options have yet been granted under
the Option Plan.
The Option Plan will be administered by the Board of Directors of the
Company which will determine, in its discretion, among other things, the
recipients of grants, whether a grant will consist of ISOs or NQSOs, or a
combination thereof, and the number of shares of Common Stock to be subject to
such options. The Board of Directors of the Company may, in its discretion,
delegate its power, duties and responsibilities under the Option Plan to a
committee consisting of two or more directors who are "disinterested persons"
within the meaning of Rule 16b-3 promulgated under the Exchange Act. The
Compensation and Stock Option Committee is responsible for administering the
Option Plan. Options may not be granted under the Option Plan with an exercise
price which is less than the market price per share on the date of grant.
The Option Plan contains certain limitations applicable only to ISOs granted
thereunder. To the extent that the aggregate fair market value, as of the date
of grant, of the shares to which ISOs become
49
<PAGE>
exercisable for the first time by an optionee during the calendar year exceeds
$100,000, the ISO will be treated as a NQSO. In addition, if an optionee owns
more than 10% of the Company's stock at the time the individual is granted an
ISO, the option price per share cannot be less than 110% of the fair market
value per share and the term of the option cannot exceed five years.
OPTION GRANTS OUTSIDE OF THE OPTION PLAN
As of the date of this Prospectus, the Company has granted options outside
of the Option Plan for the purchase of an aggregate of 315,970 shares of Common
Stock, including options to purchase 137,501 shares at $.34 per share (vesting
with respect to 34,100 shares on April 1, 1995 and with respect to the balance
in three equal annual installments thereafter), 60,000 shares at $3.00 per share
(vesting in twelve equal three-month installments commencing December 15, 1998),
and 10,000 shares at $3.00 per share (vesting in three equal annual installments
commencing January 1, 1998), granted to Barry Wald, Nina Renaud and Ajit Chitre,
respectively, each an executive officer or significant employee of the Company.
The other 108,469 options granted are exercisable at various per share prices
ranging from $3.00 to the initial public offering price per share, commencing at
various times beginning immediately.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company has included in its Certificate of Incorporation provisions to
indemnify its directors and officers to the extent permitted by Delaware law.
The Company's Certificate of Incorporation also includes provisions to eliminate
the personal liability of its directors and officers to the Company and its
stockholders to the fullest extent permitted by Delaware law. Under current law,
such exculpation would extend to an officer's or director's breaches of
fiduciary duty, except for (i) breaches of such person's duty of loyalty, (ii)
those instances where such person is found not to have acted in good faith and
(iii) those instances where such person received an improper personal benefit as
the result of such breach.
The Company's bylaws provide that the Company may indemnify any person,
including officers and directors, with regard to any action or proceeding to the
fullest extent permitted under Delaware law.
The Company will enter into an Indemnification Agreement ("Indemnification
Agreement") with each of its directors and officers. Each Indemnification
Agreement will provide that the Company will indemnify the indemnitee against
expenses, including reasonable attorneys' fees, judgments, penalties, fines and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with any civil or criminal action or administrative proceeding
arising out of his or her performance of his or her duties as a director or
officer, other than an action instituted by the director or officer. Such
indemnification is available if the indemnitee acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action, had no
reasonable cause to believe his or her conduct was unlawful. Each
Indemnification Agreement also will require that the Company indemnify the
director or other party thereto in all cases to the fullest extent permitted by
director or officer that is party thereto to bring suit to seek recovery of
amounts due under such Indemnification Agreement and will require that the
Company indemnify the director or other party thereto in all cases to the
fullest extent permitted by applicable law. Although the Company intends to seek
to obtain directors' and officers' liability insurance, such insurance is
generally very expensive. If the Company is not able or willing to obtain
director' and officers' liability insurance to cover amounts, if any, required
to be indemnified by the Company, any payments made by the Company under an
Indemnification Agreement will have an adverse impact on its earnings.
It is the position of the Commission that insofar as the foregoing
provisions may be invoked to disclaim liability for damages arising under the
Securities Act, that provision is against public policy as expressed in the
Securities Act and is therefore unenforceable.
50
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth as of the date of this Prospectus and as
adjusted to reflect the sale of the 1,250,000 shares of Common Stock offered
hereby, certain information concerning the beneficial ownership of the Common
Stock by: (i) each person known by the Company to own more than 5% of the
outstanding Common Stock, (ii) each of the Company's directors, (iii) each of
the Company's Named Executive Officers, and (iv) all executive officers and
directors of the Company as a group:
<TABLE>
<CAPTION>
PERCENTAGE
OF OUTSTANDING
SHARES BENEFICIALLY
NUMBER OF OWNED(1)
SHARES ------------------------
NAME AND ADDRESS OF BENEFICIALLY BEFORE AFTER
BENEFICIAL OWNER OWNED (1) OFFERING OFFERING
- ------------------------------------------------------------------------------ ----------- ----------- -----------
<S> <C> <C> <C>
Avantika Sanjeev Chitre Irrevocable Trust, dated July 8, 1991,
Bruce W. Mcroy, Trustee..................................................... 690,072 31.23% 19.95%
c/o Bruce W. McRoy, Esq.
Reicker, Clough, Pfau & Pyle LLP
15 West Carillo Street, Suite 100
Santa Barbara, CA 93102
Sanjeev and Deepa Chitre (2).................................................. 690,072 31.23% 19.95%
Fred Kassner.................................................................. 386,017(3) 16.22% 10.63%
c/o Liberty Travel
69 Spring Street
Ramsey, NJ 07446
Cynthia R. May (2)............................................................ 226,651(4) 9.99% 6.44%
Marathon Investments, L.L.C................................................... 221,651(5) 9.79% 6.31%
13260 Spencer Road
Hemlock, Mi 48626
Irwin M. Rosenthal............................................................ 172,518(6) 7.81% 4.99%
c/o Rubin Baum Levin Constant & Friedman
30 Rockefeller Center
New York, NY 10012
Michael R. Splinter (2)....................................................... 159,741(7) 6.90% 4.48%
Barry Wald (2)................................................................ 103,126(8) 4.46% 2.89%
Suzanne Rosenthal (2)......................................................... 5,000(9) * *
All executive officers and directors as a group (6 persons)................... 1,184,590(10) 47.71% 31.73%
</TABLE>
- ------------------------
* Denotes less than 1%
(1) Except as indicated in the footnotes to this table, the Company believes
that all the persons named in the table have sole voting and investment
power with respect to all shares shown as beneficially owned by them,
subject to community property laws where applicable. In accordance with the
rules of the Commission, a person or entity is deemed to be the beneficial
owner of securities that can be acquired by such person or entity within 60
days from the date of this Prospectus upon the exercise of options or
warrants. Each beneficial owner's percentage ownership is determined by
assuming that options and warrants that are held by such person (but not
those held by any other person) and which are exercisable within 60 days of
the date of this Prospectus have been exercised. The inclusion herein of
such shares listed as beneficially owned does not constitute an admission of
beneficial ownership.
51
<PAGE>
Percentages herein assume a base of 2,209,702 shares of Common Stock
outstanding as of the date of this Prospectus and a base of 3,459,702 shares
of Common Stock outstanding immediately after the consummation of the
Offering.
(2) The address of the beneficial owner is c/o AyurCore, Inc., 1737 N. First
Street, Suite 290, San Jose, California 97112.
(3) Includes 170,000 shares of Common Stock underlying warrants. See
"Description of Securities."
(4) Represents shares of Common Stock underlying options granted under the
Option Plan. Does not include an additional 10,000 shares underlying options
granted under the Option Plan which are not exercisable within the next 60
days. Also includes 221,651 shares beneficially owned (including 55,000
shares underlying October 1997 Warrants) by Marathon Investments, L.L.C.
("Marathon"), of which Ms. May is a principal. Ms. May disclaims beneficial
ownership of the shares owned by Marathon to the extent such shares exceed
her proportionate interest therein. Does not include shares held by Ms.
May's father, as to which Ms. May disclaims beneficial ownership.
(5) Includes 55,000 shares of Common stock underlying October 1997 Warrants. See
"Description of Securities."
(6) Mr. Rosenthal is a partner in the law firm of Rubin Baum Levin Constant &
Friedman, which firm shares beneficial ownership of shares held of record by
Mr. Rosenthal. Mr. Rosenthal disclaims beneficial ownership of such shares
to the extent such shares exceed his proportionate interest therein.
(7) Includes 100,000 shares of Common stock underlying warrants and 5,000 shares
of Common Stock underlying options granted under the Option Plan. Does not
include an additional 10,000 shares underlying options granted under the
Option Plan which are not exercisable within the next 60 days. See
"Description of Securities."
(8) Represents shares of Common Stock underlying non-Option Plan options. Does
not include an additional 34,375 shares underlying non-Option Plan options
which are not exercisable within the next 60 days.
(9) Represents shares of Common stock underlying stock options granted under the
Option Plan. Does not include an additional 10,000 shares underlying options
granted under the Option Plan which are not exercisable within the next 60
days.
(10) Includes 155,000 shares of Common Stock underlying warrants, 15,000 shares
underlying options granted under the Option Plan and 103,126 shares
underlying non-Option Plan options.
CERTAIN TRANSACTIONS
In October 1994, the Company borrowed $250,000 from Fred Kassner, a
principal stockholder of the Company, under a two-year convertible promissory
note bearing interest at prime plus 2% per annum, which was convertible into
61,050 shares of Common Stock. In April 1996, the Company borrowed an additional
$250,000 from Mr. Kassner under a 90-day promissory note bearing interest at
prime plus 2% per annum. In connection with the April 1996 loan, Mr. Kassner was
granted two-year warrants to purchase up to 125,000 shares of Common Stock at
130% of the initial public offering price per share. Effective October 31, 1997,
pursuant to the Note Conversion, the outstanding principal and accrued interest
under such notes, totaling $619,868, was converted into 154,967 shares of Common
Stock. In connection with this transaction Mr. Kassner was also granted October
1997 Warrants to purchase up to 45,000 shares of Common Stock at $4.00 per
share.
In February 1995, Marathon, a principal stockholder of the Company,
purchased 166,651 shares of Common Stock from the Company for an aggregate
purchase price of $1,000,000, or $6.00 per share. Under the subscription
agreement, Marathon was granted certain anti-dilution rights. In consideration
for the waiver by Marathon of the anti-dilution rights, Marathon was granted
October 1997 Warrants to purchase up to 55,000 shares of Common Stock at $4.00
per share. Cynthia R. May, a director of the Company, is also a principal of
Marathon.
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<PAGE>
At various times from January 1996 through July 1997, the Company borrowed
an aggregate principal amount of $204,700 from Sanjeev Chitre, the Chairman of
the Board of Directors and a principal stockholder of the Company, under a
promissory note bearing interest at prime plus 2% per annum payable
semi-annually. Originally, the note was to become due on demand, in stages, at
various times from January 1997 to July 1998. In December 1997, the terms of the
loan were revised to provide that no amounts would become due and payable
thereunder until one year following the consummation of the Offering. The
Company has allocated no proceeds of the Offering to repayment of the loan.
In January 1996, Mr. Irwin Rosenthal, Secretary of the Company and husband
of Ms. Suzanne Rosenthal, a director of the Company, loaned the Company $25,000,
as evidenced by a promissory note bearing an annual interest rate of prime plus
2%. Originally, the note was to become due and payable on demand commencing
January 1997. Mr. Rosenthal was a director of the Company at the time of the
loan. In December 1997, the terms of the loan were revised to provide that no
amounts would become due and payable thereunder until one year following the
consummation of the Offering. The Company has allocated no proceeds of the
Offering to the repayment of this loan.
Mr. Rosenthal is also a partner of Rubin Baum Levin Constant & Friedman
("RBLC&F"), counsel to the Company. The Company incurred expenses of
approximately $22,000, $68,000 and $39,000 for the years ended December 31, 1995
and 1996 and the nine months ended September 30, 1997, respectively, for legal
services rendered by such firm during such periods. In addition, RBLC&F
contributed services to the Company valued at approximately $128,000 in the
aggregate over such periods. The Company paid to RBLC&F a total of $5,000, $0
and $25,000 during the years ended December 31, 1995 and 1996 and the nine
months ended September 30, 1997, respectively. At September 30, 1997,
approximately $144,000 was owed by the Company to RBLC&F. See "Legal Matters."
In each of March 1996 and August 1997, Michael R. Splinter, a director of
the Company, and his wife, Patricia Robestoff, loaned the Company $100,000, as
evidenced by promissory notes each bearing an annual interest rate of prime plus
2%. In connection with the loans, these individuals were granted two-year
warrants to purchase up to 100,000 shares of Common Stock at 130% of the initial
public offering price per share. Effective October 31, 1997, the outstanding
principal and accrued interest under such notes, totaling $218,964, was
converted into 54,741 shares of Common Stock in connection with the Note
Conversion.
At various times from November 1996 through September 1997, the Company
borrowed an aggregate principal amount of $500,000 from the Atlantic Bank under
three-month term notes bearing interest at Atlantic Bank's prime rate plus 2%
per annum, payable monthly. The notes have been consolidated and are presently
due on February 2, 1998. The Atlantic Bank loan is guaranteed by Sanjeev and
Deepa Chitre and secured by a pledge of common stock of another company, which
stock is owned by the Avantika Sanjeev Chitre Irrevocable Trust, dated July 8,
1991, Bruce W. McRoy, trustee (the "Avantika Trust"), a trust for the benefit of
Sanjeev and Deepa Chitre's minor daughter. The Company intends to use proceeds
from the Offering to repay this loan.
Effective upon the inception of Bio-Ved in November 1995, all of the
outstanding stock of Bio-Ved was registered in the names of Mr. Sanjeev Chitre's
sister, Anita Chitre, and her husband, Ajit Chitre, Managing Director of
Bio-Ved, both of whom are resident Indians. The stock was registered in the
names of these individuals pending compliance with Indian regulatory
requirements applicable to AyurCore, Inc.'s investment in Bio-Ved. Currently,
and as a result of such investment, Bio-Ved is owned more than 99% by AyurCore,
Inc. with the balance being owned by Mr. and Mrs. Ajit Chitre. Since January
1995, Mr. Ajit Chitre has been compensated for services rendered in connection
with the Company's India operations at the rate of approximately $9,000 per
year.
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<PAGE>
DESCRIPTION OF SECURITIES
GENERAL
The Company's authorized capital stock consists of 25,000,000 shares of
Common Stock, $.001 par value per share, and 5,000,000 shares of preferred
stock, $.001 par value per share (the "Preferred Stock"). As of the date of this
Prospectus, there were outstanding 2,209,702 shares of Common Stock (held by
approximately 10 holders) and no shares of Preferred Stock.
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held of
record on each matter submitted to a vote of stockholders. There is no
cumulative voting for election of directors. Subject to the prior rights of any
series of Preferred Stock which may from time to time be outstanding, holders of
Common Stock are entitled to receive dividends ratably, when, as, and if
declared by the Board of Directors' out of funds legally available therefor and,
upon the liquidation, dissolution, or winding up of the Company, are entitled to
share ratably in all assets remaining after payment of liabilities and payment
of accrued dividends and liquidation preferences on any Preferred Stock. Holders
of Common Stock have no preemptive rights and have no rights to convert their
Common Stock into any other securities. All of the outstanding shares of Common
Stock are validly authorized and issued, fully paid, and nonassessable.
PREFERRED STOCK
The Preferred Stock may be issued in one or more series, the terms of which
may be determined at the time of issuance by the Board of Directors, without
further action by stockholders, and may include voting rights (including the
right to vote as a series on particular matters), preferences as to dividends
and liquidation, conversion rights, redemption rights, and sinking fund
provisions. The issuance of any such Preferred Stock could adversely affect the
rights of the holders of Common Stock and, therefore, reduce the value of the
Common Stock. The ability of the Board of Directors to issue Preferred Stock
could discourage, delay, or prevent a takeover of the Company.
OUTSTANDING WARRANTS
The Company has outstanding warrants to purchase up to an aggregate of
250,000 shares of Common Stock at a purchase price of 130% of the initial public
offering price per share. These warrants expire at various times from March 1998
to August 1999. In addition, the Company has outstanding October 1997 Warrants
to purchase up to an aggregate of 100,000 shares of Common Stock at $4.00 per
share. These warrants expire in October 2002. Subject to certain limitations and
exclusions, holders of these warrants are entitled to certain piggyback
registration rights with respect to the underlying shares.
DIVIDEND POLICY
The Company has never paid any cash dividends on its Common Stock. The
Company anticipates that in the future, earnings, if any, will be retained for
use in the business of the Company or for other corporate purposes, and it is
not anticipated that cash dividends in respect of the Common Stock will be paid.
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company, at 40 Wall Street, 46th Floor, New
York, New York, 10005, will serve as the Company's Transfer Agent and Registrar
for the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, the Company will have outstanding
3,459,702 shares of Common Stock. Of such shares, the 1,250,000 shares of Common
Stock offered hereby will be freely tradable without restriction or further
registration under the Securities Act except for any shares purchased by a
person who is or thereby becomes an affiliate of the Company, which shares will
be subject to
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<PAGE>
the resale limitations contained in Rule 144 promulgated under the Securities
Act. The remaining 2,209,702 shares of Common Stock are restricted securities
within the meaning of Rule 144 under the Securities Act and, in general, if held
for at least one year, will be eligible for sale in the public market in
reliance upon and subject to the limitations of Rule 144.
In general under Rule 144 as currently in effect, a person (or persons whose
shares are aggregated), including a person who may be deemed to be an affiliate
of the Company as that term is defined under the Securities Act, is entitled to
sell, within any three-month period, a number of shares beneficially owned for
at least one year that does not exceed the greater of (i) one percent of the
number of the then outstanding shares of Common Stock or (ii) the average weekly
trading volume in the Common Stock during the four calendar weeks preceding such
sale. Sales under Rule 144 are also subject to certain requirements as to the
manner of sale, notice and the availability of current public information about
the Company. Furthermore, a person who is not deemed to have been an affiliate
of the Company during the ninety days preceding a sale by such person and who
has beneficially owned such shares for at least two years is entitled to sell
such shares without regard to the volume, manner of sale or notice requirements.
Under Rule 144 (and subject to the conditions thereof), of the 2,209,702 shares
of Common Stock outstanding as of the date of this Prospectus, 619,850 are
eligible for sale immediately, 1,380,144 are held by affiliates of the Company
and will become eligible for sale beginning 90 days after the date of this
Prospectus; and substantially all of the remaining 209,708 shares will become
eligible for sale as of October 31, 1998. Notwithstanding the foregoing, the
holders of all of such shares have agreed, subject to certain limited
exceptions, not to offer, sell, assign, pledge or transfer any of such shares
for a period of 12 months from the date of this Prospectus without the
Representative's prior written consent. In addition, the Company has granted
certain registration rights with respect to the 125,000 and 100,000 shares of
Common Stock underlying the Representative's Warrants and the October 1997
Warrants, respectively, commencing one year following the date of this
Prospectus. See "Underwriting."
Under Rule 701 of the Securities Act, persons who purchase shares upon the
exercise of options granted prior to the effective date of the Offering are
entitled to sell such shares 90 days after the effective date of the Offering
and in reliance on Rule 144 without having to comply with the holding period
requirements of Rule 144 and, in the case of nonaffiliates, without having to
comply with the public information, volume limitation, or notice provisions of
Rule 144.
Prior to the Offering, there has been no public market for the Company's
securities. Following the Offering, the Company cannot predict the effect, if
any, that market sales of the Common Stock, or the availability of such shares
for sale, will have on the market price prevailing from time to time.
Nevertheless, sales by the existing stockholders of substantial amounts of
Common Stock in the public market could adversely affect prevailing market
prices for the Company's securities. In addition, the availability for sale of
substantial amounts of Common Stock acquired through the exercise of options or
warrants could adversely affect prevailing market prices for the Common Stock.
UNDERWRITING
The underwriters named below (collectively, the "Underwriters") for which LT
Lawrence & Co., Inc. (the "Representative") is acting as representative, have
agreed severally, not jointly, subject to the terms and conditions contained in
the underwriting agreement between the Company and the Underwriters (the
"Underwriting Agreement"), to purchase from the Company, and the Company has
agreed to sell to the
55
<PAGE>
several Underwriters, the 1,250,000 shares of Common Stock offered hereby. The
number of shares of Common Stock that each Underwriter has agreed to purchase is
set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
LT Lawrence & Co., Inc...........................................................
----------
Total............................................................................ 1,250,000
----------
----------
</TABLE>
The Underwriters are committed on a "firm commitment" basis to purchase and
pay for all of the shares of Common Stock offered hereby (other than shares
offered pursuant to the over-allotment option) if any shares are purchased. The
shares of Common Stock are being offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by the Underwriters and subject
to approval of certain legal matters by counsel and to certain other conditions.
Through the Representative, the several Underwriters have advised the
Company that they propose to offer the shares of Common Stock to the public at
the public offering price set forth on the cover page of this Prospectus. The
Underwriters may allow to certain dealers who are members of the National
Association of Securities Dealers, Inc. ("NASD") concessions, not in excess of
$ per share, of which not in excess of $ per share may be reallowed
to other dealers who are members of the NASD. After the commencement of the
Offering, the public offering price, concessions and reallowance may be changed.
The Company has granted the Representative an option, exercisable for 45
days following the date of this Prospectus, to purchase up to 187,500 additional
shares of Common Stock at the public offering price set forth on the cover page
of this Prospectus, less the underwriting discounts and commissions. The
Representative may exercise this option in whole or, from time to time, in part,
solely for the purpose of covering over-allotments, if any, made in connection
with the sale of the shares of Common Stock offered hereby.
The Company has agreed to pay to the Representative individually, and not as
a representative of the Underwriters, a 3% nonaccountable expense allowance,
$50,000 of which has been paid as of the date of this Prospectus. The Company
has also agreed to pay all expenses in connection with qualifying the shares of
Common Stock offered hereby for sale under the laws of such states as the
Representative may designate, including expenses of counsel retained for such
purpose by the Representative.
The Company has agreed to issue to the Representative and its designees, for
an aggregate of $125, the Representative's Warrants to purchase up to 125,000
shares of Common Stock, at an exercise price of $ per share (135% of the
initial public offering price per share). The Representative's Warrants may not
be transferred for one year following the date of this Prospectus, except to the
officers and partners of the Representative or the Underwriters or members of
the selling group, and are exercisable at any time, and from time to time,
during the four-year period commencing one year following the date of this
Prospectus (the "Warrant Exercise Term"). During the Warrant Exercise Term, the
holders of the Representative's Warrants are given, at nominal cost, the
opportunity to profit from a rise in the market price of the Common Stock. To
the extent that the Representative's Warrants are exercised or exchanged,
dilution to the interests of the Company's stockholders will occur. Further, the
terms upon which the Company will be able to obtain additional equity capital
may be adversely affected since the holders of the Representative's Warrants can
be expected to exercise them at a time when the Company would, in all
likelihood, be able to obtain any needed capital on terms more favorable to the
Company than those provided in the Representative's Warrants. Any profit
realized by the Representative on the sale of the Representative's Warrants or
the underlying shares of Common Stock may be deemed additional underwriting
compensation. Subject to certain limitations and exclusions, the Company has
agreed to register, at
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the request of the holders of a majority of the Representative's Warrants and at
the Company's expense, the Representative's Warrants and the shares of Common
Stock underlying the Representative's Warrants under the Securities Act on one
occasion during the Warrant Exercise Term and to include such Representative's
Warrants and such underlying shares in any appropriate registration statement
that is filed by the Company during the seven years following the date of this
Prospectus.
In addition, the Company has agreed to enter into a consulting agreement to
retain the Representative as a financial consultant for a period of two years
from the consummation of this Offering at an annual fee of $15,000, the entire
$30,000 payable in full, in advance. The consulting agreement will not require
the consultant to devote a specific amount of time to the performance of its
duties thereunder. In the event that the Representative originates an
acquisition or merger transaction to which the Company is a party, the
Representative will also be entitled to receive a finder's fee in consideration
for origination of such transaction.
The Company has also agreed, for a period of five years following
consummation of the Offering, if so requested by the Representative, to nominate
and use its best efforts to elect a designee of the Representative as a director
of the Company, or, at the Representative's option, as a non-voting adviser to
the Company's Board of Directors. The Company's officers, directors and
stockholders have agreed to vote their shares in favor of such designee. The
Representative has not yet exercised its right to designate such a person.
All of the Company's officers, directors and stockholders have agreed that,
for the 12-month period following the date of this Prospectus, they will not,
subject to certain limited exceptions, directly or indirectly sell, offer for
sale, transfer, pledge or otherwise dispose of any securities of the Company or
exercise any registration rights relating to any securities of the Company,
without the prior written consent of the Representative.
The Representative has informed the Company that the Underwriters do not
intend to sell any of the shares of Common Stock offered hereby to discretionary
accounts.
The Company has agreed to indemnify the Underwriters against certain civil
liabilities in connection with the Registration Statement of which this
Prospectus forms a part, including liabilities under the Securities Act.
Prior to the Offering, there has been no public market for the Common Stock.
Consequently, the initial public offering price of the shares of Common Stock
will be determined by negotiation between the Company and the Representative and
may not necessarily relate to the Company's asset value, net worth or other
established criteria of value. Among the factors that will be considered in
determining the offering price are the Company's financial condition and
prospects, management, market prices of similar securities of comparable
publicly-traded companies, certain financial and operating information of
companies engaged in activities similar to those of the Company and the general
condition of the securities market.
In connection with the Offering, the Underwriters may purchase and sell the
Common Stock in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
created by the Underwriters in connection with the Offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or retarding a decline in the market price of the Common stock; and syndicate
short positions created by the Underwriters involve the sale by the Underwriters
of a greater number of securities than they are required to purchase from the
Company in the Offering. The Underwriters also may impose a penalty bid, whereby
selling concessions allowed to syndicate members or other broker-dealers in
respect of the securities sold in the Offering for their account may be
reclaimed by the syndicate Underwriters if such shares of Common Stock are
repurchased by the syndicate Underwriters in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the Common Stock, which may be higher than the price that might
otherwise prevail in the open market; and these activities, if commenced, may be
discontinued at any time. These transactions may be effected on Nasdaq, the
over-the-counter market or otherwise.
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The Underwriters may also place bids or purchase shares to reduce a short
position created in connection with the Offering. Short positions are created by
persons who sell shares which they do not own in anticipation of purchasing
shares at a lower price in the market to deliver in connection with the earlier
sale. Short positions tend to place downward pressure on the market price of a
stock.
The Representative and/or the Underwriters may impose a penalty bid by
reclaiming the selling concession to be paid to an Underwriter or selected
dealer when the securities sold by the Underwriter or selected dealer are
purchased to reduce a short position created in connection with the Offering.
The Representative was organized in February 1992 and registered as a
broker-dealer with the Commission and the NASD, in 1993. Prior to the Offering,
the Representative has acted as a principal underwriter in six public offerings.
The Commission is conducting an investigation concerning various aspects of
the Representative's compliance with the Federal securities laws. The
Representative cannot predict whether this investigation will ever result in any
type of action against the Representative, or, if so, whether any such action
might have an adverse effect on the Representative or the securities offered
hereby. The Company has been advised that the Representative intends to make a
market in the securities following the Offering. An unfavorable resolution of
the Commission's investigation could have the effect of limiting the
Representative's ability to make a market in the Company's securities, which
could affect the liquidity or price of such securities.
LEGAL MATTERS
Certain legal matters in connection with the issuance of the securities
offered hereby will be passed upon for the Company by Rubin Baum Levin Constant
& Friedman, New York, New York. Irwin M. Rosenthal, a partner of Rubin Baum
Levin Constant & Friedman, is Secretary of the Company, is married to Ms.
Suzanne Rosenthal, a director of the Company, and owns 172,518 shares of Common
Stock. Mr. Rosenthal rendered legal services to the Company in connection with
the Offering. Nishith Desai Associates has served as special counsel to the
Company in connection with matters related to the laws of India. Tenzer
Greenblatt, LLP, New York, NY, will pass upon certain legal matters for the
Underwriter.
EXPERTS
The Combined Financial Statements of the Company as of December 31, 1996,
for the years ended December 31, 1996 and 1995 and for the period from January
11, 1993 (inception) through December 31, 1996, included herein and elsewhere in
the Registration Statement, of which this Prospectus forms a part, have been
audited by Richard A. Eisner & Company, LLP, independent auditors, as set forth
in their report (which contains an explanatory paragraph relating to the
existence of substantial doubt about the Company's ability to continue as a
going concern) thereon appearing elsewhere in the Registration Statement, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission, a Registration Statement on Form
SB-2 (together with all amendments, schedules and exhibits thereto, the
"Registration Statement") under the Securities Act with respect to the Common
Stock offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and the Common Stock offered hereby, reference is made to
the Registration Statement. Statements made in the Prospectus as to the contents
of any contract, agreement or other document are not necessarily complete; with
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference. The Registration Statement
and the exhibits thereto may be inspected, without
58
<PAGE>
charge, at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's regional offices at Northwestern Atrium Center, 500 West
Madison Street, Room 1400, Chicago, IL 60661, and 7 World Trade Center, Suite
1300, New York, NY 10048. Copies of such material can also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, the Commission
maintains a website that contains reports, proxy statements, and other
information filed with the Commission. The address of such site is
http://www.sec.gov.
59
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AYURCORE, INC. AND BIO-VED PHARMACEUTICALS PRIVATE LIMITED
(A DEVELOPMENT STAGE ENTERPRISE)
CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
COMBINED FINANCIAL STATEMENTS
Independent auditors' report............................................................................. F-2
Balance sheets as of December 31, 1996 and as of September 30, 1997 (unaudited).......................... F-3
Statements of operations for each of the years in the two-year period ended
December 31, 1996, for the period from January 11, 1993 (inception) through
December 31, 1996, for the nine-month periods ended September 30, 1996 and 1997
(unaudited) and for the period from January 11, 1993 (inception) through
September 30, 1997 (unaudited)......................................................................... F-4
Statements of changes in capital deficiency for the period from
January 11, 1993 (inception) through December 31, 1993 and for each of the years
in the three years ended December 31, 1996 and for the nine months ended
September 30, 1997 (unaudited)......................................................................... F-5
Statements of cash flows for each of the years in the two-year period ended
December 31, 1996, for the period from January 11, 1993 (inception) through
December 31, 1996 and for the nine-month periods ended September 30, 1996 and 1997
(unaudited) and for the period January 11, 1993 (inception) through
September 30, 1997 (unaudited)......................................................................... F-6
Notes to financial statements............................................................................ F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
AyurCore, Inc.
We have audited the accompanying combined balance sheet of AyurCore, Inc.
and Bio-Ved Pharmaceuticals Private Limited, an entity organized in India,
(collectively, the "Company", a development stage enterprise), as of December
31, 1996, and the related combined statements of operations, changes in capital
deficiency and cash flows for each of the two years in the period ended December
31, 1996 and for the period January 11, 1993 (inception) through December 31,
1996. 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements enumerated above present fairly, in
all material respects, the combined financial position of AyurCore, Inc. and
Bio-Ved Pharmaceuticals Private Limited as of December 31, 1996 and the combined
results of their operations and their combined cash flows for each of the years
in the two-year period ended December 31, 1996 and for the period January 11,
1993 (inception) through December 31, 1996 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
financial statements, the Company has sustained recurring losses, a working
capital deficiency, negative cash flows from operating activities and
shareholders' capital deficiency that raise substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note A. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
As described in Note N[1], in October 1997 AyurCore, Inc. invested in
Bio-Ved Pharmaceuticals Private Limited and obtained substantially all of its
common stock.
Richard A. Eisner & Company, LLP
New York, New York
October 9, 1997
With respect to Notes J[1] and J[2]
November 18, 1997
With respect to Note N
December 8, 1997
F-2
<PAGE>
AYURCORE, INC. AND BIO-VED PHARMACEUTICALS PRIVATE LIMITED
(A DEVELOPMENT STAGE ENTERPRISE)
COMBINED BALANCE SHEETS
(NOTE A)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------- -------------
<S> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash.............................................................................. $ 83,000 $ 165,000
Accounts receivable............................................................... 12,000
Inventory (Note B[2])............................................................. 12,000 1,000
Prepaid expenses and other current assets......................................... 39,000 16,000
------------- -------------
Total current assets.......................................................... 134,000 194,000
Equipment, net (Notes B[3] and C)................................................... 54,000 43,000
Investments to be held to maturity (Note D)......................................... 12,000
Deferred registration costs (Note J[5])............................................. 25,000
Other assets........................................................................ 28,000 29,000
------------- -------------
$ 216,000 $ 303,000
------------- -------------
------------- -------------
LIABILITIES
Current liabilities:
Due to bank (Note D).............................................................. $ 3,000
Bank debt (Note G)................................................................ $ 200,000 500,000
Accounts payable and accrued expenses (Note H).................................... 467,000 650,000
Notes payable (Note I)............................................................ 892,000 1,074,000
Accrued interest (Note I)......................................................... 99,000 174,000
------------- -------------
Total current liabilities..................................................... 1,658,000 2,401,000
------------- -------------
Commitments and other matters (Notes A, K and L)
CAPITAL DEFICIENCY (NOTE J)
Preferred stock--$.001 par value, 5,000,000 shares authorized, none issued
Common stock--$.001 par value, 25,000,000 shares authorized, 1,999,994 issued and
outstanding....................................................................... 2,000 2,000
Additional paid-in capital.......................................................... 2,051,000 2,089,000
Unearned compensatory stock options................................................. (74,000) (64,000)
Deficit accumulated during the development stage.................................... (3,421,000) (4,125,000)
------------- -------------
Total capital deficiency...................................................... (1,442,000) (2,098,000)
------------- -------------
$ 216,000 $ 303,000
------------- -------------
------------- -------------
</TABLE>
See notes to financial statements
F-3
<PAGE>
AYURCORE, INC. AND BIO-VED PHARMACEUTICALS PRIVATE LIMITED
(A DEVELOPMENT STAGE ENTERPRISE)
COMBINED STATEMENTS OF OPERATIONS
(NOTE A)
<TABLE>
<CAPTION>
JANUARY 11, JANUARY 11,
1993 1993
YEAR ENDED (INCEPTION) NINE MONTHS ENDED (INCEPTION)
DECEMBER 31, THROUGH SEPTEMBER 30, THROUGH
------------------------ DECEMBER 31, ------------------------ SEPTEMBER 30,
1995 1996 1996 1996 1997 1997
----------- ----------- ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
REVENUE:
Net product sales (one customer)..... $ 83,000 $ 83,000
Royalty income (Note L[3])........... 12,000 12,000
Government grant..................... 100,000 100,000
<CAPTION>
----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Total revenue.................... 195,000 195,000
<CAPTION>
----------- -------------
<S> <C> <C> <C> <C> <C> <C>
COSTS AND EXPENSES:
Cost of sales........................ 83,000 83,000
Research and development............. $ 318,000 $ 401,000 $1,040,000 $ 297,000 228,000 1,268,000
General and administrative........... 828,000 844,000 2,277,000 593,000 480,000 2,757,000
<CAPTION>
----------- ----------- ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
1,146,000 1,245,000 3,317,000 890,000 791,000 4,108,000
----------- ----------- ------------ ----------- ----------- -------------
OTHER (INCOME) EXPENSES:
Interest income...................... (11,000) (1,000) (12,000) (1,000) (12,000)
Interest expense..................... 28,000 83,000 116,000 60,000 108,000 224,000
<CAPTION>
----------- ----------- ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
17,000 82,000 104,000 59,000 108,000 212,000
<CAPTION>
----------- ----------- ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net loss............................... $(1,163,000) $(1,327,000) $(3,421,000) $ (949,000) $ (704,000) $(4,125,000)
<CAPTION>
----------- ----------- ------------ ----------- ----------- -------------
----------- ----------- ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net loss per common share.............. $(.57) $(.64) $(.46) $(.34)
<CAPTION>
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Weighted average number of shares
outstanding (Note B[6]).............. 2,051,939 2,065,827 2,065,827 2,065,827
<CAPTION>
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See notes to financial statements
F-4
<PAGE>
AYURCORE, INC. AND BIO-VED PHARMACEUTICALS PRIVATE LIMITED
(A DEVELOPING STAGE ENTERPRISE)
COMBINED STATEMENTS OF CHANGES IN CAPITAL DEFICIENCY
(NOTES A AND J)
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
COMMON STOCK ADDITIONAL UNEARNED DURING THE
----------------------- PAID-IN COMPENSATORY DEVELOPMENT SUBSCRIPTION
SHARES AMOUNT CAPITAL STOCK OPTIONS STAGE RECEIVABLE
---------- ----------- ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of shares to founders................. 1,587,128 $ 2,000 $ (2,000)
Sale of common stock ($0.55 per share)......... 45,833 25,000
Sale of common stock ($1.36 per share)......... 139,332 190,000 $ (90,000)
Contribution of services (Note E).............. 28,000
Options granted to employees (Note J[4])....... 22,000 $ (22,000)
Compensatory stock options earned.............. 3,000
Net loss....................................... $ (163,000)
---------- ----------- ----------- ------------- ------------ ------------
Balance--December 31, 1993..................... 1,772,293 2,000 263,000 (19,000) (163,000) (90,000)
Sale of common stock ($4.09 per share)......... 61,050 250,000
Proceeds from payment of subscription
receivables.................................. 90,000
Contribution of services (Note E).............. 15,000
Options granted to employees (Note J[4])....... 398,000 (398,000)
Compensatory stock options earned.............. 73,000
Net loss....................................... (768,000)
---------- ----------- ----------- ------------- ------------ ------------
Balance--December 31, 1994..................... 1,833,343 2,000 926,000 (344,000) (931,000) -0 -
Sale of common stock ($6.00 per share) (Note
J[2])........................................ 166,651 1,000,000
Contribution of services (Note E).............. 42,000
Compensatory stock options earned.............. 142,000
Net loss....................................... (1,163,000)
---------- ----------- ----------- ------------- ------------ ------------
Balance--December 31, 1995..................... 1,999,994 2,000 1,968,000 (202,000) (2,094,000) -0 -
Contribution of services (Note E).............. 33,000
Valuation of warrants (Note I)................. 15,000
Value of options granted (Note J[4])........... 39,000 (39,000)
Compensatory stock options earned (net of
$4,000 for forfeitures)...................... (4,000) 167,000
Net loss....................................... (1,327,000)
---------- ----------- ----------- ------------- ------------ ------------
Balance--December 31, 1996..................... 1,999,994 2,000 2,051,000 (74,000) (3,421,000) -0 -
Valuation of warrants (Note I)................. 13,000
Options granted to employees (Note J[4])....... 60,000 (60,000)
Compensatory stock options earned (net of
$35,000 for forfeitures)..................... (35,000) 70,000
Net loss....................................... (704,000)
---------- ----------- ----------- ------------- ------------ ------------
Balance--September 30, 1997 (unaudited)........ 1,999,994 $ 2,000 $ 2,089,000 $ (64,000) $(4,125,000) -0 -
---------- ----------- ----------- ------------- ------------ ------------
---------- ----------- ----------- ------------- ------------ ------------
<CAPTION>
TOTAL
CAPITAL
DEFICIENCY
------------
<S> <C>
Issuance of shares to founders................. $ -0 -
Sale of common stock ($0.55 per share)......... 25,000
Sale of common stock ($1.36 per share)......... 100,000
Contribution of services (Note E).............. 28,000
Options granted to employees (Note J[4])....... -0 -
Compensatory stock options earned.............. 3,000
Net loss....................................... (163,000)
------------
Balance--December 31, 1993..................... (7,000)
Sale of common stock ($4.09 per share)......... 250,000
Proceeds from payment of subscription
receivables.................................. 90,000
Contribution of services (Note E).............. 15,000
Options granted to employees (Note J[4])....... -0 -
Compensatory stock options earned.............. 73,000
Net loss....................................... (768,000)
------------
Balance--December 31, 1994..................... (347,000)
Sale of common stock ($6.00 per share) (Note
J[2])........................................ 1,000,000
Contribution of services (Note E).............. 42,000
Compensatory stock options earned.............. 142,000
Net loss....................................... (1,163,000)
------------
Balance--December 31, 1995..................... (326,000)
Contribution of services (Note E).............. 33,000
Valuation of warrants (Note I)................. 15,000
Value of options granted (Note J[4])........... -0 -
Compensatory stock options earned (net of
$4,000 for forfeitures)...................... 163,000
Net loss....................................... (1,327,000)
------------
Balance--December 31, 1996..................... (1,442,000)
Valuation of warrants (Note I)................. 13,000
Options granted to employees (Note J[4])....... -0 -
Compensatory stock options earned (net of
$35,000 for forfeitures)..................... 35,000
Net loss....................................... (704,000)
------------
Balance--September 30, 1997 (unaudited)........ $ (2,098,000)
------------
------------
</TABLE>
See notes to financial statements
F-5
<PAGE>
AYURCORE, INC. AND BIO-VED PHARMACEUTICALS PRIVATE LIMITED
(A DEVELOPMENT STAGE ENTERPRISE)
COMBINED STATEMENTS OF CASH FLOWS
(NOTE A)
<TABLE>
<CAPTION>
JANUARY 11, JANUARY 11,
1993 1993
YEAR ENDED (INCEPTION) NINE MONTHS ENDED (INCEPTION)
DECEMBER 31, THROUGH SEPTEMBER 30, THROUGH
---------------------- DECEMBER 31, -------------------- SEPTEMBER 30,
1995 1996 1996 1996 1997 1997
---------- ---------- ------------ --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Cash flows from operating activities:
Net loss................................... $(1,163,000) $(1,327,000) $(3,421,000) $(949,000) $(704,000) $(4,125,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization.......... 6,000 12,000 21,000 5,000 28,000 49,000
Contribution of services............... 42,000 33,000 118,000 8,000 118,000
Compensation expense attributable to
options.............................. 142,000 163,000 381,000 126,000 35,000 416,000
Amortization of debt discount.......... 15,000 15,000 15,000 7,000 22,000
Accrued interest....................... 26,000 68,000 99,000 45,000 75,000 174,000
Changes in:
Inventory.............................. (12,000) (12,000) (10,000) 11,000 (1,000)
Accounts receivable.................... (12,000) (12,000)
Other assets........................... (26,000) (39,000) (67,000) (27,000) 22,000 (45,000)
Accounts payable and accrued
expenses............................. 24,000 295,000 467,000 173,000 183,000 650,000
---------- ---------- ------------ --------- --------- -------------
Net cash used in operating
activities......................... (949,000) (792,000) (2,399,000) (614,000) (355,000) (2,754,000)
---------- ---------- ------------ --------- --------- -------------
Cash flows from investing activities:
Purchase of investments.................... (12,000) (12,000)
Purchase of equipment...................... (29,000) (42,000) (75,000) (37,000) (17,000) (92,000)
---------- ---------- ------------ --------- --------- -------------
Net cash used in investing
activities......................... (29,000) (42,000) (75,000) (37,000) (29,000) (104,000)
---------- ---------- ------------ --------- --------- -------------
Cash flows from financing activities:
Net proceeds from sales of common stock.... 1,000,000 1,465,000 1,465,000
Proceeds from bank borrowings.............. 200,000 200,000 303,000 503,000
Proceeds from notes payable................ 200,000 200,000 200,000 100,000 300,000
Proceeds from shareholder loans and
advances................................. 442,000 702,000 400,000 88,000 790,000
Repayment of shareholder advances.......... (10,000) (10,000) (10,000)
Deferred registration costs................ (25,000) (25,000)
---------- ---------- ------------ --------- --------- -------------
Net cash provided by financing
activities......................... 990,000 842,000 2,557,000 600,000 466,000 3,023,000
---------- ---------- ------------ --------- --------- -------------
Net increase (decrease) in cash.............. 12,000 8,000 83,000 (51,000) 82,000 165,000
Cash at beginning of period.................. 63,000 75,000 75,000 83,000
---------- ---------- ------------ --------- --------- -------------
Cash at end of period........................ $ 75,000 $ 83,000 $ 83,000 $ 24,000 $ 165,000 $ 165,000
---------- ---------- ------------ --------- --------- -------------
---------- ---------- ------------ --------- --------- -------------
Supplemental disclosure of cash flow
information:
Cash paid during the period for interest... $ 26,000 $ 26,000
</TABLE>
See notes to financial statements
F-6
<PAGE>
AYURCORE, INC. AND BIO-VED PHARMACEUTICALS PRIVATE LIMITED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1997 IS UNAUDITED)
NOTE A--THE COMPANY
AyurCore, Inc. was incorporated in Delaware on January 11, 1993. In October
1997, AyurCore, Inc. obtained substantially all of the common stock of Bio-Ved
Pharmaceuticals Private Limited ("Bio-Ved"), an Indian company. From inception,
November 8, 1995, Bio-Ved was solely funded by AyurCore, Inc. and, accordingly,
the accompanying financial statements include the accounts of Bio-Ved (which
accounts reflect net losses for the year ended December 31, 1996 and the nine
month period ended September 30, 1997, respectively). Effective November 1995,
Bio-Ved was wholly owned by relatives of the majority stockholders of AyurCore,
Inc. See Note N[1].
AyurCore, Inc. and Bio-Ved (collectively, the "Company") are engaged in the
discovery, development, clinical testing and marketing of proprietary
plant-based pharmaceuticals (phyto-pharmaceuticals) for the treatment of
chronic, difficult-to-treat human diseases, applying the principles of Ayurveda
(an ancient science native to India which uses plants as medicinal therapies).
Substantially all the Company's operations relating to Ayurvedic drugs are being
conducted in India and certain of the Company's products require raw materials
which are indigenous to India. The Company is in the development stage and, to
date, has not generated any significant sales, has incurred expenses and has
sustained losses. Consequently, its operations are subject to all the risks
inherent in the establishment of a new business enterprise.
For the period from inception through December 31, 1996, the Company has
accumulated a deficit of $3,421,000, and has been dependent upon advances and
loans from shareholders. These factors raise substantial doubt about the
Company's ability to continue as a going concern. In order to continue its
operations, the Company is seeking additional financing, which it is endeavoring
to do by means of a public offering of securities (see Note J[5]). However,
there is no assurance that the Company can complete its proposed securities
offering or that it can obtain adequate additional financing from other sources
or that profitable operations can be attained. The financial statements do not
include any adjustments relating to the recoverability of recorded asset amounts
or the amount and classification of liabilities that might be necessary as a
result of the above uncertainty.
Foreign investments in Indian companies are subject to currency exchange
control laws. Such laws may restrict the repatriation of income earned by, and
capital invested in, such subsidiaries. However, future funding of investments
may be repatriated provided the Company receives approval from the governmental
agency responsible for administering the currency controls for which an
application has been filed.
In addition, the Indian government prohibits the export of certain plants,
plant portions and their derivatives and extracts.
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
[1] BASIS OF PRESENTATION:
The accompanying combined financial statements include the accounts of
AyurCore, Inc. (including its Indian liaison office) and Bio-Ved Pharmaceuticals
Private Limited (a company organized in India).
F-7
<PAGE>
AYURCORE, INC. AND BIO-VED PHARMACEUTICALS PRIVATE LIMITED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1997 IS UNAUDITED)
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[1] BASIS OF PRESENTATION: (CONTINUED)
Subsequent to September 30, 1997 Bio-Ved became a substantially wholly-owned
subsidiary. All material intercompany transactions and account balances have
been eliminated in combination.
[2] INVENTORY:
Inventory consists of raw materials and is stated at the lower of cost
(first-in, first-out method) or market.
[3] EQUIPMENT:
Equipment is carried at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets which range
from three to five years. Leasehold improvements are amortized over the lesser
of the economic useful life of the improvement or term of the lease whichever is
shorter.
[4] RESEARCH AND DEVELOPMENT AND PATENTS:
Research and development costs and patent expenses are charged to operations
as incurred.
[5] 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.
[6] LOSS PER SHARE OF COMMON STOCK:
Net loss per share of common stock is based on the weighted average number
of shares outstanding during each period, as modified in accordance with certain
rules of the Securities and Exchange Commission. Accordingly, the weighted
average number of shares outstanding during each period includes options issued
twelve months prior to the Company's proposed initial public offering at a price
below the anticipated initial public offering price ($6.00) using the treasury
stock method as if they were outstanding for all periods.
[7] FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying value of cash, notes payable, and trade payables and accrued
expenses approximates the fair value because of the short maturity of those
instruments.
F-8
<PAGE>
AYURCORE, INC. AND BIO-VED PHARMACEUTICALS PRIVATE LIMITED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1997 IS UNAUDITED)
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[8] FOREIGN CURRENCY:
The financial statements for the operations in India are translated into
U.S. dollars from the Company's functional currency (Indian Rupee) at year end
exchange rates for assets and liabilities and weighted average exchange rate for
revenue and expenses. The effect of foreign currency translation adjustments are
included as a component of capital deficiency. Such amounts for the periods
presented were not material.
[9] STOCK-BASED COMPENSATION:
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123") encourages, but does not require,
companies to record compensation cost for stock-based employee compensation
plans at fair value. The Company has elected to account for its employee
stock-based compensation plans using the intrinsic value method prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB No. 25"). Under the provisions of APB No. 25, compensation cost
for stock options is measured as the excess, if any, of the quoted market price
of the Company's common stock at the date of the grant over the amount an
employee must pay to acquire the stock. Stock options granted to nonemployees
for goods or services are measured using the fair value of these options and
such costs are included in operating results as an expense.
[10] REVENUE RECOGNITION:
Sales revenue is recognized when product is shipped. Grant revenues are
recognized as the expenses for research and development activities performed
under the terms of the grant award are incurred.
[11] INTERIM FINANCIAL INFORMATION:
The financial statements at September 30, 1997 and for the nine months ended
September 30, 1996 and 1997 are unaudited, but include all adjustments
(consisting only of normal recurring adjustments) which management considers
necessary for a fair presentation of financial position, results of operations
and cash flows for those periods. Results of interim periods are not necessarily
indicative of results for the entire year or any future periods.
[12] RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share", which is required to be adopted for the year
ending December 31, 1997. At that time, the Company will be required to change
the method used to compute loss per share. The Company has not determined the
impact on adoption of this accounting standard
In June 1997, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 129, "Disclosure of Information about Capital
Structure", No. 130, "Reporting Comprehensive Income", and No. 131, "Disclosures
about Segments of an Enterprise and Related Information". The
F-9
<PAGE>
AYURCORE, INC. AND BIO-VED PHARMACEUTICALS PRIVATE LIMITED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1997 IS UNAUDITED)
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[12] RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS: (CONTINUED)
above pronouncements will not have a significant effect on the information
presented in the financial statements.
NOTE C--EQUIPMENT
Equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
Office furniture and equipment.................................. $ 27,000 $ 35,000
Computer equipment.............................................. 18,000 23,000
Laboratory equipment............................................ 21,000 25,000
Leasehold improvements.......................................... 9,000 9,000
------------ -------------
75,000 92,000
Less accumulated depreciation and amortization.................. 21,000 49,000
------------ -------------
Net............................................................. $ 54,000 $ 43,000
------------ -------------
------------ -------------
</TABLE>
NOTE D--INVESTMENTS
The Company accounts for its investments based on the following categories:
(1) held-to-maturity; (2) available for sale and (3) trading investments.
Held-to-maturity investments at September 30, 1997 consist of interest bearing
deposits in Indian banks (see Note A). The carrying amount approximates fair
value and the deposits mature between January 1999 and August 2000.
Approximately $6,000 of the deposits are collateral for amounts due to bank.
NOTE E--RELATED PARTY TRANSACTIONS
The Company's operations in India are being directed by a relative of the
principal stockholders. Such individual's compensation, based on an agreement,
amounts to $9,000 per annum.
During the year ended December 31, 1995, the Company incurred $5,000 of
expenses for rent and administrative services from a company of which a
stockholder is chairman. In addition, during the year ended December 31, 1994
the shareholder advanced approximately $10,000 to the Company to pay various
expenses. These advances were noninterest bearing and were repaid on February
1995.
For the years ended December 31, 1995 and 1996 and for the nine months ended
September 30, 1996 and 1997 approximately $64,000, $101,000, $25,000 and
$39,000, respectively (including services contributed), were charged to
operations for services provided by a law firm, of which a partner is also a
shareholder and an officer of the Company. At December 31, 1996 and September
30, 1997, amounts owed
F-10
<PAGE>
AYURCORE, INC. AND BIO-VED PHARMACEUTICALS PRIVATE LIMITED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1997 IS UNAUDITED)
NOTE E--RELATED PARTY TRANSACTIONS (CONTINUED)
to this related party aggregated approximately $129,000 and $144,000,
respectively, and are included in accounts payable.
NOTE F--INCOME TAXES
The Company recognizes deferred tax assets and liabilities for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases.
As of December 31, 1996, the Company has available for tax purposes the
following net operating loss carryforwards, utilizable against the taxable
income generated in each of the respective jurisdictions:
<TABLE>
<S> <C>
United States (expiring through 2011)...................... $2,850,000
India (expiring through 2004).............................. 100,000
</TABLE>
At December 31, 1996, the Company has provided a valuation reserve against
the full amount of its net operating loss benefit of approximately $1,180,000
(including $40,000 net operating loss benefit arising from Indian operations
which may only be utilized against future Indian taxable income) and the benefit
of $200,000 from other temporary differences, principally compensation expense
not currently deductible, since the likelihood of realization cannot be
determined.
A reconciliation between the actual income tax benefit and income taxes
computed by applying the United States federal income tax rate of 34% to the net
loss is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
<S> <C> <C>
1995 1996
----------- -----------
Computed federal income tax (benefit) at 34%........................ $ (395,000) $ (451,000)
Impact of difference between foreign jurisdictions effective tax
rate and U.S. tax rate............................................ (6,000)
State taxes, net of federal tax benefit............................. (69,000) (73,000)
Increase in valuation reserve....................................... 464,000 530,000
----------- -----------
$ -0- $ -0-
----------- -----------
----------- -----------
</TABLE>
The Internal Revenue Code contains provisions which may limit the
utilization of the net operating loss carryforward available in any given year
if significant changes occur in shareholder ownership interests. If the proposed
public offering discussed in Note J[5] to the financial statements is
consummated, it is probable that the amount of carryforward available in any
given year will be limited.
NOTE G--BANK DEBT
In October 1996 the Company borrowed $200,000 from a bank, payable on demand
evidenced by a note bearing interest at 2% above the bank's "Benchmark Rate"
(8.25% at December 31, 1996 and 8.50% at September 30, 1997). Additionally, the
Company borrowed $100,000 in May 1997 and $200,000 in September 1997. In
September 1997 the three notes were combined into one note for $500,000 which is
F-11
<PAGE>
AYURCORE, INC. AND BIO-VED PHARMACEUTICALS PRIVATE LIMITED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1997 IS UNAUDITED)
NOTE G--BANK DEBT (CONTINUED)
due February 2, 1998. The debt is collateralized by certain securities held by a
principal stockholder and guaranteed by two principal stockholders who are also
executive officers.
NOTE H--ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
Professional fees (Note E)...................................... $ 171,000 $ 196,000
Payroll and related expenses.................................... 94,000 280,000
Consulting...................................................... 104,000 124,000
Other........................................................... 98,000 50,000
------------ -------------
$ 467,000 $ 650,000
------------ -------------
------------ -------------
</TABLE>
NOTE I--NOTES PAYABLE
Notes payable are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
Notes payable to stockholders (1)............................... $ 325,000 $ 325,000
Notes payable to third parties (1).............................. 100,000 200,000
Convertible note to stockholder (1)(3).......................... 250,000 250,000
Notes payable to third parties (2).............................. 100,000 100,000
Note payable to stockholder (4) 117,000 205,000
------------ -------------
892,000 1,080,000
Less unamortized debt discount.................................. (6,000)
------------ -------------
Notes payable................................................... $ 892,000 $ 1,074,000
------------ -------------
------------ -------------
</TABLE>
- ------------------------
(1) Notes bear interest at 2% above prime (8.25% at December 31, 1996 and 8.5%
at September 30, 1997) and are payable on demand with the exception of
$100,000 at September 30, 1997, which is due on November 12, 1997.
(2) Note bears interest at 10% and is payable on demand.
(3) Convertible note is convertible into 61,050 shares of common stock at the
holder's option.
(4) Note bears interest at 2% above prime (8.25% at December 31, 1996 and 8.5%
at September 30, 1997) and becomes due and payable on demand, in stages, at
various dates from January 15, 1997 through July 14, 1998.
Interest payable to stockholders aggregated $85,000 and $144,000 at December
31, 1996 and September 30, 1997, respectively.
In conjunction with certain notes issued, the Company granted warrants to
purchase common stock (see Note J[3]). During the year ended December 31, 1996
and nine months ended September 30, 1997, the Company valued these warrants,
using the Black-Scholes pricing model, at $15,000 and $13,000, respectively
which is being treated as debt discount and amortized over the period of each
loan.
F-12
<PAGE>
AYURCORE, INC. AND BIO-VED PHARMACEUTICALS PRIVATE LIMITED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1997 IS UNAUDITED)
NOTE J--CAPITAL DEFICIENCY
[1] STOCK SPLIT AND CHANGE IN CAPITAL:
On November 18, 1997, the Board of Directors of the Company approved an
18,333.486-for-1 stock split of its common stock. In addition, the Board of
Directors increased the authorized shares to 25,000,000 shares of common stock
and 5,000,000 shares of preferred stock. All per share and share amounts in the
accompanying financial statements have been retroactively adjusted to reflect
the stock split.
[2] COMMON STOCK:
On November 18, 1997 the Board of Directors of the Company approved the
reclassification of its Class A and Class B common stock into one class of
common stock. The accompanying financial statements present common stock on the
converted basis.
A subscription agreement for the purchase of 166,651 shares of common stock
for $1,000,000 contains an antidilution provision on the next subscription for
the same class of stock which is at a per share price less than $6.00.
[3] WARRANTS:
In connection with certain notes payable issued during the year ended
December 31, 1996 and nine months ended September 30, 1997 (see Note I), the
Company issued warrants for the purchase of 200,000 and 50,000 shares,
respectively, of common stock at an exercise price of 130% of the initial public
offering price, expiring through August 1999.
[4] STOCK OPTIONS:
Pro forma information regarding net loss and loss per share is required by
SFAS No. 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that statement. The fair
value of options granted to employees during the year ended December 31, 1996 is
estimated to be $1.37 per share. The fair value of these options was estimated
at the date of grant using the Black-Scholes option pricing model with the
following weighted average assumptions for the year ended December 31, 1996:
risk free interest rate of 6.64%-6.73%; dividend yield of 0%; volatility of 40%
and expected life for options granted of 5 years.
The fair value of options granted during the nine months ended September 30,
1996 and September 30, 1997 is estimated at $1.37 and $2.14, respectively. The
fair value on the grant date was computed using the Black-Scholes option pricing
model with the following assumptions for the nine months ended September 30,
1996 and September 30, 1997: dividend yield of 0%; volatility of 40%; risk free
interest rate of 6.64%-6.73% and 5.5%, respectively, and expected life for
options granted of 5 years in 1996 and 1997.
During the year ended December 31, 1996 the Company issued options for
29,000 shares of common stock to consultants which were valued at $39,000 and
are being amortized over the period of the related agreements.
F-13
<PAGE>
AYURCORE, INC. AND BIO-VED PHARMACEUTICALS PRIVATE LIMITED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1997 IS UNAUDITED)
NOTE J--CAPITAL DEFICIENCY (CONTINUED)
[4] STOCK OPTIONS: (CONTINUED)
Management has determined that the pro forma effects for employee
stock-based compensation under SFAS No. 123 would not be significant to net loss
or net loss per share for the year ended December 31, 1996 and for the nine
months ended September 30, 1996 and September 30, 1997. Accordingly, such pro
forma information is not presented herein.
Through December 31, 1994 the Company has granted 261,252 options to
employees at exercise prices less than the fair value of the underlying common
stock at the dates of grant. The Company recorded the difference as unearned
compensation, which is being amortized over the vesting period.
During the nine months ended September 30, 1997 the Company granted 60,000
options to an employee at an exercise price which is $1.00 below the fair value
of the underlying common stock. The Company recorded the difference as unearned
compensation, which is being amortized over the vesting period.
Stock option activity is summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE NUMBER OF
OPTIONS EXERCISE SHARES
OUTSTANDING PRICE EXERCISABLE
----------- ----------- -----------
<S> <C> <C> <C>
Outstanding at December 31, 1994......................... 291,252 .99 13,750
----------- -----------
-----------
Outstanding at December 31, 1995......................... 291,252 .99 63,267
-----------
-----------
Granted.................................................. 40,500 3.00
Forfeited................................................ (55,000) .14
-----------
Outstanding at December 31, 1996......................... 276,752 1.46 82,900
-----------
-----------
Granted.................................................. 60,000 3.00
Forfeited................................................ (25,782) 1.02
-----------
Outstanding at September 30, 1997........................ 310,970 1.79 124,700
----------- -----------
----------- -----------
</TABLE>
The following table summarizes information about stock options outstanding:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
Range of exercise price......................................... $.34-6.00 $.34-6.00
Weighted-average remaining contractual life..................... 5.17 years 5.17 years
Weighted-average exercise price of exercisable options.......... $0.80 $0.80
</TABLE>
[5] PROPOSED PUBLIC OFFERING:
The Company has signed a letter of intent with an underwriter with respect
to a proposed public offering of the Company's securities. There is no assurance
that such offering will be consummated. In
F-14
<PAGE>
AYURCORE, INC. AND BIO-VED PHARMACEUTICALS PRIVATE LIMITED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1997 IS UNAUDITED)
NOTE J--CAPITAL DEFICIENCY (CONTINUED)
[5] PROPOSED PUBLIC OFFERING: (CONTINUED)
connection therewith the Company anticipates incurring substantial expenses
which, if the offering is not consummated, will be charged to expense.
NOTE K--ROYALTIES
In September 1994, April 1995 and June 1995, the Company acquired certain
exclusive intellectual property rights from two inventors for payments
aggregating $38,000, including certain milestone payments ($22,000 paid as of
December 31, 1996). The Company has ongoing royalty commitments for sales of
certain products covered by the rights acquired. The agreements provide for the
payment of royalties on gross revenue earned on these product sales and
sublicensing incorporating the technology.
In December 1995, the Company was assigned certain exclusive intellectual
property rights from an inventor for royalty payments on net receipts and on net
royalties received from sublicenses.
As of September 30, 1997 no royalty payments were due under these
agreements.
NOTE L--COMMITMENTS
[1] LEASES:
The Company is obligated for annual minimum rentals under operating leases
for office, equipment and laboratory facilities as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------------------------------------------------------------------
<S> <C>
1997.................................................................... $ 53,000
1998.................................................................... 46,000
1999.................................................................... 6,000
----------
$ 105,000
----------
----------
</TABLE>
Rent expense (including related party amounts--Note E) was approximately
$21,000, $49,000, $35,000, and $43,000 for the years ended December 31, 1995 and
1996, and for the nine months ended September 30, 1996 and 1997, respectively.
[2] EMPLOYMENT AND CONSULTING AGREEMENTS:
At December 31, 1996, the Company had an employment agreement with an
officer, which provides for $50,000 through August 31, 1997.
F-15
<PAGE>
AYURCORE, INC. AND BIO-VED PHARMACEUTICALS PRIVATE LIMITED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1997 IS UNAUDITED)
NOTE L--COMMITMENTS (CONTINUED)
[2] EMPLOYMENT AND CONSULTING AGREEMENTS: (CONTINUED)
The Company has consulting agreements which provide for payments through May
1998. Future payments as of December 31, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------------------------------------------------------------------
<S> <C>
1997.................................................................... $ 62,000
1998.................................................................... 26,000
----------
$ 88,000
----------
----------
</TABLE>
[3] SUPPLY AGREEMENT:
On April 1, 1996, the Company entered into a five-year exclusive agreement
to provide Blue Cross Laboratories Ltd. of Mumbai, India ("Blue Cross") with an
anticeptic formulation at a mutually agreed upon price. The agreement provides
for the Company to have available one month's supply of the product and is
subject to penalties for nondelivery. The Company is to receive a royalty based
on a percentage of the net sales value realized by Blue Cross.
F-16
<PAGE>
AYURCORE, INC. AND BIO-VED PHARMACEUTICALS PRIVATE LIMITED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1997 IS UNAUDITED)
NOTE M--INFORMATION ON BUSINESS SEGMENT
The Company operates in a single industry, the discovery, development,
clinical testing and marketing of proprietary plant-based pharmaceuticals
(phyto-pharmaceuticals) for the treatment of chronic, difficult-to-treat human
diseases, applying the principles of Ayurveda. The Company's activities consist
of operations in India and the United States. Information related to domestic
and foreign operations is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------------
<S> <C> <C>
1995 1996
------------ ------------
Operating loss:
United States................................................... $ 853,000 $ 891,000
India........................................................... 310,000 436,000
------------ ------------
$ 1,163,000 $ 1,327,000
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C> <C>
Identifiable assets:
United States.................................................. $ 93,000
India (see Note A)............................................. 123,000
------------
$ 216,000
------------
------------
</TABLE>
NOTE N--SUBSEQUENT EVENTS
[1] On October 10, 1997, the Board of Directors of Bio-Ved authorized the
issuance of 27,165 shares of its common stock for $7,500 to AyurCore, Inc.,
representing substantially all of its outstanding common stock. On October
14, 1997, Bio-Ved filed a declaration for direct investment with the Reserve
Bank of India.
[2] Effective October 31, 1997, certain noteholders converted approximately
$700,000 of principal plus interest of $139,000 (through October 31, 1997)
into shares of common stock at $4.00 per share. If shares were issued at
$4.00 per share in lieu of debt at the respective issuance date of debt, pro
forma net loss per share for the years ended December 31, 1995 and 1996 and
for the nine months ended September 30, 1996 and 1997 would have been
$(.54), $(.58), $(.42) and $(.30), respectively.
On December 8, 1997, the Board of Directors of the Company approved the grant
of warrants to purchase 45,000 shares of common stock in connection with a
debt conversion. In addition, warrants to purchase 55,000 shares of common
stock were granted in full release of certain antidilution rights (see Note
J[2]). The warrants are exercisable at $4.00 per share and expire on October
30, 2002.
[3] On December 1, 1997, the terms of certain demand notes in the aggregate
principal amount of $230,000 were modified to provide that no amounts would
become due and payable thereunder until one year following the consummation
of the proposed public offering.
F-17
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OFFERED
HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF
THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary.............................. 3
Risk Factors.................................... 8
Use of Proceeds................................. 18
Dilution........................................ 19
Capitalization.................................. 21
Selected Combined Financial Data................ 22
Plan of Operation............................... 24
Business........................................ 28
Management...................................... 46
Principal Stockholders.......................... 51
Certain Transactions............................ 52
Description of Securities....................... 53
Shares Eligible for Future Sale................. 54
Underwriting.................................... 55
Legal Matters................................... 58
Experts......................................... 58
Additional Information.......................... 58
Index to Combined Financial Statements.......... F-1
</TABLE>
------------------------
UNTIL , 1998 (25 DAYS FROM THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITER AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
1,250,000 SHARES
AYURCORE, INC.
COMMON STOCK
---------------------
PROSPECTUS
---------------------
LT LAWRENCE & CO., INC.
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article Eight of the Certificate of Incorporation of AyurCore, Inc. (the
"Registrant") eliminates the personal liability of directors to the Registrant
or its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that such elimination of the personal liability of directors
of the Registrant does not apply to (a) any breach of the director's duty of
loyalty to the Registrant or its stockholders, (b) act or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law, (c)
action prohibited under section 174 of the Delaware General Corporation Law, and
(d) any transaction from which the director derived an improper personal
benefit. Item 25. Other Expenses of Issuance and Distribution.
The following are the estimated expenses of the issuance and distribution of
the securities being registered, all of which will be paid by the "Registrant".
<TABLE>
<S> <C>
SEC Registration fee............................................. $3,267.13
NASD filing fee.................................................. 1,607.50
Nasdaq SmallCap Market fees...................................... 7,500
Printing expenses................................................ *
Fees and expenses of counsel..................................... *
Fees and expenses of accountants................................. *
Transfer agent and registrar fees................................ *
Blue sky fees and expenses....................................... *
Representative's nonaccountable expense allowance................ 225,000(1)
Miscellaneous.................................................... *
---------
Total............................................................ $ 630,000
---------
---------
</TABLE>
- ------------------------------
(1) Assuming an initial public offering price of $ 6.00 per share.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
Set forth below is information as to securities of the Registrant sold
within the past three years which were not registered under the Securities Act
of 1933, as amended (the "Act"). In connection with such sales, the Registrant
relied upon the exemption from registration provided by Section 4(2) of the Act.
All purchasers have represented that they are accredited investors. The
information below gives effect to (i) the reclassification of the Registrant's
Class A Common Stock and Class B Common Stock as a single class of Common stock
and (ii) a stock split effected November 26, 1997, pursuant to which each
outstanding share of common stock was reclassified and converted into 18,333.486
shares of Common Stock.
On February 3, 1995, Marathon Investments L.L.C. purchased 166,651 shares of
Common Stock of the Registrant at a purchase price of $1,000,000.
From March 1996 to August 1997, the Company issued warrants to purchase
250,000 shares of Common Stock to three lenders in connection with their loans
to the Company in the aggregate amount of $500,000. Each warrant entitles the
holder to purchase one share of Common Stock at a price equal to 130% of the
initial public offering price per share for a period of two years.
Effective October 31, 1997, two holders of debt aggregating $838,830 in
principal and accrued interest (the "Debt") converted the Debt into an aggregate
of 209,708 shares of Common Stock of the Registrant. In addition, effective
December 8, 1997, the Company approved the issuance of 45,000 warrants to one of
such holders in connection with the Debt conversion, as well as 55,000 warrants
to another stockholder of the Company in consideration for the release of
certain antidilution rights. Each warrant entitles the holder to purchase one
share of common stock at $4.00 per share for a period of five years.
II-1
<PAGE>
ITEM 27. EXHIBITS.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the Registrant (including amendments thereto).
3.2 By-Laws of the Registrant.
4.1 Form of Representative's Warrant Agreement.
4.2 Form of Common Stock Certificate.(1)
5.1 Opinion of Rubin Baum Levin Constant & Friedman regarding legality.(1)
10.1 Form of Employment Agreement to be entered into between the Registrant and Barry Wald.
10.2 Form of Employment Agreement to be entered into between the Registrant and Deepa Chitre.
10.3 1997 Stock Option Plan (including forms of option agreements).
10.4 Form of Indemnification Agreement to be entered into between the Registrant and its directors and
executive officers.(1)
10.5 Lease Deed, dated as of April 19, 1996, by and between BAIF Development Research Foundation and Bio-Ved
Pharmaceuticals Private Limited ("Bio-Ved") (including agreement for furniture, fixtures and fittings).
10.6 Office Building Lease, dated as of September 8, 1995, by and between Northwestern Mutual Life Insurance
Company by its Agent Gibson Speno Management Company and Bio-Ved.
10.7 Agreement, dated as of July 26, 1994, by and between Poona College Pharmacy and Bio-Ved.
10.8 Memorandum of Understanding, dated as of October 9, 1997, by and between Bio-Ved and Alembic Chemicals
Works Co. Limited.
10.9 Memorandum of Understanding, dated as of October 23, 1997, by and between Kancor Flavours & Extracts
Pvt. Ltd. and Bio-Ved.(2)
10.10 Agreement, dated as of October 10, 1997, by and between Bio-Ved and Eisen Pharmaceutical Co. (Pvt.)
Ltd.(2)
10.11 Agreement, dated as of September 28, 1994, by and between Bio-Ved and Dr. Bhushan Patwardhan
("Patwardhan") regarding RA-11.(2)
10.12 Agreement, dated as of April 7, 1995, by and between Patwardhan and the Registrant regarding RA-11.(2)
10.13 Agreement, dated as of April 7, 1995, by and between Patwardhan and the Registrant regarding RA-11.(2)
10.14 Agreement, dated as of April 7, 1995, by and between Patwardhan and the Registrant regarding IM-10.(2)
10.15 Agreement, dated as of June 26, 1995, by and between the Registrant and S.V. Karnataki.(2)
10.16 Patent Agreement, dated as of December 15, 1995, by and between Dr. Abraham Rosenberg and the
Registrant.(2)
10.17 Distribution Agreement, dated as of September 1, 1997, by and between the Registrant and MD
Pharmaceuticals Laboratories Ltd.(2)
10.18 Memorandum of Understanding, dated as of April 1, 1996, by and between Bio-Ved and Blue Cross
Laboratories Ltd. (including supplement thereto).(2)
</TABLE>
- ------------------------
(1) To be filed by amendment.
(2) Confidential treatment is being requested for portions of this exhibit
pursuant to Rule 406 under the Securities Act.
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.19 Promissory Note, dated January 29, 1996, made by the Registrant in favor of Irwin Rosenthal.
10.20 Promissory Note, dated as of July 14, 1997, made by the Registrant in favor of Sanjeev Chitre.
10.21 Stock Purchase Agreement, dated as of October 31, 1997, between the Registrant and Fred Kassner.
10.22 Stock Purchase Agreement, dated as of October 31, 1997, between the Registrant and Michael Splinter and
Patricia Robestoff.
10.23 Form of Consulting Agreement between the Registrant and LT Lawrence & Co., Inc.
10.24 Form of Warrant, dated as of December 8, 1997, in favor of each of Fred Kassner and Marathon
Investments, LLC.
10.25 Form of Registration Rights Agreement, dated as of December 8, 1997, in favor of each of Fred Kassner
and Marathon Investments, LLC.
11.1 Statement regarding computation of loss per share.
21.1 Subsidiaries of Registrant.
23.1 Consent of Richard A. Eisner & Company, LLP.
23.2 Consent of Rubin Baum Levin Constant & Friedman (included in Exhibit 5).
24.1 Power of Attorney (included with the signature page to the registration statement).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
(1) To be filed by amendment.
(2) Confidential treatment is being requested for portions of this exhibit
pursuant to Rule 406 under the Securities Act.
ITEM 28. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes to provide to the
Underwriter at the closings specified in the Underwriting Agreement certificates
in such denominations and registered in such names as required by the
Underwriter to permit prompt delivery to each purchaser of the Common Stock
offered hereby.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant 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 Securities Act and will be governed by the final
adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for the filing on Form SB-2 and authorized the Registration
Statement to be signed on its behalf by the undersigned, there unto duly
authorized, in the City of San Jose, California, on December 11, 1997.
AYURCORE, INC.
By: /s/ DEEPA CHITRE
-----------------------------------------
Deepa Chitre,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below (other than Cynthia R. May) hereby severally constitutes and appoints
Deepa Chitre, Sanjeev Chitre and Suzanne Rosenthal and each of them, his true
and lawful attorneys-in-fact and agents, each acting alone, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and all documents relating thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, each acting alone full power and authority to
do and perform each and every act and thing necessary or advisable to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
President, Chief Executive
/s/ DEEPA CHITRE Officer and Director
- ------------------------------ (Principal Executive December 11, 1997
Deepa Chitre, M.D. Officer)
/s/ SANJEEV CHITRE
- ------------------------------ Chairman of the Board of December 11, 1997
Sanjeev Chitre Directors
Chief Financial Officer
/s/ NINA RENAUD and Treasurer (Principal
- ------------------------------ Financial and Accounting December 11, 1997
Nina Renaud Officer)
/s/ MICHAEL SPLINTER
- ------------------------------ Director December 11, 1997
Michael Splinter
/s/ CYNTHIA R. MAY
- ------------------------------ Director December 11, 1997
Cynthia R. May
/s/ SUZANNE ROSENTHAL
- ------------------------------ Director December 11, 1997
Suzanne Rosenthal
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ----------- --------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the Registrant (including amendments thereto).
3.2 By-Laws of the Registrant.
4.1 Form of Representative's Warrant Agreement.
4.2 Form of Common Stock Certificate.(1)
5.1 Opinion of Rubin Baum Levin Constant & Friedman regarding legality.(1)
10.1 Form of Employment Agreement to be entered into between the Registrant and Barry Wald.
10.2 Form of Employment Agreement to be entered into between the Registrant and Deepa Chitre.
10.3 1997 Stock Option Plan (including forms of option agreements).
10.4 Form of Indemnification Agreement to be entered into between the Registrant and its directors
and executive officers.(1)
10.5 Lease Deed, dated as of April 19, 1996, by and between BAIF Development Research Foundation
and Bio-Ved Pharmaceuticals Private Limited ("Bio-Ved") (including agreement for furniture,
fixtures and fittings).
10.6 Office Building Lease, dated as of September 8, 1995, by and between Northwestern Mutual Life
Insurance Company by its Agent Gibson Speno Management Company and Bio-Ved.
10.7 Agreement, dated as of July 26, 1994, by and between Poona College Pharmacy and Bio-Ved.
10.8 Memorandum of Understanding, dated as of October 9, 1997, by and between Bio-Ved and Alembic
Chemicals Works Co. Limited.
10.9 Memorandum of Understanding, dated as of October 23, 1997, by and between Kancor Flavours &
Extracts Pvt. Ltd. and Bio-Ved.(2)
10.10 Agreement, dated as of October 10, 1997, by and between Bio-Ved and Eisen Pharmaceutical Co.
(Pvt.) Ltd.(2)
10.11 Agreement, dated as of September 28, 1994, by and between Bio-Ved and Dr. Bhushan Patwardhan
("Patwardhan") regarding RA-11.(2)
10.12 Agreement, dated as of April 7, 1995, by and between Patwardhan and the Registrant regarding
RA-11.(2)
10.13 Agreement, dated as of April 7, 1995, by and between Patwardhan and the Registrant regarding
RA-11.(2)
10.14 Agreement, dated as of April 7, 1995, by and between Patwardhan and the Registrant regarding
IM-10.(2)
10.15 Agreement, dated as of June 26, 1995, by and between the Registrant and S.V. Karnataki.(2)
10.16 Patent Agreement, dated as of December 15, 1995, by and between Dr. Abraham Rosenberg and the
Registrant.(2)
10.17 Distribution Agreement, dated as of September 1, 1997, by and between the Registrant and MD
Pharmaceuticals Laboratories Ltd.(2)
10.18 Memorandum of Understanding, dated as of April 1, 1996, by and between Bio-Ved and Blue Cross
Laboratories Ltd. (including supplement thereto).(2)
</TABLE>
- ------------------------
(1) To be filed by amendment.
(2) Confidential treatment is being requested for portions of this exhibit
pursuant to Rule 406 under the Securities Act.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ----------- --------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
10.19 Promissory Note, dated January 29, 1996, made by the Registrant in favor of Irwin Rosenthal.
10.20 Promissory Note, dated as of July 14, 1997, made by the Registrant in favor of Sanjeev
Chitre.
10.21 Stock Purchase Agreement, dated as of October 31, 1997, between the Registrant and Fred
Kassner.
10.22 Stock Purchase Agreement, dated as of October 31, 1997, between the Registrant and Michael
Splinter and Patricia Robestoff.
10.23 Form of Consulting Agreement between the Registrant and LT Lawrence & Co., Inc.
10.24 Form of Warrant, dated as of December 8, 1997, issued in favor of each of Fred Kassner and
Marathon Investments, LLC.
10.25 Form of Registration Rights Agreement, dated as of December 8, 1997, in favor of each of Fred
Kassner and Marathon Investments, LLC.
11.1 Statement regarding computation of loss per share.
21,1 Subsidiaries of Registrant.
23.1 Consent of Richard A. Eisner & Company, LLP.
23.2 Consent of Rubin Baum Levin Constant & Friedman (included in Exhibit 5).
24.1 Power of Attorney (included with the signature page to the registration statement).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
(1) To be filed by amendment.
(2) Confidential treatment is being requested for portions of this exhibit
pursuant to Rule 406 under the Securities Act.
<PAGE>
Exhibit 1
AYURCORE, INC.
1,250,000 Shares of Common Stock
($.001 par value per share)
UNDERWRITING AGREEMENT
New York, New York
_______ __, 1998
L.T. Lawrence & Co., Inc.
as Representative of the
Several Underwriters named
in Schedule A hereto
3 New York Plaza
New York, New York 10004
Dear Sirs:
AyurCore, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell to the underwriters (the "Underwriters") named in Schedule A to
this Underwriting Agreement (the "Agreement"), for whom LT Lawrence & Co., Inc.
(the "Representative") is acting as representative, one million two hundred and
fifty thousand (1,250,000) shares of common stock, par value $.001 per share
(the "Offered Shares"), which Offered Shares are presently authorized but
unissued shares of the common stock, par value $.001 per share (individually a
"Common Share" and collectively the "Common Shares"), of the Company. In
addition, the Representative, in order to cover over-allotments in the sale of
the Offered Shares, may purchase from the Company, for its own account, up to an
aggregate of one hundred eighty-seven thousand five hundred (187,500) Common
Shares (the "Optional Shares"; the Offered Shares and the Optional Shares are
hereinafter sometimes collectively referred to as the "Shares"). The Shares are
described in the Registration Statement, as defined below. The Company also
proposes to issue and sell to the Representative for its own account and/or the
accounts of its designees, warrants to purchase an aggregate of one hundred
twenty-five thousand (125,000) Common Shares (the "Warrant Shares") at an
exercise price of $____ per Warrant Share [135% of the initial public offering
price per Share] (the "Representative's Warrants"), which sale will be
consummated in accordance with the terms and conditions of the form of
Representative's Warrant Agreement filed as an exhibit to the Registration
Statement.
<PAGE>
The Representative hereby warrants to the Company that it has been
authorized by each of the Underwriters to enter into this Underwriting Agreement
on their behalf and to act for them in the manner herein provided. The Company
hereby confirms its respective agreements with the Representative and each of
the Underwriters, on whose behalf the Representative is signing this Agreement,
as follows:
1. Purchase and Sale of Offered Shares. On the basis of the
representations and warranties herein contained, but subject to the terms and
conditions herein set forth, the Company hereby agrees to sell the Offered
Shares to the Underwriters, severally, and each Underwriter agrees severally and
not jointly, to purchase from the Company, at a purchase price of $____ per
share, the number of Offered Shares set forth opposite the name of such
Underwriter in Schedule A attached hereto, plus any additional Offered Shares
which such Underwriter may become obligated to purchase pursuant to the
provisions of Section 10 hereof. The Underwriters plan to offer the Offered
Shares to the public at a public offering price of $____ per share.
2. Payment and Delivery.
(a) Payment for the Offered Shares will be made to the Company
by wire transfer against delivery of the Offered Shares to the Representative.
Such payment and delivery will be made at 10:00 A.M. New York City time, on the
third business day following the Effective Date (the fourth business day
following the Effective Date in the event that trading of the Offered Shares
commences on the day following the Effective Date), the date and time of such
payment and delivery being herein called the "Closing Date." The certificates
representing the Offered Shares to be delivered will be in such denominations
and registered in such names as the Representative may request not less than two
full business days prior to the Closing Date, and will be made available to the
Representative for inspection, checking and packaging at the office of American
Stock Transfer & Trust Company, the Company's transfer agent, at 40 Wall Street,
New York, New York 10005, not less than one full business day prior to the
Closing Date.
(b) On the Closing Date, the Company will sell the
Representative's Warrants to the Representative or to its designees (limited to
officers and partners of the Representative and/or, at the Representative's
direction, members of the selling group or underwriting syndicate participating
in the distribution of the Offered Shares and/or their respective officers or
partners). The Representative's Warrants will be in the form of, and in
accordance with, the provisions of the Representative's Warrant Agreement
attached as an exhibit to the Registration Statement. The aggregate purchase
price for the Representative's Warrants is $125.
2
<PAGE>
The Representative's Warrants will be restricted from sale, transfer,
assignment, pledge or hypothecation for a period of one year from the
Effective Date, except to officers or partners of the Representative and
Underwriters and members of the selling group and/or their officers or
partners. Payment for the Representative's Warrants will be made to the
Company by check or checks payable to its order on the Closing Date against
delivery of the certificates representing the Representative's Warrants. The
certificates representing the Representative's Warrants will be in such
denominations and such names as the Representative may request prior to the
Closing Date.
3. Option to Purchase Optional Shares.
(a) For the purposes of covering any over-allotments in
connection with the distribution and sale of the Offered Shares as contemplated
by the Prospectus as defined below, the Representative is hereby granted an
option to purchase for its own account, and not as representative of the
Underwriters, all or any part of the Optional Shares from the Company. The
purchase price to be paid for the Optional Shares will be the same price per
Optional Share as the price per Offered Share set forth in Section 1 hereof.
The option granted hereby may be exercised by the Representative as to all or
any part of the Optional Shares at any time within 45 days after the Effective
Date. The Representative will not be under any obligation to purchase any
Optional Shares prior to the exercise of such option.
(b) The option granted hereby may be exercised by the
Representative by giving oral notice to the Company, which must be confirmed by
a letter, telex or telegraph setting forth the number of Optional Shares to be
purchased, the date and time for delivery of and payment for the Optional Shares
to be purchased and stating that the Optional Shares referred to therein are to
be used for the purpose of covering over-allotments in connection with the
distribution and sale of the Offered Shares. If such notice is given prior to
the Closing Date, the date set forth therein for such delivery and payment will
not be earlier than either two full business days thereafter or the Closing
Date, whichever occurs later. If such notice is given on or after the Closing
Date, the date set forth therein for such delivery and payment will not be
earlier than two (2) full business days thereafter. In either event, the date
so set forth will not be more than 15 full business days after the date of such
notice. The date and time set forth in such notice is herein called the "Option
Closing Date." Upon exercise of such option, the Company will become obligated
to convey to the Representative, and, subject to the terms and conditions set
forth in Section 3(d) hereof, the Representative will become obligated to
purchase, the number of Optional Shares specified in such notice.
3
<PAGE>
(c) Payment for any Optional Shares purchased will be made to
the Company by wire transfer against delivery of the Optional Shares purchased
to the Representative. The certificates representing the Optional Shares to be
delivered will be in such denominations and registered in such names as the
Representative requests not less than two full business days prior to the Option
Closing Date, and will be made available to the Representatives for inspection,
checking and packaging at the aforesaid office of the Company's transfer agent
or correspondent not less than one full business day prior to the Option Closing
Date.
(d) The obligation of the Representative to purchase and pay for
any of the Optional Shares is subject to the accuracy and completeness (as of
the date hereof and as of the Option Closing Date) of and compliance in all
material respects with the representations and warranties of the Company herein,
to the accuracy and completeness of the statements of the Company or its
officers made in any certificate or other document to be delivered by the
Company pursuant to this Agreement, to the performance in all material respects
by the Company of its obligations hereunder, to the satisfaction by the Company
of the conditions, as of the date hereof and as of the Option Closing Date, set
forth in Section 3(b) hereof, and to the delivery to the Representative of
opinions, certificates and letters dated the Option Closing Date substantially
similar in scope to those specified in Sections 5 and 6(b), (c), (d) (e) and (f)
hereof, but with each reference to "Offered Shares" and "Closing Date" to be,
respectively, to the Optional Shares and the Option Closing Date.
4. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the several Underwriters that:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with full
corporate power and authority to own or lease, as the case may be, and operate,
its properties, whether tangible or intangible, and to conduct its business as
described in the Registration Statement and to execute, deliver and perform this
Agreement and the Representative's Warrant Agreement and to consummate the
transactions contemplated hereby and thereby. The Company has no subsidiaries
other than Bio-Ved Pharmaceuticals Private Limited, a corporation duly organized
and validly existing under the laws of India (the "Subsidiary") and the Company
has no equity interest in any other entity. Unless the context otherwise
requires, all references to the "Company" in this Agreement shall include the
Subsidiary. Each of the Company and the Subsidiary is duly qualified to do
business as a foreign corporation and is in good standing in all jurisdictions
wherein such qualification is necessary and failure so to qualify could have a
material adverse
4
<PAGE>
effect on the financial condition, results of operations, business or
properties of the Company or the Subsidiary. The Subsidiary has full
corporate power and authority to own or lease, as the case may be, and
operate its properties and to conduct its business as described in the
Prospectus. The Company owns ___% of the issued and outstanding shares of
capital stock of the Subsidiary free and clear of any security interests,
liens, encumbrances, claims and charges, and all of such shares have been
duly authorized and validly issued and are fully paid and nonassessable.
There are no options or warrants for the purchase of, or other rights to
purchase, or outstanding securities convertible into or exchangeable for, any
capital stock or other securities of the Subsidiary.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding obligation of the Company, and
each of the Representative's Warrant Agreement and the Consulting Agreement
described in Section 5(af) hereof (the "Consulting Agreement"), when executed
and delivered by the Company on the Closing Date, will be the valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms. The execution, delivery and performance of this
Agreement, the Representative's Warrant Agreement and the Consulting Agreement
by the Company, the consummation by the Company of the transactions herein and
therein contemplated and the compliance by the Company with the terms of this
Agreement, the Representative's Warrant Agreement and the Consulting Agreement
have been duly authorized by all necessary corporate action and do not and will
not, with or without the giving of notice or the lapse of time, or both, (i)
result in any violation of the Certificate of Incorporation or By-laws, each as
amended, of the Company or the Subsidiary; (ii) result in a breach of or
conflict with any of the terms or provisions of, or constitute a default under,
or result in the modification or termination of, or result in the creation or
imposition of any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company or the Subsidiary pursuant to any indenture,
mortgage, note, contract, commitment or other agreement or instrument to which
the Company or the Subsidiary is a party or by which the Company, the Subsidiary
or any of their respective properties or assets is or may be bound or affected;
(iii) violate any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company, the Subsidiary or any of their respective
properties or business; or (iv) have any effect on any permit, certification,
registration, approval, consent, order, license, franchise or other
authorization (collectively, the "Permits") necessary for the Company or the
Subsidiary to own or lease and operate its properties and conduct its business
or on the ability of the Company to make use thereof.
5
<PAGE>
(c) No Permits of any court or governmental agency or body,
other than under the Securities Act of 1933, as amended (the "Act"), the
Regulations (as hereinafter defined) and applicable state securities or Blue Sky
laws, are required (i) for the valid authorization, issuance, sale and delivery
of the Shares to the Underwriters, and (ii) the consummation by the Company of
the transactions contemplated by this Agreement, the Representative's Warrant
Agreement and the Consulting Agreement or, if so required, all such Permits,
have been duly obtained and are in full force and effect.
(d) The conditions for use of a registration statement on Form
SB-2 set forth in the General Instructions to Form SB-2 have been satisfied with
respect to the Company and the transactions contemplated herein. The Company
has prepared in conformity with the requirements of the Act and the rules and
regulations (the "Regulations") of the Securities and Exchange Commission (the
"Commission") and filed with the Commission a registration statement (File No.
333-_____) on Form SB-2 and has filed one or more amendments thereto, covering
the registration of the Shares under the Act, including the related preliminary
prospectus or preliminary prospectuses (each thereof being herein called a
"Preliminary Prospectus") and a proposed final prospectus. Each Preliminary
Prospectus was endorsed with the legend required by Item 501(a)(5) of Regulation
S-B of the Regulations and, if applicable, Rule 430A of the Regulations. Such
registration statement including any documents incorporated by reference therein
and all financial schedules and exhibits thereto, as amended at the time it
becomes effective, and the final prospectus included therein are herein,
respectively, called the "Registration Statement" and the "Prospectus," except
that, (i) if the prospectus filed by the Company pursuant to Rule 424(b) of the
Regulations differs from the Prospectus, the term "Prospectus" will also include
the prospectus filed pursuant to Rule 424(b), and (ii) if the Registration
Statement is amended or such Prospectus is supplemented after the date the
Registration Statement is declared effective by the Commission (the "Effective
Date") and prior to the Option Closing Date, the terms "Registration Statement"
and "Prospectus" shall include the Registration Statement as amended or
supplemented.
(e) Neither the Commission nor, to the best of the Company's
knowledge, any state regulatory authority has issued any order preventing or
suspending the use of any Preliminary Prospectus or has instituted or, to the
best of the Company's knowledge, threatened to institute any proceedings with
respect to such an order.
(f) The Registration Statement when it becomes effective, the
Prospectus (and any amendment or supplement thereto)
6
<PAGE>
when it is filed with the Commission pursuant to Rule 424(b), and both
documents as of the Closing Date and the Option Closing Date referred to
below, will contain all statements which are required to be stated therein in
accordance with the Act and the Regulations and will in all material respects
conform to the requirements of the Act and the Regulations, and neither the
Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, on such dates, will contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading, except that this representation and warranty
does not apply to statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company in connection
with the Registration Statement or Prospectus or any amendment or supplement
thereto by the Representative, or by any Underwriter through the
Representative, expressly for use therein.
(g) The Company had at the date or dates indicated in the
Prospectus a duly authorized and outstanding capitalization as set forth in the
Registration Statement and the Prospectus. Based on the assumptions stated in
the Registration Statement and the Prospectus, the Company will have on the
Closing Date the adjusted stock capitalization set forth therein. Except as set
forth in the Registration Statement or the Prospectus, on the Effective Date and
on the Closing Date, there will be no options to purchase, warrants or other
rights to subscribe for, or any securities or obligations convertible into, or
any contracts or commitments to issue or sell shares of the Company's capital
stock or any such warrants, convertible securities or obligations. Except as
set forth in the Prospectus, no holder of any of the Company's securities has
any rights, "demand," "piggyback" or otherwise, to have such securities
registered under the Act.
(h) The descriptions in the Registration Statement and the
Prospectus of contracts and other documents are accurate and present fairly the
information required to be disclosed, and there are no contracts or other
documents required to be described in the Registration Statement or Prospectus
or to be filed as exhibits to the Registration Statement under the Act or the
Regulations which have not been so described or filed as required.
(i) Richard A. Eisner & Company, LLP, the accountants who have
certified certain of the combined financial statements of the Company and the
Subsidiary (the "Financial Statements") filed and to be filed with the
Commission as part of the Registration Statement and the Prospectus, are
independent public accountants within the meaning of the Act and Regulations.
The Financial Statements and schedules and the notes thereto filed as part of
the Registration Statement and included in the
7
<PAGE>
Prospectus are complete, correct and present fairly the financial position of
the Company as of the dates thereof, and the results of operations and
changes in financial position of the Company for the periods indicated
therein, all in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved except as
otherwise stated in the Registration Statement and the Prospectus. The
selected financial data set forth in the Registration Statement and the
Prospectus present fairly the information shown therein and have been
compiled on a basis consistent with that of the audited and unaudited
financial statements included in the Registration Statement and the
Prospectus.
(j) Each of the Company and the Subsidiary has filed with the
appropriate federal, state and local governmental agencies, and all appropriate
foreign countries and political subdivisions thereof, all tax returns, including
franchise tax returns, which are required to be filed or has duly obtained
extensions of time for the filing thereof and has paid all taxes shown on such
returns and all assessments received by it to the extent that the same have
become due; and the provisions for income taxes payable, if any, shown on the
Financial Statements filed with or as part of the Registration Statement are
sufficient for all accrued and unpaid foreign and domestic taxes, whether or not
disputed, and for all periods to and including the dates of such Financial
Statements. Except as disclosed in writing to the Representative, neither the
Company nor the Subsidiary has executed or filed with any taxing authority,
foreign or domestic, any agreement extending the period for assessment or
collection of any income taxes and is not a party to any pending action or
proceeding by any foreign or domestic governmental agency for assessment or
collection of taxes; and no claims for assessment or collection of taxes have
been asserted against the Company or the Subsidiary.
(k) The outstanding Common Shares and outstanding options and
warrants to purchase Common Shares have been duly authorized and validly issued.
The outstanding Common Shares are fully paid and nonassessable. The outstanding
options and warrants to purchase Common Shares constitute the valid and binding
obligations of the Company, enforceable in accordance with their terms. None of
the outstanding Common Shares or options or warrants to purchase Common Shares
has been issued in violation of the preemptive rights of any shareholder of the
Company. None of the holders of the outstanding Common Shares is subject to
personal liability solely by reason of being such a holder. The offers and
sales of the outstanding Common Shares and outstanding options and warrants to
purchase Common Shares were at all relevant times either registered under the
Act and the applicable state securities or Blue Sky laws or exempt from such
registration requirements. The authorized Common Shares and outstanding options
and warrants
8
<PAGE>
to purchase Common Shares conform to the descriptions thereof contained in
the Registration Statement and Prospectus. Except as set forth in the
Registration Statement and the Prospectus, on the Effective Date and the
Closing Date, there will be no outstanding options or warrants for the
purchase of, or other outstanding rights to purchase, Common Shares or
securities convertible into Common Shares.
(l) No securities of the Company have been sold by the Company
or by or on behalf of, or for the benefit of, any person or persons controlling,
controlled by, or under common control with the Company within the three years
prior to the date hereof, except as disclosed in the Registration Statement.
(m) The issuance and sale of the Shares and the Warrant Shares
have been duly authorized and, when the Shares and the Warrant Shares have been
issued and duly delivered against payment therefor as contemplated by this
Agreement and the Representative's Warrant Agreement, respectively, the Shares
and the Warrant Shares will be validly issued, fully paid and nonassessable, and
the holders thereof will not be subject to personal liability solely by reason
of being such holders. Neither the Shares nor the Warrant Shares will be
subject to preemptive rights of any shareholder of the Company.
(n) The issuance and sale of the Representative's Warrants have
been duly authorized and, when issued, paid for and delivered as contemplated by
the Representative's Warrant Agreement, the Representative's Warrants will
constitute valid and binding obligations of the Company, enforceable as to the
Company in accordance with their terms. The Representative's Warrants will not
be subject to preemptive rights of any shareholder of the Company. The Warrant
Shares have been duly reserved for issuance upon exercise of the
Representative's Warrants in accordance with the provisions of the
Representative's Warrant Agreement. The Representative's Warrants conform to
the description thereof contained in the Registration Statement and the
Prospectus.
(o) Neither the Company nor the Subsidiary is in violation of,
or in default under, (i) any term or provision of its certificate of
incorporation or by-laws, each as amended; (ii) any material term or provision
or any financial covenants of any indenture, mortgage, contract, commitment or
other agreement or instrument to which it is a party or by which it or any of
its property or business is or may be bound or affected; or (iii) any existing
applicable law, rule, regulation, judgment, order or decree of any governmental
agency or court, domestic or foreign, having jurisdiction over the Company, the
Subsidiary or any of the their respective properties or business. Each of the
Company and the Subsidiary owns, possesses or has obtained all governmental and
9
<PAGE>
other (including those obtainable from third parties) Permits necessary to own
or lease, as the case may be, and operate its properties, whether tangible or
intangible, and conduct its business and operations as presently conducted, and
all such Permits are outstanding and in good standing, and there are no
proceedings pending or to the best of the Company's knowledge, threatened (nor,
to the best of the Company's knowledge, is there any basis therefor), which seek
to cancel, terminate or limit such Permits.
(p) Except as set forth in the Prospectus, there are no claims,
actions, suits, proceedings, arbitrations, investigations or inquiries before
any governmental agency, court or tribunal, domestic or foreign, or before any
private arbitration tribunal, pending, or, to the best of the Company's
knowledge, threatened against the Company or the Subsidiary or involving the
Company's or the Subsidiary's properties or business which, if determined
adversely to the Company or the Subsidiary would, individually or in the
aggregate, result in any material adverse change in the financial position,
shareholders' equity, results of operations, properties, business, management or
affairs or business prospects of the Company or the Subsidiary or which question
the validity of the capital stock of the Company or this Agreement or of any
action taken or to be taken by the Company pursuant to, or in connection with,
this Agreement; nor, to the best of the Company's knowledge, is there any basis
for any such claim, action, suit, proceeding, arbitration, investigation or
inquiry. There are no outstanding orders, judgments or decrees of any court,
governmental agency or other tribunal naming the Company or the Subsidiary and
enjoining the Company or the Subsidiary from taking, or requiring the Company or
the Subsidiary to take, any action, or to which the Company or the Subsidiary or
the Company's or the Subsidiary's properties or business is bound or subject.
(q) Neither the Company nor any of its affiliates has incurred
any liability for any finder's fees or similar payments in connection with the
transactions herein contemplated.
(r) Each of the Company and the Subsidiary owns or possesses
adequate and enforceable rights to use all patents, patent applications,
trademarks, service marks, copyrights, rights, trade secrets, confidential
information, processes and formulations used or proposed to be used in the
conduct of its business as described in the Prospectus (collectively the
"Intangibles"); to the best of the Company's knowledge, neither the Company nor
the Subsidiary has infringed or is infringing upon the rights of others with
respect to the Intangibles; and neither the Company nor the Subsidiary has
received any notice of conflict with the asserted rights of others with respect
to the Intangibles which could, singly or in the aggregate, materially adversely
affect its bus-
10
<PAGE>
iness as presently conducted or the prospects, financial condition or results
of operations of the Company or the Subsidiary and the Company knows of no
basis therefor; and, to the best of the Company's knowledge, no others have
infringed upon the Intangibles of the Company or the Subsidiary.
(s) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus and the latest combined
financial statements included in the Prospectus, neither the Company nor the
Subsidiary has incurred any material liability or obligation, direct or
contingent, or entered into any material transaction, whether or not incurred in
the ordinary course of business, or any material loss or interference with its
business from fire, storm, explosion, flood or other casualty, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree; and since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there have not been, and prior
to the Closing Date referred to below there will not be, any changes in the
capital stock or any material increases in the long-term debt of the Company or
the Subsidiary or any material adverse change in or affecting the general
affairs, management, financial condition, shareholders' equity, results of
operations or prospects of the Company or the Subsidiary, other than as set
forth or contemplated in the Prospectus.
(t) Each of the Company and the Subsidiary has good and
marketable title in fee simple to all real property and good title to all
personal property (tangible and intangible) owned by it, free and clear of all
security interests, charges, mortgages, liens, encumbrances and defects, except
such as are described in the Registration Statement and Prospectus or such as do
not materially affect the value or transferability of such property and do not
interfere with the use of such property made, or proposed to be made, by the
Company or the Subsidiary. The leases, licenses or other contracts or
instruments under which the Company and the Subsidiary lease, hold or are
entitled to use any property, real or personal, are valid, subsisting and
enforceable only with such exceptions as are not material and do not interfere
with the use of such property made, or proposed to be made, by the Company or
the Subsidiary, and all rentals, royalties or other payments, if any, accruing
thereunder which became due prior to the date of this Agreement have been duly
paid, and neither the Company nor, to the best of the Company's knowledge, any
other party is in default thereunder and, to the best of the Company's
knowledge, no event has occurred which, with the passage of time or the giving
of notice, or both, would constitute a default thereunder. Neither the Company
nor the Subsidiary has received notice of any violation of any applicable law,
ordinance, regulation, order or requirement relating to its owned or leased
properties. Each of the Company
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and the Subsidiaries has adequately insured its properties against loss or
damage by fire or other casualty and maintains, in adequate amounts, such
other insurance as is usually maintained by companies engaged in the same or
similar businesses located in its geographic area.
(u) Each contract or other instrument (however characterized or
described) to which the Company or the Subsidiary is a party or by which their
respective properties or businesses is or may be bound or affected and to which
reference is made in the Prospectus has been duly and validly executed, is in
full force and effect in all material respects and is enforceable against the
parties thereto in accordance with its terms, and none of such contracts or
instruments has been assigned by the Company or the Subsidiary, and neither the
Company nor, to the best of the Company's knowledge, any other party is in
default thereunder and, to the best of the Company's knowledge, no event has
occurred which, with the lapse of time or the giving of notice, or both, would
constitute a default thereunder.
None of the material provisions of such contracts or instruments
violates any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court having jurisdiction over the Company
or the Subsidiary or any of their respective assets or businesses.
(v) Except as set forth in the Prospectus, each of the Company
and the Subsidiary (i) is in all material respects in compliance with the
provisions of all laws relating to the regulation of the Company's products,
including the Federal Food Drug and Cosmetic act (the "FD&C Act") and all
comparable state, local and foreign laws, the rules and regulations promulgated
thereunder and all rules and regulations promulgated by the United States Food
and Drug Administration (the "FDA") and all comparable state, local and foreign
regulatory authorities; (ii) has all authorizations, approvals, consents,
orders, registrations, licenses or permits of any court or the FDA and all
comparable state and foreign regulatory authorities which are necessary or
required to conduct its business; (iii) has had no material liabilities, debts,
obligations or claims asserted against it, whether accrued, absolute, contingent
or otherwise, and whether due or to become due, on account of such regulatory
matters and (iv) does not manufacture, fabricate or market any product or
perform any service which is subject to regulation by the FDA, or to any
provision of the FD&C Act, or any rule or regulation promulgated thereunder.
The language contained in the Prospectus with respect to the FDA and all
comparable state and foreign regulatory authorities, the laws relating to the
regulation of the Company's products, including the FD&C Act and all comparable
state, local and foreign laws, rules and regulations, and all other such
12
<PAGE>
regulatory matters, is accurate, complete and true in all material respects and
does not omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(w) The employment, consulting, confidentiality and
non-competition agreements between the Company and its officers, employees and
consultants and between the Subsidiary and its officers, employees and
consultants, described in the Registration Statement, are binding and
enforceable obligations upon the respective parties thereto in accordance with
their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium or other similar laws or
arrangements affecting creditors' rights generally and subject to principles of
equity.
(x) Except as set forth in the Prospectus, the Company has no
employee benefit plans (including, without limitation, profit sharing and
welfare benefit plans) or deferred compensation arrangements that are subject to
the provisions of the Employee Retirement Income Security Act of 1974, as
amended.
(y) To the best of the Company's knowledge, no labor problem
exists with any of the Company's employees or any of the Subsidiary's employees
or is imminent which could adversely affect the Company or the Subsidiary.
(z) Neither the Company nor the Subsidiary has, directly or
indirectly, at any time (i) made any contributions to any candidate for
political office, or failed to disclose fully any such contribution in violation
of law or (ii) made any payment to any state, federal or foreign governmental
officer or official, or other person charged with similar public or quasi-public
duties, other than, in each case, payments or contributions required or allowed
by applicable law. The Company's internal accounting controls and procedures
are sufficient to cause the Company to comply in all material respects with the
Foreign Corrupt Practices Act of 1977, as amended.
(aa) The Shares have been approved for listing on the Nasdaq
SmallCap Market of the National Association of Securities Dealers, Inc.
("NASDAQ").
(ab) The Company has provided Tenzer Greenblatt LLP, counsel to
the Underwriters ("Underwriters' Counsel"), all agreements, certificates,
correspondence and other items, documents and information requested by such
counsel's Corporate Review Memorandum dated October 8, 1997.
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Any certificate signed by an officer of the Company or by an
officer of the Subsidiary and delivered to the Representative or to the
Underwriters' Counsel shall be deemed to be a representation and warranty by the
Company to the Underwriters as to the matters covered thereby.
5. Certain Covenants of the Company. The Company covenants with the
several Underwriters as follows:
(a) The Company will not at any time, whether before the
Effective Date or thereafter during such period as the Prospectus is required by
law to be delivered in connection with the sales of the Shares by the
Representative or a dealer, file or publish any amendment or supplement to the
Registration Statement or Prospectus of which the Representative has not been
previously advised and furnished a copy, or to which the Representative shall
object in writing.
(b) The Company will use its best efforts to cause the
Registration Statement to become effective and will advise the Representative
immediately, and, if requested by the Representative, confirm such advice in
writing, (i) when the Registration Statement, or any post-effective amendment to
the Registration Statement or any supplemented Prospectus is filed with the
Commission; (ii) of the receipt of any comments from the Commission; (iii) of
any request of the Commission for amendment or supplementation of the
Registration Statement or Prospectus or for additional information; and (iv) of
the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or of any order preventing or suspending the use of
any Preliminary Prospectus, or of the suspension of the qualification of the
Shares for offering or sale in any jurisdiction, or of the initiation of any
proceedings for any of such purposes. The Company will use its best efforts to
prevent the issuance of any such stop order or of any order preventing or
suspending such use and to obtain as soon as possible the lifting thereof, if
any such order is issued.
(c) The Company will deliver to each Underwriter, without
charge, from time to time until the Effective Date, as many copies of each
Preliminary Prospectus as each Underwriter may reasonably request, and the
Company hereby consents to the use of such copies for purposes permitted by the
Act. The Company will deliver to each Underwriter, without charge, as soon as
the Registration Statement becomes effective, and thereafter from time to time
as requested, such number of copies of the Prospectus (as supplemented, if the
Company makes any supplements to the Prospectus) as each Underwriter may
reasonably request. The Company has furnished or will furnish to the
Representative a signed copy of the Registration Statement as originally filed
and
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<PAGE>
of all amendments thereto, whether filed before or after the Registration
Statement becomes effective, a copy of all exhibits filed therewith and a
signed copy of all consents and certificates of experts.
(d) The Company will comply with the Act, the Regulations, the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations thereunder so as to permit the continuance of sales of and
dealings in the Offered Shares and in any Optional Shares which may be issued
and sold. If, at any time when a prospectus relating to the Shares is required
to be delivered under the Act, any event occurs as a result of which the
Registration Statement and Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or if it shall be necessary to amend or
supplement the Registration Statement and Prospectus to comply with the Act or
the regulations thereunder, the Company will promptly file with the Commission,
subject to Section 5(a) hereof, an amendment or supplement which will correct
such statement or omission or which will effect such compliance.
(e) The Company will furnish such proper information as may be
required and otherwise cooperate in qualifying the Shares for offering and sale
under the securities or Blue Sky laws relating to the offering in such
jurisdictions as the Representative may reasonably designate, provided that no
such qualification will be required in any jurisdiction where, solely as a
result thereof, the Company would be subject to service of general process or to
taxation or qualification as a foreign corporation doing business in such
jurisdiction.
(f) The Company will make generally available to its security
holders, in the manner specified in Rule 158(b) under the Act, and deliver to
the Representative and Underwriters' Counsel as soon as practicable and in any
event not later than 45 days after the end of its fiscal quarter in which the
first anniversary date of the effective date of the Registration Statement
occurs, an earning statement meeting the requirements of Rule 158(a) under the
Act covering a period of at least 12 consecutive months beginning after the
effective date of the Registration Statement.
(g) For a period of three years from the Effective Date, the
Company will deliver to the Representative and to Underwriters' Counsel, on a
timely basis (i) a copy of each report or document, including, without
limitation, reports on Forms 8-K, 10-K (or 10-KSB) and 10-Q (or 10-QSB) and
exhibits thereto, filed or furnished to the Commission, any securities exchange
or the
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<PAGE>
National Association of Securities Dealers, Inc. ("NASD") on the date each
such report or document is so filed or furnished; (ii) as soon as
practicable, copies of any reports or communications (financial or other) of
the Company mailed to its security holders; (iii) as soon as practicable, a
copy of any Schedule 13D, 13G, 14D-1 or 13E-3 received or prepared by the
Company from time to time; (iv) quarterly statements setting forth such
information regarding the Company's results of operations and financial
position (including balance sheet, profit and loss statements and data
regarding outstanding purchase orders) as is regularly prepared by management
of the Company; and (v) such additional information concerning the business
and financial condition of the Company as the Representative may from time to
time reasonably request and which can be prepared or obtained by the Company
without unreasonable effort or expense. The Company will furnish to its
shareholders annual reports containing audited financial statements and such
other periodic reports as it may determine to be appropriate or as may be
required by law.
(h) Neither the Company nor any person that controls, is
controlled by or is under common control with the Company will take any action
designed to or which might be reasonably expected to cause or result in the
stabilization or manipulation of the price of the Common Shares.
(i) If the transactions contemplated by this Agreement are
consummated, the Representative shall retain the $50,000 previously paid to it,
and the Company will pay or cause to be paid the following: all costs and
expenses incident to the performance of the obligations of the Company under
this Agreement, including, but not limited to, the fees and expenses of
accountants and counsel for the Company; the costs of preparing, printing and
delivering the Registration Statement (including financial statements and
exhibits), Preliminary Prospectuses and the Prospectus, and any amendments or
supplements thereto (all in such quantities as the Underwriters may reasonably
require); the costs of printing and delivering the Underwriting Agreement, the
Agreement Among Underwriters, the Selected Dealer Agreement and related
documents (all in such quantities as the Underwriters may reasonably require);
the costs of preparing and printing stock certificates and issuing and
delivering the Shares to the Representative; all taxes, if any, on the issuance
of the Shares; transfer agent and registrar fees; the filing fees, costs and
expenses incurred in filing and securing any required review by the Commission,
the NASD, Nasdaq and either the Boston Stock Exchange or the Pacific Stock
Exchange; the filing fees, costs and expenses incurred in qualifying the Shares
for sale under the "Blue Sky" or securities laws of those states, as specified
by the Representative, in which the Shares are to be offered or sold, including
the legal fees and disbursements of Underwriters' Counsel
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<PAGE>
(which legal fees and disbursements, not including filing and listing fees
paid by Underwriters' Counsel on the Company's behalf, shall not exceed
$35,000) incurred in connection therewith, and the cost of printing and
mailing the "Blue Sky" Survey; the cost of furnishing to the several
Underwriters copies of the Registration Statement, Preliminary Prospectuses
and the Prospectus as herein provided; the costs of conducting a background
check on the two most senior executives of the Company; the costs (up to a
maximum of $10,000) of placing "tombstone advertisements" in any publications
which may be selected by the Representative; subject to their prior written
approval by the Company, "road show" expenses, including related travel and
meeting costs, and all other costs and expenses incident to the performance
of the Company's obligations hereunder which are not otherwise specifically
provided for in this Section 5(i).
In addition, at the Closing Date or the Option Closing Date, as
the case may be, the Representative will deduct from the payment for the Offered
Shares and Optional Shares, as the case may be, three percent (3%) of the gross
proceeds of the offering (less the sum of $50,000 previously paid to the
Representative), as payment for the Representative's nonaccountable expense
allowance relating to the transactions contemplated hereby, which amount will
include the fees and expenses of Underwriters' Counsel (other than those payable
by the Company in connection with "Blue Sky" qualifications referred to in the
preceding paragraph).
(j) If the transactions contemplated by this Agreement or
related hereto are not consummated for any reason other than because of the
Representative's termination of the offering for "cause" (as defined herein),
the Company will only be obligated to reimburse the Representative for up to
Fifty Thousand Dollars ($50,000) of the Representative's actual out-of-pocket
expenses incurred in connection with the offering (including, without
limitation, the reasonable fees and disbursements of Underwriters' Counsel),
inclusive of the Fifty Thousand Dollars ($50,000) previously paid to the
Representative (the "Advance") as part of the three percent (3%)
nonaccountable expense allowance described in Section 5(j) above (it being
understood that if any portion of the Advance is not needed for the
effectuation of such reimbursement, such portion will be returned to the
Company). However, if the transactions contemplated herein are not
consummated due to the Representative's termination of the offering for
"cause" ("cause" being understood to mean a breach by the Company of any of
the covenants, warranties or representations in this Agreement), the Company
will be obligated to promptly reimburse the Representative for up to
_____________________ Dollars ($______)
[the aggregate amount of the potential three percent (3%) nonaccountable
expense allowance described in Section 5(j) above] of its actual out-of-pocket
expenses incurred in connection with the offering (including, without
limitation the reasonable fees and
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<PAGE>
disbursements of Underwriters' Counsel), inclusive of the Advance (it being
understood that if any portion of the Advance is not needed for the
effectuation of such reimbursement, such portion will be returned to the
Company). Additionally, if the transactions contemplated by this Agreement
or related hereto are not consummated for any reason, any amounts paid by the
Company to Underwriters' Counsel in respect of "Blue Sky" matters shall be
retained by such counsel to the extent of its actual charges for fees and
disbursements relating to such "Blue Sky" matters (it being understood that
any balance remaining after payment of such fees and expenses will be
returned to the Company).
(k) The Company intends to apply the net proceeds from the sale
of the Shares for the purposes set forth in the Prospectus. No portion of the
net proceeds from the sale of the shares will be used to repay any indebtedness
without the prior written consent of the Representative.
(l) During the period of twelve (12) months following the date
hereof, without the Representative's prior written consent (i) neither the
Company nor any of its officers, directors or securityholders will offer for
sale, sell, contract to sell, grant an option for the sale of, issue, assign,
transfer, pledge or otherwise dispose of, directly or indirectly, any
securities of the Company owned by them as of the date hereof, in any manner
whatsoever, whether pursuant to Rule 144 of the Regulations or otherwise,
other than: (a) the grant of options pursuant to an employee stock option
plan approved by the Representative; (b) up to 25,000 options, each to
purchase one Common Share at $____ [the initial public offering price],
currently owned by Dr. Richard Polisson; (c) up to 5,000, 1,250, 2,000,
5,000, 2,500, 2,500, 750 and 3,750 options, each to purchase one Common Share
at $3.00, currently owned by Bhushen Patwardham, Ph.D., John Graves, Ph.D.,
Subramaniam Shastri, Ph.D., Arvind Chopra, M.D., Madhu Chaubal, Ph.D., George
Enrlich, M.D., Christine Kasik and Ajit Chitre, respectively; and (d) by bona
fide gift, will or the laws of descent and distribution to the
securityholder's spouse, children or grandchildren, a trust for the benefit
of such securityholder's spouse, children or grandchildren, a partnership,
the general partner of which is the securityholder (or a corporation, a
majority of whose outstanding stock is owned of record or beneficially by the
securityholder or any of the foregoing) or partners of the securityholder in
connection with the securityholder partnership's distribution of its Common
Shares to its partners; provided in each case that the transferee first
executes and delivers to the Representative an undertaking to be bound by the
provisions of this Section 5(l); and (ii) no holder of registration rights
relating to securities of the Company will execute any such registration
rights. The Company will deliver to the Representative the undertakings as
of the date hereof of its officers, directors and securityholders to this
effect.
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<PAGE>
(m) The Company will not file any registration statement
relating to the offer or sale of any of the Company's securities, including any
registration statement on Form S-8, during the twelve (12) months following the
date hereof without the Representative's prior written consent.
(n) The Company maintains and will continue to maintain a system
of internal accounting controls sufficient to provide reasonable assurances
that: (i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary in order to
permit preparation of financial statements in accordance with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(o) The Company will use its best efforts to maintain the
listing or quotation of its Common Shares on the Nasdaq market for so long as
the Common Shares are qualified for such listing or quotation.
(p) The Company will, concurrently with the Effective Date,
register the class of equity securities of which the Shares are a part under
Section 12(g) of the Exchange Act and the Company will maintain such
registration for a minimum of five (5) years from the Effective Date.
(q) Subject to the sale of the Offered Shares, the
Representative and its successors will have the right to designate a nominee for
election, at its or their option, as a member of the Board of Directors of the
Company (the "Director-Designee"), and the Company will use its best efforts to
cause such Director-Designee to be elected and continued in office as a director
of the Company until the expiration of five (5) years from the Effective Date.
Each of the Company's current officers, directors and shareholders agrees to
vote all of the Common Shares owned by such person or entity so as to elect and
continue in office such Director-Designee. Following the election of such
Director-Designee as a director, such person shall receive no more or less
compensation than is paid to other non-employee directors of the Company for
attendance at meetings of the Board of Directors of the Company and shall be
entitled to receive reimbursement for all reasonable costs incurred in attending
such meetings including, but not limited to, food, lodging and transportation to
the same extent that other directors are reimbursed for such expenses. If the
Representative does not exercise its option to designate a member of the
Company's Board of Directors, the Representative shall
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<PAGE>
nonetheless have the right to have a designee of the Representative appointed
as a non-voting advisor (the "Advisor") to the Board or to send a
representative (who need not be the same individual from meeting to meeting)
to observe each meeting of the Board of Directors. The Company agrees to
indemnify and hold the Director-Designee or the Advisor, as the case may be,
harmless, to the maximum extent permitted by law, against any and all claims,
actions, awards and judgments arising out of his or her service as a director
or advisor and, in the event the Company maintains a liability insurance
policy affording coverage for the acts of its officers and directors, to
include the Director-Designee or the Advisor, as the case may be, as an
insured under such policy. The rights and benefits of such indemnification
and the benefits of such insurance shall, to the extent possible, extend to
the Representative insofar as it may be or may be alleged to be responsible
for the Director-Designee or the Advisor. The Company agrees to give the
Representative notice of each such meeting and to provide the Representative
and, if designated by the Representative, the Advisor, with an agenda and
minutes of the meeting no later than it gives such notice and provides such
items to the directors.
(r) The Company shall retain a transfer agent for the Common
Shares, reasonably acceptable to the Representative, for a period of three (3)
years following the Effective Date. In addition, for a period of three (3)
years following the Effective Date, the Company, at its own expense, shall cause
its transfer agent to provide the Representative with copies of the Company's
daily transfer sheets and when requested by the Representative, a current list
of the Company's security holders, including a list of the beneficial owners of
securities held by a depository trust company and other nominees.
(s) The Company hereby agrees, at its sole cost and expense, to
supply and deliver to Underwriters' Counsel, within a reasonable period from the
date hereof, five bound volumes, including the Registration Statement, as
amended or supplemented, all exhibits to the Registration Statement, the
Prospectus and all other underwriting documents.
(t) The Company shall, as of the date hereof, have applied for
listing in Standard & Poor's Corporation Records Service (including annual
report information) or Moody's Industrial Manual (Moody's OTC Industrial Manual
not being sufficient for these purposes) and shall use its best efforts to have
the Company listed in such manual and shall maintain such listing for a period
of five (5) years following the Effective Date.
(u) For a period of three (5) years from the Effective Date, the
Company shall provide the Representative, on a
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<PAGE>
not less than annual basis, with internal forecasts setting forth projected
results of operations for each quarterly and annual period in the two (2)
fiscal years following the respective dates of such forecasts. Such
forecasts shall be provided to the Representative more frequently than
annually if prepared more frequently by management, and revised forecasts
shall be prepared and provided to the Representative when required to reflect
more current information, revised assumptions or actual results that differ
materially from those set forth in the forecasts.
(v) For a period of three (3) years following the Effective
Date, the Company shall continue to retain Richard A. Eisner & Co. (or such
other nationally recognized accounting firm as is acceptable to the
Representative) as the Company's independent public accountants.
(w) For a period of three (3) years following the Effective
Date, the Company, at its expense, shall cause its independent certified public
accountants, as described in Section 5(v) above, to review (but not audit) the
Company's financial statements for each of the first three fiscal quarters prior
to the announcement of quarterly financial information, the filing of the
Company's 10-Q (or 10-QSB) quarterly report (or other equivalent report) and the
mailing of quarterly financial information to shareholders.
(x) For a period of three (3) years from the Effective Date, the
Company will not offer or sell any of its securities pursuant to Regulation S of
the Act or at a discount from market or in a discounted transaction, without the
prior written consent of the Representative.
(y) For a period of twenty-five (25) days following the Effective
Date, the Company will not issue press releases or engage in any other publicity
without the Representative's prior written consent, other than normal and
customary releases issued in the ordinary course of the Company's business or
those releases required by law.
(z) For a period of three (3) years from the Effective Date, the
Company will not increase or authorize an increase in the compensation of its
three (3) most highly paid employees, other than increases provided for in
employment agreements with the Company in effect as of the Effective Date and
disclosed in the Prospectus, without the prior written consent of the
Representative.
(aa) For a period of three (3) years following the Effective
Date, the Company will promptly submit to the Representative copies of
accountant's management reports and
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<PAGE>
similar correspondence between the Company's accountants and the Company.
(ab) For a period of three (3) years following the Effective
Date, the Company will provide to the Representative ten day's written notice
prior to any issuance by the Company or its subsidiaries of any equity
securities or securities exchangeable for or convertible into equity securities
of the Company, except for (i) shares of Common Stock issuable upon exercise of
currently outstanding options and warrants or conversion of currently
outstanding convertible securities and (ii) options (and shares issuable upon
exercise of such options) available for future grant pursuant to any stock
option plan in effect on the Effective Date and the issuance of shares of
Common Stock upon the exercise of such options.
(ac) For a period of three (3) years following the Effective
Date, the Company will retain a financial public relations firm reasonably
acceptable to the Representative.
(ad) For a period of five (5) years following the Effective
Date the Company's Board of Directors shall be comprised of seven (7) persons,
at least three (3) of whom (including, if designated, the Representative's
director designee) must, during such period, be persons not otherwise affiliated
with the Company, its management or its founders. In addition, during such
period, the Company will cause its Board of Directors to meet, either in person
or telephonically, a minimum of four (4) times per year and will hold a
shareholder's meeting at least once per annum.
(ae) Prior to the Effective Date, the Company shall have
obtained directors' and officers' insurance naming the Representative as an
additional insured party, in an amount equal to the lesser of (i) twenty-five
percent (25%) of the gross proceeds of the offering and (ii) One Million
Dollars ($1,000,000) and will maintain such insurance until at least three
(3) years following the Closing Date.
(af) The Company will employ the Representative or a designee
of the Representative as a financial consultant on a non-exclusive basis for
a period of two (2) years from the Closing Date, pursuant to a separate
written consulting agreement between the Company and the Representative
and/or such designee (the "Consulting Agreement"), at an annual rate of
Fifteen Thousand Dollars ($15,000) (exclusive of any accountable
out-of-pocket expenses), the entire Thirty Thousand Dollars ($30,000) payable
in full, in advance, on the Closing Date. In addition, the Consulting
Agreement shall provide that the Company will pay the Representative a
finder's fee in the event that the Company consummates a merger or
acquisition directly or indirectly
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<PAGE>
originated by the Representative during the term of the Consulting Agreement.
The Company further agrees to deliver a duly and validly executed copy of
said Consulting Agreement, in form and substance acceptable to the
Representative, on the Closing Date.
(ag) For a period of five (5) years from the Effective Date, or
until such earlier time as the Common Shares are listed on the New York Stock
Exchange or the American Stock Exchange, the Company shall cause its legal
counsel to provide the Representative with a list, to be updated at least
annually, of those states in which the Offered Units, Shares and Warrants may
be traded in non-issuer transactions under the Blue Sky laws of the 50 states.
6. Conditions of the Underwriters' Obligation to Purchase Shares
from the Company. The obligation of the several Underwriters to purchase and
pay for the Offered Shares which they have agreed to purchase from the
Company is subject (as of the date hereof and the Closing Date) to the
accuracy of and compliance in all material respects with the representations
and warranties of the Company herein, to the accuracy of the statements of
the Company or its officers made pursuant hereto, to the performance in all
material respects by the Company of its obligations hereunder, and to the
following additional conditions:
(a) The Registration Statement will have become effective not
later than 9:00 A.M., New York City time, on the day following the date of
this Agreement, or at such later time or on such later date as the
Representative may agree to in writing; prior to the Closing Date, no stop
order suspending the effectiveness of the Registration Statement will have
been issued and no proceedings for that purpose will have been initiated or
will be pending or, to the best of the Representative's or the Company's
knowledge, will be contemplated by the Commission; and any request on the
part of the Commission for additional information will have been complied
with to the satisfaction of Underwriters' Counsel.
(b) At the time that this Agreement is executed and at the
Closing Date, there will have been delivered to the Representative a signed
opinion of Rubin Baum Levin Constant & Friedman, counsel for the Company, and
____________, Indian counsel for the Company (collectively referred to as
"Company Counsel"), dated as of the date hereof or the Closing Date, as the
case may be, (and any other opinions of counsel referred to in such opinions
of Company Counsel or relied upon by Company Counsel in rendering their
opinions), reasonably satisfactory to Underwriters' Counsel, to the effect
that:
(i) The Company is a corporation duly organized,
validly existing and in good standing under the laws of
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the State of Delaware, with full corporate power and authority and with all
Permits necessary to own or lease, as the case may be, and operate its
properties, whether tangible or intangible, and to conduct its business as
described in the Registration Statement. The Company has no subsidiaries
other than the Subsidiary and no equity interests in any other entity. The
Subsidiary is a corporation duly organized and validly existing under the
laws of its state of incorporation. Unless the context otherwise requires,
all references to the "Company" in this opinion shall include the Subsidiary.
Each of the Company and the Subsidiary is duly qualified to do business as a
foreign corporation and is in good standing in all jurisdictions wherein such
qualification is necessary and the failure to so qualify could have a
material adverse effect on the financial condition, results of operations,
business or properties of the Company and the Subsidiary. The Subsidiary has
full corporate power and authority, with all Permits necessary to own or
lease, as the case may be, and operate its properties and to conduct its
business as described in the Prospectus.
The Company owns ___% of the issued and outstanding shares of
capital stock of the Subsidiary free and clear of any security interests,
liens, encumbrances, claims and charges, and all of such shares have been
duly authorized and validly issued and are fully paid and nonassessable.
(ii) The Company has full power and authority,
corporate and other, to execute, deliver and perform this Agreement, the
Consulting Agreement and the Representative's Warrant Agreement and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement, the Consulting Agreement and the
Representative's Warrant Agreement by the Company, the consummation by the
Company of the transactions herein and therein contemplated and the
compliance by the Company with the terms of this Agreement and the
Representative's Warrant Agreement have been duly authorized by all necessary
corporate action, and this Agreement has been duly executed and delivered by
the Company. This Agreement is (assuming for the purposes of this opinion
that it is valid and binding upon the other party thereto), and each of the
Consulting Agreement and the Representative's Warrant Agreement, when
executed and delivered by the Company on the Closing Date, will be, valid and
binding obligations of the Company, enforceable in accordance with their
respective terms, subject, as to enforcement of remedies, to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws affecting
the rights of creditors generally and the discretion of courts in granting
equitable remedies and except that enforceability of the indemnification
provisions set forth in Section 7 hereof and the contribution provisions set
forth in
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Section 8 hereof may be limited by the federal securities laws or public
policy underlying such laws.
(iii) The execution, delivery and performance of this
Agreement, the Consulting Agreement and the Representative's Warrant
Agreement by the Company, the consummation by the Company of the transactions
herein and therein contemplated and the compliance by the Company with the
terms of this Agreement, the Consulting Agreement and the Representative's
Warrant Agreement do not, and will not, with or without the giving of notice
or the lapse of time, or both, (A) result in a violation of the Certificate
of Incorporation or By-Laws, each as amended, of the Company or the
Subsidiary, (B) result in a breach of or conflict with any terms or
provisions of, or constitute a default under, or result in the modification
or termination of, or result in the creation or imposition of any lien,
security interest, charge or encumbrance upon any of the properties or assets
of the Company or any the Subsidiary pursuant to, any indenture, mortgage,
note, contract, commitment or other material agreement or instrument to which
the Company or the Subsidiary is a party or by which the Company or the
Subsidiary or any of the Company's or the Subsidiary's properties or assets
are or may be bound or affected; (C) violate any existing applicable law,
rule, regulation, judgment, order or decree of any governmental agency or
court, domestic or foreign, having jurisdiction over the Company or the
Subsidiary or any of the Company's or the Subsidiary's properties or
business; or (D) have any effect on any Permit necessary for the Company or
the Subsidiary to own or lease and operate its properties or conduct its
business or on the ability of the Company to make use thereof.
(iv) To the best of Company Counsel's knowledge, no
Permits of any court or governmental agency or body (other than under the
Act, the Regulations and applicable state securities or Blue Sky laws) are
required for the valid authorization, issuance, sale and delivery of the
Shares or the Representative's Warrants, and the consummation by the Company
of the transactions contemplated by this Agreement or the Representative's
Warrant Agreement.
(v) The Registration Statement has become effective
under the Act; to the best of Company Counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has been issued,
and no proceedings for that purpose have been instituted or are pending,
threatened or contemplated under the Act or applicable state securities laws.
(vi) The Registration Statement and the Prospectus,
as of the Effective Date, and each amendment or supplement thereto as of its
effective or issue date (except for the
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financial statements and other financial data included therein or omitted
therefrom, as to which Company Counsel need not express an opinion) comply as
to form in all material respects with the requirements of the Act and
Regulations and the conditions for use of a registration statement on Form
SB-2 have been satisfied by the Company.
(vii) The descriptions in the Registration Statement
and the Prospectus of statutes, regulations, government classifications,
contracts and other documents (including opinions of such counsel); and the
response to Item 13 for Form SB-2 have been reviewed by Company Counsel, and,
based upon such review, are accurate in all material respects and present
fairly the information required to be disclosed, and there are no material
statutes, regulations or government classifications, or, to the best of
Company Counsel's knowledge, material contracts or documents, of a character
required to be described in the Registration Statement or the Prospectus or
to be filed as exhibits to the Registration Statement, which are not so
described or filed as required.
None of the material provisions of the contracts or
instruments described above violates any existing applicable law, rule,
regulation, judgment, order or decree of any governmental agency or court
having jurisdiction over the Company or the Subsidiary or any of their assets
or businesses. To the best of Company Counsel's knowledge, the Company is
not in default under any contract or agreement material to its business or
under any promissory note or other evidence of indebtedness for borrowed
funds.
(viii) The outstanding Common Shares and outstanding
options and warrants to purchase Common Shares have been duly authorized and
validly issued. The outstanding Common Shares are fully paid and
nonassessable. The outstanding options and warrants to purchase Common Shares
constitute the valid and binding obligations of the Company, enforceable in
accordance with their terms. None of the outstanding Common Shares or
options or warrants to purchase Common Shares has been issued in violation of
the preemptive rights of any shareholder of the Company. None of the holders
of the outstanding Common Shares is subject to personal liability solely by
reason of being such a holder. The offers and sales of the outstanding Common
Shares and outstanding options and warrants to purchase Common Shares were at
all relevant times either registered under the Act and the applicable state
securities or Blue Sky laws or exempt from such registration requirements.
The authorized Common Shares and outstanding options and warrants to purchase
Common Shares conform to the descriptions thereof contained in the
Registration Statement and Prospectus. To the best of Company Counsel's
knowledge, except as set forth in the
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Prospectus, no holders of any of the Company's securities has any rights,
"demand", "piggyback" or otherwise, to have such securities registered under
the Act.
(ix) The issuance and sale of the Shares and the
Warrant Shares have been duly authorized and, when the Shares and the Warrant
Shares have been issued and duly delivered against payment therefor as
contemplated by this Agreement and the Representative's Warrant Agreement,
respectively, the Shares and the Warrant Shares will be validly issued, fully
paid and nonassessable, and the holders thereof will not be subject to
personal liability solely by reason of being such holders. None of the
Offered Units, the Shares nor the Warrant Shares are subject to preemptive
rights of any shareholder of the Company. The certificates representing the
Shares are in proper legal form.
(x) The issuance and sale of the Representative's
Warrants have been duly authorized and, when paid for, issued and delivered
pursuant to the terms of the Representative's Warrant Agreement, they will
constitute the valid and binding obligations of the Company, enforceable as
to the Company in accordance with their terms, to issue and sell the Warrant
Shares. The Representative's Warrants will not be subject to preemptive
rights of any shareholder of the Company. The Warrant Shares have been duly
reserved for issuance upon exercise of the Representative's Warrants in
accordance with the provisions of the Representative's Warrant Agreement.
The Representative's Warrants conform to the descriptions thereof contained
in the Registration Statement and the Prospectus.
(xi) Upon delivery of the Offered Shares to the
Underwriters against payment therefor as provided in this Agreement, the
Underwriters (assuming they are bona fide purchasers within the meaning of
the Uniform Commercial Code) will acquire good title to the Offered Shares,
free and clear of all liens, encumbrances, equities, security interests and
claims.
(xii) Assuming that the Representative exercises the
over-allotment option to purchase any of the Optional Shares and make payment
therefor in accordance with the terms of this Agreement, upon delivery of the
Optional Shares so purchased to the Representative hereunder, the
Representative (assuming it is a bona fide purchaser within the meaning of
the Uniform Commercial Code) will acquire good title to such Optional Shares,
free and clear of any liens, encumbrances, equities, security interests and
claims.
(xiii) To the best of Company Counsel's knowledge,
there are no claims, actions, suits, proceedings, arbitrations,
investigations or inquiries before any governmental
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agency, court or tribunal, foreign or domestic, or before any private
arbitration tribunal, pending or threatened against the Company or the
Subsidiary, or involving the Company's or the Subsidiary's properties or
business, other than as described in the Prospectus, such description being
accurate, and other than litigation incident to the kind of business
conducted by the Company which, individually and in the aggregate, is not
material.
(xiv) Each of the Company and the Subsidiary owns or
possesses adequate and enforceable rights to use all patents, patent
applications, trademarks, service marks, copyrights, rights, trade secrets,
confidential information, processes and formulations used or proposed to be
used in the conduct of its business as described in the Prospectus
(collectively the "Intangibles"); to the best of Company Counsel's knowledge,
neither the Company nor the Subsidiary has infringed nor is infringing upon
the rights of others with respect to the Intangibles; and, to the best of
Company Counsel's knowledge, neither the Company nor the Subsidiary has
received any notice that it has or may have infringed, is infringing upon or
is conflicting with the asserted rights of others with respect to the
Intangibles which might, singly or in the aggregate, materially adversely
affect its business, results of operations or financial condition and such
counsel is not aware of any licenses with respect to the Intangibles which
are required to be obtained by the Company or the Subsidiary.
Company Counsel has participated in reviews and discussions in
connection with the preparation of the Registration Statement and the
Prospectus, and in the course of such reviews and discussions and such other
investigation as Company Counsel deemed necessary, no facts came to its
attention which lead it to believe that (A) the Registration Statement
(except as to the financial statements and other financial data contained
therein, as to which Company Counsel need not express an opinion), on the
Effective Date, contained any untrue statement of a material fact required to
be stated therein or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or that (B) the
Prospectus contains any untrue statement of a material fact or omits to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
In rendering its opinion pursuant to this Section 6(b), Company
Counsel may rely upon the certificates of government officials and officers
of the Company as to matters of fact, provided that Company Counsel shall
state that they have no reason to believe, and do not believe, that they are
not justified in relying upon such certificates of government officials and
officers of the Company as to matters of fact, as the case may be.
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The opinion letters delivered pursuant to this Section 6(b)
shall state that any opinion given therein qualified by the phrase "to the
best of our knowledge" is being given by Company Counsel after due
investigation of the matters therein discussed.
(c) At the time this Agreement is executed, and at the Closing
Date there will have been delivered to the Representative a signed opinion of
__________________, special regulatory counsel for the Company ("Special
Counsel") dated as of the date hereof on the Closing Date, as the case may
be, reasonably satisfactory to Underwriters' Counsel, to the effect that:
(i) Each of the Company and the Subsidiary is in
compliance, in all material respects, with the provisions of all laws
relating to the regulation of the Company's products, including the Federal
Food, Drug and Cosmetic Act (the "FD&C Act") and all state laws comparable to
the FD&C Act, the rules, regulations promulgated thereunder and all rules and
regulations promulgated by the Food and Drug Administration ("FDA") and all
Comparable state regulatory authorities;
(ii) Each of the Company and the Subsidiary has all
authorizations, approvals, consents, orders, registrations, licenses or
permits of any Court or the FDA and all state regulatory authorities
comparable to the FDA which are necessary or required for the Company to
conduct its current business in material compliance with the FD&C Act or
Comparable state law;
(iii) Neither the Company nor the Subsidiary has any
material liabilities, debts, obligations or claims asserted against it,
whether accrued, absolute, contingent or otherwise, and whether due or to
become due, on account of such regulatory matters;
(iv) The Company and the Subsidiary do not manufacture,
fabricate, assemble or receive any products or component parts in violation
of the FD&C Act or any comparable state law, or any rule or regulation
promulgated thereunder, or contract for the manufacture, fabrication,
assembly or delivery of any products or component parts in violation of the
FD&C Act or any comparable state law, or any rule or regulation promulgated
thereunder;
(v) None of the material provisions of the contracts or
instruments, as described in the Registration Statement, violates any
existing applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court having jurisdiction over the Company or any of
its assets or business relating to or promulgated by the FDA or any
comparable state regulatory authorities.
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<PAGE>
(vi) The discussion contained in the Registration
Statement with respect to the FDA and comparable state regulatory authorities
and of the laws relating to the regulation of the Company's products,
including the FD&C Act and comparable state laws, rules and regulations, is
accurate, complete and true in all material respects and does not omit to
state any material fact required to be stated therein or necessary to make
the statements therein in light of the circumstances under which they were
made, not misleading.
Special Counsel has participated in reviews and discussions in
connection with the preparation of the Registration Statement and the
Prospectus, and in the course of such reviews and discussions and such other
investigation as Special Counsel deemed necessary, no facts came to its
attention which lead it to believe that the sections of the Registration
Statement entitled "Risk Factors - Government Regulation; No Assurance of
Regulatory Approvals" and "Business," on the Effective Date, contained any
untrue statement of a material fact required to be stated therein or omitted
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
(d) At the Closing Date, there will have been delivered to the
Representative a signed opinion of Underwriters' Counsel, dated as of the
Closing Date, to the effect that the opinions delivered pursuant to Sections
6(b) and (c) hereof appear on their face to be appropriately responsive to
the requirements of this Agreement, except to the extent waived by the
Representative, specifying the same, and with respect to such other related
matters as the Representative may require.
(e) At the Closing Date (i) the Registration Statement and the
Prospectus and any amendments or supplements thereto will contain all
material statements which are required to be stated therein in accordance
with the Act and the Regulations and will conform in all material respects to
the requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus nor any amendment or supplement thereto will
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; (ii) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there will not have been
any material adverse change in the financial condition, results of operations
or general affairs of the Company from that set forth or contemplated in the
Registration Statement and the Prospectus, except changes which the
Registration Statement and the Prospectus indicate might occur after the
Effective Date; (iii) since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there shall have been
no material transaction, contract or agreement entered into by the Company,
other than in the
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ordinary course of business, which would be required to be set forth in the
Registration Statement and the Prospectus, other than as set forth therein;
and (iv) no action, suit or proceeding at law or in equity will be pending
or, to the best of the Company's knowledge, threatened against the Company
which is required to be set forth in the Registration Statement and the
Prospectus, other than as set forth therein, and no proceedings will be
pending or, to the best of the Company's knowledge, threatened against the
Company before or by any federal, state or other commission, board or
administrative agency wherein an unfavorable decision, ruling or finding
would materially adversely affect the business, property, financial condition
or results of operations of the Company, other than as set forth in the
Registration Statement and the Prospectus. At the Closing Date, there will
be delivered to the Representative a certificate signed by the Chairman of
the Board or the President or a Vice President of the Company, dated the
Closing Date, evidencing compliance with the provisions of this Section 6(e)
and stating that the representations and warranties of the Company set forth
in Section 4 hereof were accurate and complete in all material respects when
made on the date hereof and are accurate and complete in all material
respects on the Closing Date as if then made; that the Company has performed
all covenants and complied with all conditions required by this Agreement to
be performed or complied with by the Company prior to or as of the Closing
Date; and that, as of the Closing Date, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been initiated or, to the best of his
knowledge, are contemplated or threatened. In addition, the Representative
will have received such other and further certificates of officers of the
Company as the Representative or Underwriters' Counsel may reasonably request.
(f) At the time that this Agreement is executed and at the
Closing Date, the Representative will have received a signed letter from
Richard A. Eisner & Co., dated the date such letter is to be received by the
Representative and addressed to it, confirming that it is a firm of
independent public accountants within the meaning of the Act and Regulations
and stating that: (i) insofar as reported on by it, in its opinion, the
financial statements of the Company included in the Prospectus comply as to
form in all material respects with the applicable accounting requirements of
the Act and the applicable Regulations; (ii) on the basis of procedures and
inquiries (not constituting an examination in accordance with generally
accepted auditing standards) consisting of a reading of the unaudited interim
financial statements of the Company, if any, appearing in the Registration
Statement and the Prospectus and the latest available unaudited interim
financial statements of the Company, if more recent than that appearing in
the Registration Statement and Prospectus, inquiries of officers of the
Company responsible for financial and accounting matters as to the
transactions and events subsequent to the date of the latest audited
financial statements of the Company, and a reading of the minutes of meetings
of the shareholders, the
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Board of Directors of the Company and any committees of the Board of
Directors, as set forth in the minute books of the Company, nothing has come
to its attention which, in its judgment, would indicate that (A) during the
period from the date of the latest financial statements of the Company
appearing in the Registration Statement and Prospectus to a specified date
not more than three business days prior to the date of such letter, there
have been any decreases in net current assets or net assets as compared with
amounts shown in such financial statements or decreases in net sales or
decreases in total or per share net income compared with the corresponding
period in the preceding year or any change in the capitalization or long-term
debt of the Company, except in all cases as set forth in or contemplated by
the Registration Statement and the Prospectus, and (B) the unaudited interim
financial statements of the Company, if any, appearing in the Registration
Statement and the Prospectus, do not comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Regulations or are not fairly presented in conformity with generally accepted
accounting principles and practices on a basis substantially consistent with
the audited financial statements included in the Registration Statement or
the Prospectus; and (iii) it has compared specific dollar amounts, numbers of
shares, numerical data, percentages of revenues and earnings, and other
financial information pertaining to the Company set forth in the Prospectus
(with respect to all dollar amounts, numbers of shares, percentages and other
financial information contained in the Prospectus, to the extent that such
amounts, numbers, percentages and information may be derived from the general
accounting records of the Company, and excluding any questions requiring an
interpretation by legal counsel) with the results obtained from the
application of specified readings, inquiries and other appropriate procedures
(which procedures do not constitute an examination in accordance with
generally accepted auditing standards) set forth in the letter, and found
them to be in agreement.
(g) There shall have been duly tendered to the Representative
certificates representing the Offered Shares to be sold on the Closing Date.
(h) The NASD shall have indicated that it has no objection to
the underwriting arrangements pertaining to the sale of the Offered Shares by
the Underwriters or the sale of the Shares by the Representative.
(i) No action shall have been taken by the Commission or the
NASD the effect of which would make it improper, at any time prior to the
Closing Date or the Option Closing Date, as the case may be, for any member
firm of the NASD to execute transactions (as principal or as agent) in the
Shares, and no proceedings for the purpose of taking such action shall have
been instituted or shall be pending, or, to the best of the Representative's
or the Company's knowledge, shall be contemplated
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by the Commission or the NASD. The Company represents at the date hereof,
and shall represent as of the Closing Date or Option Closing Date, as the
case may be, that it has no knowledge that any such action is in fact
contemplatedby the Commission or the NASD.
(j) The Company meets the current and any existing and proposed
criteria for inclusion of the Offered Shares in NASDAQ.
(k) All proceedings taken at or prior to the Closing Date or
the Option Closing Date, as the case may be, in connection with the
authorization, issuance and sale of the Shares shall be reasonably
satisfactory in form and substance to the Representative and to Underwriters'
Counsel, and such counsel shall have been furnished with all such documents,
certificates and opinions as they may request for the purpose of enabling
them to pass upon the matters referred to in Section 6(d) hereof and in order
to evidence the accuracy and completeness of any of the representations,
warranties or statements of the Company, the performance of any covenants of
the Company, or the compliance by the Company with any of the conditions
herein contained.
(l) As of the date hereof, the Company will have delivered to
the Underwriters the written undertakings of its officers, directors and
security holders and/or registration rights holders, as the case may be, to
the effect of the matters set forth in Sections 5(l) and (q).
If any of the conditions specified in this Section 6 have not
been fulfilled, this Agreement may be terminated by the Representative on
notice to the Company.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Underwriter, including specifically each person that may be substituted for
an Underwriter as provided in Section 10 hereof, each officer, director,
partner, employee and agent of any Underwriter, and each person, if any, who
controls any of the Underwriters within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act, from and against any and all losses,
claims, damages, expenses or liabilities, joint or several (and actions in
respect thereof), to which they or any of them may become subject under the
Act or under any other statute or at common law or otherwise, and, except as
hereinafter provided, will reimburse each of the Underwriters and each such
person, if any, for any legal or other expenses reasonably incurred by them
or any of them in connection with investigating or defending any actions,
whether or not resulting in any liability, insofar as such losses, claims,
damages, expenses, liabilities or actions arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained (i)
in the Registration Statement, in any Preliminary Prospectus or in the
Prospectus (or the Registration
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Statement or Prospectus as from time to time amended or supplemented) or (ii)
in any application or other document executed by the Company, or based upon
written information furnished by or on behalf of the Company, filed in any
jurisdiction in order to qualify the Shares under the securities laws thereof
(hereinafter "application"), or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary in order to make the statements therein not misleading,
in light of the circumstances under which they were made, unless such untrue
statement or omission was made in such Registration Statement, Preliminary
Prospectus, Prospectus or application in reliance upon and in conformity with
information furnished in writing to the Company in connection therewith by an
Underwriter or any such person through an Underwriter expressly for use
therein; provided, however, that the indemnity agreement contained in this
Section 7(a) with respect to any Preliminary Prospectus will not inure to the
benefit of an Underwriter (or to the benefit of any other person that may be
indemnified pursuant to this Section 7(a)) if (A) the person asserting any
such losses, claims, damages, expenses or liabilities purchased the Shares
which are the subject thereof from such Underwriter or other indemnified
person; (B) such Underwriter or other indemnified person failed to send or
give a copy of the Prospectus to such person at or prior to the written
confirmation of the sale of such Shares to such person; and (C) the
Prospectus did not contain any untrue statement or alleged untrue statement
or omission or alleged omission giving rise to such cause, claim, damage,
expense or liability.
(b) Each Underwriter (including specifically each person that
may be substituted for an Underwriter as provided in Section 10 hereof)
agrees to indemnify and hold harmless the Company, each of its directors,
each of its officers who have signed the Registration Statement and each
person, if any, who controls the Company within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act, from and against any and all
losses, claims, damages, expenses or liabilities, joint or several (and
actions in respect thereof), to which they or any of them may become subject
under the Act or under any other statute or at common law or otherwise, and,
except as hereinafter provided, will reimburse the Company and each such
director, officer or controlling person for any legal or other expenses
reasonably incurred by them or any of them in connection with investigating
or defending any actions, whether or not resulting in any liability, insofar
as such losses, claims, damages, expenses, liabilities or actions arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained (i) in the Registration Statement, in any Preliminary
Prospectus or in the Prospectus (or the Registration Statement or Prospectus
as from time to time amended or supplemented) or (ii) in any application
(including any application for registration of the Shares under state
securities or Blue Sky laws), or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary in order to make
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the statements therein not misleading, in light of the circumstances under
which they were made, but only insofar as any such statement or omission was
made in reliance upon and in conformity with information furnished in writing
to the Company in connection therewith by such Underwriter, or by the
Representative on behalf of such Underwriter, expressly for use therein.
(c) Promptly after receipt of notice of the commencement of
any action in respect of which indemnity may be sought against any
indemnifying party under this Section 7, the indemnified party will notify
the indemnifying party in writing of the commencement thereof, and the
indemnifying party will, subject to the provisions hereinafter stated, assume
the defense of such action (including the employment of counsel satisfactory
to the indemnified party and the payment of expenses) insofar as such action
relates to an alleged liability in respect of which indemnity may be sought
against the indemnifying party. After notice from the indemnifying party of
its election to assume the defense of such claim or action, the indemnifying
party shall no longer be liable to the indemnified party under this Section 7
for any legal or other expenses subsequently incurred by the indemnified
party in connection with the defense thereof other than reasonable costs of
investigation; provided, however, that if, in the reasonable judgment of the
indemnified party or parties, it is advisable for the indemnified party or
parties to be represented by separate counsel, the indemnified party or
parties shall have the right to employ a single counsel to represent the
indemnified parties who may be subject to liability arising out of any claim
in respect of which indemnity may be sought by the indemnified parties
thereof against the indemnifying party, in which event the fees and expenses
of such separate counsel shall be borne by the indemnifying party. Any party
against whom indemnification may be sought under this Section 7 shall not be
liable to indemnify any person that might otherwise be indemnified pursuant
hereto for any settlement of any action effected without such indemnifying
party's consent which consent shall not be unreasonably withheld.
8. Contribution. To provide for just and equitable contribution,
if (i) an indemnified party makes a claim for indemnification pursuant to
Section 7 hereof (subject to the limitations thereof) and it is finally
determined, by a judgment, order or decree not subject to further appeal,
that such claim for indemnification may not be enforced, even though this
Agreement expressly provides for indemnification in such case; or (ii) any
indemnified or indemnifying party seeks contribution under the Act, the
Exchange Act, or otherwise, then the Company (including, for this purpose,
any contribution made by or on behalf of any director of the Company, any
officer of the Company who signed the Registration Statement and any
controlling person of the Company) as one entity and the Underwriters
(including, for this purpose, any contribution by or on behalf of each
person, if any, who controls any Underwriter within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act and each officer,
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director, partner, employee and agent of any of the Underwriters) as a second
entity, shall contribute to the losses, liabilities, claims, damages and
expenses whatsoever to which any of them may be subject, so that the
Underwriters are responsible for the proportion thereof equal to the
percentage which the underwriting discount per Share set forth on the cover
page of the Prospectus represents of the initial public offering price per
Share set forth on the cover page of the Prospectus and the Company is
responsible for the remaining portion; provided, however, that if applicable
law does not permit such allocation, then, if applicable law permits, other
relevant equitable considerations such as the relative fault of the Company
and the Underwriters in connection with the facts which resulted in such
losses, liabilities, claims, damages and expenses shall also be considered.
The relative fault, in the case of an untrue statement, alleged untrue
statement, omission or alleged omission, shall be determined by, among other
things, whether such statement, alleged statement, omission or alleged
omission relates to information supplied by the Company or by the
Underwriters, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement, alleged
statement, omission or alleged omission. The Company, on one hand, and the
Underwriters, on the other hand, agree that it would be unjust and
inequitable if the respective obligations of the Company and the Underwriters
for contribution were determined by pro rata or per capita allocation of the
aggregate losses, liabilities, claims, damages and expenses or by any other
method of allocation that does not reflect the equitable considerations
referred to in this Section 8. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) will be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person, if any, who
controls any of the Underwriters within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act and each officer, director, partner,
employee and agent of any of the Underwriters will have the same rights to
contribution as the Underwriters, and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, each officer of the Company who has signed the Registration
Statement and each director of the Company will have the same rights to
contribution as the Company, subject in each case to the provisions of this
Section 8. Anything in this Section 8 to the contrary notwithstanding, no
party will be liable for contribution with respect to the settlement of any
claim or action effected without its written consent. This Section 8 is
intended to supersede, to the extent permitted by law, any right to
contribution under the Act or the Exchange Act or otherwise available.
9. Survival of Indemnities, Contribution, Warranties and
Representations. The respective indemnity and contribution agreements of the
Company and the Underwriters contained in Sections 7 and 8 hereof, and the
representations and warranties of the Company contained in this Agreement
shall remain operative and
36
<PAGE>
in full force and effect, regardless of any termination or cancellation of
this Agreement or any investigation made by or on behalf of the Underwriters,
the Company or any of its directors and officers or any controlling person
referred to in said Sections, and shall survive the delivery of, and payment
for, the Shares.
10. Substitution of Underwriters.
(a) If one or more Underwriters should default in its or their
obligation to purchase and pay for any Offered Shares hereunder and if the
aggregate number of such Offered Shares which all Underwriters so defaulting
have agreed to purchase does not exceed 10% of the total number of the
Offered Shares, the non-defaulting Underwriters will be obligated severally
to purchase and pay for (in addition to the number of Offered Shares set
forth opposite their names in Schedule A attached hereto) the full number of
Offered Shares agreed to be purchased by all defaulting Underwriters, and not
so purchased, in proportion to their respective commitments hereunder. In
such event the Representative, for the accounts of the several nondefaulting
Underwriters, may take up and pay for all or any part of such additional
Offered Shares to be purchased by each such Underwriter under this Section
10(a), and may postpone the Closing Date to a time not exceeding three full
business days after the Closing Date determined as provided in Section 2
hereof.
(b) If one or more Underwriters should default in its or their
obligation to purchase and pay for any Offered Shares hereunder and if the
aggregate number of such Offered Shares which all Underwriters so defaulting
have agreed to purchase exceeds 10% of the total number of Offered Shares, or
if one or more Underwriters for any reason permitted hereunder should cancel
its or their obligation to purchase and pay for Offered Shares hereunder, the
non-cancelling and non-defaulting Underwriters (hereinafter called the
"remaining Underwriters") will have the right to purchase such Offered Shares
in such proportion as may be agreed among them at the Closing Date determined
as provided in Section 2 hereof. If the remaining Underwriters do not
purchase and pay for such Offered Shares at such Closing Date, the Closing
Date will be postponed for 24 hours and the remaining Underwriters will have
the right to purchase such Offered Shares, or to substitute another person or
persons to purchase the same, or both, at such postponed Closing Date. If
purchasers have not been found for such Offered Shares by such postponed
Closing Date, the Closing Date will be postponed for a further 24 hours, and
the Company will have the right to substitute another person or persons,
reasonably satisfactory to the Representative to purchase such Offered Shares
at such second postponed Closing Date. If it shall be arranged for the
remaining Underwriters or substituted underwriters to take up the Offered
Shares of the defaulting Underwriter or Underwriters as provided in this
Section, the Company shall have the right to postpone the time of delivery
for a period of not more than three (3) full business days, in order to
effect whatever changes may
37
<PAGE>
thereby be made necessary in the Registration Statement or the Prospectus or
in any other documents or arrangements, and the Company agrees promptly to
file any amendments to the Registration Statement or supplements to the
Prospectus which may thereby be made necessary. If the Company has not found
such purchasers for such Offered Shares by such second postponed Closing
Date, then this Agreement will automatically terminate, and neither the
Company nor the remaining Underwriters will be under any obligation under
this Agreement (except that the Company and the Underwriters will remain
liable to the extent provided in Sections 7 and 8 hereof and the Company will
also remain liable to the extent provided in Section 5(j) hereof). As used
in this Agreement, the term "Underwriter" includes any person substituted for
an Underwriter under this Section 10(b). Nothing in Section 11 hereof will
relieve a defaulting Underwriter from the liability for its default and
nothing in this Section 10(b) will obligate any Underwriter to purchase or
find purchasers for any Offered Shares in excess of those agreed to be
purchased by such Underwriter under the terms of Section 2 hereof.
11. Termination of Agreement.
(a) The Company, by written or telegraphic notice to the
Representative, or the Representative, by written or telegraphic notice to
the Company, may terminate this Agreement prior to the earlier of (i) 10:00
A.M., New York City time, on the first full business day after the Effective
Date; or (ii) the time when the Underwriters, after the Registration
Statement becomes effective, release the Offered Shares for public offering.
The time when the Underwriters "release the Offered Shares for public
offering" for the purposes of this Section 11 means the time when the
Underwriters release for publication the first newspaper advertisement, which
is subsequently published, relating to the Offered Shares, or the time when
the Underwriters release for delivery to members of a selling group copies of
the Prospectus and an offering letter or an offering telegram relating to the
Offered Shares, whichever will first occur.
(b) This Agreement, including without limitation, the
obligation to purchase the Shares and the obligation to purchase the Optional
Shares after exercise of the option referred to in Section 3 hereof, are
subject to termination in the absolute discretion of the Underwriters, by
notice given to the Company prior to delivery of and payment for all the
Offered Shares or the Optional Shares, as the case may be, if, prior to such
time, any of the following shall have occurred: (i) the Company withdraws the
Registration Statement from the Commission or the Company does not or cannot
expeditiously proceed with the public offering; (ii) the representations and
warranties in Section 4 hereof are not materially correct or cannot be
complied with; (iii) trading in securities generally on the New York Stock
Exchange or AMEX will have been suspended; (iv) limited or minimum prices
will have been established on either such Exchange; (v) a banking moratorium
will
38
<PAGE>
have been declared either by federal or New York State authorities; (vi) any
other restrictions on transactions in securities materially affecting the
free market for securities or the payment for such securities, including the
Offered Shares or the Optional Shares, will be established by either of such
Exchanges, by the Commission, by any other federal or state agency, by action
of the Congress or by Executive Order; (vii) trading in any securities of the
Company shall have been suspended or halted by any national securities
exchange, the NASD or the Commission; (viii) there has been a materially
adverse change in the condition (financial or otherwise), prospects or
obligations of the Company; (ix) the Company will have sustained a material
loss, whether or not insured, by reason of fire, flood, accident or other
calamity; (x) any action has been taken by the government of the United
States or any department or agency thereof which, in the judgment of the
Representative, has had a material adverse effect upon the market or
potential market for securities in general; or (xi) the market for securities
in general or political, financial or economic conditions will have so
materially adversely changed that, in the judgment of the Representative, it
will be impracticable to offer for sale, or to enforce contracts made by the
Underwriters for the resale of, the Offered Shares or the Optional Shares, as
the case may be.
(c) If this Agreement is terminated pursuant to Section 6
hereof or this Section 11 or if the purchases provided for herein are not
consummated because any condition of the Underwriters' obligations hereunder
is not satisfied or because of any refusal, inability or failure on the part
of the Company to comply with any of the terms or to fulfill any of the
conditions of this Agreement, or if for any reason the Company shall be
unable to or does not perform all of its obligations under this Agreement,
the Company will not be liable to any of the Underwriters for damages on
account of loss of anticipated profits arising out of the transactions
covered by this Agreement, but the Company will remain liable to the extent
provided in Sections 5(j), 7, 8 and 9 of this Agreement.
12. Information Furnished by the Underwriters to the Company. It
is hereby acknowledged and agreed by the parties hereto that for the purposes
of this Agreement, including, without limitation, Sections 4(f), 7(a), 7(b)
and 8 hereof, the only information given by the Underwriters to the Company
for use in the Prospectus are the statements set forth in the last sentence
of the last paragraph on the cover page, the statement appearing in the last
paragraph on page ___ with respect to stabilizing the market price of Shares,
the information in the _____ paragraph of the "Underwriting" Section
commencing on page ___ with respect to concessions and reallowances, the
table on page ___ regarding the offering syndicate, and the information in
the _____, ______, and ______, full paragraphs on page ___ with respect to
discretionary accounts, the determination of the public offering price,
stabilizing the market price of the Shares and the Representative,
39
<PAGE>
respectively, as such information appears in any Preliminary Prospectus and
in the Prospectus.
13. Notices and Governing Law. All communications hereunder will
be in writing and, except as otherwise provided, will be delivered at, or
mailed by certified mail, return receipt requested, or telecopied to, the
following addresses: if to the Representative, or the Underwriters, to LT
Lawrence & Co., Inc. 3 New York Plaza, New York, New York 10004, Facsimile
No. (212) 361-6363, with a copy to Tenzer Greenblatt LLP, Attention: Robert
J. Mittman, Esq., 405 Lexington Avenue, New York, New York 10174, Facsimile
No. (212) 885-5001; if to the Company at 1737 N. First Street, Suite 290, San
Jose, California 95112, Attention: President, Facsimile No. (408) 441-6382
with a copy to Rubin Baum Levin Constant & Friedman, Attention: Irwin M.
Rosenthal, Esq., 30 Rockefeller Plaza, 29th Floor, New York, New York 10112,
Facsimile No. (212) 698-7825.
This Agreement shall be deemed to have been made and delivered in
New York City and shall be governed as to validity, interpretation,
construction, effect and in all other respects by the internal laws of the
State of New York. The Company (1) agrees that any legal suit, action or
proceeding arising out of or relating to this Agreement shall be instituted
exclusively in New York State Supreme Court, County of New York, or in the
United States District Court for the Southern District of New York, (2)
waives any objection which the Company may have now or hereafter to the venue
of any such suit, action or proceeding, and (3) irrevocably consents to the
jurisdiction of the New York State Supreme Court, County of New York, and the
United States District Court for the Southern District of New York in any
such suit, action or proceeding. The Company further agrees to accept and
acknowledge service of any and all process which may be served in any such
suit, action or proceeding in the New York State Supreme Court, County of New
York, or in the United States District Court for the Southern District of New
York and agrees that service of process upon the Company mailed by certified
mail to the Company's address shall be deemed in every respect effective
service of process upon the Company in any such suit, action or proceeding.
14. Parties in Interest. This Agreement is made solely for the
benefit of the several Underwriters, the Company and, to the extent
expressed, any person controlling the Company or the Underwriters, each
officer, director, partner, employee and agent of the Underwriters, the
directors of the Company, its officers who have signed the Registration
Statement, and their respective executors, administrators, successors and
assigns, and, no other person will acquire or have any right under or by
virtue of this Agreement. The term "successors and assigns" will not include
any purchaser of the Shares from any of the Underwriters, as such purchaser.
40
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement between the Company and the
Underwriters in accordance with its terms.
Very truly yours,
AYURCORE, INC.
By:
--------------------------------
Name:
Title:
Confirmed and accepted in
New York, N.Y., as of the
date first above written:
LT LAWRENCE & CO., INC.
By:
---------------------------
Name:
Title:
Acting on behalf of itself
as the Representative of the
several Underwriters named in
Schedule A hereto.
41
<PAGE>
SCHEDULE A
TO THE UNDERWRITING AGREEMENT
Underwriter Number of Shares
- ------------- ----------------------
LT Lawrence & Co., Inc. . . . . . . .
Total . . . . . . . . . . . . 1,250,000
----------
----------
42
<PAGE>
[As filed with the Secretary of State of Delaware on 1/11/93]
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
BIO-VED, INC.
FIRST: The name of the corporation is BIO-VED, INC.
SECOND: The address of the Corporation's registered office in the State of
Delaware is 15 East North Street, City of Dover, County of Kent. The name of
its registered agent at such address is United Corporate Services, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the Delaware General
Corporation Law.
FOURTH:
I. The aggregate number of shares which the Corporation shall have
authority to issue is Three Hundred (300) shares, consisting of (i) One
Hundred (100) shares of Class A Common Stock, par value $.001 per share
("Class A Common Stock"), (ii) One Hundred (100) shares of Class B Common
Stock, par value $.001 per share ("Class B Common Stock"), and (iii) One
Hundred (100) shares of Preferred Stock, par value $.01 per share ("Preferred
Stock").
II. Except as otherwise provided in this Article FOURTH, the rights,
preferences and limitations of Class A Common Stock and Class B Common Stock
shall be identical in all respects:
(a) The dividend rights of the holders of shares of Class A
Common Stock and Class B Common Stock shall be identical, except that no
stock dividends on the Class A Common Stock may be paid in Class B Common
Stock and no stock dividends on the Class B Common Stock may be paid in Class
A Common Stock. Whenever a stock dividend is paid, the holder of a share of
any class of common stock shall be paid the same number of shares of common
stock of the class of such share as are paid to the holder of a share of
common stock of any other class in shares of common stock of such other
class. Whenever a combination or subdivision of the shares of any class is
made, the same combination or subdivision shall be made with respect to other
classes.
(b) Each holder of Class A Common Stock shall have one vote in
respect of each share of Class A Common Stock held by him and each holder of
Class B Common Stock shall have four votes in respect of each share of Class B
Common Stock held by him on all matters voted upon by the shareholders.
(c) (i) All outstanding shares of Class B Common Stock shall be
convertible at all times, at the election of the holder thereof, into an equal
number of fully paid
<PAGE>
and nonassessable shares of Class A Common Stock by delivery of written notice
by the holder of such shares of Class B Common Stock to the Corporation or its
transfer agent of his election together with the certificate(s) representing the
shares to be converted. Thereupon, the Corporation or its transfer agent, as the
case may be, shall exchange such certificate(s) for a certificate or
certificates representing an equal number of shares of Class A Common Stock.
Shares of Class B Common Stock shall be deemed to have been converted
immediately prior to the close of business the day upon which the Corporation
or its transfer agent receives such shares for conversion. The person
entitled to receive the Class A Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder of such Class A Common
Stock at such time. Thereafter, the shares of Class B Common Stock so
converted shall be authorized and unissued shares of Class B Common Stock of
the Corporation.
(ii) Except as provided in subparagraph (iii) below, upon
the sale, assignment, transfer, conveyance, or other disposition, whether
voluntary, by operation of law or otherwise (a "Transfer," which, for the
purpose hereof, shall not include a pledge) of shares of Class B Common Stock,
other than a transfer to another holder of Class B Common Stock or to a private
charitable foundation as to which a holder of Class B Common Stock is the sole
voting member, the shares so transferred shall, by virtue of such Transfer,
automatically be converted into an equal number of fully paid and nonassessable
shares of Class A Common Stock. Thereafter, the shares of Class B Common Stock
so converted shall be authorized and unissued shares of Class B Common Stock of
the Corporation.
(iii) Upon the death of any holder of Class B Common Stock,
the shares of Class B Common Stock so held as of the date of death of the
deceased shareholder shall be automatically converted into an equal number of
fully paid and nonassessable shares of Class A Common Stock unless and to the
extent that any of such shares are purchased by another holder of Class B Common
Stock on or prior to 90 days from the date that a legal representative is duly
appointed by a court of competent jurisdiction or 120 days from such date if
within such 90 day period another holder of Class B Common Stock has exercised
any right to purchase shares of Class B Common Stock held by such legal
representative. If there should be only one holder of Class B Common Stock,
effective immediately upon his death, the shares of Class B Common Stock so held
as of the date of death shall be automatically converted into an equal number of
fully paid and nonassessable shares of Class A Common Stock. Thereafter, the
shares of Class B Common Stock so converted shall be authorized and unissued
shares of Class B Common Stock of the Corporation.
(iv) With respect to any shares of Class B Common Stock
converted into Class A Common Stock pursuant to paragraphs (i) and (iii) above,
until surrender as hereinafter
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<PAGE>
provided, each outstanding certificate, which prior to such conversion
represented shares of Class B Common Stock, shall be deemed for all purposes to
evidence ownership of the number of shares of Class A Common Stock into which
the shares of Class B Common Stock shall have been converted. Upon surrender to
the Corporation, or its transfer agent, for cancellation of the certificate or
certificates representing such shares, the holder thereof shall be entitled to
receive a certificate or certificates representing the number of shares of
common stock to which such holder is entitled.
III. The Board of Directors of the Corporation is authorized, subject
to limitations prescribed by law and the provisions of this Article FOURTH, to
provide for, from time to time, in one or more series of any number, the
issuance of shares of Preferred Stock, and, by filing a certificate pursuant to
the General Corporation Law of the State of Delaware, to establish the number of
shares to be included in each such series and to fix the designation, relative
rights, preferences, qualifications and limitations of the shares of each such
series. The authority of the Board of Directors with respect to each series
shall include, but not be limited to, determination of each of the following:
(a) The number of shares constituting that series and the
distinctive designation of that series;
(b) The dividend rate on the shares of the series, whether
dividends shall be cumulative and, if so, from which date or dates, and whether
they shall be payable in preference to, or in another relation to, the dividends
payable on any other class or classes or series of stock;
(c) Whether that series shall have voting rights, in addition to
the voting rights provided by law, and, if so, the terms of such voting rights;
(d) Whether that series shall have conversion or exchange
privileges, and, if so, the terms and conditions of such conversion or exchange,
including provision for adjustment of the conversion or exchange rate in such
events as the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption, including
the manner of selecting shares for redemption if less than all such shares are
to be redeemed, the date or dates upon or after which they shall be redeemable,
and the amount per share payable in case of redemption, which amount may vary
under different conditions and at different redemption dates;
(f) Whether that series shall be entitled to the benefit of a
sinking fund to be applied to the purchase or
-3-
<PAGE>
redemption of shares of that series and, if so, the terms and amounts of such
sinking fund;
(g) The right of the shares of the series to the benefit of
conditions and restrictions upon the creation of indebtedness of the Corporation
or any subsidiary upon the issue of any additional stock (including additional
shares of such series or of any other series) and upon the payment of dividends
or the making of other distributions on and the purchase, redemption or other
acquisition by the Corporation or any subsidiary of, any outstanding stock of
the Corporation;
(h) The right of the shares of that series in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation and whether such rights shall be in preference to or in another
relation to the comparable rights of any other class or classes or series of
stock; and
(i) Any other relative, participating optional or other special,
rights, qualifications, limitations or restrictions of that series.
IV. Shares of any series of Preferred Stock which have
been redeemed (whether through the operation of a sinking fund or otherwise) or
which, if convertible or exchangeable, have been converted into or exchanged for
shares of stock of any other class or classes, shall have the status of
authorized and unissued shares of Preferred Stock of the same series and may be
reissued as a part of the series of which they were originally a part or may be
reclassified and reissued as part of any other series of Preferred Stock or of a
new series of Preferred Stock to be created by resolution or resolutions of the
Board of Directors, all subject to the conditions and restrictions on issuance
set forth in the resolution or resolutions adopted by the Board of Directors
providing for the issue of any series of Preferred Stock.
V. Except as otherwise provided by the resolution or resolutions
providing for the issue of any series of Preferred Stock, after payment shall
have been made to the holders of Preferred Stock of the full amount of dividends
to which they shall be entitled pursuant to the resolution or resolutions
providing for the issuance of any series of Preferred Stock, the holders of
Class A and Class B Common Stock shall be entitled, to the exclusion of the
holders of Preferred Stock of any and all series, to receive such dividends as
from time to time may be declared by the Board of Directors.
VI. Except as otherwise provided by the resolution or resolutions
providing for the issue of any series of Preferred Stock, in the event of any
liquidation, dissolution of winding up of the Corporation, whether voluntary or
involuntary, the holders of Class A and Class B Common Stock shall be entitled,
after
-4-
<PAGE>
payment shall have been made to the holders of Preferred Stock of the full
amount to which they shall be entitled pursuant to the resolution or resolutions
providing for the issuance of any series of Preferred Stock, to share, to the
exclusion of the holders of Preferred Stock of any and all series, in all
remaining assets of the Corporation available for distribution to its
stockholders ratably according to the number of shares of Class A and Class B
Common Stock held by them.
VII. The number of authorized shares of any class may be increased or
decreased by the affirmative vote of the holders of a majority of the stock of
the Corporation entitled to vote.
FIFTH: The name and mailing address of the sole incorporator are as follows:
Rachel Abarbanel
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, New York 10112
SIXTH: Meetings of stockholders may be held at such places,
within or without the State of Delaware, as may be fixed by the Board of
Directors pursuant to the authority granted in the by-laws. Special meetings of
stockholders may be called by the President or by the Board of Directors only.
Elections of directors need not be by ballot unless the by-laws of the
Corporation shall provide otherwise or a stockholder demands election by ballot
at the election and before the voting begins. The books of the Corporation may
be kept outside the State of Delaware at such place or places as may be
designated from time to time by the Board of Directors or in the by-laws of the
Corporation.
SEVENTH: The number of directors which shall constitute the entire Board of
Directors of the Corporation shall not be less than three, the exact number to
be fixed from time to time by the Board of Directors pursuant to a resolution
duly adopted by a majority of the entire Board.
EIGHTH: No directors of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that this Article EIGHTH shall not eliminate or
limit the liability of a director (i) for any breach of such director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions of
such director not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which such director derived an
improper personal benefit; nor shall this Article EIGHTH eliminate or limit the
liability of a director for any act or omission occurring prior to the date this
Article EIGHTH becomes effective.
-5-
<PAGE>
NINTH: The Corporation may lend money to, guarantee an obligation of, or
otherwise assist, any director, officer or other employee of the Corporation
when authorized by a majority of the Board, subject to Section 143 of the
Delaware General Corporation
Law.
TENTH: The Board of Directors is expressly authorized to adopt, amend and
repeal the by-laws of the Corporation.
ELEVENTH: The Corporation shall, to the fullest extent permitted by Section 145
of the Delaware General Corporation Law as the same may be amended or
supplemented, indemnify any and all persons whom it shall have power to
indemnify from and against any and all expenses, liabilities or other matters.
TWELFTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application of any
receiver or receivers appointed for this Corporation under the provisions of
Section 291 of the Delaware General Corporation Law, or on the application of
trustees in dissolution or of any receiver or receivers appointed for this
Corporation under the provisions of Section 279 of the Delaware General
Corporation Law, order a meeting of the creditors or class of creditors and/or
stockholders or class of stockholders of this Corporation as the case may be, to
be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, agree to any compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Incorporation and affirms the statements herein contained on this 8th day of
January 1993.
/S/ Rachel Abarbanel
------------------------------
Rachel Abarbanel, Incorporator
-6-
<PAGE>
[As filed with the Secretary of State of Delaware on 12/29/94]
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
BIO-VED, INC.
The undersigned, on behalf of BIO-VED, INC., a corporation organized
and existing under the laws of the State of Delaware (the "Corporation"), in
order to amend the Corporation's Certificate of Incorporation, hereby certifies
as follows:
1. The name of the Corporation is BIO-VED, INC.
2. The Corporation hereby amends its Certificate of Incorporation as
follows:
(a) The first paragraph of ARTICLE FOURTH of the Certificate of
Incorporation, relating to the authorized capital stock of the
Corporation, is hereby amended to read as follows:
"FOURTH: I. The aggregate number of shares which the
Corporation shall have authority to issue is Seven Hundred
(700) shares, consisting of (i) One Hundred (100) shares of
Class A Common Stock, par value $.001 per share ("Class A
Common Stock"), (ii) Five Hundred (500) shares of Class B
Common Stock, par value $.001 per share ("Class B Common
Stock"), and (iii) One Hundred (100) shares of Preferred
Stock, par value $.01 per share ("Preferred Stock")."
3. The amendment contained herein (i) was duly approved by written
consent of the stockholders of the Corporation in accordance with the provisions
of Section 228 of the General Corporation Law of the State of Delaware (the
"DGCL") and written notice has been given as provided in that Section and (ii)
was duly adopted in accordance with the provisions of Section 242 of the DGCL.
IN WITNESS WHEREOF, the undersigned, being a duly authorized officer
of the Corporation, has executed this Certificate of Amendment on behalf of the
Corporation and affirms the statements herein contained on the 29 day of
December, 1994.
BIO-VED, INC.
By: /s/ Barry Wald
---------------------
Barry Wald, President
<PAGE>
[As filed with the Secretary of State of Delaware of 9/27/95]
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
BIO-VED, INC.
The undersigned, on behalf of BIO-VED, INC., a corporation organized
and existing under the laws of the State of Delaware (the "Corporation"), in
order to amend the Corporation's Certificate of Incorporation, hereby certifies
as follows:
1. The name of the Corporation is BIO-VED, INC.
2. The Corporation hereby amends its Certificate of Incorporation as
follows:
(a) ARTICLE FIRST of the Certificate of Incorporation, relating to
the name of the Corporation, is hereby amended to read as follows:
"FIRST: The name of the corporation is AyurCore, Inc."
3. The amendment contained herein (i) was duly approved by written
consent of the stockholders of the Corporation in accordance with the provisions
of Section 228 of the General Corporation Law of the State of Delaware (the
"DGCL") and written notice has been given as provided in that Section and (ii)
was duly adopted in accordance with the provisions of Section 242 of the DGCL.
IN WITNESS WHEREOF, the undersigned, being a duly authorized officer
of the Corporation, has executed this Certificate of Amendment on behalf of the
Corporation and affirms the statements herein contained on the 26 day of
September, 1995.
BIO-VED, INC.
By: /s/ Barry Wald
----------------------
Barry Wald, President
<PAGE>
[As filed with the Secretary of State of Delaware on 11/18/97]
CERTIFICATE FOR
RENEWAL AND REVIVAL OF CHARTER
OF
AYURCORE, INC.
AyurCore, Inc. a corporation organized under the laws of Delaware, the
certificate of incorporation of which was filed in the office of the Secretary
of State on the 11th day of Janurary, 1993, and recorded in the office of the
Recorder of Deeds for Kent county, the charter of which was voided for
non-payment of taxes, now desires to procure a restoration, renewal and revival
of its charter, and hereby certifies as follows:
1. The name of the corporation is AyurCore, Inc.
2. Its registered office in the State of Delaware is located at United
Corporate Services, Inc., 15 East North Street, in the city of Dover, County of
Kent, State of Delaware 19901. The name of its registered agent at that address
is United Corporate Services, Inc.
3. The date when the restoration, renewal and revival of the charter of
this company is to commence is the 28th day of Februrary, 1997, same being prior
to the date of the expiration of the charter. This renewal and revival of the
charter of this corporation is to be perpetual.
4. This corporation was duly organized and carried on the business
authorized by its charter until the 1st day of March, 1997, at which time its
charter became inoperative and void for non-payment of taxes and this
certificate for renewal and revival is filed by authority of the duly elected
directors of the corporation in accordance with the laws of the State of
Delaware.
IN TESTIMONY WHEREOF, and in compliance with the provisions of Section 312
of the General Corporation Law of the State of Delaware, as amended, providing
for the renewal, extension and restoration of charters, Deepa Chitre, Chief
Executive Officer, the last authorized officer of AyurCore, Inc., has hereunto
set her hand to this certificate this 17th day of November, 1997.
By: /s/ Deepa Chitre
-------------------------------------
Deepa Chitre, Chief Executive Officer
<PAGE>
[As filed with the Secretary of State of Delaware on 11/26/97]
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
AYURCORE, INC.
AyurCore, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), hereby certifies
that the amendments set forth below to the Corporation's Certificate of
Incorporation were duly adopted in accordance with Section 242 of the General
Corporation Law of the State of Delaware, and notice of such adoption was given
in accordance with Section 228 thereof:
FIRST: Article FOURTH of the Corporation's Certificate of
Incorporation is hereby amended to read in its entirety as follows:
FOURTH:
I A. The total number of shares of capital stock which may be issued by the
Corporation is thirty million (30,000,000), divided into classes of which
twenty-five million (25,000,000) shall be Common Stock, par value $.001 per
share, and of which five million (5,000,000) shall be Preferred Stock, par value
$.001 per share.
Upon the effectiveness of the amendment to the Corporation's Certificate of
Incorporation containing this paragraph, each outstanding share of the
Corporation's Class A Common Stock, par value $.001 per share, if any, and Class
B Common Stock, par value $.001 per share, shall be and they hereby are ,
reclassified as and change into 18,333.486 shares of fully paid and
nonassessable Common Stock. Upon surrender to the Corporation of certificates
(duly endorsed in blank) representing shares of Common Stock to be converted,
certificates representing the appropriate number of shares of Common Stock (less
fractions thereof) shall be issued and delivered to the surrendering
stockholders. The Corporation shall pay in cash the fair value of fractions of
a share as of the time when those entitled to receive such fractions are
determined.
B. The designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions of the shares of Common Stock of the
Corporation are as follows:
1. Dividends may be paid upon the Common Stock as and when declared by
the Board of Directors out of any funds legally available therefor.
2. Upon any liquidation, dissolution or winding up of the Corporation,
the holders of the Common Stock shall be entitled to receive any and all assets
of the Corporation remaining to be paid or distributed.
3. Except as otherwise provided by statute, by any express provision of
this Certificate or by any agreement to the contrary between the Corporation and
its stockholders, all rights to vote
<PAGE>
and all voting power shall be exclusively vested in the Common Stock and the
holders thereof shall be entitled to one vote for each share of Common Stock for
the election of directors and upon all other matters.
4. The Corporation shall be entitled to treat the person in whose name
any share, right or option is registered as the owner thereof, for all purposes,
and shall not be bound to recognize any equitable or other claim to or interest
in such share, right or option on the part of any other person, whether or not
the Corporation shall have notice thereof, save as may be expressly provided by
the laws of the State of Delaware.
C. The Board of Directors is authorized, subject to limitations
prescribed by law and the provisions of this Article FOURTH, to provide for the
issuance of the shares of Preferred Stock in series, and by filing a certificate
pursuant to the applicable law of the State of Delaware, to establish from time
to time the number of shares to be included in each such series, and to fix the
designation, powers, preferences and rights of the shares of each such series
and the qualifications, limitations or restrictions thereof.
1. The authority of the Board of Directors with respect to each series
shall include, but not be limited to, determination of the following:
a. The number of shares constituting that series and the distinctive
designation of that series;
b. The dividend rate on the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that series;
c. Whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting rights;
d. Whether that series shall have conversion privileges, and, if so,
the terms and conditions of such conversion, including provision for adjustment
of the conversion rate in such events as the Board of Directors shall determine;
e. Whether or not the shares of that series shall be redeemable,
and, if so, the terms and conditions of such redemption, including the date or
dates upon or after which they shall be redeemable, and the amount per share
payable in case of redemption, which amount may vary under different conditions
and at different redemption dates;
f. Whether that series shall have a sinking fund for the redemption
or purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
g. The rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the corporation, and
the relative rights of priority, if any, of
<PAGE>
payment of shares of that series; and
h. Any other relative rights, preferences and limitations of that
series.
2. Dividends on outstanding shares of Preferred Stock shall be paid or
declared and set apart for payment before any dividends shall be paid or
declared and set apart for payment on the shares of Common Stock with respect to
the same dividend period.
3. If upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the assets available for distribution to holders
of shares of Preferred Stock of all series shall be insufficient to pay such
holders the full preferential amount to which they are entitled, then such
assets shall be distributed ratably among the shares of all series of Preferred
stock in accordance with the respective preferential amounts (including unpaid
cumulative dividends, if any) payable with respect thereto.
4. The Corporation shall be entitled to treat the person in whose name
any share, right or option is registered as the owner thereof, for all purposes,
and shall not be bound to recognize any equitable or other claim to or interest
in such share, right or option on the part of any other person, whether or not
the Corporation shall have notice thereof, save as may be expressly provided by
the laws of the State of Delaware.
IN WITNESS WHEREOF, AYURCORE, INC. has caused this certificate to be
signed and attested by its duly authorized officers, this 25th day of November,
1997.
AYURCORE, INC.
By: /s/ Deepa Chitre
-------------------------------------
Deepa Chitre, President and
Chief Executive Officer
ATTEST:
By: /s/ Irwin Rosenthal
--------------------------
Irwin Rosenthal, Secretary
<PAGE>
Exhibit 3.2
BY-LAWS
OF
BIO-VED, INC.
(a Delaware corporation)
ARTICLE I
Office
Section 1.1. Registered Office. The registered office of Bio-ved,
Inc. (the "Corporation") in the State of Delaware shall be located at 15 East
North Street, in the City of Dover, County of Kent, or at such other place as
the Board of Directors may at any time or from time to time designate.
Section 1.2. Registered Agent. The registered agent of the
Corporation in the State of Delaware at its registered office is United
Corporate Services, Inc., or such other person, firm or corporation as the Board
of Directors may at any time or from time to time designate.
Section 1.3. Other Offices. The Corporation may establish or
discontinue, from time to time, an office or offices and places of business
other than said registered office, within or without the State of Delaware, as
may be deemed proper for the conduct of the business of the Corporation.
<PAGE>
ARTICLE II
Meetings of Stockholders
Section 2.1. Annual Meeting. The annual meeting of such holders of
capital stock ("Stock") as are entitled to vote thereat ("Annual Meeting of
Stockholders") shall be held for the election of directors and the transaction
of such other business as properly may come before it at such date and time as
the Board of Directors may determine.
Section 2.2. Special Meetings. In addition to such special meetings
as are provided for by law or by the Certificate of Incorporation, special
meetings of the stockholders of the Corporation may be called at any time by the
Board of Directors. Special meetings shall be called by means of a notice as
provided in Section 2.4 hereof.
Section 2.3. Place of Meetings. All meetings of the stockholders
shall be held at such place within or without the State of Delaware as shall be
designated by the Board of Directors.
Section 2.4. Notice of Meetings. Whenever stockholders are required
or permitted to take any action at a meeting, a written notice of the meeting
shall be given which shall state the place, date and hour of the meeting and, in
case of a special meeting, the purpose or purposes for which the meeting is
called. The notice of each Annual Meeting of Stockholders shall identify each
matter intended to be acted upon at such meeting. If mailed, the notice shall
be addressed to each stockholder in a postage-prepaid envelope at his address as
it appears on the records of the Corpo-
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<PAGE>
ration unless, prior to the time of mailing, the Secretary shall have received
from any such stockholder a written request that notices intended for him be
mailed to some other address. In such case the notice intended for such
stockholder shall be mailed to the address designated in such request. Notice
of each meeting of stockholders shall be delivered personally or mailed not less
than ten (10) nor more than sixty (60) days before the date fixed for the
meeting to each stockholder entitled to vote at such meeting.
Section 2.5. Waiver of Notice. Whenever notice is required to be
given, a written waiver thereof signed by the person entitled to notice whether
before or after the time stated therein for such meeting shall be deemed
equivalent to notice. Attendance of a person at a meeting of stockholders shall
constitute a waiver of notice of such meeting, except as otherwise provided by
law. Neither the business to be transacted at nor the purpose of any regular or
special meeting of the stockholders need be specified in any written waiver of
notice.
Section 2.6. Organization of Meetings. The Chairman of the Board,
if any, shall act as chairman at all meetings of stockholders at which he is
present and, as such chairman, shall call such meetings of stockholders to order
and shall preside thereat. If the Chairman of the Board shall be absent from
any meeting of stockholders, the duties otherwise provided in this Section to be
performed by him at such meeting shall be performed at such meeting by the
President. If both the Chairman of the Board and the President shall be absent,
such duties shall be performed by a Vice
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<PAGE>
President designated by the Chairman of the Board to preside at such meeting.
If no such officer is present at such meeting, any stockholder or the proxy of
any stockholder entitled to a vote at the meeting may call the meeting to order
and a chairman to preside thereat shall be elected by a majority of those
present and entitled to vote. The Secretary of the Corporation shall act as
secretary at all meetings of the stockholders but, in his absence, the chairman
of the meeting may appoint any person present to act as secretary of the
meeting.
Section 2.7. Stockholders Entitled to Vote. The Board of Directors
may fix a date not less than ten (10) nor more than sixty (60) days preceding
the date of any meeting of stockholders, or preceding the last day on which the
consent of stockholders may be effectively expressed for any purpose without a
meeting, as a record date for the determination of the stockholders entitled:
(a) to notice of, and to vote at, such meeting and any adjournment thereof; or
(b) to express such consent. In such case such stockholders of record on the
date so fixed, shall be entitled to notice of, and to vote at, such meeting and
any adjournment thereof or to express such consent, as the case may be,
notwithstanding any transfer of any stock on the books of the Corporation after
any such record date is so fixed.
Section 2.8. List of Stockholders Entitled to Vote. The Secretary
shall prepare and make or cause to be prepared and made, at least ten (10) days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at such meet-
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<PAGE>
ing, arranged in alphabetical order and showing the address of each such
stockholder as it appears on the records of the Corporation and the number of
shares registered in the name of each such 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 specified in the notice of meeting within the
city where the meeting is to be held or, if not so specified, at the place where
the meeting is to be held, and a duplicate list shall be similarly open to
examination at the principal place of business of the Corporation. Such list
shall be produced and kept at the time and place of the meeting during the whole
time thereof and may be inspected by any stockholder who is present.
Section 2.9. Quorum and Adjournment. Except as otherwise provided
by law and in the Certificate of Incorporation, the holders of a majority of the
shares of Stock entitled to vote at the meeting shall constitute a quorum at
each meeting of the stockholders. Where more than one class or series of Stock
is entitled to vote at such a meeting, a majority of the shares of each such
class or series of Stock entitled to vote at such meeting shall constitute a
quorum at such meeting. In the absence of a quorum, the holders of a majority
of all such shares of Stock present in person or by proxy may adjourn any
meeting from time to time until a quorum shall attend. At any such adjourned
meeting at which a quorum may be present, any business may be transacted which
might have been transacted at the meeting as originally called. Notice
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<PAGE>
of an adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 2.10. Order of Business. The order of business at all
meetings of stockholders shall be as determined by the chairman of the meeting.
Section 2.11. Vote of Stockholders. Except as otherwise permitted by
law, by the Certificate of Incorporation or elsewhere in these By-Laws, all
action by stockholders shall be taken at a meeting of the stockholders. Except
as otherwise provided in the Certificate of Incorporation, every stockholder of
record, as determined pursuant to Section 2.7 hereof, who is entitled to vote
shall at every meeting of the stockholders be entitled to one vote for each
share of Stock to participate in such vote held by such stockholder on the
record date. Every stockholder entitled to vote shall have the right to vote in
person or by proxy. Except as otherwise provided by law, no vote on any
question upon which a vote of the stockholders may be taken need be by ballot
unless the chairman of the meeting shall determine that it shall be by ballot or
the holders of a majority of the shares of Stock present in person or by proxy
and entitled to participate in such vote shall so demand. In a vote by ballot
each ballot shall state the number of shares voted and the name of the
stockholder or proxy voting. Unless otherwise provided by law or by the
Certificate of Incorporation, each director shall be elected by the vote of the
holders of a plurality, and all other questions shall be decided by the vote of
the holders of a majority, of the shares of Stock present
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<PAGE>
in person or by proxy at the meeting and entitled to vote on the question.
Section 2.12. Proxies. Each stockholder entitled to vote at a
meeting of stockholders or to express consent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy. A proxy acting for any stockholder shall be duly appointed by an
instrument in writing subscribed by such stockholder.
Section 2.13. Consent of Stockholders in Lieu of Meeting. Whenever
the vote of stockholders at a meeting thereof is required or permitted to be
taken for or in connection with any corporate action by any provisions of the
General Corporation Law of the State of Delaware, the meeting, prior notice of
such meeting and the vote of the stockholders may be dispensed with and such
corporate action may be taken with the written consent of the stockholders of
Stock having not less than the minimum percentage of the total vote required by
statute for the proposed corporate action, unless the Certificate of
Incorporation or the By-Laws require a greater percentage for such action, in
which case the consent shall be that of the holders of such greater percentage;
provided, however, that prompt notice is given to all the stockholders who have
not consented of the taking of such corporate action without a meeting and by
less than unanimous written consent.
Section 2.14. Attendance at Meetings of Stockholders. Any
stockholder of the Corporation not entitled to notice of the
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<PAGE>
meeting or to vote at such meeting shall nevertheless be entitled to attend any
meeting of stockholders of the Corporation.
ARTICLE III
Board of Directors
Section 3.1. Number, Election and Term of Office. The number of
directors which shall constitute the entire Board of Directors of the
Corporation shall be not less than three, the exact number to be fixed from time
to time by the Board of Directors pursuant to a resolution duly adopted by a
majority of the Board. Any decrease in the number of directors shall be
effective at the time of the next succeeding Annual Meeting of Stockholders
unless there shall be vacancies in the Board of Directors, in which case such
decrease may become effective at any time prior to the next succeeding Annual
Meeting of Stockholders to the extent of the number of such vacancies.
Directors need not be stockholders. Except as otherwise provided by statute or
these By-Laws, the directors (other than members of the initial Board of
Directors) shall be elected at the Annual Meeting of Stockholders. Each
director shall hold office until his successor shall have been elected and
qualified, or until his earlier resignation or removal.
Section 3.2. General Powers. The business, properties and affairs
of the Corporation shall be managed by or under the direction of the Board of
Directors which, without limiting the generality of the foregoing, shall have
the power to appoint the officers and agents of the Corporation, to fix and
alter the sal-
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<PAGE>
aries of officers, employees, and agents of the Corporation, to grant general or
limited authority (including authority to delegate and sub-delegate) to
officers, employees, and agents of the Corporation, to make, execute, affix the
corporate seal to and deliver contracts and other instruments and documents
including bills, notes, checks or other instruments for the payment of money, in
the name and on behalf of the Corporation without specific authority in each
case and to appoint committees in addition to those provided for in Articles IV
and V hereof with such powers and duties as the Board of Directors may determine
and as provided by law. The membership of such committees shall consist of such
persons as are designated by the Board of Directors. In addition, the Board of
Directors may exercise all the powers of the Corporation and do all lawful acts
and things which are not reserved to the stockholders by law, by the Certificate
of Incorporation or by the By-Laws.
Section 3.3. Place of Meetings. Meetings of the Board of Directors
may be held at the principal place of business of the Corporation or at any
other place, within or without the State of Delaware, from time to time as
designated by the Board of Directors. Meetings of the Board of Directors may be
held, and one or more directors may attend any meeting of the Board of
Directors, by telephonic conference.
Section 3.4. Organization Meeting. The Board of Directors,
including its newly elected members, shall meet and organize without notice as
soon as practicable after each Annual Meeting of Stockholders at the place at
which such meeting of stockholders
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<PAGE>
took place. If a quorum is not present, such organization meeting may be held
at any other time or place which may be specified for special meetings of the
Board of Directors in a notice given in the manner provided in Section 3.6
hereof or in a waiver of notice thereof.
Section 3.5. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such times as may be determined by resolution of the
Board of Directors. No notice shall be required for any regular meeting.
Except as otherwise provided by law, any business may be transacted at any
regular meeting of the Board of Directors.
Section 3.6. Special Meetings; Notice; and Waiver of Notice.
Special meetings of the Board of Directors shall be called by the Secretary or
an Assistant Secretary at the request of the Chairman of the Board or Vice
Chairman of the Board, if any, the President, a Vice President, or at the
request in writing of one or more of the whole Board of Directors stating the
purpose or purposes of such meeting. Notices of special meetings shall be
delivered personally to each director or shall be mailed to each director either
by overnight courier service or first-class mail addressed to him at his
residence or usual place of business or other address provided to the
Corporation, or shall be sent to him at any of such places by telegraph,
telecopy, or shall be communicated to him personally or by telephone, such that
such notice is received by each director not later than the three (3) days
before the day on which the meeting is to be held. Notice of any meeting
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<PAGE>
of the Board of Directors shall not be required to be given to any director if
he shall sign a written waiver thereof either before or after the time stated
therein for such meeting or if he shall be present at the meeting and
participate in the business transacted thereat. Any and all business transacted
at any meeting of the Board of Directors shall be fully effective without any
notice thereof having been given if all the members shall be present thereat.
Unless limited by law, the Certificate of Incorporation, the By-Laws, or by the
terms of the notice thereof, any and all business may be transacted at any
special meeting without the notice thereof having so specifically enumerated the
matters to be acted upon.
Section 3.7. Organization. The Chairman of the Board, if any, shall
preside at all meetings of the Board of Directors at which he is present. If
the Chairman of the Board shall be absent from any meeting of the Board of
Directors, the duties otherwise provided in this Section 3.7 to be performed by
him at such meeting shall be performed by the President, if he is a director.
If the Chairman of the Board and the President, if he is a director, shall be
absent, such duties shall be performed by a director designated by the Chairman
of the Board to preside at such meeting. If no such officer or director is
present at such meeting, one of the directors present shall be chosen to preside
by a majority vote of the members of the Board of Directors present at such
meeting. The Secretary of the Corporation shall act as the secretary at all
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<PAGE>
meetings of the Board of Directors and, in his absence, a temporary secretary
shall be appointed by the chairman of the meeting.
Section 3.8. Quorum and Adjournment. Except as otherwise provided
by these By-Laws and by the Certificate of Incorporation, at every meeting of
the Board of Directors a majority of the total number of directors shall
constitute a quorum. Except when the total number of directors is one, in no
event shall a quorum consist of less than two directors. Except as otherwise
provided by law, by the Certificate of Incorporation or elsewhere herein
(including without limitation in Sections 2.11, 3.12, 4.1, 4.8, 5.1, 6.3, or
10.2 hereof), the vote of a 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
absence of a quorum, any meeting may be adjourned from time to time until a
quorum is present. Notice of an adjourned meeting shall be required to be given
if notice was required to be given of the meeting as originally called.
Section 3.9. Voting. On any question on which the Board of
Directors shall vote, the names of those voting and their votes shall be entered
in the minutes of the meeting when any member of the Board of Directors present
at the meeting so requests.
Section 3.10. Acting Without a Meeting. 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 of
Directors or of such committee,
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<PAGE>
as the case may be, consent thereto in writing and such written consents are
filed with the minutes of such proceeding.
Section 3.11. Resignations. Any director may resign at any time by
written notice thereof to the Corporation. Any resignation shall be effective
immediately unless some other time is specified for it to take effect.
Acceptance of any resignation shall not be necessary to make it effective unless
such resignation is tendered subject to such acceptance.
Section 3.12. Filling of Vacancies. Unless otherwise provided by the
Certificate of Incorporation, newly created directorships resulting from any
increase in the authorized number of directors or any vacancies in the Board of
Directors resulting from death, resignation, retirement, disqualification,
removal from office or other cause shall be filled by the Board of Directors at
any meeting by affirmative vote of a majority of the remaining directors then in
office or by a sole remaining director though the remaining director or
directors be less than the quorum provided for in Section 3.8 hereof. Each
director so elected shall hold office until his successor shall have been
elected and qualified or until his earlier resignation or removal.
Section 3.13. Compensation. The Board of Directors shall have the
authority to fix the compensation, including without limitation, fees and
expenses, of directors for services to the Corporation in any capacity.
Section 3.14. Records. The Board of Directors shall keep minutes of
its acts and proceedings. Any action taken by the
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<PAGE>
Board of Directors shall be entered into the minutes of the Board of Directors.
Each director shall be entitled to receive a copy of the minutes of the Board of
Directors at his request.
ARTICLE IV
Executive Committee
Section 4.1. Appointment and Powers. The Board of Directors may, by
resolution adopted by affirmative vote of a majority of the whole Board of
Directors, appoint an Executive Committee and the members thereof consisting of
one or more members which shall have and may exercise, during the intervals
between the meetings of the Board of Directors, all of the powers of the Board
of Directors in the management of the business, properties and affairs of the
Corporation; provided, however, that the foregoing is subject to the applicable
provisions of law and the Certificate of Incorporation and shall not be
construed as authorizing action by the Executive Committee with respect to any
action which is required to be taken by vote of a specified proportion of the
whole Board of Directors. So far as practicable, the members of the Executive
Committee shall be appointed at the organization meeting of the Board of
Directors in each year and, unless sooner discharged by affirmative vote of a
majority of the whole Board of Directors, shall hold office until the next
annual organization meeting of the Board of Directors and until their respective
successors are appointed or until they sooner die, resign or are removed. All
acts done and powers conferred by the Executive Com-
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<PAGE>
mittee shall be deemed to be, and may be certified as being, done or conferred
under authority of the Board of Directors.
Section 4.2. Place of Meetings. Meetings of the Executive Committee
may be held at the principal place of business of the Corporation or at any
other place within or without the State of Delaware from time to time designated
by the Board of Directors or the Executive Committee. Meetings of the Executive
Committee may be held, and one or more members may attend any meeting of the
Executive Committee, by telephonic conference.
Section 4.3. Meetings; Notice; and Waiver of Notice. Regular
meetings of the Executive Committee shall be held at such times as may be
determined by resolution either of the Board of Directors or the Executive
Committee and no notice shall be required for any regular meeting. Special
meetings of the Executive Committee shall be called by the Secretary or an
Assistant Secretary upon the request of any member of the Executive Committee.
Notices of special meetings shall be delivered personally to each member or
shall be mailed to each member either by overnight courier service or
first-class mail addressed to him at his residence or usual place of business or
other address provided to the Corporation, or shall be sent to him at any of
such places by telegraph, telecopy, or shall be communicated to him personally
or by telephone, such that such notice is received by each member not later than
the business day before the date fixed for the meeting. Notice of any such
meeting shall not be required to be given to any member of the Executive
Committee if he shall sign a written waiver
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<PAGE>
thereof either before or after the time stated therein for such meeting or if he
shall be present at the meeting and participate in the business transacted
thereat, and all business transacted at any meeting of the Executive Committee
shall be fully effective without any notice thereof having been given if all the
members shall be present thereat. Unless limited by law, the Certificate of
Incorporation, the By-Laws, or the terms of notice thereof, any and all business
may be transacted at any special meeting without the notice thereof having
specifically enumerated the matters to be acted upon.
Section 4.4. Organization. The Chairman of the Executive Committee
shall preside at all meetings of the Executive Committee at which he is
present. In the absence of the Chairman of the Executive Committee, the
Chairman of the Board, if he is a member of the Executive Committee, shall
preside at meetings of the Executive Committee at which he is present. In
the absence of the Chairman of the Executive Committee and the Chairman of
the Board, the President, if he is a member of the Executive Committee, shall
preside at meetings of the Executive Committee at which he is present. In
the absence of the Chairman of the Executive Committee, the Chairman of the
Board, the President, if he is a member of the Executive Committee, one of
the members present shall be chosen by the members of the Executive Committee
present to preside at such meeting. The Secretary of the Corporation shall
act as secretary at all meetings of the Executive Committee, if he is a
member thereof, and, in his absence, or if he is not a member thereof, a
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temporary secretary shall be appointed by the secretary of the meeting.
Section 4.5. Quorum and Adjournment. A majority of the members of
the Executive Committee shall constitute a quorum for the transaction of
business. The vote of a majority of those present at any meeting at which a
quorum is present shall be the act of the Executive Committee. In the absence
of a quorum, any meeting may be adjourned from time to time until a quorum is
present. No notice of any adjourned meeting shall be required to be given other
than by announcement at the meeting that is being adjourned.
Section 4.6. Voting. On any question on which the Executive
Committee shall vote, the names of those voting and their votes shall be entered
in the minutes of the meeting when any member of the Executive Committee present
at the meeting so requests.
Section 4.7. Records. The Executive Committee shall keep minutes of
its acts and proceedings which shall be submitted at the next regular meeting of
the Board of Directors. Any action taken by the Board of Directors with respect
thereto shall be entered in the minutes of the Board of Directors. Each
director shall be entitled to receive a copy of the minutes of the Executive
Committee at his request.
Section 4.8. Vacancies; Alternate Members; and Absences. In case of
any increase in the number of members of the Executive Committee or of any
vacancy created by death, resignation, disqualification or otherwise, the
additional member or members may be elected or the vacancy or vacancies
filled,as the case
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may be, by affirmative vote of a majority of the remaining Board of Directors or
by a sole remaining director, though the remaining director or directors be less
than the quorum provided for herein. By similar vote, the Board of Directors
may designate one or more directors as alternate members of the Executive
Committee who may replace any absent or disqualified member at any meeting of
the Executive Committee.
ARTICLE V
Other Committees of the Board
Section 5.1. Appointing Other Committees of the Board. The Board of
Directors may from time to time by resolution adopted by affirmative vote of a
majority of the whole Board of Directors appoint other committees of the Board
of Directors and the members thereof which shall have such powers of the Board
of Directors and such duties as the Board of Directors may properly determine
and as provided by law. Such other committee of the Board of Directors shall
consist of one or more directors. By similar vote, the Board of Directors may
designate one or more directors as alternate members of any such committee who
may replace any absent or disqualified member at any meeting of any such
committee. In the absence or disqualification of any member of any such
committee, 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 absent or disqualified member.
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Section 5.2. Place and Time of Meetings; Notice; Waiver of Notice;
and Records. Meetings of such committees of the Board of Directors may be held
at any place, within or without the State of Delaware, from time to time
designated by the Board of Directors or the committee. Regular meetings of any
such committee shall be held at such times as may be determined by resolution of
the Board of Directors or the committee and no notice shall be required for any
regular meeting. A special meeting of any such committee shall be called by
resolution of the Board of Directors or by the Secretary or an Assistant
Secretary upon the request of any member of the committee. The provisions of
Section 4.3 hereof with respect to notice and waiver of notice of special
meetings of the Executive Committee shall also apply to all special meetings of
other committees of the Board of Directors. Any such committee may make rules
for holding and conducting its meetings and shall keep minutes of all meetings.
Meetings of any such committee may be held, and one or more members of such
committee may attend any meeting of such committee, by telephonic conference.
ARTICLE VI
The Officers
Section 6.1. Officers. The officers of the Corporation shall be a
Chairman of the Board, President, Secretary and Treasurer. The officers shall
be elected by the Board of Directors. The Board of Directors may also elect a
Vice Chairman of the Board, one or more Vice Presidents, one or more Executive
Vice
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Presidents, a Chairman of the Executive Committee, a Controller, one or more
Second Vice Presidents, Assistant Secretaries, Assistant Treasurers, Assistant
Controllers and such other officers and agents as in their judgment may be
necessary or desirable. The Chairman of the Board, the Vice Chairman of the
Board and the Chairman of the Executive Committee shall be selected from the
directors.
Section 6.2. Terms of Office and Vacancies. So far as is
practicable, all officers shall be appointed at the organization meeting of the
Board of Directors in each year and, except as otherwise provided in Sections
6.1, 6.3, and 6.4 hereof, shall hold office until the organization meeting of
the Board of Directors in the next subsequent year and until their respective
successors are elected and qualify or until they sooner die, retire, resign or
are removed. If any vacancy shall occur in any office, the Board of Directors
may elect a successor to fill such vacancy for the remainder of the term.
Section 6.3. Removal of Officers. Any officer may be removed at any
time, either with or without cause, by affirmative vote of a majority of the
whole Board of Directors at any regular meeting or at any special meeting called
for that purpose.
Section 6.4. Resignations. Any officer may resign at any time by
giving written notice thereof to the Corporation. Any resignation shall be
effective immediately unless some other date is specified for it to take
effect. Acceptance of any resignation
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shall not be necessary to make it effective unless such resignation is tendered
to such acceptance.
Section 6.5. Officers Holding More Than One Office. Any officer may
hold two or more offices so long as the duties of such offices can be
consistently performed by the same person.
Section 6.6. The Chairman of the Board. The Chairman of the Board
shall be a member of the Board of Directors, and, subject to the control of the
Board of Directors, shall have general and active charge, control and
supervision of the business, property and affairs of the Corporation. As
provided in Section 2.6 hereof, he shall act as chairman at all meetings of the
stockholders at which he is present; as provided in Section 3.7 hereof, he shall
preside at all meetings of the Board of Directors at which he is present; and as
provided in Section 4.4 hereof, in the absence of the Chairman of the Executive
Committee, he shall preside at all meetings of the Executive Committee at which
he is present, if he is a member thereof. He shall also perform such other
duties and shall have such other powers as may from time to time be assigned to
him by the Board of Directors.
Section 6.7. The Vice Chairman of the Board. The Vice Chairman of
the Board shall perform such duties and have such powers as may from time to
time be assigned to him by the Board of Directors.
Section 6.8. The President. The President shall perform such duties
and have such powers as may from time to time be assigned to him by the Board of
Directors. As provided in Section
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4.4 hereof, in the absence of the Chairman of the Executive Committee and the
Chairman of the Board, he shall preside at all meetings of the Executive
Committee at which he is present, if he is a member thereof. In the absence or
disability of the Chairman of the Board, the duties of the Chairman of the
Board, including those duties set forth in Sections 2.6, 3.7 and 4.4 hereof,
shall be performed and his powers may be exercised by the President. If neither
the President nor the Chairman of the Board is available, the duties of the
President shall be performed and his powers may be exercised by such member of
the Board of Directors as may be designated by the President and, failing such
designation or in the absence of the person so designated, by such member of the
Board of Directors as may be designated by the Chairman of the Board.
Section 6.9. The Vice Presidents. The Vice Presidents, including
the Executive Vice Presidents, shall perform such duties and have such powers as
may from time to time be assigned to them by the Board of Directors, the
Chairman of the Board or the President.
Section 6.10. The Secretary. The Secretary shall attend to the
giving of notice of each meeting of stockholders, the Board of Directors and
committees thereof and, as provided in Sections 2.6, 3.7, and 4.4 hereof, shall
act as secretary at each meeting of stockholders, directors and the Executive
Committee, if he is a member thereof. He shall keep minutes of all proceedings
at such meetings as well as of all proceedings at all meetings of such other
committees of the Board of Directors as any such committee
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shall direct him to so keep. The Secretary shall have charge of the corporate
seal and he or any officer of the Corporation shall have authority to attest to
any and all instruments or writings to which the same may be affixed. He shall
keep and account for all books, documents, papers and records of the Corporation
except those for which some other officer or agent is properly accountable. He
shall generally perform all the duties usually appertaining to the office of
secretary of a corporation. In the absence of the Secretary, such person as
shall be designated by the chairman of any meeting shall perform his duties.
Section 6.11. The Treasurer. The Treasurer shall have the care and
custody of all the funds of the Corporation and shall deposit such funds in such
banks or other depositories as the Board of Directors or any officer or officers
thereunto duly authorized by the Board of Directors shall from time to time
direct or approve. In the absence of a Controller, he shall perform all duties
appertaining to the office of Controller of the Corporation. He shall generally
perform all the duties usually appertaining to the office of a treasurer of a
corporation. When required by the Board of Directors, he shall give bonds for
the faithful discharge of his duties in such sums and with such sureties as the
Board of Directors shall approve. In the absence of the Treasurer, such person
as shall be designated by the Chairman of the Board or President shall perform
his duties.
Section 6.12. The Controller. The Controller shall prepare and have
the care and custody of the books of account of
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the Corporation. He shall keep a full and accurate account of all moneys
received and paid on account of the Corporation. He shall render a statement of
his accounts whenever the Board of Directors shall require. He shall generally
perform all the duties usually appertaining to the office of controller of a
corporation. When required by the Board of Directors, he shall give bonds for
the faithful discharge of his duties in such sums and with such sureties as the
Board of Directors shall approve.
Section 6.13. Additional Powers and Duties. In addition to the
foregoing specifically enumerated duties and powers, the several officers of the
Corporation shall perform such other duties and exercise such further powers as
the Board of Directors may from time to time determine or as may be assigned to
them by any superior officer.
ARTICLE VII
Stock and Transfers of Stock
Section 7.1. Stock Certificates. The Stock of the Corporation shall
be represented by certificates signed by two officers of the Corporation, one
the Chairman of the Board, the Vice Chairman of the Board, the President or a
Vice President and the other the Secretary or an Assistant Secretary. Any or
all of the signatures may be a facsimile. Such certificates shall be sealed
with the seal of the Corporation. Such seal may be a facsimile, engraved or
printed. In case any officer who has signed any such certificate shall have
ceased to be such officer before
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such certificate is issued, it may nevertheless be issued by the Corporation
with the same effect as if he were such officer at the date of issue.
Certificates representing the Stock of the Corporation shall be in such form as
shall be approved by the Board of Directors.
Section 7.2. Registration of Transfers of Stock. Registration of a
transfer of Stock shall be made on the books of the Corporation only upon
presentation by the person named in the certificate evidencing such stock, or by
an attorney lawfully authorized in writing, upon surrender and cancellation of
such certificate, with duly executed assignment and power of transfer endorsed
thereon or attached thereto, and with such proof of the authenticity of the
signature thereon as the Corporation or its agents may reasonably require.
Section 7.3. Lost Certificates. In case any certificate
representing Stock shall be lost, stolen or destroyed, the Board of Directors in
its discretion or any officer or officers thereunto duly authorized by the Board
of Directors may authorize the issuance of a substitute certificate in the place
of the certificate so lost, stolen or destroyed; provided, however, in each such
case the Corporation may require the owner of the lost, stolen or destroyed
certificate or his legal representative to give the Corporation evidence which
the Corporation determines in its discretion satisfactory of the loss, theft or
destruction of such certificate and of the ownership thereof and may also
require a bond sufficient to indemnify it against any claim that may be made
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against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 7.4. Determination of Stockholders of Record for Certain
Purposes. In order that the Corporation may determine the stockholders 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 in advance a record date which shall not be more than sixty
(60) days prior to any such action.
ARTICLE VIII
Indemnification and Insurance
Section 8.1. The Corporation may indemnify, to the maximum extent
permitted by law, whomever the Corporation has the power to indemnify under the
provisions of the General Corporation Law of the State of Delaware, or
otherwise.
Section 8.2. Expenses incurred in defending or investigating a
threatened or pending action, suit or proceeding may be paid by the Corporation
in advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of the director, officer, employee or
agent to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this Article
VIII.
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Section 8.3. The indemnification and advancement of expenses
provided by or granted pursuant to this Article VIII shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any By-law, agreement, contract,
vote of stockholders or disinterested directors or pursuant to the direction
(howsoever embodied) of any court of competent jurisdiction or otherwise, both
as to action in his official capacity and as to action in another capacity while
holding such office.
Section 8.4. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
Corporation would have the power or the obligation to indemnify him against such
liability under the provisions of this Article VIII.
Section 8.5. For purposes of this Article VIII, references to "the
Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and
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employees or agents so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article VIII with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
Section 8.6. The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article VIII, shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
ARTICLE IX
Miscellaneous
Section 9.1. Seal. The seal of the Corporation shall have inscribed
thereon the name of the Corporation, the year of its organization and the state
of its incorporation.
Section 9.2. Fiscal Year. The fiscal year of the Corporation shall
be determined by the Board of Directors.
Section 9.3. Signatures on Negotiable Instruments. All bills,
notes, checks or other instruments for the payment of money shall be signed or
countersigned by such officers or agents of Cor-
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poration and in such manner as from time to time may be prescribed by resolution
(whether general or special) of the Board of Directors or as may be prescribed
by any officer or officers or any officer and agent jointly thereunto duly
authorized by the Board of Directors.
Section 9.4. Books of the Corporation. Except as otherwise provided
by law, the books of the Corporation shall be kept at the principal place of
business of the Corporation and at such other locations as the Board of
Directors may from time to time determine.
Section 9.5. References to Gender. Whenever in the By-Laws
reference is made to the masculine gender, such reference shall where the
context so requires be deemed to include the feminine gender, and the By-Laws
shall be read accordingly.
Section 9.6. References to Articles and Section Numbers and to the
By-Laws and the Certificate of Incorporation. Whenever in the By-Laws reference
is made to an Article or Section number, such reference is to the number of an
Article or Section of the By-Laws. Whenever in the By-Laws reference is made to
the By-Laws, such reference is to these By-Laws of the Corporation as the same
may be from time to time amended. Whenever reference is made to the Certificate
of Incorporation, such reference is to the Certificate of Incorporation of the
Corporation as the same may from time to time be amended.
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ARTICLE X
Amendments
Section 10.1. Stockholders. Except as provided in these By-Laws or
in the Certificate of Incorporation, these By-Laws may be amended or repealed,
or new By-Laws may be adopted, at any annual or special meeting of the
stockholders, by a majority of the total votes of the stockholders, or when
stockholders are required to vote by class, by a majority of the appropriate
class, in person or represented by proxy and entitled to vote on such action;
provided, however, that the notice of such meeting shall have been given as
provided in these By-Laws, which notice shall mention that amendment or repeal
of these By-Laws, or the adoption of new By-Laws, is one of the purposes of such
meeting.
Section 10.2. Directors. Except as provided in the Certificate of
Incorporation or these By-Laws, these By-Laws may also be amended or repealed or
new By-Laws may be adopted by vote of two-thirds of all members of the Board at
any meeting thereof; provided, however, that notice of such meeting shall have
been given as provided in these By-Laws, which notice shall mention that
amendment or repeal of the By-Laws, or the adoption of new By-Laws, is one of
the purposes of such meeting. By-Laws adopted by the Board may be amended or
repealed by the stockholders as provided in Section 10.1 of this Article X.
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Exhibit 4.1
WARRANT AGREEMENT dated as of ____________ __, 1998 between AyurCore,
Inc., a Delaware corporation (the "Company"), on the one hand, and LT Lawrence &
Co., Inc., hereinafter referred to as the "Representative"), on the other hand.
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to the Representative, in its
individual capacity and not as representative of the several Underwriters
(defined below), warrants ("Warrants") to purchase up to 125,000 (as such number
may be adjusted from time to time pursuant to Article 8 of this Agreement)
shares (the "Shares") of common stock, $.001 par value per share, of the Company
(the "Common Stock"); and
WHEREAS, the Representative has agreed, pursuant to the underwriting
agreement (the "Underwriting Agreement") dated ____________ __, 1998 between the
Representative, as representative of the several underwriters named in Schedule
A to the Underwriting Agreement (the "Underwriters"), and the Company, to act as
representative of the several Underwriters in connection with the Company's
proposed public offering (the "Public Offering") of 1,250,000 shares of Common
Stock (the "Public Shares") at an initial public offering price of $____ per
share; and
WHEREAS, the Warrants issued pursuant to this Agreement are being
issued by the Company to the Representative and/or to its designees who are
officers or partners of the Representative and/or, at the Representative's
direction, to members of the selling group or underwriting syndicate
participating in the distribution of the Public Shares in the Public Offering
and/or their respective officers or partners (collectively, the "Designees"), in
consideration for, and as part of the Representative's compensation in
connection with, the Representative's acting as representative of the several
Underwriters pursuant to the Underwriting Agreement;
NOW, THEREFORE, in consideration of the premises, the payment by the
Representative or the Designees to the Company of ONE HUNDRED AND TWENTY-FIVE
DOLLARS ($125), the agreements herein set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Grant.
The Representative and/or the Designees are hereby granted the right
to purchase, at any time from ___________, 1999 until 5:00 P.M., New York City
time, on ___________, 2003, (the "Warrant Exercise Term"), up to 125,000 fully
paid and non-assessable Shares at an initial exercise price (subject to
<PAGE>
adjustment as provided in Article 8 hereof) of $_______ per Share.
2. Warrant Certificates.
The warrant certificates delivered and to be delivered pursuant to
this Agreement (the "Warrant Certificates") shall be in the form set forth as
Exhibit A attached hereto and made a part hereof, with such appropriate
insertions, omissions, substitutions and other variations as required or
permitted by this Agreement.
3. Exercise of Warrants.
3.1 Cash Exercise. The Warrants initially are exercisable at a
price of $______ per Share, payable in cash or by check to the order of the
Company, or any combination of thereof, subject to adjustment as provided in
Article 8 hereof. Upon surrender of a Warrant Certificate with the annexed Form
of Election to Purchase duly executed, together with payment of the Exercise
Price (as hereinafter defined) for the Shares purchased, at the Company's
principal offices (currently located at 1737 N. First Street, Suite 290, San
Jose, California 95112) the registered holder of a Warrant Certificate ("Holder"
or "Holders") shall be entitled to receive a certificate or certificates for the
Shares so purchased. The purchase rights represented by each Warrant
Certificate are exercisable at the option of the Holder thereof, in whole or in
part (but not as to fractional shares of the Common Stock). In the case of the
purchase of less than all the Shares purchasable under any Warrant Certificate,
the Company shall cancel said Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate of like tenor for the
balance of the Shares purchasable thereunder.
3.2 Cashless Exercise. At any time during the Warrant Exercise
Term, the Holder may, at the Holder's option, exchange, in whole or in part, the
Warrants represented by such Holder's Warrant Certificate (a "Warrant
Exchange"), into the number of Shares determined in accordance with this Section
3.2, by surrendering such Warrant Certificate at the principal office of the
Company or at the office of its transfer agent, accompanied by a notice stating
such Holder's intent to effect such exchange, the number of Warrants to be so
exchanged and the date on which the Holder requests that such Warrant Exchange
occur (the "Notice of Exchange"). The Warrant Exchange shall take place on the
date specified in the Notice of Exchange or, if later, the date the Notice of
Exchange is received by the Company (the "Exchange Date"). Certificates for the
Shares issuable upon such Warrant Exchange and, if applicable, a new Warrant
Certificate of like tenor representing the Warrants which were subject to the
surrendered Warrant Certificate and not included in the Warrant Exchange, shall
be issued as of the Exchange Date
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and delivered to the Holder within three (3) days following the Exchange Date.
In connection with any Warrant Exchange, the Holder shall be entitled to
subscribe for and acquire (i) the number of Shares (rounded to the next highest
integer) which would, but for the Warrant Exchange, then be issuable pursuant to
the provisions of Section 3.1 above upon the exercise of the Warrants specified
by the Holder in its Notice of Exchange (the "Total Number") less (ii) the
number of Shares equal to the quotient obtained by dividing (a) the product of
the Total Number and the existing Exercise Price (as hereinafter defined) by (b)
the Market Price (as hereinafter defined) of a Public Share on the day preceding
the Warrant Exchange. "Market Price" at any date shall be deemed to be the last
reported sale price, or, in case no such reported sales takes place on such day,
the average of the last reported sale prices for the last three (3) trading
days, in either case as officially reported by the principal securities exchange
on which the Common Stock is listed or admitted to trading or as reported in the
NASDAQ National Market System, or, if the Common Stock is not listed or admitted
to trading on any national securities exchange or quoted on the NASDAQ National
Market System, the closing bid price as furnished by (i) the National
Association of Securities Dealers, Inc. through NASDAQ or (ii) a similar
organization if NASDAQ is no longer reporting such information.
4. Issuance of Certificates.
Upon the exercise of the Warrants, the issuance of certificates for
the Shares purchased shall be made forthwith (and in any event within three (3)
business days thereafter) without charge to the Holder thereof including,
without limitation, any tax which may be payable in respect of the issuance
thereof, and such certificates shall (subject to the provisions of Article 5
hereof) be issued in the name of, or in such names as may be directed by, the
Holder thereof; provided, however, that the Company shall not be required to pay
any tax which may be payable in respect of any transfer involved in the issuance
and delivery of any such certificates in a name other than that of the Holder
and the Company shall not be required to issue or deliver such certificates
unless or until the person or persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the Shares
shall be executed on behalf of the Company by the manual or facsimile signature
of the present or any future Chairman or Vice Chairman of the Board of Directors
or President or Vice President of the Company under its corporate seal
reproduced thereon, attested to by the manual or facsimile signature of the
present or any future Secretary or Assistant Secretary of the Company. Warrant
Certificates shall be dated
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the date of execution by the Company upon initial issuance, division, exchange,
substitution or transfer.
Upon exercise, in part or in whole, of the Warrants, certificates
representing the Shares shall bear a legend substantially similar to the
following:
"The securities represented by this certificate and the other
securities issuable upon exercise thereof have not been registered for
purposes of public distribution under the Securities Act of 1933, as
amended (the "Act"), and may not be offered or sold except (i)
pursuant to an effective registration statement under the Act, (ii) to
the extent applicable, pursuant to Rule 144 under the Act (or any
similar rule under such Act relating to the disposition of
securities), or (iii) upon the delivery by the holder to the Company
of an opinion of counsel, reasonably satisfactory to counsel to the
Company, stating that an exemption from registration under such Act is
available."
5. Restriction on Transfer of Warrants.
The Holder of a Warrant Certificate, by the Holder's acceptance
thereof, covenants and agrees that the Warrants are being acquired as an
investment and not with a view to the distribution thereof, and that the
Warrants may not be sold, transferred, assigned, hypothecated or otherwise
disposed of, in whole or in part, for a period of one (1) year from the date
hereof, except to the Designees.
6. Price.
6.1. Initial and Adjusted Exercise Price. The initial exercise
price of each Warrant shall be $____ per Share. The adjusted exercise price per
Share shall be the price which shall result from time to time from any and all
adjustments of the initial exercise price in accordance with the provisions of
Article 8 hereof.
6.2. Exercise Price. The term "Exercise Price" herein shall mean
the initial exercise price or the adjusted exercise price, depending upon the
context.
7. Registration Rights.
7.1. Registration Under the Securities Act of 1933. None of the
Warrants or Shares have been registered for purposes of public distribution
under the Securities Act of 1933, as amended (the "Act").
7.2. Registrable Securities. As used herein the term
"Registrable Security" means each of the Warrants, the
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Shares and any shares of Common Stock issued upon any stock split or stock
dividend in respect of such Shares; provided, however, that with respect to any
particular Registrable Security, such security shall cease to be a Registrable
Security when, as of the date of determination, (i) it has been effectively
registered under the Act and disposed of pursuant thereto, (ii) registration
under the Act is no longer required for the subsequent public distribution of
such security or (iii) it has ceased to be outstanding. The term "Registrable
Securities" means any and/or all of the securities falling within the foregoing
definition of a "Registrable Security." In the event of any merger,
reorganization, consolidation, recapitalization or other change in corporate
structure affecting the Common Stock, such adjustment shall be made in the
definition of "Registrable Security" as is appropriate in order to prevent any
dilution or enlargement of the rights granted pursuant to this Article 7.
7.3. Piggyback Registration. If, at any time during the seven
years following the effective date of the Public Offering, the Company proposes
to prepare and file one or more post-effective amendments to the registration
statement filed in connection with the Public Offering or any new registration
statement or post-effective amendments thereto covering equity or debt
securities of the Company, or any such securities of the Company held by its
shareholders (in any such case, other than in connection with a merger,
acquisition or pursuant to Form S-8 or successor form) (for purposes of this
Article 7, collectively, the "Registration Statement"), it will give written
notice of its intention to do so by registered mail ("Notice"), at least thirty
(30) business days prior to the filing of each such Registration Statement, to
all holders of the Registrable Securities. Upon the written request of such a
holder (a "Requesting Holder"), made within twenty (20) business days after
receipt of the Notice, that the Company include any of the Requesting Holder's
Registrable Securities in the proposed Registration Statement, the Company
shall, as to each such Requesting Holder, use its best efforts to effect the
registration under the Act of the Registrable Securities which it has been so
requested to register ("Piggyback Registration"), at the Company's sole cost and
expense and at no cost or expense to the Requesting Holders.
Notwithstanding the provisions of this Section 7.3, the Company shall
have the right at any time after it shall have given written notice pursuant to
this Section 7.3 (irrespective of whether any written request for inclusion of
Registrable Securities shall have already been made) to elect not to file any
such proposed Registration Statement, or to withdraw the same after the filing
but prior to the effective date thereof.
7.4. Demand Registration.
(a) At any time during the Warrant Exercise Term, any
"Majority Holder" (as such term is defined in Section
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7.4(c) below) of the Registrable Securities shall have the right (which right is
in addition to the piggyback registration rights provided for under Section 7.3
hereof), exercisable by written notice to the Company (the "Demand Registration
Request"), to have the Company prepare and file with the Securities and Exchange
Commission (the "Commission"), on one occasion, at the sole expense of the
Company (except as provided in Section 7.5(b) hereof), a Registration Statement
and such other documents, including a prospectus, as may be necessary (in the
opinion of both counsel for the Company and counsel for such Majority Holder),
in order to comply with the provisions of the Act, so as to permit a public
offering and sale of the Registrable Securities by the holders thereof. The
Company shall use its best efforts to cause the Registration Statement to become
effective under the Act, so as to permit a public offering and sale of the
Registrable Securities by the holders thereof. Once effective, the Company will
use its best efforts to maintain the effectiveness of the Registration Statement
until the earlier of (i) the date that all of the Registrable Securities have
been sold or (ii) the date that the holders of the Registrable Securities
receive an opinion of counsel to the Company that all of the Registrable
Securities may be freely traded (without limitation or restriction as to
quantity or timing and without registration under the Act) under Rule 144(k)
promulgated under the Act or otherwise.
(b) The Company covenants and agrees to give written notice
of any Demand Registration Request to all holders of the Registrable Securities
within ten (10) business days from the date of the Company's receipt of any such
Demand Registration Request. After receiving notice from the Company as
provided in this Section 7.4(b), holders of Registrable Securities may request
the Company to include their Registrable Securities in the Registration
Statement to be filed pursuant to Section 7.4(a) hereof by notifying the Company
of their decision to have such securities included within ten (10) days of their
receipt of the Company's notice.
(c) The term "Majority Holder" as used in Section 7.4
hereof shall mean any holder or any combination of holders of Registrable
Securities, if included in such holders' Registrable Securities are that
aggregate number of Shares (including Shares already issued and Shares issuable
pursuant to the exercise of outstanding Warrants) as would constitute a majority
of the aggregate number of Shares (including Shares already issued and Shares
issuable pursuant to the exercise of outstanding Warrants) included in all the
Registrable Securities.
7.5. Covenants of the Company With Respect to Registration. The
Company covenants and agrees as follows:
(a) In connection with any registration under Section 7.4
hereof, the Company shall file the Registration
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Statement as expeditiously as possible, but in any event no later than twenty
(20) business days following receipt of any demand therefor, shall use its best
efforts to have any such Registration Statement declared effective at the
earliest possible time, and shall furnish each holder of Registrable Securities
such number of prospectuses as shall reasonably be requested.
(b) The Company shall pay all costs, fees and expenses
(other than underwriting fees, discounts and nonaccountable expense allowances
applicable to the Registrable Securities and the fees and expenses of counsel
retained by the holders of the Registrable Securities) in connection with all
Registration Statements filed pursuant to Sections 7.3 and 7.4(a) hereof
including, without limitation, the Company's legal and accounting fees, printing
expenses, and blue sky fees and expenses.
(c) The Company will take all necessary action which may be
required in qualifying or registering the Registrable Securities included in the
Registration Statement for offering and sale under the securities or blue sky
laws of such states as are reasonably requested by the holders of such
securities.
(d) The Company shall indemnify any holder of the
Registrable Securities to be sold pursuant to any Registration Statement and any
underwriter or person deemed to be an underwriter under the Act and each person,
if any, who controls such holder or underwriter or person deemed to be an
underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), against all loss,
claim, damage, expense or liability (including all expenses reasonably incurred
in investigating, preparing or defending against any claim whatsoever) to which
any of them may become subject under the Act, the Exchange Act or otherwise,
arising from such registration statement to the same extent and with the same
effect as the provisions pursuant to which the Company has agreed to indemnify
the Underwriters as set forth in Section 7 of the Underwriting Agreement and to
provide for just and equitable contribution as set forth in Section 8 of the
Underwriting Agreement.
(e) Any holder of Registrable Securities to be sold
pursuant to a Registration Statement, and such Holder's successors and assigns,
shall severally, and not jointly, indemnify, the Company, its officers and
directors and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act, against all loss,
claim, damage or expense or liability (including all expenses reasonably
incurred in investigating, preparing or defending against any claim whatsoever)
to which they may become subject under the Act, the Exchange Act or otherwise,
arising from information furnished by or on behalf of such Holder, or such
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Holder's successors or assigns, for specific inclusion in such Registration
Statement to the same extent and with the same effect as the provisions pursuant
to which the Underwriters have agreed to indemnify the Company as set forth in
Section 7 of the Underwriting Agreement and to provide for just and equitable
contribution as set forth in Section 8 of the Underwriting Agreement.
(f) Nothing contained in this Agreement shall be construed
as requiring any Holder to exercise the Warrants held by such Holder prior to
the initial filing of any Registration Statement or the effectiveness thereof.
(g) If the Company shall fail to comply with the provisions
of this Section 7 the Company shall, in addition to any other equitable or other
relief available to the holders of Registrable Securities, be liable for any or
all incidental, special and consequential damages sustained by the holders of
Registrable Securities, requesting registration of their securities.
(h) The Company shall promptly deliver copies of all
correspondence between the Commission and the Company, its counsel or auditors
and all memoranda relating to discussions with the Commission or its staff with
respect to the Registration Statement to each Holder of Registrable Securities
included for registration in such Registration Statement pursuant to Section 7.3
hereof or Section 7.4 hereof that requests such correspondence and memoranda and
to the managing underwriter, if any, of the offering in connection with which
such Holder's Registrable Securities are being registered and shall permit each
such Holder and managing underwriter to do such investigation, upon reasonable
advance notice, with respect to information contained in or omitted from the
Registration Statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. Such investigation shall include access to books, records and
properties and opportunities to discuss the business of the Company with its
officers and independent auditors, all to such reasonable extent and at such
reasonable times and as often as any such Holder or managing underwriter shall
reasonably request.
8. Adjustments of Exercise Price and Number of Shares.
8.1 Computation of Adjusted Price. In case the Company shall at
any time after the date hereof pay a dividend in shares of Common Stock or make
a distribution in shares of Common Stock, then upon such dividend or
distribution, the Exercise Price in effect immediately prior to such dividend or
distribution shall forthwith be reduced to a price determined by dividing:
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<PAGE>
(a) an amount equal to the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution
multiplied by the Exercise Price in effect immediately prior to such dividend or
distribution, by
(b) the total number of shares of Common Stock
outstanding immediately after such issuance or sale.
For the purposes of any computation to be made in accordance
with the provisions of this Section 8.1, the Common Stock issuable by way of
dividend or other distribution on any stock of the Company shall be deemed to
have been issued immediately after the opening of business on the date following
the date fixed for the determination of stockholders entitled to receive such
dividend or other distribution.
8.2. Subdivision and Combination. In case the Company shall at
any time subdivide or combine the outstanding shares of Common Stock, the
Exercise Price shall forthwith be proportionately decreased in the case of
subdivision or increased in the case of combination.
8.3. Adjustment in Number of Shares. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Article 8, the number of
Shares issuable upon the exercise of each Warrant shall be adjusted to the
nearest full number by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of Shares issuable
upon exercise of the Warrants immediately prior to such adjustment and dividing
the product so obtained by the adjusted Exercise Price.
8.4. Reclassification, Consolidation, Merger, etc. In case of
any reclassification or change of the outstanding shares of Common Stock
(other than a change in par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination), or in the case of
any consolidation of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger in which the Company is the
surviving corporation and which does not result in any reclassification or
change of the outstanding shares of Common Stock, except a change as a result
of a subdivision or combination of such shares or a change in par value, as
aforesaid), or in the case of a sale or conveyance to another corporation of
the property of the Company as an entirety, the Holders shall thereafter have
the right to purchase the kind and number of shares of stock and other
securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance as if the Holders were the owners
of the shares of Common Stock underlying the Warrants immediately prior to
any such events at a price equal to the product of (x) the number of shares
of Common Stock issuable upon exercise of the Holder's Warrants and (y) the
Exercise Price in effect immediately prior to the record date for such
reclassification,
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<PAGE>
change, consolidation, merger, sale or conveyance as if such Holders had
exercised the Warrants.
8.5. Determination of Outstanding Shares of Common Stock. The
number of shares of Common Stock at any one time outstanding shall include the
aggregate number of shares of Common Stock issued and the aggregate number of
shares of Common Stock issuable upon the exercise of options, rights, warrants
and upon the conversion or exchange of convertible or exchangeable securities.
8.6. Dividends and Other Distributions with Respect to
Outstanding Securities. In the event that the Company shall at any time prior
to the exercise of all Warrants make any distribution of its assets to holders
of its Common Stock as a liquidating or a partial liquidating dividend, then the
holder of Warrants who exercises its Warrants after the record date for the
determination of those holders of Common Stock entitled to such distribution of
assets as a liquidating or partial liquidating dividend shall be entitled to
receive for the Warrant Price per Warrant, in addition to each share of Common
Stock, the amount of such distribution (or, at the option of the Company, a sum
equal to the value of any such assets at the time of such distribution as
determined by the Board of Directors of the Company in good faith) which would
have been payable to such holder had he been the holder of record of the Common
Stock receivable upon exercise of his Warrant on the record date for the
determination of those entitled to such distribution. At the time of any such
dividend or distribution, the Company shall make appropriate reserves to ensure
the timely performance of the provisions of this Subsection 8.6.
8.7. Subscription Rights for Shares of Common Stock or Other
Securities. In the case the Company or an affiliate of the Company shall at any
time after the date hereof and prior to the exercise of all the Warrants issue
any rights, warrants or options to subscribe for shares of Common Stock or any
other securities of the Company or of such affiliate to all the shareholders of
the Company, the Holders of unexercised Warrants on the record date set by the
Company or such affiliate in connection with such issuance of rights, warrants
or options shall be entitled, in addition to the shares of Common Stock or other
securities receivable upon the exercise of the Warrants, to receive such rights,
warrants or options that such Holders would have been entitled to receive had
they been, on such record date, the holders of record of the number of whole
shares of Common Stock then issuable upon exercise of their outstanding Warrants
(assuming for purposes of this Section 8.7), that the exercise of the Warrants
is permissible immediately upon issuance).
9. Exchange and Replacement of Warrant Certificates.
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<PAGE>
Each Warrant Certificate is exchangeable without expense, upon the
surrender thereof by the registered Holder at the principal executive office of
the Company, for a new Warrant Certificate of like tenor and date representing
in the aggregate the right to purchase the same number of Shares in such
denominations as shall be designated by the Holder thereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrant
Certificate, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu thereof.
10. Elimination of Fractional Interests.
The Company shall not be required to issue certificates representing
fractions of Shares, nor shall it be required to issue scrip or pay cash in lieu
of fractional interests, it being the intent of the parties that all fractional
interests shall be eliminated by rounding any fraction up to the nearest whole
number of Shares.
11. Reservation and Listing of Securities.
The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance upon the
exercise of the Warrants, such number of shares of Common Stock as shall be
issuable upon the exercise thereof. The Company covenants and agrees that, upon
exercise of the Warrants and payment of the Exercise Price therefor, all Shares
issuable upon such exercise shall be duly and validly issued, fully paid,
non-assessable and not subject to the preemptive rights of any shareholder. As
long as the Warrants shall be outstanding, the Company shall use its best
efforts to cause all shares of Common Stock issuable upon the exercise of the
Warrants to be listed on or quoted by Nasdaq or listed on such national
securities exchange in the event the Common Stock is listed on a national
securities exchange.
12. Notices to Warrant Holders.
Nothing contained in this Agreement shall be construed as conferring
upon the Holder or Holders the right to vote or to consent or to receive notice
as a shareholder in respect of any meetings of shareholders for the election of
directors or any other matter, or as having any rights whatsoever as a
shareholder of the Company. If, however, at any time prior to the expiration of
the Warrants and their exercise, any of the following events shall occur:
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<PAGE>
(a) the Company shall take a record of the holders of its shares
of Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall be
proposed; or
(d) reclassification or change of the outstanding shares of
Common Stock (other than a change in par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination),
consolidation of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger in which the Company is the
surviving corporation and which does not result in any reclassification or
change of the outstanding shares of Common Stock, except a change as a result
of a subdivision or combination of such shares or a change in par value, as
aforesaid), or a sale or conveyance to another corporation of the property of
the Company as an entirety is proposed; or
(e) The Company or an affiliate of the Company shall propose
to issue any rights to subscribe for shares of Common Stock or any other
securities of the Company or of such affiliate to all the shareholders of the
Company;
then, in any one or more of said events, the Company shall give written notice
to the Holder or Holders of such event at least fifteen (15) days prior to the
date fixed as a record date or the date of closing the transfer books for the
determination of the shareholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, options or
warrants, or entitled to vote on such proposed dissolution, liquidation, winding
up or sale. Such notice shall specify such record date or the date of closing
the transfer books, as the case may be. Failure to give such notice or any
defect therein shall not affect the validity of any action taken in connection
with the declaration or payment of any such dividend or distribution, or the
issuance of any convertible or exchangeable securities or subscription rights,
options or warrants, or any proposed dissolution, liquidation, winding up or
sale.
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<PAGE>
13. Notices.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly made when delivered,
or mailed by registered or certified mail, return receipt requested:
(a) If to a registered Holder of the Warrants, to the address of such
Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3 of this
Agreement or to such other address as the Company may designate by notice to the
Holders.
14. Supplements and Amendments.
The Company and Representative may from time to time supplement or
amend this Agreement without the approval of any Holders of Warrant Certificates
in order to cure any ambiguity, to correct or supplement any provision contained
herein which may be defective or inconsistent with any provisions herein, or to
make any other provisions in regard to matters or questions arising hereunder
which the Company and Representative may deem necessary or desirable and which
the Company and the Representative deem not to adversely affect the interests of
the Holders of Warrant Certificates.
15. Successors.
All the covenants and provisions of this Agreement by or for the
benefit of the Company and the Holders inure to the benefit of their respective
successors and assigns hereunder.
16. Termination.
This Agreement shall terminate at the close of business on
___________, 2006. Notwithstanding the foregoing, this Agreement will terminate
on any earlier date when all Warrants have been exercised and all the Shares
have been resold to the public; provided, however, that the provisions of
Section 7.5 hereof shall survive any termination pursuant to this Section 16
until the close of business on ___________, 2009.
17. Governing Law.
This Agreement and each Warrant Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of New York and for all
purposes shall be construed in accordance with the laws of said State.
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<PAGE>
18. Benefits of This Agreement.
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company and the Representative and any other
registered holder or holders of the Warrant Certificates, Warrants or the Shares
any legal or equitable right, remedy or claim under this Agreement; and this
Agreement shall be for the sole and exclusive benefit of the Company and the
Representative and any other holder or holders of the Warrant Certificates,
Warrants or the Shares.
19. Counterparts.
This Agreement may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original, and
such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
[SEAL] AYURCORE, INC.
By:
--------------------------------------
Name:
Title:
Attest:
_______________________
LT LAWRENCE & CO., INC.
By:
--------------------------------------
Name:
Title:
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EXHIBIT A
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO
THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE
COMPANY, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, _______ __, 2003
No. W- _______ Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that _______________ ____________
or registered assigns, is the registered holder of _______ Warrants to purchase,
at any time from ____________ __, 1999 until 5:00 P.M. New York City time on
_____________ __, 2003 ("Expiration Date"), up to _____ fully-paid and
non-assessable shares (the "Shares") of common stock, par value $.001 per
share(the "Common Stock"), of AyurCore, Inc., a Delaware corporation (the
"Company"), at the initial exercise price, subject to adjustment in certain
events (the "Exercise Price"), of $____ per Share upon surrender of this Warrant
Certificate and payment of the Exercise Price at an office or agency of the
Company, but subject to the conditions set forth herein and in the warrant
agreement dated as of ___________, 1998 between the Company and LT Lawrence &
Co., Inc. (the "Warrant Agreement"). Payment of the Exercise Price may be made
in cash, or by certified or official bank check in New York Clearing House funds
payable to the order of the Company, or any combination thereof.
No Warrant may be exercised after 5:00 P.M., New York City time, on
the Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to in a description of the rights, limitation
of
<PAGE>
rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events, the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair, the rights
of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax, or other governmental charge
imposed in connection therewith.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated: ___________, 1998 AYUCORE, INC.
[SEAL] By:__________________________
Name:
Title:
Attest:
______________________
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[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _________ Shares and
herewith tenders in payment for such Shares cash or a certified or official bank
check payable in New York Clearing House Funds to the order of AyuCore, Inc. in
the amount of $___________, all in accordance with the terms hereof. The
undersigned requests that a certificate for such Shares be registered in the
name of______________________, whose address is __________________, and that
such Certificate be delivered to __________________, whose address is
_____________.
Dated: Signature:_________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
________________________________
________________________________
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED _________________________________________________
hereby sells, assigns and transfers unto
______________________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _______________, Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: Signature: ______________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate)
_______________________________
_______________________________
(Insert Social Security or Other
Identifying Number of Assignee)
<PAGE>
Exhibit 10-1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of the Start Date
(defined in Section 9.1 hereof), by and between AyurCore, Inc., a Delaware
corporation ("Company"), and Barry Wald ("Employee").
1. Employment. The Company hereby employs Employee to render services in
accordance with and subject to the terms, conditions and provisions of this
Agreement. Employee shall have the title President-International Operations.
Employee shall render services at such places in San Jose, California and
vicinity as the Company shall designate from time to time. Notwithstanding
anything in this Agreement to the contrary, the Company may, at any time
during the term of this Agreement, change Employee's position in the Company
and the title of Employee's position in the Company; provided that (a)
Employee's compensation under this Agreement shall not be reduced solely as a
result of any such change and (b) in all events Employee's position in the
Company shall be that of an executive officer.
2. Acceptance of Employment. Employee hereby accepts employment by the
Company subject to the terms, conditions and provisions of this Agreement and
agrees to devote his entire working time and attention and best talents and
abilities exclusively to the service of the Company as the Company may direct
during the term hereof. It is expressly understood and agreed that in the
performance of his duties and obligations hereunder, Employee shall at all
times be subject to the control and direction of the Chief Executive Officer
of the Company or such other persons as the Board of Directors of the Company
may designate from time to time.
3. Duties.
3.1. Authority. Employee shall report to the Chief Executive Officer
of the Company or such other persons as the Board of Directors of the Company
may designate from time to time, and his powers and authority shall be those
reasonably necessary and appropriate for him to perform his duties as
President - International Operations, provided that in all events Employee
shall be subject to the direction and control of the and Chief Executive
Officer of the Company and such persons as the Board of Directors of the
Company may designate from time to time.
3.2. Exclusive Employment. Employee shall devote his full time and
effort during normal business hours to the business and affairs of the
Company. Employee shall not be involved in any business activities other than
those performed for the Company except as shall be specifically approved in
writing by the Company.
3.3. Services. Employee shall perform the duties and services
described on Exhibit A hereto, which by this reference is incorporated herein.
<PAGE>
4. Compensation.
4.1. Salary. In full consideration for the services to be rendered by
Employee and in complete discharge of the Company's obligations hereunder,
the Company shall pay to Employee and Employee shall accept from the Company
the following (subject to all withholding requirements which may be imposed
by applicable taxing authorities):
a. a salary of $130,000.00 per year payable in arrears in
accordance with the Company's usual business practices.
b. reimbursement on a monthly basis for all reasonable expenses
incurred in connection with the performance of duties under this Agreement,
provided that such expenses are documented and approved by the Company in
each instance. Employee shall obtain the prior written approval of the
Company for any expense in excess of $1,000 for which reimbursement will be
requested.
c. such fringe benefits (such as paid vacations, participation in
medical insurance plans and employee benefit plans) as are generally
available to all employees of the Company; and
d. such other benefits (if any) as may be authorized from time to
time by the Board of Directors of the Company.
4.2. Bonus and Salary Increases. The Company may, in its sole
discretion, award to the Employee a bonus of up to $15,000 for each six-month
period of service under this Agreement. In addition, the Company may, in its
sole discretion, increase the Employee's salary with respect to any year of
this Agreement in an amount not to exceed 10% of the previous year's salary.
4.3. Vacation. Employee shall be entitled to a paid (at Employee's
then current salary rate) vacation of a duration dependent upon years of
Employee's continuous employment with the Company according to the following
schedule:
During Years Weeks of Vacation
____________ _________________
1 2
2 - 5 3
6 and thereafter 4
The non-carryover vacation period to which Employee is entitled for any year
shall accrue on a daily basis during such year. Once Employee has accrued
the maximum number of weeks of vacation to which employee is then entitled,
Employee shall not accrue any additional vacation until Employee has used
some or all of Employee's accrued vacation. Subject to the limitations of
the preceding sentence, periods of vacation accrued but not taken during one
year may be carried over and taken during any succeeding year. The Company
shall have no obligation to make any payment to Employee on account of any
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vacation accrued but not taken by Employee during any year, except that, on
the termination of Employee's employment with the Company, the Company shall
pay to Employee an amount equal to the product of Employee's then current
salary and the number of weeks (and partial weeks) of vacation accrued but
untaken by Employee as of the date of the termination.
5. Policies and Regulations. Employee shall observe, comply with and be
bound by all of the policies, rules and regulations established by the
Company with respect to its employees and otherwise, all of which are subject
to change by the Company from time to time.
6. Rights to Creations.
6.1. Creation. The term "Creation" means every idea, concept,
invention, device, design, apparatus, machine, practice, process, method,
product, composition of matter, improvement, formula, algorithm, literary or
graphical or audiovisual work or sound recording, mask work, or computer
program of any kind, whether or not subject to patent, copyright, mask work
right, or similar protection.
6.2. Creates, Created. The terms "Creates" and "Created" mean
invented, developed, devised, conceived, discovered, created, first reduced
to practice, written, or fixed in a tangible medium of expression.
6.3. Disclosure and Assignment of Creations. Employee shall promptly
inform and disclose to the Company all Creations which Employee Creates
(either alone or with others) during the term of this Agreement, if the
Creations:
a. relate, at the time Created, to the business of the Company or
to any actual or demonstrably anticipated research or development
work of the Company; or
b. result from any work or services performed by Employee for the
Company; or
c. were Created utilizing any of the Company's equipment, supplies,
facilities, time, or Confidential Information.
ALL OF THE ABOVE-DESCRIBED CREATIONS ARE HEREBY ASSIGNED BY EMPLOYEE
TO THE COMPANY, AND ARE THE EXCLUSIVE PROPERTY OF THE COMPANY.
The assignment of the Creations contemplated in this Section shall occur
automatically and immediately at the time the Creation is Created. The
Company shall have no obligation to pay Employee any additional or separate
compensation for Employee's assignment of any Creation to the Company
pursuant to this Section. Notwithstanding the foregoing, Employee shall
execute and deliver to the Company, and shall permit the filing
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and/or recording of, all such assignments, memorandum of assignment and other
documents as the Company reasonably may request from time to time to
memorialize any such assignment.
6.4. Collaboration. Employee shall not, without the prior written
consent of the Company, which consent can be withheld for any reason or no
reason, collaborate or join in creative efforts with any person or entity not
employed or retained by the Company with respect to any of the services to be
performed by Employee under this Agreement. It is the intent of the parties
that complete title and all rights in and to all of the benefits and results
of Employee's performance of services under this Agreement and all
Confidential Information, Creations and other proprietary rights relating to
or arising from Employee's performance of services under this Agreement shall
belong to the Company.
6.5. Governmental Rights. Employee shall assign to the Company all of
Employee's rights in any Creation of Employee if the Company is required to
grant those rights to the United States or any foreign government or any
agencies of the United States or any foreign government.
6.6. Employee's Assistance. Employee shall assist the Company in
obtaining and/or maintaining patents, copyrights, mask work rights, and
similar rights to any Creations assigned by Employee to the Company if the
Company, in its sole discretion, requests such assistance. Employee shall
sign all documents and do all other things deemed necessary by the Company,
at the Company's expense, to obtain and/or maintain such rights, to assign
them to the Company, and to protect them against infringement by other
parties.
6.7. Appointment of Agent. Employee hereby irrevocably appoints the
Chief Executive Officer of the Company to act as Employee's agent and
attorney-in-fact to perform all acts necessary to obtain and/or maintain
patents, copyrights, mask work rights, and similar rights, to any Creations
assigned by Employee to the Company under this Agreement if Employee (a)
refuses to perform those acts, or (b) is unavailable, within the meaning of
any applicable laws. Employee acknowledges that the grant of the foregoing
power of attorney is coupled with an interest and shall survive the death or
disability of Employee.
6.8. Further Disclosure. Employee shall promptly disclose to the
Company, in confidence, (a) all Creations of any kind which Employee Creates
during the term of this Agreement, and (b) each application for patent,
copyright registration, mask work registration, or similar right filed by
Employee within one (1) year after termination of this Agreement. Employee
agrees that any such application shall be presumed to relate to a Creation of
Employee Created during the term of this Agreement, unless Employee can prove
otherwise.
6.9. Records. During the term of this Agreement Employee shall keep in
the manner and form requested by the Company, complete, accurate, and
authentic information and records on all Creations. The information and
records, and all copies of
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them, shall be the exclusive property of the Company. Employee shall
promptly surrender all such information and records upon the request of the
Company, and on any termination of this Agreement.
6.10. Obligations of the Company. Nothing contained in this Agreement
shall be construed to preclude the Company from exercising any or all of its
rights and privileges as sole and exclusive owner of all of the Creations
owned by or assigned to the Company under this Agreement. In exercising such
rights and privileges with respect to any particular Creation, the Company
may decide not to file any patent application or any copyright or mask work
registration on the Creation, may decide to maintain the Creation as secret
and confidential, or may decide to abandon the Creation or dedicate it to the
public. Employee shall have no authority to exercise any rights or
privileges with respect to the Creations owned by or assigned to the Company
under this Agreement.
6.11. Conformance with Labor Code. THIS AGREEMENT DOES NOT APPLY TO ANY
CREATIONS WHICH QUALIFY FULLY UNDER THE PROVISIONS OF SECTION 2870 OF THE
CALIFORNIA LABOR CODE, OR ANY SIMILAR APPLICABLE LAW. For Employee's
information, the current text of Section 2870 is reproduced below:
"(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or his rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the
employer's equipment, supplies, facilities, or trade secret information
except for those inventions that either:
"(1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably
anticipated research or development of the employer; or
"(2) Result from any work performed by the employee for the employer.
"(b) The extent a provision in an employment agreement purports to require
an employee to assign an invention otherwise excluded from being required
to be assigned under subdivision (a), the provision is against the public
policy of this state and is unenforceable."
The provisions of this Section shall apply only to the extent that the place
at which Employee performs his services under this Agreement is located in
the State of California and only with respect to services performed in the
State of California.
7. Confidential Information.
7.1. Confidential Information. The term "Confidential Information"
means all Creations, data, information, know-how, processes, process
parameters, methods,
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practices, designs, fabrication techniques, technical plans, algorithms,
computer programs , documentation, mask works, customer lists, price lists,
supplier lists, business plans, marketing plans, financial information, and
the like, in whatever form or medium, and whether or not designated or marked
"Confidential" or the like, which: (a) relate to the business of the Company
and (i) which have not been disclosed by the Company to the general public or
(ii) which Employee knows or has good reason to know are not generally known
to the general public; or (b) are received by the Company from a third party
under an obligation of confidentiality to the third party.
7.2. Restriction. Employee acknowledges that during Employee's
performance of services under this Agreement, Employee may be given access
to, become acquainted with, or develop Confidential Information. Employee
shall not use or disclose (directly or indirectly) any Confidential
Information at any time or in any manner, except as required in the course of
his performance of services for the Company under this Agreement. All
Confidential Information, documents, and equipment of the Company, whether
prepared by Employee or otherwise coming into Employee's possession, are the
exclusive property of the Company, and must not be removed from any of the
Company's premises except as required in the course of Employee's performance
of services under this Agreement. All such Confidential Information,
documents, and equipment shall be promptly returned by Employee to the
Company upon the request of the Company, and on any termination of this
Agreement.
7.3. No Disclosure or Use from Others. Employee shall not disclose to
the Company or use on behalf of the Company or in connection with his
performance of any services under this Agreement, any confidential
information, trade secrets or other proprietary information obtained from any
person or entity other than the Company, and shall not bring any confidential
information, trade secrets or other proprietary information of any person or
entity other than the Company on to the Company's premises.
8. Restrictions on Employee.
8.1. No Conflicting Obligations. Employee represents to the Company
that each of the following is true, correct and complete.
a. Employee is neither a party to nor bound by any agreement with or
obligation to any other person or entity that would (i) constitute a
conflict of interest for the Company or Employee, or (ii) interfere with
Employee's performance of services under this Agreement and his compliance
with the terms and provisions of this Agreement, or (iii) interfere with
the creative efforts of Employee relating to the Projects or services
contemplated by this Agreement.
b. Employee acknowledges that, except as set forth in this Agreement
or on Exhibit A hereto, Employee is neither a party to nor bound by any
agreement with any person or entity which either (i) restricts Employee's
use or disclosure or any information gained or learned by Employee from the
person or entity, or (ii)
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otherwise relates to Employee's use or disclosure of any confidential
information or trade secrets of the person or entity.
c. Employee is not a party to any litigation which would affect or
restrict, or might tend to affect or restrict, Employee's ability to
complete any Projects or to perform any services contemplated by this
Agreement, and no person or entity has contended or is contending that
Employee has breached any of the terms or provisions of any of the
agreements listed on Exhibit A hereto.
8.2. No Competition. During the term of this Agreement, Employee shall
not in any manner (whether as an employee, consultant, or otherwise) perform
services for, or have an ownership interest in (other than less than a 5%
equity interest in a publicly-held company), any entity that competes with
the Company.
8.3. No Conflict of Interest. During the term of this Agreement, and
for a period of one (1) year thereafter, Employee shall not provide services
to any person or entity for purposes related directly or indirectly to (a)
the services performed by Employee for the Company under this Agreement, or
(b) any project on which Employee has worked or is working for the Company.
8.4. No Competitive Planning. During the term of this Agreement,
Employee shall not undertake any planning for any business activity, other
than his performance of services under this Agreement, which is either (a)
competitive with the services which Employee performed or is performing under
this Agreement or any of the projects on which Employee has worked or is
working for the Company, or (b) competitive with the business of the Company.
8.5. No Hiring of Employees. During the term of this Agreement, and
for a period of two (2) years thereafter, Employee shall not employ or
attempt to employ (whether as an employee, consultant, or otherwise), in
competition with the Company, any of the Company's employees.
8.6. No Use of Confidential Information. During the term of this
Agreement, and for a period of three (3) years thereafter, Employee shall not
provide to any person or entity other than the Company services (whether as
an employee, consultant, or otherwise) which are competitive with the
business of the Company in which the duties of the competitive employment or
service would inherently require Employee to disclose or use any Confidential
Information.
8.7. No Solicitation of Customers. During the term of this Agreement,
and for a period of two (2) years thereafter, Employee shall not divert or
attempt to divert to any other person or entity (by solicitation or by any
other means) any of the customers of the Company existing at the time of the
termination of this Agreement. For purposes of this Section, the term
"customer" shall mean and include any person or entity (a) to which the
Company has, at any time within the twelve (12) months immediately preceding
the date of termination of this Agreement, sold or furnished any products or
services, or (b)
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which has, at any time within the twelve (12) months immediately preceding
the date of termination of this Agreement, purchased products or services in
a transaction in which the Company acted as a sales representative or a
distributor, or (c) with which, at any time within the twelve (12) months
immediately preceding the date of termination of this Agreement, the Company
has had any substantial promotional contact with a view to selling or
furnishing any products or services.
8.8. Indemnification. Employee shall defend, indemnify, and hold the
Company, and each of the Company's officers, directors, employees and agents,
harmless from any claim, liability, award, or expense (including attorney's
fees) arising from any breach of Employee's representations in this Section 8.
9. Term and Termination.
9.1. Term. Notwithstanding the date on which this Agreement is
actually executed by the Company and Employee or the date on which Employee
is actually appointed as President - International Operations by the Board of
Directors of the Company, the term of this Agreement shall begin as of the
effective date of the planned initial public offering of the Company's equity
securities (the "Start Date") and shall continue until the third anniversary
thereof ("End Date") unless sooner terminated in accordance with the terms of
this Agreement. In the event that Employee shall continue in the full-time
employment of the Company after the End Date, such continued employment shall
be subject to the terms and conditions of this Agreement and the term of this
Agreement shall include the period during which Employee in fact so continues
in such employment; provided that the continuation of employment with the
Company for any period after the End Date shall not obligate the Company to
continue to employ Employee or to continue to employ Employee for any
particular period after the End Date.
9.2. Termination by the Company. The Company may terminate this
Agreement for "cause" at any time by giving to Employee ninety (90) days
prior written notice of termination. For purposes of this Section, the term
"cause" shall mean (a) conviction of or confession by Employee of theft,
fraud, or embezzlement committed against the Company; (b) Employee's refusal
or failure to diligently perform services for the Company under this
Agreement; (c) Employee's material breach of any of his obligations under
this Agreement or Employee's failure or refusal to perform any material
obligation of Employee under this Agreement; and (d) the incapacity or
disability of Employee by reason of accident, illness, or mental or physical
disability, as a result of which Employee is prevented from fully performing
Employee's services under this Agreement for a consecutive period of sixty
(60) days or longer or an aggregate of ninety (90) days or more during any
twelve-month period. This Agreement shall terminate automatically at the end
of such 90-day period and the Company shall have no obligation to give
Employee any further notice of termination.
9.3. Termination by Employee. Employee may not terminate this
Agreement for any reason other than "cause". For purposes of this Section,
the term "cause" shall mean the Company's material breach of any of its
obligations under this
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Agreement or the Company's failure or refusal to perform any material
obligation of the Company under this Agreement. Employee may terminate this
Agreement for "cause" at any time by giving to the Company ninety (90) days
prior written notice of termination. This Agreement shall terminate
automatically at the end of such 90-day period and Employee shall have no
obligation to give the Company any further notice of termination.
9.4. Effect of Termination. In the event of the termination of this
Agreement by the Company or Employee, the Company shall be released and
discharged of and from all obligations under this Agreement except for its
obligation to pay to Employee monies due and owing to Employee with respect
to services performed prior to the date of termination of this Agreement and
except as provided in Section 12 hereof.
9.5. Related Agreements. The Company may grant to Employee one or more
stock options, or other stock incentives which may provide that the option,
or stock incentive will vest over a period of time which may be different
from the then remaining term of this Agreement. Employee acknowledges that
nothing in this Agreement or any agreement relating to any such option, or
stock incentive (a) shall obligate the Company to continue Employee's
employment for a period sufficient to permit the full vesting of such option,
bonus or stock incentive or (b) shall limit in any way the Company's right to
terminate Employee's employment in accordance with the terms of this
Agreement.
9.6. Injunctive Relief. Employee hereby acknowledges and agrees that
it would be difficult to fully compensate the Company for damages for a
breach or threatened breach of any of the provisions of Sections 3.2, 6, 7,
8, 9.3, 11 or 12.3 hereof. Accordingly, Employee specifically agrees that
the Company shall be entitled to temporary and permanent injunctive relief to
enforce the provisions of Sections 3.2, 6, 7, 8, 9.3, 11 and 12.3 hereof and
that such relief may be granted without the necessity of proving actual
damages. The foregoing provision with respect to injunctive relief shall
not, however, prohibit the Company from pursuing any other rights or remedies
available to the Company for such breach or threatened breach, including, but
not limited to, the recovery of damages from Employee or any third parties.
10. Survival of Certain Provisions. Notwithstanding anything to the contrary
contained herein, in the event of any termination of this Agreement, the
Company shall retain all of its rights under Section 6, 7, 8, 10, 11 and 12
hereof.
11. Binding Arbitration.
11.1. Resolution of Dispute. All disputes, claims and controversies
("Claims") between the parties arising from or relating to this Agreement
shall be resolved by binding arbitration as provided in this Section. The
parties each waive their right to commence an action in any court to resolve
any Claim. However, this Section shall not apply to any Claim: (a) for
worker's compensation or unemployment benefits; or (b) by the Company for
injunctive and/or other equitable relief. With respect to matters referred
to in clause (b) above, the Company may seek and obtain injunctive relief in
court and then proceed with arbitration under this Agreement.
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11.2. Processing Claim. A Claim must be processed in the manner set
forth below, otherwise the Claim shall be void and deemed waived even if
there is a federal or state statute of limitations which would allow more
time to pursue the Claim.
a. The Claim must initially be raised in writing by Employee to the
Chief Executive Officer of the Company. The Company shall respond to the
Claim within 30 days after the Claim is presented. If the Company fails to
respond, it shall be deemed a denial of Employee's Claim.
b. If Employee is not satisfied with the Company's decision,
Employee may present the Claim for resolution by arbitration. If Employee
desires to proceed to arbitration, Employee must give written notice to the
Chief Executive Officer of the Company of his intention to arbitrate within
60 days from either the mailing of the Company's final decision or the
expiration of the foregoing 30-day period.
c. If the Company desires to initiate arbitration, it must give
written notice to Employee within 60 days after either its mailing to
Employee of notice of its final decision or the expiration of the foregoing
30-day period.
11.3. Procedure. The arbitration shall be conducted in accordance with
the then-current Model Employment Arbitration Procedures of the American
Arbitration Association ("AAA") before a single arbitrator. The arbitration
shall take place in San Jose, California.
11.4. Discovery Matters. Each party shall have the right to take the
deposition of three individuals and any expert witness designated by the
other party. Each party also shall have the right to make requests for
production of documents to any party. Additional discovery may be had only
where the arbitrator so orders, upon a showing of substantial need.
11.5. Limitation. The arbitrator shall have no authority to: (a) adopt
new policies or procedures for the Company; (b) modify this Agreement or any
existing policies, procedures, wages or benefits of the Company; or (c) hear
or decide any matter that was not processed in accordance with this
Agreement. The arbitrator shall have the authority to award any form of
remedy or damages that would be available in a court; provided that Employee
shall not seek and the arbitrator shall have no authority to award punitive
or exemplary damages.
11.6. Costs. The Company and Employee each shall pay one-half of all
reasonable and necessary fees of the arbitral body and arbitrator.
11.7. Confidential Proceedings. The arbitration shall be conducted in
private, and shall not be open to the public or the media. The testimony and
other evidence presented, and the results of the arbitration, unless
otherwise agreed to by both parties,
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shall be confidential and, unless otherwise required by law, shall not be
made public or reported by either the Company or Employee.
12. Miscellaneous.
12.1. Authorized Representative of Company. Although Employee may now
or hereafter be an officer of the Company, any and all actions and decisions
to be taken or made by the Company under this Agreement or with respect to
the employment relationship described in this Agreement, and any and all
consents, approvals, agreements and waivers permitted or required to be given
or made on the part of the Company under this Agreement, shall be made and
accomplished by the Company only through the actions taken, in writing, of
its Chief Executive Officer or such other person as the Board of Directors of
the Company may designate from time to time.
12.2. Notices. All notices and other communications given or permitted
under this Agreement shall be in writing and shall be deemed given when
delivered, if delivered personally, or ten (10) days after mailing, if mailed
by certified or registered mail, postage prepaid, return receipt requested,
or two (2) days after transmission, if sent by facsimile, telex or other form
of electronic communication that provides for confirmation of transmission to
the parties, their successors in interest or their assignees at the addresses
and facsimile numbers set forth on the signature page hereto or such other
addresses and facsimile numbers as the parties may designate by written
notice in the manner aforesaid.
12.3. Assignment. The Company may assign this Agreement and grant its
rights hereunder in whole or in part to any affiliate, subsidiary or parent
of the Company, to its successor or successors, or to a corporation with
which it may be merged, consolidated, or combined, or to a corporation which
may acquire all or a major portion of the Company's assets; provided that no
such assignment shall be effective unless and until any such assignee shall
expressly assume all of the Company's obligations hereunder. Employee may
not assign any or all of his rights or obligations under this Agreement,
except only that, in the event of the death or disability of Employee,
Employee's right to receive compensation earned, and to be reimbursed for
expenses incurred, during the term of this Agreement may be assigned to
Employee's heirs or personal representative. This Agreement shall inure to
the benefit of the Company's successors, assigns, grantees, and its
affiliated, subsidiary, and parent companies and to the benefit of Employee's
heirs and successors.
12.4. Waivers. All rights and remedies of the parties hereto are
separate and cumulative, and no one of them, whether exercised or not, shall
be deemed to limit or exclude any other rights or remedies which the parties
hereto may have. Neither party hereto shall be deemed to waive any rights or
remedies under this Agreement unless such waiver is in writing and is signed
by such party. No delay or omission on the part of either party hereto in
exercising any right or remedy shall operate as a waiver of such right or
remedy or of any other right or remedy. A waiver of any right or remedy on
any one occasion shall not be construed as a bar to or waiver of any such
right or remedy on any future occasion.
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12.5. Severability. If any provision or portion thereof of this
Agreement is held to be unenforceable or invalid, the remaining provisions
and portions thereof shall nevertheless be given and continue in full force
and effect.
12.6. Section Headings. Section headings contained in this Agreement
are for convenience only and are not a part of this Agreement and do not in
any way limit or modify the provision of this Agreement.
12.7. Entire Agreement. This Agreement contains the entire
understanding between the parties hereto, and supersedes any prior written or
oral agreements between them respecting the subject matter contained herein.
There are no representations, agreements, arrangements, or understandings,
either oral or written, between or among any of the parties relating to the
subject matter of this Agreement which are not fully expressed herein.
12.8. Amendment. This Agreement may be amended only in writing duly
executed by all of the parties hereto.
12.9. Governing Law. All questions with respect to the construction of
this Agreement and the rights and liabilities of the parties with respect
thereto shall be governed by the laws of the State of California.
12.10. Interpretation. Each of the parties to this Agreement has
participated in the negotiation and preparation of this Agreement.
Therefore, the normal rule of construction that an agreement shall be
interpreted against the drafting party shall not apply. All pronouns and any
variation thereof shall be deemed to refer to the masculine, feminine, or
neuter and to the singular or plural, as the identity of the person or
persons may require for proper interpretation of this Agreement.
12.11. Attorney's Fees. In any arbitration or action between the parties
permitted under this Agreement seeking enforcement of any of the terms and
provisions of this Agreement, the prevailing party in such arbitration or
action shall be awarded, in addition to damages, injunctive or other relief,
its reasonable costs and expenses, not limited to taxable costs, and all
reasonable attorney's fees.
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12.12. Acknowledgment of Reading. Employee acknowledges that he has read
and understands this Agreement, and has received a copy of it.
IN WITNESS WHEREOF, the parties have entered into this Employment
Agreement as of the day and year first above written.
"Company" "Employee"
AyurCore, Inc.
By:________________________________ ________________________________
Deepa Chitre M.D. Barry Wald
Chief Executive Officer
Address: 1737 N. First St., #290
San Jose, CA 95112
Facsimile: (408) 441-6382
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EXHIBIT A
Services (Pursuant to Section 3.3 of the Agreement)
Barry Wald shall be responsible for all sales and marketing activities of
the Company. In addition, Barry Wald shall perform such other sales and
marketing and other services as the Board of Directors of the Company may
from time to time direct.
Confidentiality Agreements (Pursuant to Section 8.1 of the Agreement)
None.
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Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of the Start Date
(defined in Section 9.1 hereof), by and between AyurCore, Inc., a Delaware
corporation ("Company"), and Deepa Chitre ("Employee").
1. Employment. The Company hereby employs Employee to render services in
accordance with and subject to the terms, conditions and provisions of this
Agreement. Employee shall have the titles, President and Chief Executive
Officer. Employee shall render services at such places in San Jose, California
and vicinity as the Company shall designate from time to time. Notwithstanding
anything in this Agreement to the contrary, the Company may, at any time during
the term of this Agreement, change Employee's position in the Company and the
title of Employee's position in the Company; provided that (a) Employee's
compensation under this Agreement shall not be reduced solely as a result of any
such change and (b) in all events Employee's position in the Company shall be
that of an executive officer.
2. Acceptance of Employment. Employee hereby accepts employment by the
Company subject to the terms, conditions and provisions of this Agreement and
agrees to devote her entire working time and attention and best talents and
abilities exclusively to the service of the Company as the Company may direct
during the term hereof. It is expressly understood and agreed that in the
performance of her duties and obligations hereunder, Employee shall at all
times be subject to the control and direction of the Board of Directors of
the Company.
3. Duties.
3.1. Authority. Employee shall report to the Board of Directors of the
Company and her powers and authority shall be those reasonably necessary and
appropriate for her to perform her duties as President and Chief Executive
Officer.
3.2. Exclusive Employment. Employee shall devote her full time and
effort during normal business hours to the business and affairs of the
Company. Employee shall not be involved in any business activities other than
those performed for the Company except as shall be specifically approved in
writing by the Company.
3.3. Services. Employee shall perform the duties and services described
on Exhibit A hereto, which by this reference is incorporated herein.
4. Compensation.
4.1. Salary. In full consideration for the services to be rendered by
Employee and in complete discharge of the Company's obligations hereunder, the
Company shall pay
<PAGE>
to Employee and Employee shall accept from the Company the following (subject
to all withholding requirements which may be imposed by applicable taxing
authorities):
a. a salary of $140,000.00 per year payable in arrears in accordance
with the Company's usual business practices.
b. reimbursement on a monthly basis for all reasonable expenses
incurred in connection with the performance of duties under this Agreement,
provided that such expenses are documented and approved by the Company in
each instance. Employee shall obtain the prior written approval of the
Company for any expense in excess of $1,000 for which reimbursement will be
requested.
c. such fringe benefits (such as paid vacations, participation in
medical insurance plans and employee benefit plans) as are generally
available to all employees of the Company; and
d. such other benefits (if any) as may be authorized from time to
time by the Board of Directors of the Company.
4.2. Bonus and Salary Increases. The Company may, in its sole
discretion, award to the Employee a bonus of up to $35,000 for each year of
service under this Agreement. In addition, the Company may, in its sole
discretion, increase the Employee's salary with respect to any year of this
Agreement in an amount not to exceed 10% of the previous year's salary.
4.3. Vacation. Employee shall be entitled to a paid (at Employee's
then current salary rate) vacation of a duration dependent upon years of
Employee's continuous employment with the Company according to the following
schedule:
During Years Weeks of Vacation
------------- -----------------
1 2
2 - 5 3
6 and thereafter 4
The non-carryover vacation period to which Employee is entitled for any year
shall accrue on a daily basis during such year. Once Employee has accrued
the maximum number of weeks of vacation to which employee is then entitled,
Employee shall not accrue any additional vacation until Employee has used
some or all of Employee's accrued vacation. Subject to the limitations of
the preceding sentence, periods of vacation accrued but not taken during one
year may be carried over and taken during any succeeding year. The Company
shall have no obligation to make any payment to Employee on account of any
vacation accrued but not taken by Employee during any year, except that, on
the termination of Employee's employment with the Company, the Company shall
pay to Employee an amount equal to the product of Employee's then current
salary and the
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number of weeks (and partial weeks) of vacation accrued but untaken by Employee
as of the date of the termination.
5. Policies and Regulations. Employee shall observe, comply with and be
bound by all of the policies, rules and regulations established by the Company
with respect to its employees and otherwise, all of which are subject to change
by the Company from time to time.
6. Rights to Creations.
6.1. Creation. The term "Creation" means every idea, concept,
invention, device, design, apparatus, machine, practice, process, method,
product, composition of matter, improvement, formula, algorithm, literary or
graphical or audiovisual work or sound recording, mask work, or computer
program of any kind, whether or not subject to patent, copyright, mask work
right, or similar protection.
6.2. Creates, Created. The terms "Creates" and "Created" mean invented,
developed, devised, conceived, discovered, created, first reduced to practice,
written, or fixed in a tangible medium of expression.
6.3. Disclosure and Assignment of Creations. Employee shall promptly
inform and disclose to the Company all Creations which Employee Creates (either
alone or with others) during the term of this Agreement, if the Creations:
a. relate, at the time Created, to the business of the Company or to
any actual or demonstrably anticipated research or development work of
the Company; or
b. result from any work or services performed by Employee for the
Company; or
c. were Created utilizing any of the Company's equipment, supplies,
facilities, time, or Confidential Information.
ALL OF THE ABOVE-DESCRIBED CREATIONS ARE HEREBY ASSIGNED BY EMPLOYEE
TO THE COMPANY, AND ARE THE EXCLUSIVE PROPERTY OF THE COMPANY.
The assignment of the Creations contemplated in this Section shall occur
automatically and immediately at the time the Creation is Created. The Company
shall have no obligation to pay Employee any additional or separate compensation
for Employee's assignment of any Creation to the Company pursuant to this
Section. Notwithstanding the foregoing, Employee shall execute and deliver to
the Company, and shall permit the filing and/or recording of, all such
assignments, memorandum of assignment and other documents as the Company
reasonably may request from time to time to memorialize any such assignment.
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6.4. Collaboration. Employee shall not, without the prior written
consent of the Company, which consent can be withheld for any reason or no
reason, collaborate or join in creative efforts with any person or entity not
employed or retained by the Company with respect to any of the services to be
performed by Employee under this Agreement. It is the intent of the parties
that complete title and all rights in and to all of the benefits and results of
Employee's performance of services under this Agreement and all Confidential
Information, Creations and other proprietary rights relating to or arising from
Employee's performance of services under this Agreement shall belong to the
Company.
6.5. Governmental Rights. Employee shall assign to the Company all of
Employee's rights in any Creation of Employee if the Company is required to
grant those rights to the United States or any foreign government or any
agencies of the United States or any foreign government.
6.6. Employee's Assistance. Employee shall assist the Company in
obtaining and/or maintaining patents, copyrights, mask work rights, and similar
rights to any Creations assigned by Employee to the Company if the Company, in
its sole discretion, requests such assistance. Employee shall sign all
documents and do all other things deemed necessary by the Company, at the
Company's expense, to obtain and/or maintain such rights, to assign them to the
Company, and to protect them against infringement by other parties.
6.7. Appointment of Agent. Employee hereby irrevocably appoints the
Secretary of the Company to act as Employee's agent and attorney-in-fact to
perform all acts necessary to obtain and/or maintain patents, copyrights, mask
work rights, and similar rights, to any Creations assigned by Employee to the
Company under this Agreement if Employee (a) refuses to perform those acts, or
(b) is unavailable, within the meaning of any applicable laws. Employee
acknowledges that the grant of the foregoing power of attorney is coupled with
an interest and shall survive the death or disability of Employee.
6.8. Further Disclosure. Employee shall promptly disclose to the
Company, in confidence, (a) all Creations of any kind which Employee Creates
during the term of this Agreement, and (b) each application for patent,
copyright registration, mask work registration, or similar right filed by
Employee within one (1) year after termination of this Agreement. Employee
agrees that any such application shall be presumed to relate to a Creation of
Employee Created during the term of this Agreement, unless Employee can prove
otherwise.
6.9. Records. During the term of this Agreement Employee shall keep in
the manner and form requested by the Company, complete, accurate, and authentic
information and records on all Creations. The information and records, and all
copies of them, shall be the exclusive property of the Company. Employee shall
promptly surrender all such information and records upon the request of the
Company, and on any termination of this Agreement.
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6.10. Obligations of the Company. Nothing contained in this
Agreement shall be construed to preclude the Company from exercising any or
all of its rights and privileges as sole and exclusive owner of all of the
Creations owned by or assigned to the Company under this Agreement. In
exercising such rights and privileges with respect to any particular
Creation, the Company may decide not to file any patent application or any
copyright or mask work registration on the Creation, may decide to maintain
the Creation as secret and confidential, or may decide to abandon the
Creation or dedicate it to the public. Employee shall have no authority to
exercise any rights or privileges with respect to the Creations owned by or
assigned to the Company under this Agreement.
6.11. Conformance with Labor Code. THIS AGREEMENT DOES NOT APPLY TO
ANY CREATIONS WHICH QUALIFY FULLY UNDER THE PROVISIONS OF SECTION 2870 OF THE
CALIFORNIA LABOR CODE, OR ANY SIMILAR APPLICABLE LAW. For Employee's
information, the current text of Section 2870 is reproduced below:
"(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the
employer's equipment, supplies, facilities, or trade secret information
except for those inventions that either:
"(1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably
anticipated research or development of the employer; or
"(2) Result from any work performed by the employee for the employer.
"(b) The extent a provision in an employment agreement purports to require
an employee to assign an invention otherwise excluded from being required
to be assigned under subdivision (a), the provision is against the public
policy of this state and is unenforceable."
The provisions of this Section shall apply only to the extent that the place at
which Employee performs her services under this Agreement is located in the
State of California and only with respect to services performed in the State of
California.
7. Confidential Information.
7.1. Confidential Information. The term "Confidential Information"
means all Creations, data, information, know-how, processes, process parameters,
methods, practices, designs, fabrication techniques, technical plans,
algorithms, computer programs , documentation, mask works, customer lists, price
lists, supplier lists, business plans, marketing plans, financial information,
and the like, in whatever form or medium, and whether or not designated or
marked "Confidential" or the like, which: (a) relate to the
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business of the Company and (i) which have not been disclosed by the Company to
the general public or (ii) which Employee knows or has good reason to know are
not generally known to the general public; or (b) are received by the Company
from a third party under an obligation of confidentiality to the third party.
7.2. Restriction. Employee acknowledges that during Employee's
performance of services under this Agreement, Employee may be given access
to, become acquainted with, or develop Confidential Information. Employee
shall not use or disclose (directly or indirectly) any Confidential
Information at any time or in any manner, except as required in the course of
her performance of services for the Company under this Agreement. All
Confidential Information, documents, and equipment of the Company, whether
prepared by Employee or otherwise coming into Employee's possession, are the
exclusive property of the Company, and must not be removed from any of the
Company's premises except as required in the course of Employee's performance
of services under this Agreement. All such Confidential Information,
documents, and equipment shall be promptly returned by Employee to the
Company upon the request of the Company, and on any termination of this
Agreement.
7.3. No Disclosure or Use from Others. Employee shall not disclose to
the Company or use on behalf of the Company or in connection with her
performance of any services under this Agreement, any confidential
information, trade secrets or other proprietary information obtained from any
person or entity other than the Company, and shall not bring any confidential
information, trade secrets or other proprietary information of any person or
entity other than the Company on to the Company's premises.
8. Restrictions on Employee.
8.1. No Conflicting Obligations. Employee represents to the Company
that each of the following is true, correct and complete.
a. Employee is neither a party to nor bound by any agreement with or
obligation to any other person or entity that would (i) constitute a
conflict of interest for the Company or Employee, or (ii) interfere with
Employee's performance of services under this Agreement and her compliance
with the terms and provisions of this Agreement, or (iii) interfere with
the creative efforts of Employee relating to the Projects or services
contemplated by this Agreement.
b. Employee acknowledges that, except as set forth in this Agreement
or on Exhibit A hereto, Employee is neither a party to nor bound by any
agreement with any person or entity which either (i) restricts Employee's
use or disclosure or any information gained or learned by Employee from the
person or entity, or (ii) otherwise relates to Employee's use or disclosure
of any confidential information or trade secrets of the person or entity.
c. Employee is not a party to any litigation which would affect or
restrict, or might tend to affect or restrict, Employee's ability to
complete any
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Projects or to perform any services contemplated by this Agreement, and no
person or entity has contended or is contending that Employee has breached
any of the terms or provisions of any of the agreements listed on Exhibit A
hereto.
8.2. No Competition. During the term of this Agreement, Employee
shall not in any manner (whether as an employee, consultant, or otherwise)
perform services for, or have an ownership interest in (other than less than
a 5% equity interest in a publicly-held company), any entity that competes
with the Company.
8.3. No Conflict of Interest. During the term of this Agreement, and
for a period of one (1) year thereafter, Employee shall not provide services to
any person or entity for purposes related directly or indirectly to (a) the
services performed by Employee for the Company under this Agreement, or (b) any
project on which Employee has worked or is working for the Company.
8.4. No Competitive Planning. During the term of this Agreement,
Employee shall not undertake any planning for any business activity, other than
her performance of services under this Agreement, which is either (a)
competitive with the services which Employee performed or is performing under
this Agreement or any of the projects on which Employee has worked or is working
for the Company, or (b) competitive with the business of the Company.
8.5. No Hiring of Employees. During the term of this Agreement, and for
a period of two (2) years thereafter, Employee shall not employ or attempt to
employ (whether as an employee, consultant, or otherwise), in competition with
the Company, any of the Company's employees.
8.6. No Use of Confidential Information. During the term of this
Agreement, and for a period of three (3) years thereafter, Employee shall not
provide to any person or entity other than the Company services (whether as an
employee, consultant, or otherwise) which are competitive with the business of
the Company in which the duties of the competitive employment or service would
inherently require Employee to disclose or use any Confidential Information.
8.7. No Solicitation of Customers. During the term of this Agreement,
and for a period of two (2) years thereafter, Employee shall not divert or
attempt to divert to any other person or entity (by solicitation or by any
other means) any of the customers of the Company existing at the time of the
termination of this Agreement. For purposes of this Section, the term
"customer" shall mean and include any person or entity (a) to which the
Company has, at any time within the twelve (12) months immediately preceding
the date of termination of this Agreement, sold or furnished any products or
services, or (b) which has, at any time within the twelve (12) months
immediately preceding the date of termination of this Agreement, purchased
products or services in a transaction in which the Company acted as a sales
representative or a distributor, or (c) with which, at any time within the
twelve (12) months immediately preceding the date of termination of this
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Agreement, the Company has had any substantial promotional contact with a view
to selling or furnishing any products or services.
8.8. Indemnification. Employee shall defend, indemnify, and hold the
Company, and each of the Company's officers, directors, employees and agents,
harmless from any claim, liability, award, or expense (including attorney's
fees) arising from any breach of Employee's representations in this Section 8.
9. Term and Termination.
9.1. Term. Notwithstanding the date on which this Agreement is actually
executed by the Company and Employee or the date on which Employee is
actually appointed as President and Chief Executive Officer by the Board of
Directors of the Company, the term of this Agreement shall begin as of the
effective date of the planned initial public offering of the Company's equity
securities (the "Start Date") and shall continue until the third anniversary
thereof ("End Date") unless sooner terminated in accordance with the terms of
this Agreement. In the event that Employee shall continue in the full-time
employment of the Company after the End Date, such continued employment shall
be subject to the terms and conditions of this Agreement and the term of this
Agreement shall include the period during which Employee in fact so continues
in such employment; provided that the continuation of employment with the
Company for any period after the End Date shall not obligate the Company to
continue to employ Employee or to continue to employ Employee for any
particular period after the End Date.
9.2. Termination by the Company. The Company may terminate this
Agreement for "cause" at any time by giving to Employee ninety (90) days prior
written notice of termination. For purposes of this Section, the term "cause"
shall mean (a) conviction of or confession by Employee of theft, fraud, or
embezzlement committed against the Company; (b) Employee's refusal or failure to
diligently perform services for the Company under this Agreement; (c) Employee's
material breach of any of her obligations under this Agreement or Employee's
failure or refusal to perform any material obligation of Employee under this
Agreement; and (d) the incapacity or disability of Employee by reason of
accident, illness, or mental or physical disability, as a result of which
Employee is prevented from fully performing Employee's services under this
Agreement for a consecutive period of sixty (60) days or longer or an aggregate
of ninety (90) days or more during any twelve-month period. This Agreement
shall terminate automatically at the end of such 90-day period and the Company
shall have no obligation to give Employee any further notice of termination.
9.3. Termination by Employee. Employee may not terminate this
Agreement for any reason other than "cause". For purposes of this Section,
the term "cause" shall mean the Company's material breach of any of its
obligations under this Agreement or the Company's failure or refusal to
perform any material obligation of the Company under this Agreement.
Employee may terminate this Agreement for "cause" at any time by giving to
the Company ninety (90) days prior written notice of termination. This
Agreement shall terminate automatically at the end of such 90-day period and
Employee shall have no obligation to give the Company any further notice of
termination.
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9.4. Effect of Termination. In the event of the termination of this
Agreement by the Company or Employee, the Company shall be released and
discharged of and from all obligations under this Agreement except for its
obligation to pay to Employee monies due and owing to Employee with respect
to services performed prior to the date of termination of this Agreement and
except as provided in Section 12 hereof.
9.5. Related Agreements. The Company may grant to Employee one or more
stock options, or other stock incentives which may provide that the option, or
stock incentive will vest over a period of time which may be different from the
then remaining term of this Agreement. Employee acknowledges that nothing in
this Agreement or any agreement relating to any such option, or stock incentive
(a) shall obligate the Company to continue Employee's employment for a period
sufficient to permit the full vesting of such option, bonus or stock incentive
or (b) shall limit in any way the Company's right to terminate Employee's
employment in accordance with the terms of this Agreement.
9.6. Injunctive Relief. Employee hereby acknowledges and agrees that it
would be difficult to fully compensate the Company for damages for a breach or
threatened breach of any of the provisions of Sections 3.2, 6, 7, 8, 9.3, 11 or
12.3 hereof. Accordingly, Employee specifically agrees that the Company shall
be entitled to temporary and permanent injunctive relief to enforce the
provisions of Sections 3.2, 6, 7, 8, 9.3, 11 and 12.3 hereof and that such
relief may be granted without the necessity of proving actual damages. The
foregoing provision with respect to injunctive relief shall not, however,
prohibit the Company from pursuing any other rights or remedies available to the
Company for such breach or threatened breach, including, but not limited to, the
recovery of damages from Employee or any third parties.
10. Survival of Certain Provisions. Notwithstanding anything to the
contrary contained herein, in the event of any termination of this Agreement,
the Company shall retain all of its rights under Section 6, 7, 8, 10, 11 and 12
hereof.
11. Binding Arbitration.
11.1. Resolution of Dispute. All disputes, claims and controversies
("Claims") between the parties arising from or relating to this Agreement shall
be resolved by binding arbitration as provided in this Section. The parties
each waive their right to commence an action in any court to resolve any Claim.
However, this Section shall not apply to any Claim: (a) for worker's
compensation or unemployment benefits; or (b) by the Company for injunctive
and/or other equitable relief. With respect to matters referred to in clause
(b) above, the Company may seek and obtain injunctive relief in court and then
proceed with arbitration under this Agreement.
11.2. Processing Claim. A Claim must be processed in the manner set
forth below, otherwise the Claim shall be void and deemed waived even if there
is a federal or state statute of limitations which would allow more time to
pursue the Claim.
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a. The Claim must initially be raised in writing by Employee to the
Board of Directors of the Company. The Company shall respond to the Claim
within 30 days after the Claim is presented. If the Company fails to
respond, it shall be deemed a denial of Employee's Claim.
b. If Employee is not satisfied with the Company's decision,
Employee may present the Claim for resolution by arbitration. If Employee
desires to proceed to arbitration, Employee must give written notice to the
Board of Directors of the Company of her intention to arbitrate within 60
days from either the mailing of the Company's final decision or the
expiration of the foregoing 30-day period.
c. If the Company desires to initiate arbitration, it must give
written notice to Employee within 60 days after either its mailing to
Employee of notice of its final decision or the expiration of the foregoing
30-day period.
11.3. Procedure. The arbitration shall be conducted in accordance
with the then-current Model Employment Arbitration Procedures of the American
Arbitration Association ("AAA") before a single arbitrator. The arbitration
shall take place in San Jose, California.
11.4. Discovery Matters. Each party shall have the right to take
the deposition of three individuals and any expert witness designated by the
other party. Each party also shall have the right to make requests for
production of documents to any party. Additional discovery may be had only
where the arbitrator so orders, upon a showing of substantial need.
11.5. Limitation. The arbitrator shall have no authority to: (a)
adopt new policies or procedures for the Company; (b) modify this Agreement or
any existing policies, procedures, wages or benefits of the Company; or (c) hear
or decide any matter that was not processed in accordance with this Agreement.
The arbitrator shall have the authority to award any form of remedy or damages
that would be available in a court; provided that Employee shall not seek and
the arbitrator shall have no authority to award punitive or exemplary damages.
11.6. Costs. The Company and Employee each shall pay one-half of
all reasonable and necessary fees of the arbitral body and arbitrator.
11.7. Confidential Proceedings. The arbitration shall be conducted
in private, and shall not be open to the public or the media. The testimony and
other evidence presented, and the results of the arbitration, unless otherwise
agreed to by both parties, shall be confidential and, unless otherwise required
by law, shall not be made public or reported by either the Company or Employee.
12. Miscellaneous.
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12.1. Authorized Representative of Company. Although Employee may
now or hereafter be an officer of the Company, any and all actions and
decisions to be taken or made by the Company under this Agreement or with
respect to the employment relationship described in this Agreement, and any
and all consents, approvals, agreements and waivers permitted or required to
be given or made on the part of the Company under this Agreement, shall be
made and accomplished by the Company only through the actions taken, in
writing, of the entire Board of Directors or such person as the Board of
Directors of the Company may designate from time to time.
12.2. Notices. All notices and other communications given or
permitted under this Agreement shall be in writing and shall be deemed given
when delivered, if delivered personally, or ten (10) days after mailing, if
mailed by certified or registered mail, postage prepaid, return receipt
requested, or two (2) days after transmission, if sent by facsimile, telex or
other form of electronic communication that provides for confirmation of
transmission to the parties, their successors in interest or their assignees at
the addresses and facsimile numbers set forth on the signature page hereto or
such other addresses and facsimile numbers as the parties may designate by
written notice in the manner aforesaid.
12.3. Assignment. The Company may assign this Agreement and grant
its rights hereunder in whole or in part to any affiliate, subsidiary or parent
of the Company, to its successor or successors, or to a corporation with which
it may be merged, consolidated, or combined, or to a corporation which may
acquire all or a major portion of the Company's assets; provided that no such
assignment shall be effective unless and until any such assignee shall expressly
assume all of the Company's obligations hereunder. Employee may not assign any
or all of her rights or obligations under this Agreement, except only that, in
the event of the death or disability of Employee, Employee's right to receive
compensation earned, and to be reimbursed for expenses incurred, during the term
of this Agreement may be assigned to Employee's heirs or personal
representative. This Agreement shall inure to the benefit of the Company's
successors, assigns, grantees, and its affiliated, subsidiary, and parent
companies and to the benefit of Employee's heirs and successors.
12.4. Waivers. All rights and remedies of the parties hereto are
separate and cumulative, and no one of them, whether exercised or not, shall be
deemed to limit or exclude any other rights or remedies which the parties hereto
may have. Neither party hereto shall be deemed to waive any rights or remedies
under this Agreement unless such waiver is in writing and is signed by such
party. No delay or omission on the part of either party hereto in exercising
any right or remedy shall operate as a waiver of such right or remedy or of any
other right or remedy. A waiver of any right or remedy on any one occasion
shall not be construed as a bar to or waiver of any such right or remedy on any
future occasion.
12.5. Severability. If any provision or portion thereof of this
Agreement is held to be unenforceable or invalid, the remaining provisions and
portions thereof shall nevertheless be given and continue in full force and
effect.
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12.6. Section Headings. Section headings contained in this
Agreement are for convenience only and are not a part of this Agreement and do
not in any way limit or modify the provision of this Agreement.
12.7. Entire Agreement. This Agreement contains the entire
understanding between the parties hereto, and supersedes any prior written or
oral agreements between them respecting the subject matter contained herein.
There are no representations, agreements, arrangements, or understandings,
either oral or written, between or among any of the parties relating to the
subject matter of this Agreement which are not fully expressed herein.
12.8. Amendment. This Agreement may be amended only in writing duly
executed by all of the parties hereto.
12.9. Governing Law. All questions with respect to the construction
of this Agreement and the rights and liabilities of the parties with respect
thereto shall be governed by the laws of the State of California.
12.10. Interpretation. Each of the parties to this Agreement has
participated in the negotiation and preparation of this Agreement. Therefore,
the normal rule of construction that an agreement shall be interpreted against
the drafting party shall not apply. All pronouns and any variation thereof
shall be deemed to refer to the masculine, feminine, or neuter and to the
singular or plural, as the identity of the person or persons may require for
proper interpretation of this Agreement.
12.11. Attorney's Fees. In any arbitration or action between the
parties permitted under this Agreement seeking enforcement of any of the terms
and provisions of this Agreement, the prevailing party in such arbitration or
action shall be awarded, in addition to damages, injunctive or other relief, its
reasonable costs and expenses, not limited to taxable costs, and all reasonable
attorney's fees.
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12.12. Acknowledgment of Reading. Employee acknowledges that he has
read and understands this Agreement, and has received a copy of it.
IN WITNESS WHEREOF, the parties have entered into this Employment Agreement
as of the day and year first above written.
"Company" "Employee"
AyurCore, Inc.
By:___________________________ _________________________
Sanjeev Chitre Deepa Chitre
Chairman of the Board Address: _________________
Address: 1737 N. First St., #290 _________________
San Jose, CA 95112 _________________
Facsimile: (408) 441-6382
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EXHIBIT A
Services (Pursuant to Section 3.3 of the Agreement)
Deepa Chitre shall be responsible for all operations of the Company and
shall perform such services as the Board of Directors of the Company may from
time to time direct.
Confidentiality Agreements (Pursuant to Section 8.1 of the Agreement)
None.
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Exhibit 10.3
Table of Contents
Page
1. Purpose of the Plan 1
2. Stock Subject to the Plan 1
3. Administration of the Plan 1
4. Type of Option 2
5. Eligibility 2
6. Restrictions on Options 2
7. Option Agreement 3
8. Option Price 3
9. Manner of Payment; Manner of Exercise 4
10. Exercise of Options 4
11. Term of Options; Exercisability 5
12. Transferability 6
13. Recapitalization, Reorganizations and the Like 6
14. No Special Employment Rights 7
15. Withholding 7
16. Restrictions on Exercise of Options and Issuance of Shares 8
17. Purchase for Investment; Rights of Holder on Subsequent Registration 8
18. Loans 9
19. Modification of Outstanding Options 9
20. Approval of Board and Stockholders 9
21. Termination and Amendment of Plan 9
22. Duties of the Company 10
23. Limitation of Rights in the Option Shares 10
24. Governing Law 10
25. Notices 10
26. Headings 10
<PAGE>
AYURCORE, INC.
1997 STOCK OPTION PLAN
1. Purpose of the Plan.
The purpose of the AyurCore, Inc. 1997 Stock Option Plan (the
"Plan") is to advance the interests of AyurCore, Inc., a Delaware corporation
(the "Company"), by providing an opportunity for ownership of the stock of
the Company by employees, agents and directors of, and consultants to, the
Company or of any subsidiary corporation (herein called "subsidiary" or
"subsidiaries"), as defined in Section 424(f) of the Internal Revenue Code of
1986, as amended (the "Code") and the Treasury regulations promulgated
thereunder (the "Regulations"). Such employees, agents and directors of, and
consultants to, the Company or any subsidiary are hereinafter referred to
individually as an "Eligible Person" and collectively as "Eligible Persons".
By providing an opportunity for such stock ownership, the Company seeks to
attract and retain qualified personnel, and otherwise to provide additional
incentive for optionees to promote the success of its business.
2. Stock Subject to the Plan.
(a) The total number of shares of the authorized but unissued or
treasury shares of the common stock, having no par value per share, of the
Company (the "Common Stock") for which options may be granted under the Plan
(the "Options") shall be 227,986, subject to adjustment as provided in
Section 13 hereof.
(b) If an Option granted or assumed hereunder shall expire or
terminate for any reason without having been exercised in full, the
unpurchased shares subject thereto shall again be available for subsequent
Option grants under the Plan.
(c) Common Stock issuable upon exercise of an Option may be subject
to such restrictions on transfer, repurchase rights or other conditions or
restrictions as shall be determined by the Board of Directors of the Company
(the "Board").
3. Administration of the Plan.
(a) The Plan shall be administered by the Board. No member of the
Board shall act upon any matter affecting any Option granted or to be granted
to himself or herself under the Plan; provided, however, that nothing
contained herein shall be deemed to prohibit a member of the Board from
acting upon any matter generally affecting the Plan or any Options granted
thereunder. A majority of the members of the Board shall constitute a
quorum, and any action may be taken by a majority of those present and voting
at any meeting. The decision of the Board as to all questions of
interpretation and application of the Plan shall be final, binding and
conclusive on all persons. The Board, in its sole discretion, may grant
Options to purchase shares of the Common Stock only as provided in the Plan,
and shares shall be issued upon exercise of such Options as provided in the
Plan. The Board shall have authority, subject to the express provisions of
the Plan, to determine the Eligible
<PAGE>
Persons who shall be issued Options, the times when Options shall be granted
and within which they may be exercised, the prices at which Options shall be
exercised, the number of shares of Common Stock to be subject to each Option
and whether an Option shall be treated as an incentive stock option or a
non-qualified stock option. The Board shall also have the authority, subject
to the express provisions of the Plan, to amend the Plan, to determine the
terms and provisions of the respective option agreements, which may but need
not be identical, to construe the respective option agreements and the Plan,
and to make all other determinations in the judgment of the Board necessary
or desirable for the administration of the Plan. The Board may correct any
defect or supply any omission or reconcile any inconsistency in the Plan or
in any option agreement in the manner and to the extent it shall deem
expedient to implement the Plan and shall be the sole and final judge of such
expediency. The Board, in its discretion, may delegate its power, duties and
responsibilities to a committee, consisting solely of two or more
"Non-Employee Directors" (as hereinafter defined). If a committee is so
appointed, all references to the Board herein shall mean and relate to such
committee. The existence of such a committee shall not affect the power or
authority of the Board to administer the Plan. For the purposes of the Plan,
the term "Non-Employee Director" shall have the meaning ascribed to it in
paragraph (b)(3) of Rule 16b-3 promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), as such term is interpreted from
time to time.
4. Type of Option.
Options granted pursuant to the Plan shall be authorized by action
of the Board and may be designated as either incentive stock options meeting
the requirements of Section 422 of the Code or non-qualified stock options
which are not intended to meet the requirements of such Section 422 of the
Code, the designation to be in the sole discretion of the Board. Options
designated as incentive stock options that fail to continue to meet the
requirements of Section 422 of the Code shall be redesignated as
non-qualified stock options automatically without further action by the Board
on the date of such failure to continue to meet the requirements of Section
422 of the Code.
5. Eligibility.
Options designated as incentive stock options may be granted only to
Eligible Persons who are officers or employees of the Company or of any
subsidiary. Directors who are not otherwise employees of the Company or a
subsidiary shall not be eligible to be granted incentive stock options
pursuant to the Plan. Options designated as non-qualified stock options may
be granted to any Eligible Person.
The Board shall take into account such factors as it may deem
relevant in determining the number of shares of Common Stock to be included
in an Option to be granted to any Eligible Person.
6. Restrictions on Options.
Incentive stock options (but not non-qualified stock options)
granted under this Plan shall be subject to the following restrictions:
<PAGE>
(a) Limitation on Number of Shares. The aggregate fair market
value of the shares of Common Stock with respect to which incentive stock
options are granted (determined as of the date the incentive stock options
are granted), exercisable for the first time by an individual during any
calendar year shall not exceed $100,000. If an incentive stock option is
granted pursuant to which the aggregate fair market value of shares with
respect to which it first becomes exercisable in any calendar year by an
individual exceeds such $100,000 limitation, the portion of such option which
is in excess of the $100,000 limitation shall be treated as a non-qualified
stock option pursuant to Section 422(d)(1) of the Code. In determining the
fair market value under this clause (a), the provisions of Section 8 hereof
shall apply. In the event that an individual is eligible to participate in
any other stock option plan of the Company or any subsidiary of the Company
which is also intended to comply with the provisions of Section 422 of the
Code, such $100,000 limitation shall apply to the aggregate number of shares
for which incentive stock options may be granted under this Plan and all such
other plans.
(b) Ten Percent Stockholder. If any Eligible Person to whom an
incentive stock option is granted pursuant to the provisions of the Plan is
on the date of grant the owner of stock (as determined under Section 424(d)
of the Code) possessing more than 10% of the total combined voting power of
all classes of stock of the Company or any subsidiary of the Company, then
the following special provisions shall be applicable to the incentive stock
options granted to such individual:
(i) The Option price per share subject to such Options shall
be not less than 110% of the fair market value of the shares of Common Stock
with respect to which Options are granted (determined as of the date such
Option was granted). In determining the fair market value under this clause
(i), the provisions of Section 8 hereof shall apply.
(ii) The Option by its terms shall not be exercisable after the
expiration of five years from the date such Option is granted.
7. Option Agreement; Disqualifying Dispositions.
(a) Each Option shall be evidenced by an option agreement, in a
form approved from time to time by the Board (the "Agreement"), duly executed
on behalf of the Company and by the optionee to whom such Option is granted,
which Agreement shall comply with and be subject to the terms and conditions
of the Plan. The Agreement may contain such other terms, provisions and
conditions which are not inconsistent with the Plan as may be determined by
the Board; provided that Options designated as incentive stock options shall
meet all of the conditions for incentive stock options as defined in Section
422 of the Code. No Option shall be granted within the meaning of the Plan
and no purported grant of any Option shall be effective until the Agreement
shall have been duly executed on behalf of the Company and the optionee.
(b) If an optionee makes a "disposition" (within the meaning of
Section 424(c) of the Code) of shares of Common Stock issued upon exercise of
an incentive stock option within two years from the date of grant or within
one year from the date the shares of Common Stock are
<PAGE>
transferred to the optionee, the optionee shall, within ten days of
disposition, notify the Board and deliver to it any withholding and
employment taxes due. However, if the optionee is a person subject to Section
16(b) of the Exchange Act, delivery of any withholding and employment taxes
due may be deferred until ten days after the date any income on the
disposition is recognized under Section 83 of the Code. The Company may
cause a legend to be affixed to certificates representing shares of Common
Stock issued upon exercise of incentive stock options to ensure that the
Board receives notice of disqualifying dispositions.
8. Option Price.
(a) The Option price or prices of shares of the Common Stock for
Options designated as non qualified stock options shall be as determined by
the Board.
(b) Subject to the conditions set forth in Section 6(b) hereof, the
Option price or prices of shares of the Company's Common Stock designated as
incentive stock options shall be at least the fair market value of such
Common Stock on the date the Option is granted as determined by the Board in
accordance with the Regulations promulgated under Section 422 of the Code.
(c) If such shares are then listed on any national securities
exchange, the fair market value shall be the mean between the high and low
sales prices, if any, on the largest such exchange on the date of the grant
of the Option or, if there are no such sales on such date, shall be
determined by taking a weighted average of the means between the highest and
lowest sales prices on the nearest date before and the nearest date after the
date of grant in accordance with Section 25.2512-2 of the Regulations. If
the shares are not then listed on any such exchange, the fair market value of
such shares shall be the mean between the closing "Bid" and the closing "Ask"
prices, if any, as reported in the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") for the date of the grant of the
Option, or, if there are no such prices on such date, shall be determined by
taking a weighted average of the means between the highest and lowest sales
prices on the nearest date before and the nearest date after the date of
grant in accordance with Section 25.2512-2 of the Regulations. If the shares
are not then either listed on any such exchange or quoted in NASDAQ, the fair
market value shall be the mean between the average of the "Bid" and "Ask"
prices, if any, as reported in the National Association of Securities Dealers
National Daily Quotation Service for the date of the grant of the Option, or,
if there are no such prices on such date, shall be determined by taking a
weighted average of the means between the highest and lowest sales prices on
the nearest date before and the nearest date after the date of grant in
accordance with Section 25.2512-2 of the Regulations. If the fair market
value cannot be determined under the preceding three sentences, it shall be
determined in good faith by the Board in accordance with Section 422 of the
Code.
9. Manner of Payment; Manner of Exercise.
(a) Options granted under the Plan may provide for the payment of
the exercise price by delivery of (i) cash or a check payable to the order of
the Company in an amount equal to the exercise price of such Options, (ii)
shares of Common Stock owned by the optionee having a fair
<PAGE>
market value (at the date of exercise) equal in amount to the exercise price
of the Options being exercised, or (iii) any combination of (i) and (ii).
The fair market value of any shares of Common Stock which may be delivered
upon exercise of an Option shall be determined by the Board in accordance
with Section 8 hereof.
(b) To the extent that an Option is exercisable, Options may be
exercised in full at one time or in part from time to time, by giving written
notice, signed by the person or persons exercising the Option, to the
Company, stating the number of shares with respect to which the Option is
being exercised, accompanied by payment in full for such shares as provided
in Section 9(a) hereof. No exercise of an Option may be made for fewer than
100 full shares of Common Stock unless such exercise is made for the entire
fractional amount of a share remaining to be purchased pursuant to such
Option. Upon such exercise, delivery of a certificate for paid-up,
non-assessable shares shall be made by the Company to the person or persons
exercising the Option within 20 business days after receipt of such notice by
the Company.
10. Exercise of Options.
Each Option granted under the Plan shall, subject to Sections 11(b),
13 and 16 hereof, be exercisable at such time or times and during such period
as shall be set forth in the Agreement; provided, however, that except as
otherwise provided pursuant to the provisions of Section 6(b) hereof, no
Option granted under the Plan shall have a term in excess of ten years from
the date of grant.
11. Term of Options; Exercisability.
(a) Term.
(i) Each Option shall expire on a date determined by the Board
which is not more than ten years from the date of the granting thereof,
except (a) as otherwise provided pursuant to the provisions of Section 6(b)
hereof, and (b) for earlier termination as herein provided.
(ii) Except as otherwise provided in this Section 11, an Option
granted to any optionee who ceases to be an Eligible Person for any reason
shall terminate on the earlier of (i) three (3) months after the date such
optionee ceased to be an Eligible Person, or (ii) the date on which the
Option expires by its terms.
(iii) If an optionee ceases to be an Eligible Person
because the Company has terminated his or her status with the Company for
cause (as such term is defined in any employment or similar agreement between
such optionee and the Company or, if there is no such agreement, or such
agreement does not contain provisions relating to termination or removal for
cause, as such term is defined by the law of the State of Delaware), such
Option will, to the extent not terminated, be deemed to have terminated on
the date immediately preceding the date the optionee ceased to be an Eligible
Person.
<PAGE>
(iv) If an optionee ceases to be an Eligible Person because the
optionee has become disabled (within the meaning of Section 22(e)(3) of the
Code), such Option shall terminate on the earlier of (i) one year after the
date such optionee ceased to be an Eligible Person, or (ii) the date on which
the Option expires by its terms.
(v) In the event of the death of any optionee, such Option
shall terminate on the earlier of (i) one year after the date of death, or
(ii) the date on which the Option expires by its terms.
(b) Exercisability.
(i) Except as otherwise provided in this Section 11(b), an
Option granted to an optionee who thereafter ceases to be an Eligible Person
shall be exercisable only to the extent that the right to purchase shares
under such Option is exercisable on the date such optionee ceased to be an
Eligible Person.
(ii) An Option granted to an optionee who ceases to be an
Eligible Person because he or she has become disabled (as such term is
defined in any employment or similar agreement between such optionee and the
Company or, if there is no such agreement, or such agreement does not contain
provisions relating to termination or removal for disability, as determined
by the Board) shall be immediately exercisable as to the full number of
shares covered by such Option, whether or not under the provisions of the
Plan or Agreement such Option was otherwise exercisable as of the date of
disability.
(iii) In the event of the death of an optionee, the Option
granted to such optionee may be exercised as to the full number of shares
covered by such Option, whether or not under the provisions of the Plan or
Agreement the optionee was otherwise exercisable at the date of his or her
death, by the executor, administrator or personal representative of such
optionee, or by any person or persons who acquired the right to exercise such
Option by bequest or inheritance or by reason of the death of such optionee.
(iv) In addition to the acceleration of the exercisability of
Options pursuant to this Section 11(b) and Section 13(b)(ii) hereof, the
Board shall have the right, in the exercise of its discretion and for any
reason, and with the consent of the optionee, to accelerate the date on which
Options shall be exercisable.
12. Transferability.
The right of any optionee to exercise any Option granted to him or
her shall not be assignable or transferable by such optionee other than by
will or the laws of descent and distribution, and any such Option shall be
exercisable during the lifetime of such optionee only by him or her. Any
Option granted under the Plan shall be null and void and without effect upon
the bankruptcy of the optionee to whom the Option is granted, or upon any
attempted assignment or transfer, except as herein provided, including,
without limitation, any purported assignment, whether voluntary or by
<PAGE>
operation of law, pledge, hypothecation or other disposition, or levy of
execution, attachment, trustee process or similar process, whether legal or
equitable, upon such Option. The Board shall have discretion to grant any
Option that is not designated as an incentive stock option, free of any or
all of the restrictions described in this Section.
13. Recapitalization, Reorganizations and the Like.
(a) In the event that after November 25, 1997 the outstanding
shares of the Common Stock are changed into or exchanged for a different
number or kind of shares or other securities of the Company by reason of any
reorganization, recapitalization, reclassification, stock split, combination
of shares, or dividends payable in capital stock, appropriate and equitable
adjustment shall be made by the Board, in its sole discretion, in the number
and kind of shares as to which Options may be granted under the Plan and as
to which outstanding Options or portions thereof then unexercised shall be
exercisable. Such adjustment in outstanding Options shall be made without
change in the total price applicable to the unexercised portion of such
Options and with a corresponding adjustment in the Option price per share.
(b) (i) In addition, unless otherwise determined by the Board in
its sole discretion, in the case of any (I) merger or consolidation pursuant
to which the Company's stockholders shall receive cash or securities of
another corporation and less than 50% of the outstanding capital stock of the
surviving corporation pursuant to such merger or consolidation shall be owned
by the stockholders of the Company, (II) sale or conveyance to another entity
of all or substantially all of the property and assets of the Company or
(III) Change in Control of the Company, the Company shall, or shall cause
such surviving corporation or the purchaser(s) of the Company's assets to,
deliver to the optionee the same kind of consideration that is delivered to
the stockholders of the Company as a result of such merger, consolidation,
sale, conveyance or Change in Control, or the Board may cancel all
outstanding Options in exchange for consideration in cash or marketable
securities, which consideration in both cases shall be equal in value to the
value of those shares of stock or other securities the optionee would have
received had the Option been exercised (but only to the extent then
exercisable) and had no disposition of the shares acquired upon such exercise
been made prior to such merger, consolidation, sale, conveyance or Change in
Control, less the Option price therefor or, in lieu thereof, the Board shall
give the optionee at least twenty days prior written notice of any such
transaction in order to enable the optionee to exercise the exercisable
portion, if any, of the Option. Upon receipt of such consideration effective
on the date specified in such notice, all Options (whether or not then
exercisable) shall immediately terminate and be of no further force or
effect. The value of the stock or other securities the optionee would have
received if the Option had been exercised shall be determined in good faith
by the Board, and in the case of shares of Common Stock, in accordance with
the provisions of Section 8 hereof.
(ii) The Board shall also have the power and right to
accelerate the exercisability of any Options, notwithstanding any limitations
in this Plan or in the Agreement upon such merger, consolidation, sale,
conveyance or Change in Control.
(c) A "Change in Control" shall be deemed to have occurred if any
person, or any
<PAGE>
two or more persons acting as a group, and all affiliates of such person or
persons, who prior to such time Beneficially Owned (as defined in Rule 13d-3
under the Exchange Act) less than 40% of the then outstanding Common Stock,
shall acquire such additional shares of Common Stock in one or more
transactions, or series of transactions, such that following such transaction
or transactions, such person or group and affiliates Beneficially Own 50% or
more of the Common Stock outstanding.
(d) If by reason of a corporate merger, consolidation, acquisition
of property or stock, separation, reorganization, or liquidation, the Board
shall authorize the issuance or assumption of a stock option or stock options
in a transaction to which Section 424(a) of the Code applies, then,
notwithstanding any other provision of the Plan, the Board may grant an
option or options upon such terms and conditions as it may deem appropriate
for the purpose of assumption of the old Option, or substitution of a new
option for the old Option, in conformity with the provisions of such Section
424(a) of the Code and the Regulations thereunder, and any such option shall
not reduce the number of shares otherwise available for issuance under the
Plan. In the event of such issuance or assumption, the provisions of Section
13(b) hereof shall not be applicable.
14. No Special Employment Rights.
Nothing contained in the Plan or in any Option granted under the
Plan shall confer upon any optionee any right with respect to the
continuation of his or her employment by the Company or any subsidiary or
interfere in any way with the right of the Company or any subsidiary, subject
to the terms of any separate employment agreement to the contrary, at any
time to terminate such employment or to increase or decrease the compensation
of the Option holder from the rate in existence at the time of the grant of
an Option. Whether an authorized leave of absence, or absence in military or
government service, shall constitute termination of employment for purposes
of any Option shall be determined by the Board at the time of such occurrence.
15. Withholding.
The Company's obligation to deliver shares upon the exercise of any
Option granted under the Plan shall be subject to the Option holder's
satisfaction of any applicable federal, state and local income and employment
tax withholding requirements. The Company and optionee may agree to withhold
shares of Common Stock purchased upon exercise of an Option to satisfy the
above-mentioned withholding requirements.
16. Restrictions on Exercise of Options and Issuance of Shares.
(a) Notwithstanding the provisions of Sections 9 and 11 hereof, an
Option cannot be exercised, and the Company may delay the issuance of shares
covered by the exercise of an Option and the delivery of a certificate for
such shares, until one of the following conditions shall be satisfied:
(i) The shares with respect to which such Option has been
exercised are at the time of the issuance of such shares effectively
registered or qualified under applicable federal and state securities acts
now in force or as hereafter amended; or
<PAGE>
(ii) Counsel for the Company shall have given an opinion, which
opinion shall not be unreasonably conditioned or withheld, that the issuance
of such shares is exempt from registration and qualification under applicable
federal and state securities acts now in force or as hereafter amended.
(b) The Company shall be under no obligation to qualify shares or
to cause a registration statement or a post-effective amendment to any
registration statement to be prepared for the purpose of covering the
issuance of shares in respect of which any Option may be exercised or to
cause the issuance of such shares to be exempt from registration and
qualification under applicable federal and state securities acts now in force
or as hereinafter amended, except as otherwise agreed to by the Company in
writing in its sole discretion.
17. Purchase for Investment; Rights of Holder on Subsequent Registration.
Unless and until the shares to be issued upon exercise of an Option
granted under the Plan have been effectively registered under the Securities
Act of 1933, as amended (the "1933 Act"), as now in force or hereafter
amended, the Company shall be under no obligation to issue any shares covered
by any Option unless the person who exercises such Option, in whole or in
part, shall give a written representation and undertaking to the Company
which is satisfactory in form and scope to counsel for the Company and upon
which, in the opinion of such counsel, the Company may reasonably rely, that
he or she is acquiring the shares issued pursuant to such exercise of the
Option for his or her own account as an investment and not with a view to, or
for sale in connection with, the distribution of any such shares, and that he
or she will make no transfer of the same except in compliance with any rules
and regulations in force at the time of such transfer under the 1933 Act, or
any other applicable law, and that if shares are issued without such
registration, a legend to this effect may be endorsed upon the securities so
issued.
In the event that the Company shall, nevertheless, deem it necessary
or desirable to register under the 1933 Act or other applicable statutes any
shares with respect to which an Option shall have been exercised, or to
qualify any such shares for exemption from the 1933 Act or other applicable
statutes, then the Company may take such action and may require from each
optionee such information in writing for use in any registration statement,
supplementary registration statement, prospectus, preliminary prospectus,
offering circular or any other document that is reasonably necessary for such
purpose and may require reasonable indemnity to the Company and its officers
and directors from such holder against all losses, claims, damages and
liabilities arising from such use of the information so furnished and caused
by any untrue statement of any material fact therein or caused by the
omission to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the
circumstances under which they were made.
18. Loans.
At the discretion of the Board, the Company may loan to the
optionee, or pay to the optionee as a bonus, some or all of the purchase
price of the shares acquired upon exercise of an Option, the terms of such
loans or bonus to be at the discretion of the Board.
<PAGE>
19. Modification of Outstanding Options.
Subject to any applicable limitations contained herein, the Board
may authorize the amendment of any outstanding Option with the consent of the
optionee when and subject to such conditions as are deemed to be in the best
interests of the Company and in accordance with the purposes of the Plan.
Without limiting the foregoing, the Board shall have the authority to effect,
at any time and from time to time, with the consent of the affected
optionees, the cancellation of any or all outstanding Options under the Plan
and to grant in substitution therefor new Options under the Plan covering the
same or different numbers of Shares and having, at the discretion of the
Board and subject to Sections 6 and 8 hereof, an exercise price, in the case
of Options designated as non-qualified stock options, as shall be determined
by the Board and, in the case of Options designated as incentive stock
options, of not less than one hundred percent (100%) of the fair market value
of the Common Stock on the new grant date.
20. Approval of Board and Stockholders.
The Plan shall become effective upon adoption by the Board and the
stockholders of the Company; provided, however, that the Plan shall be
submitted for approval by the stockholders of the Company within 12 months
after the date of adoption of the Plan by the Board. If the stockholders of
the Company fail to approve the Plan within 12 months after the date of
adoption of the Plan by the Board, the Plan and all stock options granted
thereunder shall be and become null and void and of no further force or
effect.
21. Termination and Amendment of Plan.
Unless sooner terminated as herein provided, the Plan shall
terminate ten years from the earlier of (x) the date on which the Plan was
duly adopted by the Board, and (y) the date on which the Plan was duly
approved by the stockholders of the Company. The Board may at any time
terminate the Plan or make such modification or amendment thereof as it deems
advisable; provided, however, (i) the Board may not, without the approval of
the stockholders of the Company obtained in the manner stated in Section 20
hereof, increase the maximum number of shares for which Options may be
granted or change the designation of the class of persons eligible to receive
Options under the Plan, and (ii) any such modification or amendment of the
Plan shall be approved by a majority of the stockholders of the Company to
the extent that such stockholder approval is necessary to comply with
applicable provisions of the Code, rules promulgated pursuant to Section 16
of the Exchange Act (if any), applicable state law, or applicable NASD or
exchange listing requirements. Termination or any modification or amendment
of the Plan shall not, without the consent of an optionee, affect his or her
rights under an Option theretofore granted to him or her.
22. Duties of the Company.
The Company shall at all times keep available for issuance or
delivery such number of shares of Common Stock as will be sufficient to
satisfy the requirements of the Plan.
<PAGE>
23. Limitation of Rights in the Option Shares.
An optionee shall not be deemed for any purpose to be a stockholder
of the Company with respect to any of the Options until (x) the Option shall
have been exercised with respect thereto (including payment to the Company of
the exercise price) and (y) the earlier to occur of (i) the delivery by the
Company to the optionee of a certificate therefor, or (ii) the date on which
the Company is required to deliver a certificate pursuant to Section 9(b)
hereof.
24. Governing Law.
The Plan and all Options shall be governed by and construed under
the laws of the State of Delaware, without giving effect to principles of
conflicts of law.
25. Notices.
Any communication or notice required or permitted to be given under
the Plan shall be in writing, and mailed by registered or certified mail or
delivered by hand, if to the Company, to the attention of the President at
the Company's principal place of business; and, if to an optionee, to his or
her address as it appears on the records of the Company.
26. Headings.
The headings contained in this Plan are for convenience of reference
only and in no way define, limit or describe the scope or intent of the Plan
or in any way affect this Agreement.
<PAGE>
AYURCORE, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
PURSUANT TO AYURCORE, INC.
1997 STOCK OPTION PLAN
AGREEMENT made _______________, 19__, by and between AYURCORE, INC., a
Delaware corporation with its principal place of business at 1737 N. First
Street, Suite 290, San Jose, California 95112 (the "Company"), and the
undersigned employee, agent or director of, or consultant to, the Company or
any of its subsidiaries (the "Optionee").
W I T N E S S E T H:
WHEREAS, the Company considers it desirable and in its best interests
that the Optionee be encouraged to acquire an ownership interest in the
Company, and thereby have an added incentive to advance the interests of the
Company, by the grant of an option to purchase shares of the Company's common
stock, par value $.001 per share (the "Common Stock"), in accordance with the
Company's 1997 Stock Option Plan (the "Plan") on the terms and conditions
hereinafter set forth; and
WHEREAS, the Plan provides that each option granted thereunder is to be
evidenced by an option agreement, setting forth the terms and conditions of
the option.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the Company and the Optionee
hereby agree as follows:
1. Grant of Option.
The Company hereby grants to the Optionee the right, privilege and option
(the "Option") to purchase that number of shares of the Company's Common
Stock set forth on the signature page hereof (the "Shares") at the purchase
price per Share set forth on the signature page hereof (the "Purchase
Price"), in the manner and subject to the conditions hereinafter provided and
contained in the Plan. In the event of any inconsistencies between the Plan
and this Agreement, the Plan shall govern. Such number of Shares issuable
upon exercise of the Option shall be subject to adjustment as provided in
Section 7 below. The Option is not intended to be an incentive stock option
meeting the requirements of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").
2. Time of Exercise of Option.
Subject to the provisions of Section 4 below, the Option shall vest and
become exercisable in accordance with the schedule set forth on the signature
page hereof; provided, however, that upon a Change in Control (as defined in
the Plan) of the Company, the Option shall be immediately exercisable. To
the extent the Option is not exercised by the Optionee when it becomes
exercisable, it shall continue in full force and effect until the Expiration
Date (as hereinafter defined).
<PAGE>
3. Method of Exercise.
The Option shall be exercised by written notice in the form of Exhibit A
hereto directed to the Company at the Company's address set forth above, duly
executed by the Optionee, specifying the number of shares being purchased and
accompanied by either (i) cash or check payable to the order of the Company
in full payment of the Purchase Price for the number of Shares being
purchased, or (ii) certificate(s), duly endorsed for transfer to the Company
with signature guaranteed, for that number of previously acquired Shares
having an aggregate fair market value as determined in accordance with the
Plan ("Fair Market Value"), on the date of exercise equal to the full
Purchase Price for the number of Shares being purchased, or (iii) a
combination of (i) and (ii).
The Option shall not be exercisable at any time in an amount less than
100 Shares (or the remaining fraction of a Share then covered by and
purchasable under the Option if less than 100 Shares).
4. Term of Options; Exercisability.
A. Term.
1. This Option shall expire on the date set forth on the
signature page hereto (the "Expiration Date"), subject to earlier termination
as herein provided.
2. Except as otherwise provided in this Section 4, if the
Optionee's employment by, or retention as an agent, director of, or
consultant to, the Company and its subsidiaries is terminated for any reason,
the Option shall terminate on the earlier of (i) three months after the date
the Optionee's employment by or retention as an agent, director of, or
consultant to, the Company and its subsidiaries is terminated, or (ii) the
date on which the Option expires by its terms.
3. If the Optionee's employment by, or retention as an agent,
director of, or consultant to, the Company is terminated by the Company and
its subsidiaries for cause (as such term is defined in any employment
agreement or similar agreement between the Optionee and the Company or, if
there is no such employment or similar agreement, or the employment or
similar agreement does not have provisions relating to termination for cause,
as such term is defined by the law of the State of New York), the Option will
to the extent not terminated be deemed to have terminated on the date
immediately preceding the date the Optionee's employment by, or retention as
an agent, director of, or consultant to, the Company is terminated by the
Company and its subsidiaries.
4. If the Optionee's employment by, or retention as an agent,
director of, or consultant to, the Company is terminated by the Company and
its subsidiaries because the Optionee has become disabled (within the meaning
of Section 22(e)(3) of the Code), the Option shall terminate on the earlier
of (i) one year after the date the Optionee's employment by, or retention as
2
<PAGE>
an agent, director of, or consultant to, the Company and its subsidiaries is
terminated, or (ii) the date on which the Option expires by its terms.
5. In the event of the death of the Optionee, the Option
shall terminate on the earlier of (i) one year after the date of death, or
(ii) the date on which the Option expires by its terms.
B. Exercisability.
1. Except as provided in this Section 4.B., if the Optionee's
employment by, or retention as an agent, director of, or consultant to, the
Company and its subsidiaries is terminated, the Option shall be exercisable
only to the extent that the right to purchase Shares under the Option is
exercisable on the date the Optionee's employment by, or retention as an
agent, director of, or consultant to, the Company and its subsidiaries is
terminated.
2. If the Optionee's employment by, or retention as an agent,
director of, or consultant to, the Company is terminated by the Company and
its subsidiaries because the Optionee has become disabled (as such term is
defined in any employment or similar agreement between the Optionee and the
Company or, if there is no such employment or similar agreement, or the
employment or similar agreement does not contain provisions relating to
termination for disability, as determined by the Board of Directors of the
Company), the Option shall be immediately exercisable as to the full number
of Shares covered by the Option, whether or not under the provisions of
Section 2 hereof the Option was otherwise exercisable as of the date of
disability.
3. In the event of the death of the Optionee, the Option
granted to the Optionee shall be immediately exercisable as to the full
number of Shares covered thereby, whether or not under the provisions of
Section 2 hereof the Optionee was entitled to do so at the date of his death,
by the executor, administrator or personal representative of the Optionee, or
by any person or persons who acquired the right to exercise such Option by
bequest or inheritance or by reason of the death of the Optionee.
5. Non-Transferability.
[This provision may be deleted or modified at the discretion of the Board
or Committee granting the Option].
The right of the Optionee to exercise the Option shall not be assignable
or transferable by the Optionee otherwise than by will or the laws of descent
and distribution, and the Option may be exercised during the lifetime of the
Optionee only by the Optionee. The Option shall be null and void and without
effect upon the bankruptcy of the Optionee or upon any attempted assignment
or transfer, except as hereinabove provided, including without limitation,
any purported assignment, whether voluntary or by operation of law, pledge,
hypothecation or other disposition contrary to the
3
<PAGE>
provisions hereof, or levy of execution, attachment, trustee process or
similar process, whether legal or equitable, upon the Option.
6. Representation Letter and Investment Legend.
A. Notwithstanding the provisions of Sections 3 and 4 hereof, the
Option cannot be exercised, and the Company may delay the issuance of the
Shares covered by the exercise of the Option and the delivery of a
certificate for the Shares, until one of the following conditions shall be
satisfied:
1. The Shares with respect to which the Option has been
exercised are at the time of the issuance of the Shares effectively
registered or qualified under applicable federal and state securities acts
now in force or as hereafter amended; or
2. Counsel for the Company shall have given an opinion, which
opinion shall not be unreasonably conditioned or withheld, that the issuance
of the Shares is exempt from registration and qualification under applicable
federal and state securities acts now in force or as hereafter amended.
B. In the event that for any reason the Shares to be issued upon
exercise of the Option shall not be effectively registered under the
Securities Act of 1933, as amended (the "1933 Act"), upon any date on which
the Option is exercised in whole or in part, the Optionee shall give a
written representation to the Company in the form attached hereto as Exhibit
A and the Company shall place an "investment legend," so-called, as described
in Exhibit A, upon any certificate for the Shares issued by reason of such
exercise. In the event that the Company shall, nevertheless, deem it
necessary or desirable to register under the 1933 Act or other applicable
statutes the Shares with respect to which the Option shall have been
exercised, or to qualify the Shares for exemption from the 1933 Act or other
applicable statutes, then the Company may take such action and may require
from the Optionee such information in writing for use in any registration
statement, supplementary registration statement, prospectus, preliminary
prospectus, offering circular or any other document that is reasonably
necessary for such purpose and may require reasonable indemnity to the
Company and its officers and directors from the Optionee against all losses,
claims, damages and liabilities arising from such use of the information so
furnished and caused by any untrue statement of any material fact therein or
caused by the omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of
the circumstances under which they were made.
C. The Company shall be under no obligation to qualify the Shares
or to cause a registration statement or a post-effective amendment to any
registration statement to be prepared for the purposes of covering the issue
of the Shares or to cause the issuance of the Shares to be exempt from
registration and qualification under applicable federal and state securities
acts now in force or as hereinafter amended, except as otherwise agreed to by
the Company in writing in its sole discretion and, accordingly, the Company
may delay the issuance of the Shares covered by the
4
<PAGE>
exercise of the Option and the delivery of a certificate for the Shares until
the Company shall have determined that all conditions to the issuance of the
Shares shall have been satisfied.
7. Adjustment in and Changes in Common Stock.
Subject to the Plan, if the outstanding shares of the Common Stock are
changed into or exchanged for a different number or kind of shares or other
securities of the Company by reason of any reorganization, recapitalization,
reclassification, stock split, combination of shares, or dividends payable in
capital stock, appropriate and equitable adjustment shall be made by the
Board of Directors of the Company, in its sole discretion, in the number and
kind of shares as to which the Option or portion thereof then unexercised
shall be exercisable. Such adjustment in the Option shall be made without
change in the total price applicable to the unexercised portion of such the
Option and with a corresponding adjustment in the Option price per share.
8. Effect on Other Rights.
This Agreement shall in no way affect the Optionee's participation in or
benefits under any other plan or benefit program maintained or provided by
the Company. Nothing in this Agreement shall be construed to give the
Optionee any right to any additional options other than in the sole
discretion of the Board of Directors of the Company or to confer on the
Optionee any right to continue in the employ of the Company or any subsidiary
thereof or to continue to be retained as an agent, director of, or consultant
to, the Company, or to be evidence of any agreement or understanding, express
or implied, that the Company will employ or continue to retain the Optionee
in any particular position or at any particular rate of remuneration, or for
any particular period of time or to interfere in any way with the right of
the Company or a subsidiary thereof (or the right of the Optionee) to
terminate the employment or retention of the Optionee at any time, with or
without cause, notwithstanding the possibility that the Option may thereby be
terminated entirely.
9. Rights as a Shareholder.
The Optionee shall have no rights as a shareholder with respect to any
Shares which may be purchased by exercise of the Option until (x) the Option
shall have been exercised with respect thereto (including payment to the
Company of the Purchase Price), and (y) the earlier to occur of (i) delivery
by the Company to the optionee of a certificate therefor or (ii) the date on
which the Company is required to deliver a certificate pursuant to the Plan
and this Agreement. Except as otherwise expressly provided in the Plan, no
adjustment shall be made for dividends or other rights for which the record
date is prior to the date such certificate is issued or required to be issued
in accordance with the Plan.
10. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE
APPLICABLE TO CONTRACTS TO BE MADE AND PERFORMED ENTIRELY
5
<PAGE>
THEREIN WITHOUT REFERENCE TO CONFLICT OF LAWS PRINCIPLES.
11. Withholding Taxes.
Whenever Shares are to be issued upon exercise of the Option, the Company
shall have the right to require the Optionee to remit to the Company an
amount sufficient to satisfy all federal, state and local withholding tax
requirements, if any, prior to the delivery of any certificate or
certificates for such Shares. The Company may agree to permit the Optionee
to withhold Shares purchased upon exercise of this Option to satisfy the
above-mentioned withholding requirement.
12. Headings.
The headings contained in this Agreement are for convenience of reference
only and in no way define, limit or describe the scope or intent of this
Agreement or in any way affect this Agreement.
13. Binding Effect.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators,
successors and assigns.
6
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed,
and the Optionee has hereunto set his or her hand and seal, all as of the day
and year first above written.
AYURCORE, INC.
By:
---------------------------------
Title:
OPTIONEE:
--------------------------------
Name:
Number of Shares:
---------------------------
Purchase Price per Share:
--------------------
VESTING AND EXPIRATION SCHEDULE
Date of Vesting Number of Shares Expiration Dates
- --------------- ---------------- ----------------
7
<PAGE>
EXHIBIT A
TO STOCK OPTION AGREEMENT
Date:______________________
AyurCore, Inc.
1737 N. First Street, Suite 290
San Jose, California 95112
Ladies and Gentlemen:
I hereby elect to purchase ____ shares of the Common Stock, $.001 par
value per share, of AyurCore, Inc. (the "Company") under the option granted
to me pursuant to the Stock Option Agreement, dated _______________, ____,
under the Company's 1997 Stock Option Plan.
Enclosed is [cash] [a check] in the amount of $______.___ [______
shares of the Company's Common Stock] in full payment of the shares being
purchased ($________ per share x ____ shares).
Please deliver certificates representing the shares being purchased to me
at:
_____________________________
_____________________________
_____________________________
I hereby acknowledge that I have been informed as follows:
1. The shares of common stock of the Company to be issued to me
pursuant to the exercise of said option have not been registered under the
Securities Act of 1933, as amended (the "1933 Act"), and accordingly, must be
held indefinitely unless such shares are subsequently registered under the
1933 Act, or an exemption from such registration is available.
2. Routine sales of securities made in reliance upon Rule 144, if
applicable, under the 1933 Act can be made only after the holding period and
in limited amounts in accordance with the terms and conditions provided by
that Rule, and in any sale to which that Rule is not applicable, registration
or compliance with some other exemption under the 1933 Act will be required.
<PAGE>
3. The Company is under no obligation to me to register the shares or
to comply with any such exemptions under the 1933 Act.
4. The availability of Rule 144, if applicable, is dependent upon
adequate current public information with respect to the Company being
available and, at the time that I may desire to make a sale pursuant to the
Rule, the Company may neither wish nor be able to comply with such
requirement.
In consideration of the issuance of certificates for the shares to me, I
hereby represent and warrant that I am acquiring such shares for my own
account for investment, and that I will not sell, pledge, transfer or
otherwise dispose of such shares in the absence of an effective registration
statement covering the same, except as permitted by the provisions of Rule
144, if applicable, or some other applicable exemption under the 1933 Act.
In view of this representation and warranty, I agree that there may be
affixed to the certificates for the shares to be issued to me, and to all
certificates issued hereafter representing such shares (until in the opinion
of counsel, which opinion must be reasonably satisfactory in form and
substance to counsel for the Company, it is no longer necessary or required)
a legend as follows:
"The shares of common stock represented by this certificate have not
been registered under the Securities Act of 1933, as amended (the
"Act"), and were acquired by the registered holder, pursuant to a
representation and warranty that such holder was acquiring such shares
for his or her own account and for investment, with no intention to
transfer or dispose of the same, in violation of the registration
requirements of the Act. These shares may not be sold, pledged,
transferred or otherwise disposed of in the absence of an effective
registration statement under the Act, or an opinion of counsel, which
opinion is reasonably satisfactory to counsel to the Company, to the
effect that registration is not required under the Act."
I further agree that the Company may place a stop order with its Transfer
Agent, prohibiting the transfer of such shares, so long as the legend remains
on the certificates representing the shares.
Very truly yours,
----------------------------------
Optionee:
<PAGE>
AYURCORE, INC.
INCENTIVE STOCK OPTION AGREEMENT
PURSUANT TO AYURCORE, INC.
1997 STOCK OPTION PLAN
AGREEMENT made as of ____________ ___, 19__, by and between AYURCORE,
INC., a Delaware corporation with its principal place of business at 1737 N.
First Street, Suite 290, San Jose, California 95112 (the "Company"), and the
undersigned employee of the Company or any of its subsidiaries (the
"Optionee").
W I T N E S S E T H:
WHEREAS, the Company considers it desirable and in its best interests
that the Optionee be encouraged to acquire an ownership interest in the
Company, and thereby have an added incentive to advance the interests of the
Company, by the grant of an option to purchase shares of the Company's common
stock, par value $.001 per share (the "Common Stock"), in accordance with
the Company's 1997 Stock Option Plan (the "Plan") on the terms and conditions
hereinafter set forth; and
WHEREAS, the Plan provides that each option granted thereunder is to be
evidenced by an option agreement, setting forth the terms and conditions of
the option.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the Company and the Optionee
hereby agree as follows:
1. Grant of Option.
The Company hereby grants to the Optionee the right, privilege and option
(the "Option") to purchase that number of shares of the Company's Common
Stock set forth on the signature page hereto (the "Shares") at the purchase
price per Share set forth on the signature page hereto (the "Purchase
Price"), in the manner and subject to the conditions hereinafter provided and
contained in the Plan. In the event of any inconsistencies between the Plan
and this Agreement, the Plan shall govern. Such number of Shares issuable
upon exercise of the Option shall be subject to adjustment as provided in
Section 7 below. The Option is intended to be an incentive stock option
meeting the requirements of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"). If for any reason the Option or any part hereof is
not deemed to be an incentive stock option, to the extent it is not an
incentive stock option, it shall be treated as a non-qualified stock option.
2. Time of Exercise of Option.
Subject to the provisions of Section 4 below, the Option shall vest and
become exercisable in accordance with the schedule set forth on the signature
page hereof; provided, however, that upon
<PAGE>
a Change in Control (as defined in the Plan) of the Company, the Option shall
be immediately exercisable. To the extent the Option is not exercised by the
Optionee when it becomes exercisable, it shall continue in full force and
effect until the Expiration Date (as hereinafter defined).
3. Method of Exercise.
The Option shall be exercised by written notice in the form of Exhibit A
hereto, directed to the Company at the Company's address set forth above,
duly executed by the Optionee, specifying the number of shares being
purchased and accompanied by either (i) cash or check payable to the order of
the Company in full payment of the Purchase Price for the number of Shares
being purchased, or (ii) certificate(s), duly endorsed for transfer to the
Company with signature guaranteed, for that number of previously acquired
Shares having an aggregate fair market value as determined in accordance with
the Plan ("Fair Market Value"), on the date of exercise equal to the full
Purchase Price for the number of Shares being purchased, or (iii) a
combination of (i) and (ii).
The Option shall not be exercisable at any time in an amount less than 100
Shares (or the remaining Shares then covered by and purchasable under the Option
if less than 100 Share).
4. Term of Options; Exercisability.
A. Term.
1. This Option shall expire on the tenth anniversary of the
date of this agreement (the "Expiration Date"), subject to earlier
termination as herein provided.
2. Except as otherwise provided in this Section 4, if the
Optionee's employment by the Company and its subsidiaries is terminated for
any reason, the Option shall terminate on the earlier of (i) three months
after the date the Optionee's employment by the Company and its subsidiaries
is terminated, or (ii) the date on which the Option expires by its terms.
3. If the Optionee's employment is terminated by the Company
and its subsidiaries for cause (as such term is defined in any employment
agreement or similar agreement between the Optionee and the Company or, if
there is no such employment agreement, or the employment agreement does not
have provisions relating to termination for cause, as such term is defined by
the law of the State of Delaware), the Option will to the extent not
terminated be deemed to have terminated on the date immediately preceding the
date the Optionee's employment is terminated by the Company and its
subsidiaries.
4. If the Optionee's employment is terminated by the Company
and its subsidiaries because the Optionee has become disabled (as defined in
any employment agreement or similar agreement between the Optionee and the
Company or within the meaning of Section 22(e)(3) of the Code), the Option
shall terminate on the earlier of (i) one year after the date the Optionee's
2
<PAGE>
employment by the Company and its subsidiaries is terminated, or (ii) the
date on which the Option expires by its terms.
5. In the event of the death of the Optionee, the Option
shall terminate on the earlier of (i) one year after the date of death, or
(ii) the date on which the Option expires by its terms.
B. Exercisability.
1. Except as provided in this Section 4.B., if the Optionee's
employment by the Company and its subsidiaries is terminated, the Option
shall be exercisable only to the extent that the right to purchase Shares
under the Option is exercisable on the date the Optionee's employment by the
Company and its subsidiaries is terminated.
2. If the Optionee's employment is terminated by the Company
and its subsidiaries because the Optionee has become disabled (as such term
is defined in any employment agreement between the Optionee and the Company
or, if there is no such employment agreement, or the employment agreement
does not contain provisions relating to termination for disability, as
determined by the Board of Directors of the Company), the Option shall be
immediately exercisable as to the full number of Shares covered by the
Option, whether or not under the provisions of Section 2 hereof the Option
was otherwise exercisable as of the date of disability.
3. In the event of the death of the Optionee, the Option
granted to the Optionee shall be immediately exercisable as to the full
number of Shares covered thereby, whether or not under the provisions of
Section 2 hereof the Optionee was entitled to do so at the date of his death,
by the executor, administrator or personal representative of the Optionee, or
by any person or persons who acquired the right to exercise such Option by
bequest or inheritance or by reason of the death of the Optionee.
5. Non-Transferability.
The right of the Optionee to exercise the Option shall not be assignable
or transferable by the Optionee otherwise than by will or the laws of descent
and distribution, and the Option may be exercised during the lifetime of the
Optionee only by the Optionee. The Option shall be null and void and without
effect upon the bankruptcy of the Optionee or upon any attempted assignment
or transfer, except as hereinabove provided, including without limitation,
any purported assignment, whether voluntary or by operation of law, pledge,
hypothecation or other disposition contrary to the provisions hereof, or levy
of execution, attachment, trustee process or similar process, whether legal
or equitable, upon the Option.
6. Representation Letter and Investment Legend.
3
<PAGE>
A. Notwithstanding the provisions of Sections 3 and 4 hereof, the
Option cannot be exercised, and the Company may delay the issuance of the
Shares covered by the exercise of the Option and the delivery of a
certificate for the Shares, until one of the following conditions shall be
satisfied:
1. The Shares with respect to which the Option has been
exercised are at the time of the issuance of the Shares effectively
registered or qualified under applicable federal and state securities acts
now in force or as hereafter amended; or
2. Counsel for the Company shall have given an opinion, which
opinion shall not be unreasonably conditioned or withheld, that the issuance
of the Shares is exempt from registration and qualification under applicable
federal and state securities acts now in force or as hereafter amended.
B. In the event that for any reason the Shares to be issued upon
exercise of the Option shall not be effectively registered under the
Securities Act of 1933, as amended (the "1933 Act"), upon any date on which
the Option is exercised in whole or in part, the Optionee shall give a
written representation to the Company in the form attached hereto as Exhibit
A and the Company shall place an "investment legend," so-called, as described
in Exhibit A, upon any certificate for the Shares issued by reason of such
exercise. In the event that the Company shall, nevertheless, deem it
necessary or desirable to register under the 1933 Act or other applicable
statutes the Shares with respect to which the Option shall have been
exercised, or to qualify the Shares for exemption from the 1933 Act or other
applicable statutes, then the Company may take such action and may require
from the Optionee such information in writing for use in any registration
statement, supplementary registration statement, prospectus, preliminary
prospectus, offering circular or any other document that is reasonably
necessary for such purpose and may require reasonable indemnity to the
Company and its officers and directors from the Optionee against all losses,
claims, damages and liabilities arising from such use of the information so
furnished and caused by any untrue statement of any material fact therein or
caused by the omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of
the circumstances under which they were made.
C. The Company shall be under no obligation to qualify the Shares
or to cause a registration statement or a post-effective amendment to any
registration statement to be prepared for the purposes of covering the issue
of the Shares or to cause the issuance of the Shares to be exempt from
registration and qualification under applicable federal and state securities
acts now in force or as hereinafter amended, except as otherwise agreed to by
the Company in writing in its sole discretion and, accordingly, the Company
may delay the issuance of the Shares covered by the exercise of the Option
and the delivery of a certificate for the Shares until the Company shall have
determined that all conditions to the issuance of the Shares shall have been
satisfied.
4
<PAGE>
7. Adjustment in and Changes in Common Stock.
Subject to the Plan, if the outstanding shares of the Common Stock are
changed into or exchanged for a different number or kind of shares or other
securities of the Company by reason of any reorganization, recapitalization,
reclassification, stock split, combination of shares, or dividends payable in
capital stock, appropriate and equitable adjustment shall be made by the
Board of Directors of the Company, in its sole discretion, in the number and
kind of shares as to which the Option or portion thereof then unexercised
shall be exercisable. Such adjustment in the Option shall be made without
change in the total price applicable to the unexercised portion of such the
Option and with a corresponding adjustment in the Option price per share.
8. Effect on Other Rights.
This Agreement shall in no way affect the Optionee's participation in or
benefits under any other plan or benefit program maintained or provided by
the Company. Nothing in this Agreement shall be construed to give the
Optionee any right to any additional options other than in the sole
discretion of the Board of Directors of the Company or to confer on the
Optionee any right to continue in the employ of the Company or any subsidiary
thereof or to be evidence of any agreement or understanding, express or
implied, that the Company will employ the Optionee in any particular position
or at any particular rate of remuneration, or for any particular period of
time or to interfere in any way with the right of the Company or a subsidiary
thereof (or the right of the Optionee) to terminate the employment of the
Optionee at any time, with or without cause, notwithstanding the possibility
that the Option may thereby be terminated entirely.
9. Rights as a Shareholder.
The Optionee shall have no rights as a shareholder with respect to any
Shares which may be purchased by exercise of the Option until (x) the Option
shall have been exercised with respect thereto (including payment to the
Company of the Purchase Price), and (y) the earlier to occur of (i) delivery
by the Company to the optionee of a certificate therefor or (ii) the date on
which the Company is required to deliver a certificate pursuant to the Plan
and this Agreement. Except as otherwise expressly provided in the Plan, no
adjustment shall be made for dividends or other rights for which the record
date is prior to the date such certificate is issued or required to be issued
in accordance with the Plan.
10. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE
APPLICABLE TO CONTRACTS TO BE MADE AND PERFORMED ENTIRELY THEREIN WITHOUT
REFERENCE TO CONFLICT OF LAWS PRINCIPLES.
11. Withholding Taxes.
5
<PAGE>
Whenever Shares are to be issued upon exercise of the Option, the Company
shall have the right to require the Optionee to remit to the Company an
amount sufficient to satisfy all federal, state and local withholding tax
requirements, if any, prior to the delivery of any certificate or
certificates for such Shares. The Company may agree to permit the Optionee
to withhold Shares purchased upon exercise of this Option to satisfy the
above-mentioned withholding requirement.
12. Headings.
The headings contained in this Agreement are for convenience of reference
only and in no way define, limit or describe the scope or intent of this
Agreement or in any way affect this Agreement.
13. Binding Effect.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators,
successors and assigns.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed,
and the Optionee has hereunto set his or her hand and seal, all as of the day
and year first above written.
AYURCORE, INC.
By:___________________________
Title:
OPTIONEE:
______________________________
Name:
Number of Shares:_________________
Purchase Price per Share:$_________________
VESTING AND EXPIRATION SCHEDULE
Date of Vesting Number of Shares Expiration Date
--------------- ---------------- ---------------
6
<PAGE>
EXHIBIT A
TO STOCK OPTION AGREEMENT
Date:______________________
AyurCore, Inc.
1737 N. First Street, Suite 290
San Jose, California 95112
Ladies and Gentlemen:
I hereby elect to purchase ____ shares of the Common Stock, no par value
per share, of AyurCore, Inc. (the "Company") under the option granted to me
pursuant to the Incentive Stock Option Agreement, dated as of
_______________, 199_, under the Company's 1997 Stock Option Plan.
Enclosed is [cash] [a check] in the amount of $______.___
[______ shares of the Company's Common Stock] in full payment of the shares
being purchased ($_______________ per share x ____ shares).
Please deliver certificates representing the shares being purchased to me
at:
_____________________________
_____________________________
_____________________________
I hereby acknowledge that I have been informed as follows:
1. The shares of common stock of the Company to be issued to me
pursuant to the exercise of said option have not been registered under the
Securities Act of 1933, as amended (the "1933 Act"), and accordingly, must be
held indefinitely unless such shares are subsequently registered under the
1933 Act, or an exemption from such registration is available.
2. Routine sales of securities made in reliance upon Rule 144, if
applicable, under the 1933 Act can be made only after the holding period and
in limited amounts in accordance with the
7
<PAGE>
terms and conditions provided by that Rule, and in any sale to which that
Rule is not applicable, registration or compliance with some other exemption
under the 1933 Act will be required.
3. The Company is under no obligation to me to register the shares or
to comply with any such exemptions under the 1933 Act.
4. The availability of Rule 144, if applicable, is dependent upon
adequate current public information with respect to the Company being
available and, at the time that I may desire to make a sale pursuant to the
Rule, the Company may neither wish nor be able to comply with such
requirement.
In consideration of the issuance of certificates for the shares to me, I
hereby represent and warrant that I am acquiring such shares for my own
account for investment, and that I will not sell, pledge, transfer or
otherwise dispose of such shares in the absence of an effective registration
statement covering the same, except as permitted by the provisions of Rule
144, if applicable, or some other applicable exemption under the 1933 Act.
In view of this representation and warranty, I agree that there may be
affixed to the certificates for the shares to be issued to me, and to all
certificates issued hereafter representing such shares (until in the opinion
of counsel, which opinion must be reasonably satisfactory in form and
substance to counsel for the Company, it is no longer necessary or required)
a legend as follows:
"The shares of common stock represented by this certificate have not
been registered under the Securities Act of 1933, as amended (the
"Act"), and were acquired by the registered holder, pursuant to a
representation and warranty that such holder was acquiring such shares
for his or her own account and for investment, with no intention to
transfer or dispose of the same, in violation of the registration
requirements of the Act. These shares may not be sold, pledged,
transferred or otherwise disposed of in the absence of an effective
registration statement under the Act, or an opinion of counsel, which
opinion is reasonably satisfactory to counsel to the Company, to the
effect that registration is not required under the Act."
I further agree that the Company may place a stop order with its Transfer
Agent, prohibiting the transfer of such shares, so long as the legend remains
on the certificates representing the shares.
Very truly yours,
______________________________
Optionee:
<PAGE>
Exhibit 10.5
LEASE DEED
This Lease Deed made and executed this 19th day of April, 1996 between BAIF
Development Research Foundation, A Public Charitable Trust registered under
the Bombay Public Trust Act bearing Registration No. E-376, Pune and having
its registered office at Urulikanchan, District Pune (hereinafter referred to
as 'The Lessor') which expression unless repugnant to the contaext thereof,
(shall mean and include their heirs, successor, assigns, administrators,
etc.) of the ONE PART.
AND
M/s. BIO-VED PHARMACEUTICALS PVT. LTD. having its office at 6 Paarth 84/1
Prabhat Road, Pune 411 004 represented herein by Mr. Shirkant S. Umrani
(hereinafter called 'The Leassee') which expression shall, wherever the
context so requires or admits, (mean and include its successors in interest)
of the OTHER PART.
WHEREAS The Lessor is the owner of the building called Pradeep Chambers,
First floor, Office no. 6, situate at Bhandarkar Institute Road, Pune 411 005.
AND
WHEREAS The Leasee being in need of an office accommodation has approached
the Lessor for a Lease of the premises referred to above and the Lessor has
agreed to grant a lease on the terms and conditions hereinafter contained.
NOW THIS DEED OF LEASE WITNESSETH AND IT IS HEREBY AGREED BETWEEN LESSOR AND
LEASSEE AS UNDER:
1. The Lessor hereby grants to the Leasee a lease of the office premises
situated Office No. 6 First floor at Pradeep Chambers, Bhandarkar Institute
Road, Pune 411 005. (hereinafter referred to as the 'Said Premises' and more
particularly described in Schedule I hereunder) for a period of 36 (Thirty
six) months commencing from 1st June 1996 for office accommodation of the
Leasee.
2. It is agreed that the Leasee shall pay the Lessor a rent at the rate of
Rs. 23400/- (Rs. Twenty three thousand four hundred only) for the 1st year,
Rs. 24175/- (Rs. Twenty four thousand One hundred seventy five only) for 2nd
year, & Rs. 24950/- (Rs. Twenty four thousand nine hundred fifty only) for
the 3rd year per month for use and occupation of the said premises in advance
on or before the 10th day of every calendar month for the period upto 31st
May 1999.
3. The Leasee shall deposit with the Lessor an amount of 10 months rent
aggregating Rs. 23400/- (Rupees Two lacs thirty four thousand only) as
security deposit for observing the terms and conditions of this agreement.
This deposit shall be interest free and refundable by the Lessor to the
Leasee at the time of handing over vacant possession of the said
<PAGE>
premises. Any delay in the refund of security deposit will entail interest @
18% p.a. till the date of refund and the premises shall not be handed over
till the deposit with interest shall be paid.
4. The Leasee shall, in addition to the monthly rent, as aforesaid, pay all
actual electricity charges, during the tenure of the agreement, directly to
teh Maharashtra State Electricity Board as per the meter/s provided at the
said premises.
5. The Leasee shall also pay, during the tenure of this Agreement,
proportionate water charges in respect of the said premises as per bills.
6. The Leasee shall keep the said premises in good and tenantable condition
by effecting repairs, if any required, to the doors and windows, water mains
and electrical connections, the Lessor being responsible only for heavy and
major repairs including repairs due to leakages or seepages.
7. The Leasee shall not make any major construction or alterations in the
said premises withou the previous consent in writing of the Lessor except
that the Leasee shall make cabins, partitions and/or any other requirements
to suit the use of the said premises for office purposes.
8. The Leasee shall not assign, transfer, sublet, or part with the
possession of the said premises at any time during the subsistance of this
lease.
9. All taxes and levies, both present and future, due on the said premises
assessed/imposed, by the appropriate authority/authorities shall be borne and
paid by the Lessor.
10. It is hereby agreed between the parties that if the Leasee commits any
default in payment of the monthly rent, electricity or water charges, and/or
commits breach of any of the terms, convenants and conditions contained in
this Agreement, the Lessor shall be entitled by notice to revoke this lease
forthwith and on such revocation being made the Leasee shall within thirty
(30) days from the date of the receipt of the notice, remove all articles and
hand over vacant and peaceful possession of the said premises to the Lessor.
If the Leasee fails to comply with any such notice and/or fails to remove
articles and things belonging to Leasee and lying in the said premises, and
also fails to remove its representatives, the Lessor shall, without being in
any manner liable for any liability damages or loss that may be caused,
remove the same.
11. It is hereby agreed between the parties hereto that at all times the
ownership of the said premises shall be that of the Lessor and Leasee is
merely granted a lease of the said premises on the expiry or termination of
this lease.
12. The Leasee shall not store/keep in the said premises any articles or
goods which may expose the said premises to deterioration or
<PAGE>
damage by fire or any articles or goods of any objectionable or hazardous
nature the storing of which is likely to result in the enhancement of the
fire insurace premium in respect of the said premises excepting domestic
cooking gass or kerosene oil, which is used for cooking.
13. The Leasee will not get or claim any legal right of tenancy out of this
agreement, since this Agreement is executed to lease out the premises for a
definite period as indicated in Clause 1 hereinable.
14. The Leasee shall not do or suffer to be done anything which will be of
nuisance or annoyance to the neighbors or which may damage the said premises
or any other portion of the building in which the said premises are located.
15. Notwithstanding anything contained herein this lease may be terminated at
any time by Leasee by giving three months notice of its intention to vacate
the said premises to the Lessor, where upon the security deposit shall be
refunded to the Leasee by the Lessor.
16. The Leasee shall permit the Lessor or his duly authorised agent to enter
and inspect the said premises after due notice.
17. The Leasee shall hand over vacant and peaceful possession of the said
premises to the Lessor on the termination/expiry of this lease in good
condition, reasonable wear and tear expected whereupon the security deposit
shall be refunded to the Leasee by the Lessor forthwith.
18. This lease shall be further extended at the option of the Leasee on such
terms and conditions and for such further period as the parties hereto may
agree in writing.
19. The original agreement shall always remain with the Lessor and a copy
duly signed by both the parties shall be retained by the Leasee.
SCHEDULE I
Description of the premises - The Office No. 6 on the first floor of Pradeep
Chambers situated on Bhandarkar Institute Road, Pune 411 005 and measuring
1550 sq.ft.
IN WITNESS WHEREOF the parties hereto have respectively signed this Agreement
the day as hereinabove written.
<PAGE>
Signed and delivered by
s/N.G. Hegde
Dr. N. G. Hegde
President & Managing Trustee LESSOR
In the presence of
1. s/S.B. Karuande
S.B. Karuande
Signed and Delivered by
s/Shrikant S. Umrani
Mr. Shrikant S. Umrani
BIO-VED Pharmaceuticals Pvt. Ltd. LEASEE
In the Presence of
1. s/Neeina Bhujad
Mrs. Neeina Bhujad
<PAGE>
AGREEMENT FOR FURNITURE FIXTURES AND FITTINGS
This Lease Deed made and executed this 19th day of April 1996 between BAIF
Development Research Foundation, a Public Charitable Trust registered under
the Bombay Pulic Trust Act bearing Registration No. E-376, Pune and having
its registered office at Urulikanchan, District Pune (hereinafter referred as
'The Lessor') which expression unless repugnant to the context thereof,
(shall mean and include their heirs, successors, assigns, administrators,
etc.) of the ONE PART.
AND
M/s. BIO-VED PHARMACEUTICALS PVT. LTD. having its office at 6 Paarth 84/1
Prabhat Road, 411 004 represented herein by Mr. Shrikant S. Umrani
(hereinafter called the 'The Leasee' which expression shall, wherever the
context so requires or admist, mean and include its successors in interest)
of the OTHER PART.
WHEREBY IT IS AGREED BETWEEN LESSOR AND LEASEE AS UNDER:
1. The parties have entered in a Lease Agreement dated 19.4.96
under which the Lessor has leased out to the Leasee the Office no. 6 on first
floor of the premises situate at Pradeep Chambers, Bhandarkar Institute Road,
Pune 411 005 ('The Said Premises') initially for a period of 36 months
commencing from. The Leasee has requested and the Lessor has agreed to
<PAGE>
permit the Leasee to make use of -
i. the furniture fixtures and fittings in the said
premises (the details whereof are described in the schedule
hereunder) on the condition that the Leasee pays a sum of Rs.
20000/- (Rs. Twenty thousand only) for 1st year, Rs. 20775/- (Rs.
Twenty thousand seven hundred seventy five only) for 2nd year,
Rs. 21550/- (Rs. Twenty one thousand five hundred fifty only) for
the 3rd year per month for use of said fixtures and fittings for
the period upto 31 May 1999.
It is clearly understood that the above charges are in addition the lease
rent payable in respect of the said premises under the lease agreement dated
19.4.96.
2. The Leasee shall pay to the Lessor the aforesaid charges in advance on or
before the 10th day of every calendar month.
3. This Agreement shall commence, subsist and terminate alongwith the Lease
granted in respect of the said premises as per the lease agreement dated
19.4.96.
4. The Leasee shall deposit with the Lessor a sum of Rs. 200,000/- (Rs. Two
lacs only) as security deposit for observing the terms and conditions of this
Agreement and the same shall bear no interest and shall be refunded to the
Leasee at the time of the said premises being vacated and handed over the
Lessor. Any delay in the refund of security deposit will entail interest @
18% p.a. till the date of refund and the said premises shall not be handed
over till the deposit with interest is paid.
5. The Leasee agrees not to make any alteration to the existing fixtures and
fittings mentioned in this Agreement without first obtaining the Lessor's
consent in writing.
6. The Leasee upon the expiration of the period of 36 (Thirty six) months or
any curtailed or extended period of the lease shall hand over possession of
the said fixtures and fittings. The Lessor through its agents shall be
entitled to inspect the said fixtures and fittings at any reasonable hour
after giving previous intimation.
7. This lease shall be further extended at the option of the Leasee for such
further period and on such terms and conditions as the parties hereto may
agree in writing.
8. All the minor repairs pertaining to the fixtures and fittings should be
carried out by the Leasee at its own cost. Major repairs should be attended
to by the Lessor.
9. The Leasee shall keep all electrical and sanitary fittings and apparatus
in good and sound condition. On termination of this Agreement the Leasee
shall hand over all the fixtures and fittings in the same condition as they
were when given, to the Lessor, except normal wear and tear.
<PAGE>
10. The Leasee shall not in any way transfer the benefit of this Agreement to
any other person or Company or anyone else.
11. If the amount as agreed above remains unpaid for one month after any date
on which it is due or in case the Leasee fails to observe any of the terms of
the Agreement the Lessor shall be entitled to terminate this Agreement
forthwith without prejudice to other rights.
12. If the Leasee desires to vacate the said premises prior to expiry of the
Agreement, they shall have to give prior notice to the Lessor in writing of
three months and after that period, remove its belongings and hand over
possession of the said fixtures and fittings to the Lessor.
13. The original Agreement will be kept with the Lessor and the duplicate
copy duly signed shall be kept with the Leasee.
IN WITNESS WHEREOF the parties hereto have respectively signed this Agreement
the day as hereinabove written.
SCHEDULE I
(LIST OF FURNITURES AND FIXTURES)
Signed and Delivered by
s/N.G. Hegde
Dr. N.G. Hegde
President & Managing Trustee LESSOR
In the presence of
1. s/S.B. Karuande
S.B. Karuande
Signed and Received by
s/Shrikant S. Umrani
Mr. Shrikant S. Umrani
BIO-VED Pharmaceuticals Pvt. Ltd. LEASEE
In the presence of
1. s/Neeina Bhujad
Mrs. Neeina Bhujad
<PAGE>
Exhibit 10.6
OFFICE BUILDING LEASE
by and between
NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
A Wisconsin Corporation
by its Agent
GIBSON SPENO MANAGEMENT COMPANY
A California Corporation
("Landlord")
and
BIO-VED, INC.,
A Delaware Corporation
("Tenant")
Date: September 8, 1995
<PAGE>
TABLE OF CONTENTS
Article Page
------- -----
1. TERM 1
2. POSSESSION 1
3. BASIC RENT 1
4. RENTAL ADJUSTMENT 2
5. SECURITY DEPOSIT 3
6. USE 3
7. NOTICES 4
8. BROKERS 4
9. HOLDING OVER 4
10. TAXES ON TENANT'S PROPERTY 4
11. CONDITION OF PREMISES 5
12. ALTERATIONS 5
13. REPAIRS 5
14. LIENS 6
15. ENTRY BY LANDLORD 6
16. UTILITIES AND SERVICES 6
17. BANKRUPTCY 7
18. INDEMNIFICATION 7
19. DAMAGE TO TENANT'S PROPERTY 7
20. TENANT'S INSURANCE 7
21. DAMAGE OR DESTRUCTION 8
22. EMINENT DOMAIN 10
23. DEFAULTS AND REMEDIES 10
24. ASSIGNMENT AND SUBLETTING 11
25. SUBORDINATION 12
26. ESTOPPEL CERTIFICATE 12
<PAGE>
Article Page
------- -----
27. BUILDING PLANNING 13
28. RULES AND REGULATIONS 13
29. CONFLICT OF LAW 13
30. SUCCESSORS AND ASSIGNS 13
31. SURRENDER OF PREMISES 13
32. ATTORNEYS' FEES 13
33. PERFORMANCE BY TENANT 13
34 MORTGAGEE PROTECTION 14
35. DEFINITION OF LANDLORD 14
36. WAIVER 14
37. IDENTIFICATION OF TENANT 14
38. PARKING 15
39. TERMS AND HEADINGS 15
40. EXAMINATION OF LEASE 15
41. TIME 15
42. PRIOR AGREEMENT; AMENDMENTS 15
43. SEPARABILITY 15
44. RECORDING 15
45. CONSENTS 15
46. LIMITATION OF LIABILITY 15
47. RIDERS 16
48 FORCE MAJEURE 16
49. MODIFICATION FOR LENDER 16
50. OPTION TO EXTEND 16
51. EARLY OCCUPANCY 17
<PAGE>
TABLE OF EXHIBITS
Exhibit A The Premises
Exhibit B Work Letter Agreement
Exhibit C Standards for Utilities and Services
Exhibit D Rules and Regulations
Exhibit E Parking Rules and Regulations
<PAGE>
SAN JOSE CORPORATE CENTER
OFFICE BUILDING LEASE
THIS LEASE is made as of September 8, 1995 by and between Northwestern
Mutual Life Insurance Company, a Wisconsin Corporation ("Landlord"), and
Bio-Ved, Inc., A Delaware Corporation, ("Tenant").
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord
Suite Number 290 (the "Premises") outlined on the floor plan attached hereto
and marked Exhibit A, the Premises being agreed, for the purposes of this
Lease, to have an area of approximately 2,006 rentable square feet (1,791
usable square feet) and being situated on the 2nd floor of that certain
office building located at 1737 North First Street, San Jose, California
95112 (the "Building"). The Building contains approximately 82,596 rentable
square feet of space.
The parties hereto agree that said letting and hiring is upon and subject
to the terms, covenants and conditions herein set forth. Tenant covenants, as
a material part of the consideration for this Lease to keep and perform each
and all of said terms, covenants and conditions for which Tenant is liable
and that this Lease is made upon the condition of such performance.
Prior to the commencing of the term of this Lease the Premises shall be
improved by the Tenant Improvements described in the Work Letter marked
Exhibit B attached hereto.
1. TERM
The term of this Lease shall be for thirty-six (36) months. commencing
October 15, 1995, and ending on the last day of the month immediately
preceding the month in which the anniversary of the commencement date occurs,
unless such term shall be sooner terminated as hereinafter provided.
Failure to enter into such an amendment, however, shall not affect Tenant's
liability hereunder for the term of the Lease. Reference in this Lease to a
"Lease Year" shall mean each successive twelve month period commencing with
the commencement date.
2. POSSESSION
Tenant agrees that, if Landlord is unable to deliver possession of the
Premises to Tenant on the scheduled commencement of the term of this Lease,
this Lease shall not be void or voidable, nor shall Landlord be liable to
Tenant for any loss or damage resulting therefrom, but in such event the term
of this Lease shall not commence until Landlord tenders possession of the
Premises to Tenant with the Tenant Improvements substantially completed. If
Landlord is unable to deliver possession of the Premises by January 15,
<PAGE>
1996, provided Tenant has not caused any delays in the construction of tenant
improvements, Tenant shall be relieve from its obligations hereunder and this
Lease shall be deemed void.
3. BASIC RENT
(a) Tenant agrees to pay Landlord Basic Rent for the Premises (subject to
adjustments as hereinafter provided) as follows:
Months of Term Monthly Basic Rent
-------------- ------------------
01 - 36 $3,189.54
The Basic Rent shall be paid monthly, in advance on the first (1st) day of
each calendar month during the term, except that the first month's rent shall
be paid on execution hereof. If Tenant's obligation to pay rent commences or
ends on a day other than the first day of a calendar month, then the rental
for such period shall be prorated in the proportion that the number of days
this Lease is in effect during such period bears to thirty. In addition to
the Basic Rent, Tenant agrees to pay as additional rental the amount of
rental adjustments and other charges required by this Lease. All rental shall
be paid to Landlord, without prior demand and without any deduction or
offset, in lawful money of the United States of America, at the address of
Landlord designated on the signature page of this Lease or to such other
person or at such other place as Landlord may from time to time designate in
writing.
(b) In the event Tenant fails to pay any installment of rent when due or
in the event Tenant fails to make any other payment of which Tenant is
obligated under this Lease when due, then Tenant shall pay to Landlord a late
charge equal to five percent (5%) monthly to compensate Landlord for the
extra costs incurred as a result of such late payment. Tenant shall incur
late charges for any payments that are received more than five (5) day after
the due date.
4. RENTAL ADJUSTMENT
(a) For the purpose of this Article 4, the following terms are defined as
follows:
(i) Tenant's Percentage. That portion of the Building occupied by
Tenant divided by the total square footage of the Building, which result is
the following 2.43%.
(ii) Direct Expenses Base. The amount of the annual Direct Expenses
which Landlord has included in Basic Rent, which amount is equal to the 1996
actual direct expenses.
(iii) Direct Expenses. The term "Direct Expenses" shall include:
(A) All real and personal property taxes and assessments
imposed by any governmental authority or agency on the Building and the land
on which the
<PAGE>
Building is located (including a pro rata portion of any taxes levied on any
common areas); any assessments levied in lieu of taxes; any nonprogressive
tax on or measured by gross rentals received from the rental of space in the
Building; and any other costs levied or assessed by, or at the direction of,
any federal, state, or local government authority in connection with the use
or occupancy of the Premises or the parking facilities serving the Premises;
any tax on this transaction or any document to which Tenant is a party
creating or transferring an interest in the Premises, and any expenses,
including cost of attorneys or experts, reasonably incurred by Landlord in
seeking reduction by the taxing authority of the above referenced taxes, less
tax refunds obtained as a result of an application for review thereof; but
shall no include any net income, franchise, capital stock, estate or
inheritance taxes.
(B) Operating costs consisting of costs incurred by Landlord in
maintaining and operating the Building, exclusive of costs required to be
capitalized for federal income tax purposes, and including (without limiting
the generality of the foregoing) the following: costs of utilities, supplies
and insurance, costs of services of independent contractors, managers and
other suppliers, the fair rental value of the Building office, costs of
compensation (including employment taxes and fringe benefits) of all persons
who perform regular and recurring duties connected with the management,
operation, maintenance, and repair of the Building, its equipment, parking
facilities and the common areas, including, without limitation, engineers,
janitors, foremen, floor waxers, window washers, watchmen and gardeners, but
excluding person performing services not uniformly available to or performed
for substantially all Building tenants; a reasonable management fee; cost of
maintaining, repairing and replacing landscaping, sprinkler systems, concrete
walkways, paved parking areas, signs, and site lighting.
(C) Amortization of such capital improvements as Landlord may
have installed: (a) for the purpose of reducing operating costs, (b) to
comply with governmental rules and regulations promulgated after completion
of the Building, (c) for the purpose of replacing existing capital items and
improvements, and (d) any costs required by the CC&R's, as defined in Article
6, affecting the Premises or by any corporation, committee or association
formed in connection therewith, provided that such cost together with
interest at the maximum rate allowed by law shall be amortized over such
reasonable period as Landlord shall determine, and only the monthly amortized
cost shall be included in Direct Expenses.
(b) If Tenant's Percentage of the Direct Expenses paid or incurred by
Landlord for any calendar year exceeds the Direct Expenses Base included in
Tenant's rent, then Tenant shall pay such excess as additional rent. In
addition, for each year after the first calendar year, or portion thereof,
Tenant shall pay Tenant's Percentage of Landlord's estimate of the amount by
which Direct Expenses for that year shall exceed the Direct Expenses Base
("Landlord Estimate"). This estimated amount shall be divided into twelve
equal monthly installments. Tenant shall pay to Landlord, concurrently with
the regular monthly rent payment next due following the receipt of such
statement, an amount equal to one monthly installment multiplied by the
number of months from January in the calendar year
<PAGE>
in which said statement is submitted to the month of such payment, both
months inclusive. Subsequent installments shall be payable concurrently with
the regular monthly rent payments for the balance of that calendar year and
shall continue until the next calendar year's statement is rendered. As soon
as possible after the end of each calendar year, Landlord shall provide
Tenant with a statement showing the amount of Tenant's Percentage of Direct
Expenses, the amount of Landlord's Estimate actually paid by Tenant and the
amount of the Direct Expenses Base. Thereafter, Landlord shall reconcile the
above amounts and shall either bill Tenant for the balance due (payable on
demand by Landlord) or credit any overpayment by Tenant towards the next
monthly installment of Landlord's Estimate falling due, as the case may be.
For purposes of making these calculations, in no event shall Tenant's
Percentage of the Direct Expenses be deemed to be less than the Direct
Expenses Base.
(c) Even though the term has expired and Tenant has vacated the Premises,
when the final determination is made of Tenant's Percentage of Direct
Expenses for the year in which this Lease terminates, Tenant shall
immediately pay any increase due over the estimated expenses paid and,
conversely, any overpayment made in the event said expenses decrease shall be
rebated by Landlord to Tenant.
5. SECURITY DEPOSIT
Tenant has deposited with Landlord the sum of Thirteen Thousand One
Hundred Eighty Nine Dollars and 54/l00ths ($13,189.54). Said sum shall be
held by Landlord as security for the faithful performance by Tenant of all of
Tenant's obligations hereunder. Ten Thousand Dollars ($10,000.00) of the
deposit set forth above shall be held in an interest bearing account. All
interest earned from said $10,000.00 shall be paid to Tenant by Landlord at
the end of the lease term. If Tenant defaults with respect to any provision
of this Lease, including but not limited to the provisions relating to the
payment of rent, Landlord may (but shall not be required to) use, apply or
retain all or any part of this security deposit for the payment of any rent
or any other sum in default, or for the payment of any other amount which
Landlord may spend or become obligated to spend by reason of Tenant's default
or to compensate Landlord for any other loss or damage which Landlord may
suffer by reason of Tenant's default. If any portion of the deposit is so
used or applied, Tenant shall, upon demand, deposit cash with Landlord in an
amount sufficient to restore the security deposit to its original amount.
Tenant's failure to do so shall be a material breach of this Lease. Landlord
shall not be required to keep this security deposit separate from its general
f unds, and Tenant shall not be entitled to interest on such deposit, except
for as provided above. If Tenant shall fully and faithfully perform all of
its obligations under this Lease, the security deposit or any balance thereof
shall be returned to Tenant (or, at Landlord's option, to the last assignee
of Tenant's interest hereunder) at the expiration of the Lease term, provided
that Landlord may retain the security deposit until such time as any amount
due from Tenant in accordance with Article 4 hereof has been determined and
paid in full.
6. USE
<PAGE>
(a) Tenant shall use the Premises for general office purposes and shall
not use or permit the Premises to be used for any other purpose without the
prior written consent of Landlord. Nothing contained herein shall be deemed
to give Tenant any exclusive right to such use in the Building. Tenant shall
not use or occupy the Premises in violation of law or the certificate of
occupancy issued for the Building, and shall, upon written notice from
Landlord, discontinue any use of the Premises which is declared by any
governmental authority having jurisdiction to be a violation of law or of the
certificate of occupancy. Tenant shall comply with any direction of any
governmental authority having jurisdiction which shall, by reason of the
nature of Tenant's use or occupancy of the Premises, impose a duty upon
Tenant or Landlord with respect to the Premises or with respect to the use or
occupation thereof. Tenant shall not do or permit to be done anything which
will invalidate or increase the cost of any fire, extended coverage or any
other insurance policy covering the Building and/or property located therein
and shall comply with all rules, orders, regulations and requirements of the
Insurance Service Offices, formerly known as the Pacific Fire Rating Bureau
or any other organization performing a similar function. Tenant shall
promptly, upon demand, reimburse Landlord for any additional premium charged
for such policy by reason of Tenant's failure to comply with the provisions
of this article. Tenant shall not do or permit anything to be done in or
about the Premises which will in any way obstruct or interfere with the
rights of other tenants of the Building, or injure or annoy them, or use or
allow the Premises to be used for any improper, immoral, unlawful or
objectional purpose, nor shall Tenant cause, maintain or permit any nuisances
in, on or about the Premises. Tenant shall not commit or suffer to be
committed any waste in or upon the Premises.
7. NOTICES
Any notice required or permitted hereunder must be in writing and may be
given by personal delivery, overnight courier service, or by mail, and if
given by mail shall be deemed sufficiently given if sent by registered or
certified mail addressed to Tenant at the Premises, or to Landlord at its
address set forth at the end of this Lease. Either party may specify a
different address for notice purposes by written notice to the other except
that the Landlord may in any event use the Premises as Tenant's address for
notice purposes.
8. BROKERS
Tenant warrants that it has had no dealings with any real estate broker
or agent in connection with the negotiation of the Lease, except Duffy
D'Angelo of Colliers Parrish International whose commission shall be payable
by Landlord, and that it knows of no other real estate broker or agent who is
or might be entitled to a commission in connection with this Lease. If Tenant
has dealt with any other person or real estate broker with respect to leasing
or renting space in the Building, Tenant shall be solely responsible for the
payment of any fee due said person or firm and Tenant shall hold Landlord
free and harmless against any liability in respect thereto, including
attorneys' fees and costs.
<PAGE>
9. HOLDING OVER
If Tenant holds over after the expiration or earlier termination of the
term hereof without the express written consent of Landlord, Tenant shall
become a Tenant at sufferance only, at a rental rate equal to one hundred
fifty percent (150%) of the rent in effect upon the date of such expiration
(subject to adjustment as provided in paragraph 4 hereof and prorated on a
daily basis), and otherwise subject to the terms, covenants and conditions
herein specified, so far as applicable. Acceptance by Landlord of rent after
such expiration or earlier termination shall not result in a renewal of this
Lease. The foregoing provisions of this Article 9 are in addition to and do
not affect Landlord's right of reentry or any rights of Landlord hereunder or
as otherwise provided by law. If Tenant fails to surrender the Premises upon
the expiration of this Lease despite demand to do so by Landlord, Tenant
shall indemnify and hold Landlord harmless from all loss or liability,
including without limitation, any claim made by any succeeding tenant founded
on or resulting from such failure to surrender, and any attorneys' fees and
costs.
10. TAXES ON TENANT'S PROPERTY
(a) Tenant shall be liable for and shall pay, at least ten days before
delinquency, all taxes levied against any personal property or trade fixtures
placed by Tenant in or about the Premises. If any such taxes on Tenant's
personal property or trade fixtures are levied against Landlord or Landlord's
property or if the assessed value of the Premises is increased by the
inclusion therein of a value placed upon such personal property or trade
fixtures of Tenant and if Landlord, after written notice to Tenant, pays the
taxes based upon such increased assessment, which Landlord shall have the
right to do regardless of the validity thereof, but only under proper protest
if requested by Tenant, Tenant shall, upon demand, repay to Landlord the
taxes so levied against Landlord, or the portion of such taxes resulting from
such increase in the assessment.
(b) If the Tenant Improvements in the Premises, whether installed, and/or
paid for by Landlord or Tenant and whether or not affixed to the real
property so as to become a part thereof, are assessed for real property tax
purposes at a valuation higher than the valuation at which Tenant
Improvements conforming to Landlord's "Building Standard" in other space in
the Building are assessed, then the real property taxes and assessments
levied against the Building by reason of such excess assessed valuation shall
be deemed to be taxes levied against personal property of Tenant and shall be
governed by the provisions of Paragraph 10(a), above. If the records of the
county assessor are available and sufficiently detailed to serve as a basis
for determining whether said Tenant Improvements are assess at a higher
valuation than Landlord's Building Standard, such records shall be binding on
both the Landlord and the Tenant. If the records of the county assessor are
not available or sufficiently detailed to serve as a basis for making said
determination, the actual cost of construction shall be used.
11. CONDITION OF PREMISES
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Tenant acknowledges that neither Landlord nor any agent of Landlord has
made any representation or warranty with respect to the Premises or the
Building or with respect to the suitability of either for the conduct of
Tenant's business. The taking of possession of the Premises by Tenant shall
conclusively establish that the Premises and the Building were in
satisfaction condition at such time.
12. ALTERATIONS
(a) Tenant shall make no alterations, additions or improvements in or to
the Premises without Landlord's prior written consent, and then only by
contractors or mechanics approved by Landlord. Tenant agrees that there shall
be no construction of partitions or other obstruction which might interfere
with Landlord's free access to mechanical installations or service facilities
of the Building or interfere with the moving of Landlord's equipment to or
from the enclosures containing said installations or facilities. All such
work shall be done at such times and in such manner as Landlord may from time
to time designate. Tenant covenants and agrees that all work done by Tenant
shall be performed in full compliance with all laws, rules, orders,
ordinances, regulations and requirements of all governmental, agencies,
offices, and boards having jurisdiction, and in full compliance with the
rules, regulations and requirements of the Insurance Service Offices formerly
known as the Pacific Fire Rating Bureau, and of any similar body. Before
commencing any work, Tenant shall give Landlord at least ten (10) days
written notice of the proposed commencement of such work and shall, if
required by Landlord, secure at Tenant's own cost and expense, a completion
and lien indemnity bond, satisfaction to Landlord, for said work. Tenant
further covenants and agrees that any mechanic's lien filed against the
Premises or against the Building for work claimed to have been done for, or
materials claimed to have been furnished to Tenant will be discharged by
Tenant, by bond or otherwise, within ten (10) days after the filing thereof,
at the cost and expense of Tenant. All alterations, additions or improvements
upon the Premises made by either party, including (without limiting the
generality of the foregoing) all wallcovering, built-in cabinet work,
paneling and the like, shall, unless Landlord elects otherwise, become the
property of Landlord, and shall remain upon, and be surrendered with the
Premises, as a part thereof, at the end of the term hereof, except that
Landlord may, by written notice to Tenant, require Tenant to remove all
partitions, counters, railings and the like installed by Tenant, and Tenant
shall repair all damage resulting from such removal or, at Landlord's option,
shall pay to Landlord all costs arising from such removal.
(b) All articles of personal property and all business and trade
fixtures, machinery and equipment, furniture and movable partitions owned by
Tenant or installed by Tenant at its expense in the Premises shall be and
remain the property of Tenant and may be removed by Tenant at any time during
the lease term when Tenant is not in default hereunder. If Tenant shall fail
to remove all of its effects from the Premises upon termination of this Lease
for any cause whatsoever, Landlord may, at its option, remove the same in any
manner that Landlord shall choose, and store said effects without liability
<PAGE>
to Tenant for loss thereof. In such event, Tenant agrees to pay Landlord upon
demand any and all expenses incurred in such removal, including court costs
and attorneys' fees and storage charges at its option, without notice, sell
said effects, or any of the same, at private sale and without legal process,
for such price as Landlord may obtain and apply the proceeds of such sale
upon any amounts due under this Lease from Tenant to Landlord and upon the
expense incident to the removal and sale of said effects.
13. REPAIRS
(a) By entry hereunder, Tenant accepts the Premises as being in good and
sanitary order, condition and repair. Tenant shall keep, maintain and
preserve the Premises in first class condition and repair, and shall, when
and if needed, at Tenant's sole cost and expense, make all repairs to the
Premises and every part thereof. Tenant shall, upon the expiration or sooner
termination of the term hereof, surrender the Premises to Landlord in the
same condition as when received, usual and ordinary, wear and tear excepted.
Landlord shall have no obligation to alter, remodel, improve, repair decorate
or paint the Premises or any part thereof, except as provided in Exhibit "B".
The parties hereto affirm that Landlord has made no representations to
Tenant respecting the condition of the Premises or the Building except as
specifically herein set forth.
(b) Anything contained in Paragraph 13(a) above to the contrary,
notwithstanding, Landlord shall repair and maintain the structural portions
of the Building, including the foundation, building shell, and roof
structure, all at Landlord's expense, unless such maintenance and repairs are
caused in part or in whole by the act, neglect, or omission of any duty or
Tenant, its agents, employees, or invitees, in which event Tenant shall
reimburse Landlord, as additional rent, for the reasonable cost of such
maintenance and repairs. Landlord shall also repair and maintain the basic
plumbing, elevators, life safety systems and other building systems, heating
ventilating, air conditioning and electrical systems installed or furnished
by Landlord, the roof membrane, the parking areas, driveways, sidewalks,
landscaping, project signs and exterior site lighting. The cost of the
foregoing repairs and maintenance shall be billed to Tenant as operating
costs pursuant to Paragraph 4. Landlord shall not be liable for any failure
to make any such repairs or to perform any maintenance unless such failure
shall persist for an unreasonable time after written notice of the need of
such repairs or maintenance is given to Landlord by Tenant. Except as
provided in Article 21 hereof, there shall be no abatement of rent and no
liability of Landlord by reason of any injury to or interference with
Tenant's business arising from the making of any repairs, alterations or
improvements in or to any portion of the Building or the Premises or in or
to fixtures, appurtenances and equipment therein. Tenant waives the right to
make repairs at Landlord's expense under any law, statute or ordinance now or
hereafter in effect.
14. LIENS
Tenant shall not permit any mechanics, materialmen's or other liens to be
filed against the Building nor against Tenant's leasehold interest in the
Premises. Landlord shall
<PAGE>
have the right at all reasonable times to post and keep posted on the
Premises any notices which it deems necessary, for protection from such
liens. If any such liens are filed, Landlord may, without waiving its rights
and remedies based on such breach of Tenant and without releasing Tenant from
any of its obligations, cause such liens to be released by any means it shall
deem proper, including payments in satisfaction of the claim giving rise to
such lien. Tenant shall pay to Landlord at once, upon notice by Landlord, any
sum paid by Landlord to remove such liens, together with interest at the
maximum rate per annum permitted by law from the date of such payment by
Landlord.
15. ENTRY BY LANDLORD
Landlord reserves and shall at any and all times have the right to enter
the Premises to inspect the same, to supply janitor service and any service
to be provided by Landlord to Tenant hereunder, to show the Premises to
prospective purchasers or tenants, to post notices of nonresponsibility, to
alter, improve or repair the Premises or any other portion of the Building,
all without being deemed guilty of any eviction of Tenant and without
abatement of rent. Landlord may, on order to carry, out such purposes, erect
scaffolding and other necessary structures where reasonably required by the
character of the work to be performed, provided that the business of Tenant
shall be interfered with as little as is reasonably practicable. Tenant
hereby waives any claim for damages for any injury or inconvenient to or
interference with Tenant's business, any loss of occupancy or quite enjoyment
of the Premises, and only other loss in, upon and about the Premises.
Landlord shall at all times have and retain a key with which to unlock all
doors in the Premises. any entry to the Premises obtained by Landlord by any
of said means, or otherwise, shall not be construed or deemed to be a
forcible or unlawful entry into the Premises, or an eviction of Tenant from
the Premises or any portion thereof, and any damages caused on account
thereof shall be paid by Tenant. It is understood and agreed that no
provision of this Lease shall be construed as obligating Landlord to perform
any repairs, alterations or decorations except as otherwise expressly agreed
herein by Landlord.
16. UTILITIES AND SERVICES
Provided that Tenant is not default under this Lease, Landlord agrees to
furnish or cause to be furnished to the Premises the utilities and services
described in the Standards for Utilities and Services, attached hereto as
Exhibit C, subject to the conditions and in accordance with the standards set
forth therein. Landlord's failure to furnish any of the foregoing items when
such failure is caused by: (i) accident, breakage, or repairs; (ii) strikes,
lockouts or other labor disturbance or labor dispute of any character; (iii)
governmental regulation, moratorium or other governmental action; (iv)
inability despite the exercise of reasonable diligence to obtain electricity,
water or fuel; or (v) any other cause beyond Landlord's reasonable control,
shall not result in any liability to Landlord. In addition, Tenant shall not
be entitled to any abatement or reduction of rent by reason of such failure,
no eviction of Tenant shall result from such failure and Tenant shall not be
relieved from the performance of any covenant or agreement in this Lease
because of such failure. In the event of any failure,
<PAGE>
stoppage or interruption thereof, Landlord shall diligently attempt to resume
service promptly.
17. BANKRUPTCY
If Tenant shall file a petition in bankruptcy under any provision of the
Bankruptcy code as then in effect, or if Tenant shall be adjudicated a
bankrupt in involuntary bankruptcy proceedings and such adjudication shall
not have been vacated within thirty (30) days from the date thereof, or if a
receiver or trustee shall be appointed of Tenant's property and the order
appoint such receiver or trustee shall not be set aside or vacated within
thirty (30) days after the entry, thereof, or if Tenant shall assign Tenant's
estate or effects for the benefit of creditors, or if this Lease shall, by
operation of law or otherwise, pass to any person or persons other than
Tenant, then in any such event Landlord may terminate this Lease, if Landlord
so elects, with or without notice of such election and with or without entry,
or action by Landlord. In such case, notwithstanding any other provisions of
this Lease, Landlord, in addition to any and all rights and remedies allowed
by law or equity, shall, upon such termination, be entitled to possession of
the Premises but shall surrender the Premises to Landlord. Nothing contained
herein shall limit or prejudice the right of Landlord to recover damages by
reason of any such termination equal to the maximum allowed by any statute or
rule of law in effect at the time when, and governing the proceedings in
which, such damages are to be proved; whether or not such amount is greater,
equal to, or less than the amount of damages recoverable under the provisions
of this Article 17.
18. INDEMNIFICATION
Tenant shall indemnify, defend and hold Landlord harmless from all claims
arising from Tenant's use of the Premises or the conduct of its business or
from any activity, work, or thing done, permitted or suffered by Tenant in or
about the Premises. Tenant shall further indemnify, defend and hold Landlord
harmless from all claims arising from any breach or default in the
performance of any obligation to be performed by Tenant under the terms of
this Lease, or arising from any act, neglect, fault or omission of Tenant or
of its agents or employees, and from and against all costs, attorneys' fees,
expenses and liabilities incurred in or about such claim or any action or
proceeding brought thereon. In case any action or proceeding shall be brought
against Landlord by reason of any such claim, Tenant upon notice from
Landlord shall defend the same at Tenant's expense by counsel approved in
writing by Landlord.
19. DAMAGE TO TENANT'S PROPERTY.
Notwithstanding the provisions of Article 18 to the contrary, Landlord or
its agents shall not be liable for (i) any damage to any property entrusted
to employees of the Building, (ii) loss or damage to any property by theft or
otherwise, (iii) any injury, or damage to persons or property resulting from
fire, explosion, falling plaster, steam gas, electricity, water or rain which
may leak from any part of the Building or from the pipes,
<PAGE>
appliances or plumbing work therein or from the roof, street or subsurface or
from any other place or resulting from dampness or (iv) any other cause
whatsoever. Landlord or its agents shall not be liable for interference with
light or other incorporeal hereditaments nor shall Landlord be liable for any
latent defect in the Premises or Building. Tenant shall give prompt notice to
Landlord in case of fire or accidents in the Premises or in the Building or
of defects therein or in the fixtures or equipment.
20. TENANT'S INSURANCE
(a) Tenant shall, during the term hereof and any other period of
occupancy, at it s sole costs and expense, keep in full force and effect the
following insurance:
(i) Standard form property insurance insuring against the perils of
fire, extended coverage, vandalism, malicious mischief, special extended
coverage ("All Risk") and sprinkler leakage. This insurance policy shall be
upon all property owned by Tenant, for which Tenant is legally liable or that
was installed at Tenant's expense, and which is located in the Building
including, without limitation, furniture, fittings, installations, fixtures
(other than Tenant Improvements installed by Landlord), and any other
personal property, in an amount not less than the full replacement cost
thereof. In the event that there shall be a dispute as to the amount which
comprises full replacement cost, the decision of Landlord or any mortgagees
of Landlord shall be conclusive. This insurance policy shall also be upon
direct or indirect loss of Tenant's earnings attributable to Tenant's
inability to use fully or obtain access to the Premises or Building in an
amount as will property reimburse Tenant. Such policy shall name Landlord and
any mortgagees of Landlord as insured parties, as their respective interests
may appear.
(ii) Comprehensive General Liability insurance insuring Tenant
against any liability arising out of the lease, use, occupancy or maintenance
of the Premises and all areas appurtenant thereto. Such insurance shall be in
the amount of $1,000,000.00 combined single limit for injury to, or death of
one or more persons in an occurrence, and for damage to tangible property
(including loss of use) in an occurrence, with such liability amount to be
adjusted from year to year to reflect increases in the Consumer Price Index.
The policy shall insure the hazards of premises and operations, independent
contractors, contractual liability (covering the indemnity contained in
Paragraph 18 hereof) and shall (1) name Landlord as an additional', insured,
and (2) contain a provision that "the insurance provided the Landlord
hereunder shall be primary, and noncontributing with any other insurance
available to the Landlord."
(iii) Workers' compensation and employer's liability insurance (as
required by state law).
(iv) Any other form or forms of insurance as Tenant or Landlord or
any mortgagees of Landlord may reasonably require from time to time in form,
in amounts and for insurance risks against which a prudent tenant would
protect itself.
<PAGE>
(b) All policies shall be written in a form satisfaction, to Landlord and
shall be taken out with insurance companies holding a General Policyholders
Rating of "A" and a Financial Rating of "X" or better, as set forth in the
most current issue of Bests Insurance Guide. Within ten (10) days after the
execution of this Lease, Tenant shall deliver to Landlord copies of policies
or certificates evidencing the existence of the amounts and forms of coverage
satisfactory to Landlord. No such policy shall be cancelable or reducible in
coverage except after thirty (30) days prior written notice to Landlord.
Tenant shall, within ten (10) days prior to the expiration of such policies,
furnish Landlord with renewals or "binders" thereof, or Landlord may order
such insurance and charge the cost thereof to Tenant as additional rent. If
Landlord obtains any insurance that is the responsibility of Tenant under
this section, Landlord shall deliver to Tenant a written statement setting
forth the cost of any such insurance and showing in reasonable detail the
manner in which it has been computed.
21. DAMAGE OR DESTRUCTION
(a) If the Building and/or the Premises is damaged by fire or other
perils covered by Landlord's insurance, Landlord shall have the following
rights and obligations:
(i) In the event of total destruction, Landlord shall, as Landlord's
option, commence repair, reconstruction and restoration of the Building
and/or the Premises as soon as reasonably possible, and diligently prosecute
the same to completion, in which event this Lease shall remain in full force
and effect. If Landlord elects not to so repair, reconstruct or restore the
Building and/or the Premises, this Lease shall terminate as of the date of
such total destruction. In either event, Landlord shall give Tenant written
notice of its intention within sixty (60) days after the date of damage or
destruction.
(ii) In the event of a partial destruction of the Building and/ or
the Premises, Landlord shall promptly restore the Building and/or the
Premises unless Landlord elects to terminate this Lease as permitted herein.
Landlord shall have the right to terminate this Landlord if (1) the damage to
the Building and/or the Premises exceeds twenty-five percent (25%) of the
full insurable value thereof, (2) the damage to the Building and/or the
Premises is such that the Building and/or the Premises cannot be repaired,
reconstructed or restored within one hundred eighty (180) days from the date
of damage or destruction, or (3) insurance proceeds received by Landlord will
not be sufficient to cover the cost of such repairs, reconstruction and
restoration. Landlord shall give written notice to Tenant of its intention
within sixty (60) days after the date of damage or destruction. If Landlord
elects not to restore the Building and/or the Premises, this Lease shall be
deemed to have terminated as of the date of such partial destruction.
(b) Upon any termination of this Lease, Landlord under any of the
provisions of this Article 21, the parties shall be released without further
obligation to the other from the date possession of the Premises is
surrendered to Landlord except for items which have therefore accrued and are
then unpaid.
<PAGE>
(c) In the event of repair, reconstruction and restoration by Landlord as
herein provided, the rental payable under this Lease shall be abated
proportionately with the degree to which Tenant's use of the Premises is
impaired during the period of such repair, reconstruction or restoration.
Tenant shall not be entitled to any compensation or damages for loss in the
use of the whole or any part of the Premises and/or any inconvenience or
annoyance occasioned by such damage, repair, reconstruction or restoration.
(d) Tenant shall not be released from any of its obligations under this
Lease except to the extent and upon the conditions expressly stated in this
Article 21. Notwithstanding anything to the contrary contained in this
Article 21, if Landlord is delayed or prevented from repairing or restoring
the damaged Premises within one year after the occurrence of such damage or
destruction by reason of acts of God, war, governmental restrictions,
inability to obtain the necessary labor or materials, or other cause beyond
the control of Landlord, Landlord shall be relieved of its obligation to make
such repairs of restoration and Tenant shall be released from its obligations
under this Lease as of the end of said one year period.
(e) If damage is due to any cause other than fire or other peril covered
by All-Risk insurance, Landlord may elect to terminate this Lease.
(f) If Landlord is obligated to or elects to repair or restore as herein
provided, Landlord shall be obligated to make repair or restoration only of
those portions of the Building and the Premises which were originally
provided at Landlord's expense, and the repair and restoration of items not
provided at Landlord's expense shall be the obligation of Tenant.
(g) Notwithstanding anything to the contrary contained in this Article
21, Landlord shall not have any obligation whatsoever to repair, reconstruct
or restore the Premises when the damage resulting from any casualty covered
under this Article 21, occurs during the last twelve (12) months of the term
of this Lease or any extension hereof.
(h) The provisions of California Civil Code Section 1932, Subsection 2,
and Section 1933, Subsection 4, which permit termination of a lease upon
destruction of the leased premises, are hereby waived by Tenant; and the
provisions of this article shall govern in case of such destruction.
22. EMINENT DOMAIN
If all of the Premises, or such part thereof as shall substantially
interfere with Tenant's use and occupancy of the Premises, shall be taken for
any public or quasi-public purpose by any lawful power or authority by
exercise of the right of appropriation, condemnation or eminent domain, or
sold to prevent such taking, either party may terminate this Lease effective
as of the date possession is required to be surrendered to said authority.
Tenant shall not assert any claim against Landlord or the taking authority
for any compensation because of such taking, and Landlord shall be entitled
to receive the
<PAGE>
entire amount of any award without deduction for any estate or interest of
Tenant. If neither party terminates this Lease as permitted herein, Landlord
shall be entitled to the entire amount of the award without deduction for any
estate or interest of Tenant, Landlord shall restore the Premises to
substantially their same condition prior to such partial taking, and rent
shall be abated for the time and to the extent Tenant is prevented from using
the Premises on account of such taking and restoration. Nothing contained in
this paragraph shall be deemed to give Landlord any interest in any award
made to Tenant for the taking of personal property and fixtures belonging to
Tenant or for Tenant's moving or relocation expenses.
23. DEFAULTS AND REMEDIES
(a) The occurrence of any one or more of the following events shall
constitute a default hereunder by Tenant:
(i) The vacation or abandonment of the Premises by Tenant.
Abandonment is herein defined to include, but is not limited to, any absence
by Tenant from the Premises for five (5) business days or longer while in
default of any provision of this Lease.
(ii) The failure by Tenant to make any payment of rent where such
failure shall continue for a period of three (3) days after written notice
thereof from Landlord to Tenant; provided however, that any such notice shall
be in lieu of, and not in addition to, any notice required under California
Code of Civil Procedure Section II6I regarding unlawful detainer actions.
(iii) The failure by Tenant to observe or perform any of the express
or implied covenants or provisions of this Lease to be observed or performed
by Tenant, other than as specified in Subparagraph 23(a)(i) or (ii) above,
where such failure shall continue for a period of ten (10) days after written
notice thereof from Landlord to Tenant. Any such notice shall be in lieu of,
and not in addition to, any notice required under California Code of Civil
Procedure Section II6I regarding unlawful detainer actions. If the nature of
Tenant's default is such that more than ten (10) days are reasonably required
for its cure, then Tenant shall not be deemed to be in default if Tenant
shall commence such cure within said ten-day period and thereafter diligently
prosecute such cure to completion, which completion shall occur not later
than sixty (60) days from the date of such notice from Landlord.
(iv) (1) The making by Tenant of any general assignment for the
benefit of creditors' (2) the filing by or against Tenant of a petition to
have Tenant adjudged a bankrupt or a petition for reorganization or
arrangement under any law relating to bankruptcy (unless, in the case of a
petition filed against Tenant, the same is dismissed within thirty (30)
days); (3) the appointment of a trustee or receiver to take possession of
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease, where possession is not restored to Tenant within
thirty (30) days; or (4) the attachment, execution or other judicial seizure
of substantially all of Tenant's assets
<PAGE>
located at the Premises or of Tenant's interest in this Lease where such
seizure is not discharged within thirty (30) days.
(b) In the event of any such default by Tenant, in addition to any other
remedies available to Landlord at law or in equity, Landlord shall have the
immediate option to terminate this Lease and all rights of Tenant hereunder.
In the event that Landlord shall elect to so terminate this Lease then
Landlord may recover from Tenant:
(i) the worth at the time of award of any unpaid rent which had
been earned at the time of such termination; plus
(ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that Tenant proves could have
been reasonably avoided; plus
(iii) the worth at the time of award of the amount by which the
unpaid rent for the balance of the term after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably avoided;
plus
(iv) any other amount necessary to compensate Landlord for all
detriment approximately caused by Tenant's failure to perform Tenant's
obligations under this Lease or which in the ordinary course of things would
be likely to result therefrom.
As used in Subparagraphs 23(b)(i) and (ii) above, the "worth at the time of
award" is computed by allowing interest at the maximum rate permitted by law.
As used in Subparagraph 23(b)(iii) above, the "worth at the time of award" is
computed by discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus one percent (1%).
(c) In the event of any such default Landlord shall also have the right
to continue this Lease in full force and effect, and this Lease shall
continue in full force and effect as long as Landlord does not terminate this
Lease, and Landlord shall have the right to collect rent as it becomes due.
(d) Landlord shall also have the right, with or without terminating
this Lease, to reenter the Premises and remove all persons and property from
the Premises; such property may be removed and stored in a public warehouse
or elsewhere at the cost of and for the account of Tenant. No reentry or
taking possession of the Premises by Landlord pursuant to the Paragraph 23(c)
shall be construed as an election to terminate this Lease unless a written
notice of such intention is given to Tenant or unless the termination thereof
is decreed by a court of competent jurisdiction.
(e) All rights, options and remedies of Landlord contained in this Lease
shall be constructed and held to be cumulative, and no one of them shall be
exclusive of the other. Landlord shall have the right to pursue any one or
all of such remedies or any other
<PAGE>
remedy or relief which may be provided by law, whether or not stated in the
Lease. No waiver or any default of Tenant hereunder shall be implied from
any acceptance by Landlord or any rent or other payments due hereunder or any
omission by Landlord to take any action on account of such default if such
default persists or is repeated, and no express waiver shall affect defaults
other than as specified in said waiver. The consent or approval of Landlord
to or of any act by Tenant requiring Landlord's consent or approval shall not
be deemed to waive or render unnecessary Landlord's consent or approval to or
of any subsequent similar acts by Tenant.
24. ASSIGNMENT AND SUBLETTING
(a) Tenant shall not voluntarily assign or encumber its interest in this
Lease or in the Premises, or sublease all or any part of the Premises, or
allow any other person or entity to occupy or use all or any part of the
Premises, without first obtaining Landlord's prior written consent. Any
assignment, encumbrance or sublease without Landlord's prior written consent
shall be voidable, at Landlord's election, and shall constitute a default and
at the option of the Landlord shall result in a termination of this Lease.
No consent to assignment, encumbrance, or sublease shall constitute a further
waiver of the provisions of this paragraph. Tenant shall notify Landlord in
writing of Tenant's intent to sublease, encumber or assign this Lease and
Landlord shall, within fifteen (15) days of receipt of such written notice,
elect one of the following: (i) consent to such proposed assignment or
sublease; (ii) refuse such consent, which refusal shall be on reasonable
grounds, or (iii) elect to terminate this Lease.
(b) As a condition for granting its consent to any assignment,
encumbrance or sublease, fifteen (15) days prior to any anticipated
assignment or sublease Tenant shall give Landlord written notice (the
"Assignment Notice"), which shall set forth the name, address and business of
the proposed assignee or sublessee, information (including references)
concerning the character, ownership and financial condition of the proposed
assignee or sublessee, the Assignment Date, any ownership or commercial
relationship between Tenant and the proposed assignee or sublessee, all in
such detail as Landlord shall reasonably require. If Landlord requests
additional detail, the Assignment Notice shall not be deemed to have been
received until Landlord received such additional detail, and Landlord may
withhold consent to any assignment or sublease until such additional detail
is provided to it. Further, Landlord may require that the sublessee or
assignee remit directly to Landlord on a monthly basis, all monies due to
Tenant by said assignee or sublessee.
(c) The consent by Landlord to any assignee of this Lease or sublessee
of the Premises from obtaining the express written consent of Landlord to any
further assignment or subletting or as releasing Tenant or any assignee or
sublessee of Tenant from any liability or obligation hereunder whether or not
then accrued. In the event Landlord shall consent to an assignment or
sublease, Tenant shall pay Landlord as additional rent a reasonable
attorneys' and administration fee not to exceed $500 for costs incurred in
connection with evaluating the Assignment Notice. This section shall be
fully applicable
<PAGE>
to all further sales, hypothecation, transfers, assignments and subleases of
any portion of the by any successor assignee of Tenant, or any sublessee of
the Premises.
(d) As used in this section, the subletting of substantially all of the
Premises for substantially all of the remaining term of this Lease shall be
deemed an assignment rather than a sublease. Notwithstanding the foregoing,
Landlord shall consent to the assignment, sale or transfer if the Assignment
Notice states that Tenant desires to assign the Lease to any entity into
which Tenant is merged, with which Tenant is consolidated or which acquires
all or substantially all of the assets of Tenant, provided that the assignee
first executes, acknowledges and delivers to Landlord an agreement whereby
the assignee agrees to be bound by all of the covenants and agreements in
this Lease which Tenant has agreed to keep, observe or perform, that the
assignee agrees that the provisions of this section shall be binding upon it
as if it were the original Tenant hereunder and that the assignee shall have
a net worth (determined in accordance with generally accepted accounting
principles consistently applied) immediately after such assignment which is
at least equal to the net worth (as so determined) of Tenant at the
commencement of this Lease.
(e) Except as provided above, Landlord's consent to any sublease shall
not be unreasonably withheld. A condition to such consent shall be delivery
by Tenant to Landlord of a true copy of any such sublease. If for any
proposed assignment or sublease Tenant receives rent or other consideration,
either initially or over the term of the assignment or sublease, in excess
of the rent called for hereunder, or, in case of the sublease of a portion of
the Premises, in excess of such rent fairly allocable to such portion, after
appropriate adjustments to assure that all other payments called for
hereunder are taken into account, Tenant shall pay to Landlord as additional
rent hereunder fifty percent (50%) of the excess of each such payment or
rent, less any documented expenses incurred by Tenant in direct relation to
the assignment or sublease, or other consideration received by Tenant
promptly after its receipt. Landlord's waiver or consent to any assignment or
subletting shall not relieve Tenant from any obligation under this lease. The
parties intend that the preceding sentence shall not apply to any sublease
rentals respecting a portion of the Premises that during the entire term of
this Lease was not occupied by Tenant for its own use, but was always
subleased by Tenant and/or kept vacant. For the purposes of this section, the
rent for each square foot of floor space in the Premises shall be deemed
equal.
(f) Tenant may assign the Lease or may sublet the Premises or any part
thereof without Landlord's prior consent, to any subsidiary, affiliate or
controlled corporation, or to any corporation into which Tenant may be
converted or with which it may merge, provided said entity has comparable
financial strength and agrees to accept the Lease Agreement in it's then
current condition, and provided that the assignee or sublessee's use is
compatible with the building.
25. SUBORDINATION
<PAGE>
Without the necessity of any additional document being executed by Tenant
for the purpose of effecting a subordination, and at the election of Landlord
or any mortgagee with a lien on the building or any ground lessor with
respect to the building, this Lease shall be subject and subordinate at all
times to:
(i) All ground leases or underlying leases which may now exist or
hereafter be executed affecting the building or the land upon which the
building is situated or both;
(ii) The lien of any mortgage or deed of trust which may now exist or
hereafter be executed in any amount for which the building, land, ground
leases, or underlying leases, or Landlord's interest or estate in any of said
items is specified as security. Notwithstanding the foregoing, Landlord shall
have the right to subordinate or cause to be subordinated any such leases or
underlying leases or any such liens to this Lease. In the event that any
ground lease or underlying lease terminates for any reason or any mortgage or
deed of trust is foreclosed or a conveyance in lieu of foreclosure is made
for any reason, Tenant shall, notwithstanding any subordination, attorn to
and become the Tenant of the successor in interest to Landlord, at the option
of such successor in interest. Tenant covenants and agrees to execute and
deliver, upon demand by Landlord and in the form requested by Landlord, any
additional documents evidencing the priority or subordination of this Lease
with respect to any such ground leases or underlying leases or in the lien of
any such mortgage or deed of trust.
26. ESTOPPEL CERTIFICATE
(a) Within ten (10) days following any written request which Landlord may
make from time to time, Tenant shall execute and deliver to Landlord a
statement certifying: (i) the date of commencement of this Lease; (ii) the
fact that this Lease is unmodified and in full force and effect (or, if there
have been modifications); (iii) the date to which the rental and other sums
payable under this Lease have been paid; (iv) that there are no current
defaults under this Lease by either Landlord or Tenant except as specified in
Tenant's statement; and (v) such other matters requested by Landlord.
Landlord and Tenant intend that any statement delivered pursuant to this
Article 26 may be relied upon by any mortgage, beneficiary, purchaser, or
prospective purchaser of the building or any interest therein.
(b) Tenant's failure to deliver such statement within such time shall be
conclusive upon Tenant: (i) that this Lease is in full force and effect,
without modification except as may be represented by Landlord, (ii) that
there are no uncured defaults in Landlord's performance, and (iii) that not
more than one month's rental has been paid in advance.
27. BUILDING PLANNING
In the event Landlord requires the Premises for use in conjunction with
another suite or for other reasons connected with the Building planning
program, upon notifying Tenant in writing, Landlord shall have the right to
move to other space in the Building of
<PAGE>
which the Premises forms a part, at Landlord's sole costs and expense, and
the terms and conditions of the original Lease shall remain in full force and
effect, save and expecting that a revised Exhibit "A" shall become part of
this Lease and shall reflect the location of the new space. However, if the
new space does not meet with Tenant's approval, Tenant shall have the right
to cancel this Lease upon giving Landlord thirty (30) days notice within ten
(10) days of receipt of Landlord's notification.
28. RULES AND REGULATIONS
Tenant shall faithfully observe and comply with the "Rules and
Regulations," a copy of which is attached hereto and marked Exhibit D and
all reasonable and nondiscriminatory modifications thereof and additions
thereto from time to time put into effect by Landlord. Landlord shall not be
responsible to Tenant for the violation or nonperformance by any other tenant
or occupant of the building of any of said Rules and Regulations.
29. CONFLICT OF LAW
This Lease shall be governed by and construed pursuant to the laws of the
State of California.
30. SUCCESSORS AND ASSIGNS
Except as otherwise provided in this Lease, all of the covenants,
conditions, and provisions of this Lease shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors, and assigns.
31. SURRENDER OF PREMISES
The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation thereof, shall not work a merger, and shall, at the option of
Landlord, operate as an assignment to it of any or all subleases or
subtenancies.
32. ATTORNEY'S FEES
(a) If Landlord should bring suit for possession of the Premises, for the
recovery of any sum due under this Lease, or because of the breach of any
provisions of this Lease, or for any other relief against Tenant hereunder,
or in the event of any other litigation between the parties with respect to
this Lease, then all costs and expenses, including reasonable attorney's
fees, incurred by the prevailing party therein shall be paid by the other
party, which obligation on the part of the other party shall be deemed to
have accrued on the date of the commencement of such action and shall be
enforceable whether or not the action is prosecuted to judgment.
33. PERFORMANCE BY TENANT
<PAGE>
All covenants and agreements to be performed by Tenant under any of the
terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of rent. If Tenant shall fail to pay any
sum of money owed to any party other than Landlord, for which it is liable
hereunder, or if Tenant shall fail to perform any other act on its part to be
performed hereunder and such failure shall continue for ten (l0) days after
notice thereof by Landlord, Landlord may, without waiving or releasing Tenant
from obligations of Tenant, but shall not be obligated to, make any such
payment or perform any such other act to be made or performed by Tenant. All
sums so paid by Landlord and all necessary incidental costs together with
interest thereon at the maximum rate permissible by law, from the date of
such payment by Landlord, shall be payable to Landlord on demand. Tenant
covenants to pay any such sums and Landlord shall have (in addition to any
other right or remedy of Landlord) all rights and remedies in the event of
the nonpayment thereof by Tenant as are set forth in Article 23 hereof.
34. MORTGAGEE PROTECTION
In the event of any default on the part of Landlord, Tenant will give
notice by registered or certified mail to any beneficiary of a deed of trust
or mortgage covering the Premises whose address shall have been furnished to
Tenant, and shall offer such beneficiary or mortgagee a reasonable
opportunity to cure the default, including time to obtain possession of the
Premises by power of sale or a judicial foreclosure, if such should prove
necessary to effect a cure.
35. DEFINITION OF LANDLORD
The term "Landlord", as used in this Lease, so far as covenants or
obligations on the part of the Landlord are concerned, shall be limited to
mean and include only the owners, at the time in question, of the fee title
of the Premises or the lessees under any ground lease, if any. In the event
of any transfer, assignment, or other conveyances, the then grantor shall be
automatically freed and relieved from and after the date of such transfer,
assignment, or conveyance of all liability as respects the performance of any
covenants or obligations on the part of Landlord contained in this Lease
thereafter to be performed. Without further agreement, the transferee of such
title shall be deemed to have assumed and agreed to observe and perform any
and all obligations of Landlord hereunder, during its ownership of the
Premises. Landlord may transfer its interest in the Premises without the
consent of Tenant and such transfer or subsequent transfer shall not be
deemed a violation on Landlord's part of any of the terms and conditions of
this Lease.
36. WAIVER
The waiver by Landlord of any breach of any term, covenant, or condition
herein contained shall not be deemed to be a waiver of any subsequent breach
of the same or any other term, covenant, or condition herein contained, nor
shall any custom or practice which may grow up between the parties in the
administration of the terms hereof be
<PAGE>
deemed a waiver of or in any way affect the right of Landlord to insist upon
the performance by Tenant in strict accordance with said terms. The
subsequent acceptance of rent hereunder by Landlord shall not be deemed to
be a waiver of any preceding breach by Tenant of any term, covenant, or
condition of this Lease, other than the failure of Tenant to pay the
particular rent so accepted, regardless of Landlord's knowledge of such
preceding breach at the time of acceptance of such rent.
37. IDENTIFICATION OF TENANT
If more than one person executes this Lease as Tenant:
(i) Each of them is jointly and severally liable for the keeping,
observing and performing of all of the terms, covenants, conditions,
provisions, and agreements of this Lease to be kept, observed and performed
by Tenant, and
(ii) The term "Tenant" as used in this Lease shall mean and include each
of them jointly and severally. The act of or notice from, or notice or refund
to, or the signature of any one or more of them, with respect to the tenancy
of the Lease, including, but not limited to any renewal, extension,
expiration, termination, or modification of this Lease, shall be binding upon
each and all of the persons executing this Lease as Tenant with the same
force and effect as if each and all of them had so acted or so given or
received such notice or refund or so signed.
38. PARKING
The use by Tenant, its employees and invitees, of the parking facilities
of the building shall be on the terms and conditions set forth in Exhibit E
attached hereto and by this reference incorporated herein and shall be
subject to such other agreement between Landlord and Tenant as may
hereinafter be established.
39. TERMS AND HEADINGS
The words "Landlord" and "Tenant" as used herein shall include the plural
as well as the singular. Words used in any gender include other genders. The
paragraph headings of this Lease are not a part of this Lease and shall have
no effect upon the construction or interpretation of any part hereof.
40. EXAMINATION OF LEASE
Submission of this instrument for examination or signature by Tenant does
not constitute a reservation of or option for lease, and it is not effective
as a lease or otherwise until execution by and delivery to both Landlord and
Tenant.
41. TIME
<PAGE>
Time is of the essence with respect to the performance of every provision
of this Lease in which time or performance is a factor.
42. PRIOR AGREEMENT; AMENDMENTS
This Lease contains all of the agreements of the parties hereto with
respect to any matter covered or mentioned in this Lease, and no prior
agreement or understanding pertaining to any such matter shall be effective
for any purpose. No provisions of this Lease may be amended or added to
except by an agreement in writing signed by the parties hereto or their
respective successors in interest.
43. SEPARABILITY
Any provision of this Lease which shall prove to be invalid, void, or
illegal in no way affects, impairs, or invalidates any other provision
hereof, and any such other provisions shall remain in full force and effect.
44. RECORDING
Neither Landlord nor Tenant shall record this Lease nor a short form
memorandum thereof without the consent of the other.
45. CONSENTS
Whenever the consent of either party is required hereunder such consent shall
not be unreasonably withheld.
46. LIMITATION OF LIABILITY
In consideration of the benefits accruing hereunder, Tenant and all
successors and assigns covenant and agree that, in the event of any actual or
alleged failure, breach, or default hereunder by Landlord:
(a) The sole exclusive remedy shall be against the Landlord's interest
in the building;
(b) No partner of Landlord shall be sued or named as a party in any suit
or action (except as may be necessary to secure jurisdiction of the
partnership);
(c) No service of process shall be made against any partner of Landlord
(except as may be necessary to secure jurisdiction of the partnership);
(d) No partner of Landlord shall be required to answer or otherwise
plead to any service of process;
<PAGE>
(e) No judgement will be taken against any partner of Landlord;
(f) Any judgement taken against any partner of Landlord may be vacated
and set aside at any time nunc pro tunc;
(g) No writ of execution will ever be levied against the assets of any
partner of Landlord;
(h) These covenants and agreements are enforceable both by Landlord and
also by any partner of Landlord.
47. RIDERS
Clauses, plats and riders, if any, signed by Landlord and Tenant and
affixed to this Lease are a part hereof.
48. FORCE MAJEURE
Unless otherwise specifically provided herein if Landlord shall be
delayed or hindered in or prevented from the performance of any act required
of Landlord hereunder by reason of strikes, lockouts, labor disputes or
disturbances inability to procure materials failure of power restrictive
governmental laws or regulations riots insurrection ware or any other reason
of a like nature beyond Landlord's reasonable control then performance of
such act shall be excused for the period of the delay and the period for the
performance of such act shall be extended for a period equivalent to the
period of such delay.
49. MODIFICATION FOR LENDER
If in connection with obtaining construction interim or permanent
financing for the Building the lender shall request reasonable modifications
in this Lease as a condition to such financing Tenant will not unreasonably
withhold delay or defer its consent thereto provided that such modifications
do not increase the obligations of Tenant hereunder or materially adversely
affect the leasehold interest hereby created or Tenant's rights hereunder.
50. OPTION TO EXTEND
(a) Provided that Tenant is not in default hereunder either at the time
of exercise or at the time the extended term commences Tenant shall have the
option to extend the initial term of this Lease for one (1) additional period
of three (3) years ("Option Period") on the same terms covenants and
conditions provided herein except that upon such renewal the monthly
installments of Annual Basic Rent due hereunder shall be determined at the
time notice to extend is given. Tenant shall exercise its option by giving
Landlord written notice ("Option Notice") no later than ninety (90) days
prior to the expiration of the initial term.
<PAGE>
(b) The monthly installments of Annual Basic Rent for the Option Period
shall be determined as follows:
(i) Within fifteen (15) business days after Landlord's receipt of
the Option Notice the parties shall attempt to agree on the monthly rent for
the Option Period in question based upon ninety-five percent (95%) of the
then fair market rental value of the Premises. If the parties agree on the
monthly rent for the Option Period within such fifteen (15) day period they
shall immediately execute an amendment to this Lease stating the monthly rent
for the Option Period. In no event shall ninety-five percent (95%) of the
then fair market monthly rental value of the Premises for the Option Period
be less than the monthly installments of Annual Basic Rent last payable under
the Lease.
(ii) The "then fair market rental value of the Premises" shall mean
the fair market monthly rental value of the premises as of the commencement
of the Option Period taking into consideration the uses permitted under this
Lease the quality size design and location of the Premises and comparable
buildings located within a one (1) mile radius of the Premises. In no event
shall ninety-five percent (95%) of the then fair market monthly rental value
of the Premises for the Option Period be less than the monthly installments
of Annual Basic Rent last payable under the Lease.
(iii) Within seven (7) days after the expiration of the fifteen (15)
day period each party at its cost and by giving notice to the other party
shall appoint a real estate appraiser or commercial leasing salesperson
("Appraiser") with at least five (5) years' full-time commercial appraisal or
leasing experience in the area in which the Premises are located to appraise
and set the then fair market monthly rent for the Premises for the Option
Period.
(c) If Tenant objects to the monthly rent that has been determined Tenant
shall have the right to rescind its exercise of the option to extend and have
this Lease expire at the end of the initial term provided that Tenant pays
for all reasonable costs incurred by Landlord in connection with the
appraisal procedure. Tenant's election to allow this Lease to expire at the
end of the initial term must be exercised by delivering written notice of
exercise to Landlord within ten (10) days after the rent determination
procedure has been completed and Tenant has received notice of the monthly
rent as determined by appraisal. If Tenant does not so exercise its election
to terminate this Lease within the ten (10) day period the initial term of
this Lease shall be extended as provided in this paragraph. Notwithstanding
the foregoing if Tenant elects to so rescind exercise of its option to extend
and at the time of such election there are less than ninety (90) days
remaining on the initial term of the Lease then the termination of this Lease
shall not be effective until ninety (90) days after Landlord's receipt of
Tenant's notice of rescission. During any period that the term of this Lease
is so extended beyond the original termination date Tenant shall be required
to pay the amount of monthly rent determined pursuant to the appraisal
procedure.
(d) This option to extend and any rights granted to Tenant hereunder
shall be
<PAGE>
personal to Tenant and any of its affiliates and subsidiaries. No rights
granted to Tenant pursuant to this paragraph shall be in any way applicable
to subtenants or assignees of Tenant unless such subtenant or assignee is an
affiliate or subsidiary of Tenant.
(e) Provided that Tenant has not been in default under the terms of this
lease during the initial lease term, Landlord shall refund to Tenant the Ten
Thousand Dollar ($10,000.00) deposit, with interest set forth in section 5 of
this lease.
51. EARLY OCCUPANCY
Landlord to provide Tenant with access to the Premises five days before
Lease Commencement for installation of phones and equipment.
IN WITNESS WHEREOF, the parties have executed this Lease as of the date
first written above.
LANDLORD ADDRESS:
- -------- --------
Northwestern Mutual Life Insurance Company 1731 Technology Drive
a Wisconsin Corporation Suite 340
San Jose, CA 95110
By: Gibson Speno Management Company, 408.436.7100
A California Corporation, As Managing Agent
By: /s/ Phyllis Y. Osaki
Phyllis Y. Osaki, Agent
Its: Executive Vice President
By: /s/ Steven G. Speno
Steven G. Speno, Agent
Its: President
TENANT
- ------
Bio-Ved, Inc., ADDRESS:
A Delaware Corporation 1737 N. First Street
Suite 290
By: /s/ Barry Wald San Jose, CA 95112
Its: President
<PAGE>
EXHIBIT A
PREMISES
[Map of the Premises]
<PAGE>
EXHIBIT B
WORK LETTER AGREEMENT
This Work Letter Agreement is entered into as of the day of September 8,
1995, by and between NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, a Wisconsin
Corporation ("Landlord") and Bio-Ved, Inc., A Delaware Corporation ("Tenant").
RECITALS:
A. Concurrently with the execution of this Work Letter Agreement,
Landlord and Tenant have entered into a lease (the "Lease") covering certain
premises (the "Premises") more particularly described in Exhibit A attached
to the Lease.
B. In order to induce Tenant to enter into the Lease (which is hereby
incorporated by reference to the extent that the provisions of this Work Letter
Agreement may apply thereto) and in consideration of the mutual covenants
hereinafter contained, Landlord and Tenant hereby agree as follows:
1. COMPLETION SCHEDULE
Within ten (10) days after the execution of the Lease, Landlord shall
deliver to Tenant, for Tenant's review and approval, a schedule (the "Work
Schedule") setting forth a timetable for the planning and completion of the
installation of the Tenant Improvements to be construction in the Premises.
The Work Schedule shall set forth each of the various items of work to be
done by or approval to be given by Landlord and Tenant in connection with the
completion of the Tenant Improvements. Such schedule shall be submitted to
Tenant for its approval and, upon approval by both Landlord and Tenant, such
schedule shall become the basis for completing the Tenant Improvement work.
If Tenant shall fail to approve the Work Schedule, as it may be modified
after discussions between Landlord and Tenant, within five (5) working days
after the date such schedule is first received by Tenant, Landlord may, at
its option, terminate the Lease and all of its obligations thereunder.
2. TENANT IMPROVEMENTS
Reference herein to "Tenant Improvements" shall be a built out per the
attached Exhibit "A" to the extent that such construction and/or build out
does not exceed the "Tenant Improvement Allowance" provided in Section 6 of
this Work Letter Agreement and shall be subject to all provisions in Section
6 of this Work Letter Agreement.
3. TENANT IMPROVEMENT PLANS
Tenant Improvements shall built out per the attached Exhibit "A".
<PAGE>
4. FINAL PRICING AND DRAWING SCHEDULE
After final approval of Exhibit "A", no further changes to the Tenant
Improvement Plans may be made without the prior written approval from both
Landlord and Tenant, and then only after agreement by Tenant to pay any excess
costs resulting from such changes.
5. CONSTRUCTION OF TENANT IMPROVEMENTS
Landlord shall supervise the completion of such work and shall use its best
efforts to secure completion of the work in accordance with the Work Schedule.
The cost of such work shall be paid as provided in Paragraph Six (6) hereof.
6. PAYMENT OF COST OF THE TENANT IMPROVEMENTS
(a) Landlord hereby grants to Tenant a "Tenant Allowance" not to exceed
Ten Dollars ($10.00) per rentable square foot of the Premises for a total not
to exceed $20,060.00 dollars to improve the Premises per Exhibit "A".
Provided Tenant does not make any modifications whatsoever to the attached
Exhibit "A", Landlord shall construct the improvements as set forth in
Exhibit A, within the $20,060.00 tenant allowance. Such Tenant Allowance
shall be used only for:
(i) Payment of the cost of preparing the space plan and the final
working drawings and specifications, including mechanical, electrical and
structural drawings and of all other aspects of the Tenant Improvement Plans.
The Tenant Allowance will not be used for the payment of extraordinary design
work not included within the scope of Landlord's building standard improvements
or for payments to any other consultants, designers, or architects other than
Landlord's architect and/or space planner;
(ii) The payment of permit and license fees relating to construction
of the Tenant Improvements;
(iii) Construction of the Tenant Improvements, including, without
limitation, the following:
(1) Installation within the Premises of all partitioning, doors,
floor coverings, finishes, ceilings, wall coverings and
painting, millwork, and similar items;
(2) All electrical wiring, lighting fixtures, outlets, and
switches, and other electrical work to be installed within
the Premises;
(3) The furnishing and installation of all duct work, terminal
boxes, fuses and accessories required for the completion of
the
<PAGE>
heating, ventilation and air conditioning systems within the
Premises, including the cost of meter and key control for
after-hour air conditioning;
(4) Any additional Tenant requirements including, but not
limited to odor control, special heating, ventilation and
air conditioning, noise or vibration control, or other
special systems;
(5) All fire and life safety control systems such as fire walls,
sprinklers, halon, fire alarms, including piping, wiring,
and accessories installed within the Premises; and
(6) All plumbing, fixtures, pipes, and accessories to be
installed within the Premises.
(b) The cost of each item shall be charged against the Tenant Allowance. In
the event that the cost of installing the Tenant Improvements, as established by
Landlord's final pricing schedule, shall exceed the Tenant Allowance, or if any
of the Tenant Improvements are not to be paid out of the Tenant Allowance as
provided in Paragraph Six (6) above, the excess shall be paid by Tenant to
Landlord prior to the commencement of construction of the Tenant Improvements.
(c) In the event that, after the Tenant Improvement Plans have been
prepared and a price therefor established by Landlord, Tenant shall require any
changes or substitutions to the Tenant Improvement Plans, any additional costs
thereof shall be paid by Tenant to Landlord prior to the commencement of such
work.
7. COMPLETION AND RENTAL COMMENCEMENT DATE
The commencement of the term of this Lease and Tenant's obligation for the
payment of rental under the Lease shall not commence until substantial
completion of construction of the Tenant Improvements. However if there shall be
a delay in substantial completion of the Tenant Improvements as a result of:
(i) Tenant's failure to approve any item or perform any other obligation
in accordance with and by the specified in the Work Schedule;
(ii) Tenant's request for materials finishes or installations other than
those readily available; or
(iii) Tenant's changes in the Tenant Improvement Plans after their approval
by Tenant;
<PAGE>
then commencement of the term of the Lease and the rental commencement date
shall be accelerated by the number of days of such delay.
IN WITNESS WHEREOF the parties have executed this Lease as of the date first
written above.
LANDLORD ADDRESS:
Northwestern Mutual Life Insurance Company 1731 Technology Drive
a Wisconsin Corporation Suite 340
San Jose, CA 95110
By: Gibson Speno Management Company, 408.436.7100
A California Corporation, As Managing Agent
By: /s/ Phyllis Y. Osaki
------------------------------
Phyllis Y. Osaki, Agent
Its: Executive Vice President
By: /s/ Steven G. Speno
------------------------------
Steven G. Speno, Agent
Its: President
TENANT
Bio-Ved, Inc., ADDRESS:
A Delaware Corporation 1737 N. First Street
Suite 290
By: /s/ Barry Wald San Jose, CA 95112
-----------------
Barry Wald
Its: President
<PAGE>
EXHIBIT C
STANDARDS FOR UTILITIES AND SERVICES
The following Standards for Utilities and Services are in effect. Landlord
reserves the right to adopt nondiscriminatory modifications and additions
hereto.
As long as Tenant is not in default under any of the terms, covenants,
conditions, provisions, or agreements of this Lease, Landlord shall:
(a) Provide non-attended automatic elevator facilities Monday through
Friday, except holidays, from 8:00 a.m. to 6:00 p.m., and have one elevator
available at all other times.
(b) On Monday through Friday, except holidays, from 8:00 a.m. - 6:00 p.m.
(and other times for a reasonable additional charge to be fixed by Landlord),
ventilate the Premises and furnish air conditioning or heating on such days
and hours, when in the judgement of Landlord it may be required for the
comfortable occupancy of the Premises. The air conditioning system achieves
maximum cooling when the window coverings are closed. Landlord shall not be
responsible for room temperatures if Tenant does not keep all window
coverings in the Premises closed whenever the system is in operation. Tenant
agrees to cooperate fully at all times with Landlord, and to abide by all
regulations and requirements which Landlord may prescribe for the proper
function and protection of the air conditioning system. Tenant agrees not to
connect any apparatus, device, conduit, or pipe to the building chilled and
hot water air conditioning supply lines. Tenant further agrees that neither
Tenant nor its servants, employees, agents, visitors, licensees, or
contractors shall at any time enter mechanical installations or facilities of
the building or adjust, tamper with, touch or otherwise in any manner affect
said installations or facilities. The cost of maintenance and service calls
to adjust and regulate the air conditioning system shall be charged to Tenant
if the need for maintenance work results from either Tenant's adjustment of
room thermostats or Tenant's failure to comply with its results from either
Tenant's adjustment of room thermostats or Tenant's failure to comply with
its obligations under this section, including keeping window coverings closed
as needed. Such work shall be charged at hourly rates equal to then current
journeymen's wages for air conditioning mechanics.
(c) Landlord shall furnish to the Premises, during the usual business hours
on business days, electric current sufficient for normal office use. Tenant
agrees, should its electrical installation or electrical consumption be in
excess of the aforesaid quantity or extend beyond normal business hours, to
reimburse Landlord monthly for the measured consumption at the average cost per
kilowatt hour charged to the building during the period. If a separate meter is
not installed at Tenant's cost, such excess costs will be established by an
estimate agreed upon by Landlord and Tenant, and if the parties fail to agree,
as established by an independent licensed engineer. Said estimates to be
reviewed and adjusted quarterly. Tenant agrees not to use any apparatus or
device in, or upon, or
<PAGE>
about the Premises which may in any way increase the amount of such
services usually furnished or supplied to said Premises, and Tenant further
agrees not to connect any apparatus or device with wire, conduits, pipes, or
other means by which such services are supplied, for the purpose of using
additional or unusual amounts of such services without written consent of
Landlord. Should Tenant use the same to excess, the refusal on the part of
Tenant to pay upon demand of Landlord the amount established by Landlord for
such excess charge shall constitute a breach of the obligation to pay rent
under this Lease and shall entitle Landlord to the rights therein granted for
such breach. At all times Tenant's use of electric current shall never exceed
the capacity of the feeders to the building or the risers or wiring
installation and Tenant shall not install or use or permit the installation
or use of any computer or electronic data processing equipment in the
premises, without the prior written consent of Landlord.
(d) Water will be available in public areas for drinking and lavatory
purposes only, but if Tenant requires, uses, or consumes water for any purposes
in addition to ordinary drinking and lavatory purposes of which fact Tenant
constitutes Landlord to be the sole judge, Landlord may install a water meter
and thereby measure Tenant's water consumption for all purposes. Tenant shall
pay Landlord for the cost of the meter and the cost of the installation thereof
and throughout the duration of Tenant's occupancy, Tenant shall keep said meter
and installation equipment in good working order and repair at Tenant's own cost
and expense, in default of which Landlord may cause such meter and equipment
replaced or repaired and collect the cost thereof from Tenant. Tenant agrees to
pay for water consumed, as shown on said meter, as and when bills are rendered,
and on default in making such payment, Landlord may pay such charges and collect
the same from Tenant. Any such costs or expenses incurred, or payments made by
Landlord for any of the reasons or purposes hereinabove stated shall be deemed
to be additional rent payable by Tenant and collectible by Landlord as such.
(e) Provide janitorial service to the Premises five days a week, provided
the same are kept reasonably in order by Tenant, and if to be kept clean by
Tenant, no one other than persons approved by Landlord shall be permitted to
enter the Premises for such purposes. If the Premises are not used exclusively
as offices, they shall be kept clean and in order by Tenant, at Tenant's
expense, and to the satisfaction of Landlord, and by persons approved by
Landlord. Tenant shall pay to Landlord the cost of removal of any of Tenant's
refuse and rubbish, to the extent that the same exceeds the refuse and rubbish
usually attendant upon the use of the Premises as offices.
Landlord reserves the right to stop service of the elevator, plumbing,
ventilation, air conditioning, and electric systems, when necessary, by
reason of accident or emergency or for repairs, alterations or improvements,
in the judgment of Landlord desirable or necessary to be made, until said
repairs, alterations or improvements shall have been completed, and shall
further have no responsibility or liability for failure to supply elevator
facilities, plumbing, ventilating, air conditioning, or electric service,
when prevented from so doing by strike or accident or by any cause beyond
Landlord's reasonable control, or by
<PAGE>
laws, rules, orders, ordinances, directions, regulations, or requirements of
any federal, state, county, or municipal authority or failure of gas, oil, or
other suitable fuel supply or inability by exercise of reasonable diligence
to obtain gas, oil, or other suitable fuel. It is expressly understood and
agreed that any covenants on Landlord's part to furnish any service pursuant
to any of the terms, covenants, conditions, provisions, or agreements of this
Lease, or to perform any act or thing for the benefit of Tenant, shall not be
deemed breached if Landlord is unable to furnish or perform the same by
virtue of a strike or labor trouble or any other cause whatsoever beyond
Landlord's control.
<PAGE>
EXHIBIT D
RULES AND REGULATIONS
1. Except as specifically provided in the Lease to which these rules and
regulations are attached, no sign, placard, picture, advertisement, name, or
notice shall be installed or displayed on any part of the outside or inside of
the building without the prior written consent of Landlord. Landlord shall have
the right to remove, at Tenant's expense and without notice, any sign installed
or displayed in violation of this rule. All approved signs or lettering on doors
and walls shall be printed, painted, affixed, or inscribed at the expense of
Tenant by a person approved by Landlord.
2. If Landlord objects in writing to any curtains, blinds, shades, screens,
or hanging plants or other similar objects attached to or used in connection
with any window or door of the Premises, or placed on any windowsill, which is
visible from the exterior of the Premises, Tenant shall immediately discontinue
such use. Tenant shall not place anything against or near glass partitions,
doors, or windows which may appear unsightly from outside the Premises.
3. Tenant shall not obstruct any sidewalks, halls, passages, exits,
entrances, elevators, escalators, or stairways of the building. The halls,
passages, exits, entrances, shopping malls, elevators, and stairways are not
open to the general public, but are open, subject to reasonable regulation,
to Tenant's business invitee. Landlord shall in all cases retain the right to
control and prevent access thereto of all persons whose presence in the
judgment of Landlord would be prejudicial to the safety, character,
reputation, and interest of the building and its tenants; provided that
nothing herein contained shall be construed to prevent such access to persons
with whom any tenant normally deals in the ordinary course of its business,
unless such persons are engaged in illegal or unlawful activities. No tenant
and no employee or invitee of any tenant shall go upon the roof of the
building.
4. The directory of the building will be provided exclusively for the
display of the name and location of tenants only, and Landlord reserves the
right to exclude any other names therefrom.
5. All cleaning and janitorial services for the building and the Premises
shall be provided exclusively through Landlord, and except with the written
consent of Landlord, no person or persons other than those approved by
Landlord shall be employed by Tenant or permitted to enter the building for
the purpose of cleaning the same. Tenant shall not cause any unnecessary
labor by carelessness or indifference to the good order and cleanliness of
the Premises.
6. Landlord will furnish Tenant, free of charge, with six keys to the
main door lock in the Premises. Landlord may make a reasonable charge for any
additional keys. Tenant shall not make or have additional keys, and Tenant
shall not alter any lock or install a new
<PAGE>
additional lock or bolt on any door of its Premises. Tenant, upon the
termination of its tenancy, shall deliver to Landlord the keys of all doors
which have been furnished to Tenant, and in the event of loss of any keys so
furnished, shall pay Landlord therefor. After hours security access cards may
be obtained from Landlord at a cost to Tenant of $5.00 for each access card.
Tenant may acquire such access cards by submitting to Landlord a list of
persons, to whom access cards should be issued along with a check in the
appropriate amount.
7. If Tenant requires telegraphic, telephonic, burglar alarm, or similar
services, it shall first obtain, and comply with, Landlord's instructions in
their installation.
8. The building freight elevator(s) shall be available for use by all
tenants in the building, subject to such reasonable scheduling as Landlord, in
its discretion, shall deem appropriate. No equipment, materials, furniture,
packages, supplies, merchandise, or other property will be received in the
building or carried in the elevators except between such hours and in such
elevators as may be designated by Landlord. Tenant's initial move in and
subsequent deliveries of bulky items, such as furniture, safes, and similar
items shall, unless otherwise agreed in writing by Landlord, be made during the
hours of 6:00 p.m. and 6:00 a.m. or on Saturday or Sunday. Deliveries during
normal office hours shall be limited to normal office supplies and other small
items. No deliveries shall be made which impede or interfere with other tenants
or the operation of the building.
9. Tenant shall not place a load upon any floor of the Premises which
exceeds the load per square foot which such floor was designed to carry and
which is allowed by law. Landlord shall have the right to prescribe the weight,
size, and position of all equipment, materials, furniture, or other property
brought into the building. Heavy objects shall, if considered necessary by
Landlord, stand on such platforms as determined by Landlord to be necessary to
properly distribute the weight, which platforms shall be provided at Tenant's
expense. Business machines and mechanical equipment belonging to Tenant, which
cause noise or vibration that may be transmitted to the structure of the
building or to any space therein to such a degree as to be objectionable to
Landlord or to any tenants in the building, shall be placed and maintained by
Tenant, at Tenant's expense, on vibration eliminators or other devices
sufficient to eliminate noise or vibration. The persons employed to move such
equipment in or out of the building must be acceptable to Landlord. Landlord
will not be responsible for loss of, or damage to, any such equipment or other
property from any cause, and all damage done to the building by maintaining or
moving such equipment or other property shall be repaired at the expense of
Tenant.
10. Tenant shall not use or keep in the Premises any kerosene, gasoline,
inflammable, or combustible fluid or material other than those limited
quantities necessary for the operation of maintenance of office equipment.
Tenant shall not use or permit to be used in the Premises any foul or noxious
gas or substance, or permit or allow the Premises to be occupied or used in a
manner offensive or objectionable to Landlord or other occupants of the building
by reason of noise, odors, or vibrations, nor shall Tenant bring into or keep in
or about the Premises any birds or animals.
<PAGE>
11. Tenant shall not use any method of heating or air conditioning other
than that supplied by Landlord.
12. Tenant shall not waste electricity, water, or air conditioning and
agrees to cooperate fully with Landlord to assure the most effective operation
of the building's heating and air conditioning and to comply with any
governmental energy-saving rules, laws, or regulations of which Tenant has
actual notice.
13. Landlord reserves the right, exercisable without notice and without
liability to Tenant, to change the name and street address of the building.
14. Landlord reserves the right to exclude from the building between the
hours of 6:00 p.m. and 7:00 a.m. the following day, or such other hours as may
be established from time to time by Landlord, and on Sundays and legal holidays,
any person unless that person is known to the person or employee in charge of
the building and has a pass or is properly identified. Tenant shall be
responsible for all persons for whom it requests passes and shall be liable to
Landlord for all acts of such persons. Landlord shall not be liable for damages
for any error with regard to the admission to or exclusion from the building of
any person.
15. The toilet rooms, toilets, urinals, wash bowls, and other apparatus
shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be thrown
therein. The expense of any breakage, stoppage, or damage resulting from the
violation of this rule shall be borne by the tenant who, or whose employees or
invitees, shall have caused it.
16. Tenant shall not sell, or permit the sale at retail, of newspapers,
magazines, periodicals, theater tickets, or any other goods or merchandise to
the general public in or on the Premises. Tenant shall not make any
room-to-room solicitation of business from other tenants in the building.
Tenant shall not use the Premises for any business or activity other than
that specifically provided for in Tenant's Lease.
17. Tenant shall not install any radio or television antenna,
loudspeaker, or other devices on the roof or exterior walls of the building.
Tenant shall not interfere with radio or television broadcasting or reception
from or in the building or elsewhere.
18. Tenant shall not mark, drive nails, screws, or drill into the
partitions, woodwork, or plaster or in any way deface the Premises or any
part thereof, except in accordance with the provisions of the Lease
pertaining to alterations. Landlord reserves the right to direct electricians
as to where and how telephone and telegraph wires are to be introduced to the
Premises. Tenant shall not cut or bore holes for wires. Tenant shall not
affix any floor covering to the floor of the Premises in any manner except as
approved by Landlord. Tenant shall repair any damage resulting from
noncompliance with this rule.
19. Tenant shall not install, maintain, or operate upon the Premises any
vending
<PAGE>
machines without the written consent of Landlord.
20. Canvassing, soliciting, and distribution of handbills or any other
written material, and peddling in the building are prohibited and Tenant shall
cooperate to prevent such activities.
21. Landlord reserves the right to exclude or expel from the building any
person who, in Landlord's judgement, is intoxicated or under the influence of
liquor or drugs or who is in violation of any of the Rules or Regulations of the
building.
22. Tenant shall store all its trash and garbage within its Premises or in
other facilities provided by Landlord. Tenant shall not place in any trash box
or receptacle any material which cannot be disposed of in the ordinary and
customary manner of trash and garbage disposal. All garbage and refuse disposal
shall be made in accordance with directions issued from time to time by
Landlord.
23. The Premises shall not be used for the storage of merchandise held
for sale to the general public, or for lodging or for manufacturing of any
kind, not shall the Premises be used for any improper, immoral, or
objectionable purpose. No cooking shall be done or permitted on the Premises
without Landlord's consent, except that the use by Tenant of Underwriter'
Laboratory approved equipment for brewing coffee, tea, hot chocolate, and
similar beverages or use of microwave ovens for employee uses shall be
permitted, provided such equipment and use is in accordance with all
applicable federal, state, county, and city laws, codes, ordinances, rules,
and regulations.
24. Tenant shall not use in any space or in the public halls of the
building any hand truck except those equipped with rubber tires and side guards
or such other material-handling equipment as Landlord may approve. Tenant shall
not bring any other vehicles of any kind into the building.
25. Without the written consent of Landlord, Tenant shall not use the name
of the building in connections with or in promoting or advertising the business
of Tenant except as Tenant's address.
26. Tenant shall comply with all safety, fire protection, and evacuations
procedures and regulations established by Landlord or any governmental agency.
27. Tenant assumes any and all responsibility for protecting its Premises
from theft, robbery, and pilferage, which includes keeping doors locked and
other means of entry to the Premises closed.
28. Tenant's requirements will be attended to only upon appropriate
application to the building management office by an authorized individual.
Employees of Landlord shall not perform any work or do anything outside of their
regular duties unless under special instructions from Landlord, and no employee
of Landlord will admit any person (Tenant
<PAGE>
or otherwise) to any office without specific instructions from Landlord.
29. Landlord may waive any one or more of these Rules and Regulations for
the benefit of Tenant or any other tenant, but no such waiver by Landlord shall
be construed as a waiver of such Rules and Regulations in favor of Tenant or any
other tenant, nor prevent Landlord from thereafter enforcing any such Rules and
Regulations against any or all of the tenants of the building.
30. These Rules and Regulations are in addition to, and shall not be
construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements, and conditions of Tenant's lease of its Premises in the
building.
31. Landlord reserves the right to make such other and reasonable Rules and
Regulations as, in its judgment, may from time to time be needed for safety and
security, for care and cleanliness of the building and for the preservation of
good order therein. Tenant agrees to abide by all such Rules and Regulations
hereinabove stated and any additional rules and regulations which are adopted.
32. Tenant shall be responsible for the observance of all of the foregoing
rules by Tenant's employees, agents, clients, customers, invitees, and guests.
<PAGE>
EXHIBIT E
PARKING RULES AND REGULATIONS
The following rules and regulations shall govern use of the parking
facilities which are appurtenant to the building.
1. Tenant shall not park or permit the parking of any vehicle under its
control in any parking designated by Landlord as areas for parking by visitors
to the building. Tenant shall not leave vehicles in the parking areas overnight
nor park any vehicles in the parking areas other than automobiles, motorcycles,
motor driven or non-motor driven bicycles or four-wheeled trucks.
2. Parking stickers or any other device or form of identification supplied
by Landlord as a condition of use of the parking facilities shall remain the
property of Landlord. Such parking identification device must be displayed as
requested and may not be mutilated in any manner. The serial number of the
parking identification device may not be obliterated. Devices are not
transferable and any device in the possession of an unauthorized holder will be
void.
3. No overnight or extended term storage of vehicles shall be permitted.
4. Vehicles must be parked entirely within the painted stall lines of a
single parking stall.
5. All directional signs and arrows must be observed.
6. The speed limit within all parking areas shall be 5 miles per hour.
7. Parking is prohibited:
(a) in areas not striped for parking;
(b) in aisles;
(c) where "no parking" signs are posted;
(d) on ramps;
(e) in cross hatched areas; and
(f) in such other areas as may be designated by Landlord.
8. Every parker is required to park and lock his own vehicle. All
responsibility for damage to vehicle is assumed by the parker.
<PAGE>
9. Loss or theft of parking identification devices from automobiles must be
reported immediately, and a lost or stolen report must be filed by the customer
at that time. Landlord has the right to exclude any car from the parking
facilities that does not have an identification device.
10. Any parking identification devices found by the purchaser must be
reported immediately to avoid confusion.
11. Lost or stolen devices found by the purchaser must be reported
immediately to avoid confusion.
12. Washing, waxing, cleaning, or servicing of any vehicle in any area
not specifically reserved for such purpose is prohibited.
13. Landlord reserves the right to modify and/or adopt such other
reasonable and non-discriminatory rules and regulations for the parking
facilities as it deems necessary for the operation of the parking facilities.
Landlord may refuse to permit any person who violates these rules to park in
the parking facilities, and any violation of the rules shall subject the car
to removal.
14. Landlord reserves the right to charge for parking on a
non-discriminatory basis.
15. Tenant shall have the use of four (4) unassigned parking spaces per
one thousand square feet of Tenant's leased Premises.
<PAGE>
Exhibit 10.7
AGREEMENT
THIS AGREEMENT IS MADE at Pune and San Jose
BETWEEN
BHARATI VIDYAPEETH'S
POONA COLLEGE OF PHARMACY
ERANDAWANE, PUNE - 411 038, INDIA
(Hereinafter referred to as the COLLEGE)
... OF THE FIRST PART;
AND
MESSERS BIO-VED, INC.
911, BERN COURT #110
SAN JOSE CA 95112 USA.
(Hereinafter referred to as 'BIO-VED')
...OF THE SECOND PART
WITNESSETH THAT..
BIO-VED. Inc. (BIO-VED) is a Medical Technology Company founded in the United
States of America with the purpose of identifying and developing in India
scientific technologies and products for medical applications. The Company seeks
to export these technologies/products to other countries and market them.
BIO-VED seeks to establish long term collaborative relationships with various
institutions in India, for the purpose of carrying on its various research
activities, and accordingly this Agreement is made as follows:
1. BIO-VED agrees to provide a grant to the College of Pharmacy (College)
over several annual periods for the purpose that the amount be used to
modify & upgrade the existing animal toxicology and related laboratory
facilities at the College, in order that these facilities satisfy the good
laboratory practices (GLP) of the United States.
The total amount of the grant and its annual subdivision would be
determined following a survey by a consultant commissioned by BIO-VED.
BIO-VED may be able to assist in the training and preparation of
documentation needed to achieve GLP status more quickly.
2. All equipment purchased for the animal toxicology facility and for the
purpose of the existing laboratory/equipment to suit US GLP standards,
shall become the sole property of the College on the completion of the
project. During the period of leisure that is to say when the equipment is
not needed by the BIO-VED for use, the College
<PAGE>
may use the said equipment. BIO-VED shall also be entitled to use the
equipment of the College without any charges during the period of leisure
that is to say when the College equipment is not actually used by the
College, provided that if any consumables are required, for the use of
either party, the charges for the consumables would be paid by the user.
3. BIO-VED may buy any equipment, laboratory, electrical or electronic or
otherwise, and bring it to the premises allocated to it by the College.
BIO-VED shall have a right to use the equipment by itself, its employees,
consultants, research assistants, research scholars and BIO-VED may also
permit other scientists, technicians to use such equipment.
4. BIO-VED agrees to fund two Ph.D. candidate fellowships at the College under
the supervision of one Professor of the College and the other as a BIO-VED
preapproved designee. BIO-VED will pay for the fellowship grant to each
candidate approximately Rs. 50,000.00 per annum and for the supplies used
in the studies. One fellowship will begin on or about August 1, 1994 and
the second, on or about January 1, 1995.
5. The College agrees to contract with BIO-VED for the commissioning of animal
toxicology studies for BIO-VED's product/s. The studies shall be conducted
by the College at local competitive rates.
6. The College will grant BIO-VED a first priority client status for animal
toxicology studies.
7. BIO-VED shall be permitted to solicit other clients for animal toxicology
studies to be provided by the College on an exclusive basis for the first
two years. Thereafter BIO-VED will continue on a non-exclusive basis.
8. The College will, as far as practicable, establish a mutually agreed rate
schedule for all animal toxicology studies and will revise these rates
annually.
9. In respect of animal toxicology studies provided to BIO-VED the College
relinquishes all rights to date generated, provided the studies have been
fully paid for.
10. In respect of data generated through fellowship studies funded by BIO-VED,
the College agrees to grant to BIO-VED the right of pre-publication review
and appropriate editing.
11. The College agrees to allow BIO-VED to utilise the pilot plant at the
College, when functional, for pre-clinical supplies to BIO-VED at locally
competitive rates.
12. An estimated 200 sq.mtrs. of space is required for setting up the
laboratory and office by BIO-VED and for housing the equipment purchased by
BIO-VED. The College has provided three rooms bearing room nos. 310, 311 &
312 along with the additional open space of the terrace on 3rd floor of the
College building. The sum of Rs.1,50,000/- per year as a grant will be
given by BIO-VED to the College for their research work. BIO-
<PAGE>
VED shall not have any tenancy or interest in the premises save and except
right to use the premises during the period and for the purposes of the
project.
The first year's grant is paid in advance by Cheque No. 1171, dated June
30, 1994 drawn on National Westminister Bank, USA for US $5,000/-. (US $
Five Thousand only) After realisation, excess over Rs. 1,50,000 shall be
refunded by the College to BIO-VED.
13. It is agreed that the College shall permit the BIO-VED to avail of the
services of any of the personnel either on full-time or part-time basis as
may be required by BIO-VED on suitable compensation for such services.
14. The College shall provide one telephone line for BIO-VED and shall permit
the BIO-VED to print such number on their letterheads and other materials.
The line may be used for the telefax communication also. The charges for
the telephone and telefax line shall be paid by BIO-VED as per actuals.
15. Any movables such as air-conditioners, cooling equipment, computers,
printers, electronic equipment, other than the equipment brought for animal
toxicology, shall be the exclusive property of BIO-VED and may be moved as
needed.
16. The term preferred client's status shall mean that the College agrees to
give first priority to BIO-VED in animal toxicology studies and pilot plant
facilities.
17. College agrees to title supported fellowships as 'BIO-VED' RESEARCH
FELLOWSHIPS in all communications and credits.
18. College agrees to confidentiality of all data generated through toxicology
or pilot plant contracts completed on its premises.
19. The Agreement shall be initially valid for a period of five years provided
that the period may be reduced by mutual consent. After the expiry of a
period of five years, the parties shall have a right to renew the Agreement
on the same terms and conditions save and except the amount of grant which
shall be fixed by mutual consent.
20. No public announcement or disclosure of this definitive agreement will be
made without the mutual consent of the parties.
Signed by Principal
/s/ Shivajirao S. Kadam
- -----------------------
Dr. Shivajirao S. Kadam
<PAGE>
on behalf of
THE COLLEGE OF PHARMACY
Pune - 411 038.
on 6th July, 1994. (Party of he First Part)
In the presence of
1. /s/ K.R. Mahadik
----------------------
Prof. Dr. K.R. Mahadik
Vice Principal
College of Pharmacy,
Pune 411 038.
2. /s/ Ajit P. Chitre
------------------
Mr. Ajit P. Chitre
10, Shri Vishnubaug Society
Pune 411 016.
Signed by
/s/ Barry Wald
- --------------
Mr. Barry Wald
on behalf of
BIO-VED Inc. USA.
On 26, July, 1994. (Party of the Second Part).
In the presence of
1. /s/ Mary Adams
--------------
Mary Adams
1064 PAINTBRUSH DR.
SUNNYVALE, CA 94086
2. /s/ Sheri Zipse
---------------
Sheri Zipse
2945 ASPEN DRIVE
SANTA CLARA, CA 95051
<PAGE>
Exhibit 10.8
MEMORANDUM OF UNDERSTANDING
THIS MEMORANDUM OF UNDERSTANDING made at Bombay between BIO-VED PHARMACEUTICALS
LIMITED, Pune, ("BIO-VED") and ALEMBIC CHEMICALS WORKS CO. LIMITED, Baroda
("ALEMBIC") as follows;
A. Bio-Ved is entitled to use or otherwise have permission in respect of an
ayurvedic pharmaceutical preparation recommended for the treatment of
Rheumatic Arthritis and Osteo Arthritis manufactured and marketed under the
brand name of ARTREX ("the Product");
B. The formulations of ARTREX are patented under US Patent Laws (Patent #
549,4668 issued on Feb 27, 1996) as well as Indian Patent Laws (# 176901
issued on August 26, 1994); and the ownership of these patents is with
AyurCore, Inc., USA the parent Company of Bio-Ved in India;
C. Bio-Ved and Alembic have agreed that the said ARTREX will be manufactured
by Bio-Ved and marketed by Alembic in India on the following broad terms:
1. The trademark ARTREX is owned by Bio-Ved and shall remain an exclusive
property of Bio-Ved. Alembic neither has nor shall claim any right,
title or interest in the said trademark or the product;
2. Initially, Alembic shall test market the said product ARTREX all over
Maharashtra including the Cities of Pune and Bombay to have the
assessment regarding acceptance and effectiveness of the product for
the recommended disorders for a period of six months from the date
hereof.
3. For the purpose of promoting the product ARTREX in the Maharashtra
state for test marketing, Bio-Ved will make available mutually agreed
Physicians samples (3.5 lac capsules) free of cost till March 98. All
other promotional material will be prepared by Alembic at its own cost
and all such promotional materials shall be jointly prepared.
4. Bio-Ved shall furnish requisite Technical Data including the clinical
trials conducted in respect of the Product ARTREX either in India or
abroad. Such technical data and details will be used by Alembic for
the purpose of promotion of the said product ARTREX.
5. Bio-Ved shall be responsible for the product liability, that may arise
out of its use and accordingly shall indemnify Alembic for the same.
However, Alembic through its distributors shall observe the usual
marketing norms and ethical practices such as withdrawal of stocks of
expiry dates, damaged goods in transit
<PAGE>
etc.
6. The product ARTREX shall be marketed by Alembic in India only whereas
Bio-Ved shall have manufacturing as well as marketing rights in
respect of the product ARTREX outside India.
7. Alembic shall make available to Bio-Ved the forecast of sales response
as well as place orders atleast 60 days in advance of its required
quantity for the sale.
8 [a] The supply of the product ARTREX shall be made ex-Pune @ Rs.7=00
per blister pack of 10 capsules to Alembic inclusive of excise
duty, if any.
[b] The maximum Retail price shall be decided by Alembic but conveyed
to Bio-Ved well in advance to enable Bio-Ved to do the needful.
[c] Various other details shall be decided mutually by and between
the parties from time to time.
9. It is mutually agreed by and between the parties hereto that Alembic
shall launch the said product with full promotional efforts as a major
product launch. It is further mutually agreed that effective 1st
April, 1998, Alembic will be able to implement all India launch in
respect of the said product ARTREX, subject to satisfactory results
obtained by doctors during test marketing and substantial volumes of
business to make the deal commercially viable.
10. It is further mutually agreed by and between the parties hereto that
the parties will enter into the detail Marketing Agreement on long
term basis for and in respect of the said product ARTREX. In the
event, if such a detail Marketing Agreement is not executed for any
reason whatsoever on or before 31st March, 1998, then, in that event,
this Memorandum of Understanding shall come to an end and none of the
parties shall have any right, title, interest including any claim in
respect of the said product against each other save and except the
recovery for the supplies made by Bio-Ved to Alembic hereunder.
11. The detail Marketing Agreement that will be executed between Alembic
and Bio-Ved shall, inter alia, provide the following:
[a] The maximum retail price of the product ARTREX from time to
time shall be fixed by Alembic;
[b] Transfer price in respect of the product ARTREX shall be reviewed
and revised once in every six months based on the costs of
production incurred by Bio-Ved plus reasonable return of profit
thereon;
<PAGE>
[c] An exit clause which would provide that in the event of
termination of the Agreement during the subsistence thereof by
Bio-Ved, it shall compensate Alembic as and by way of liquidated
damages an amount equivalent to three times of the total sales
turnover of previous twelve months calculated/based on the
transfer price given effect to by and between the parties.
12. Alembic shall not, during the period this MoU is in force or any time
thereafter, without the consent of Bio-Ved, for any reason, disclose
or permit the use by any person, firm or corporation of any technical
data, information, details or otherwise or any improvement which may
be received from Bio-Ved and shall take all reasonable efforts to
prevent any such disclosure or use by its officers, directors and
employees both during the terms of office and employment and
thereafter or by any other persons, who for any reason, may access or
use such information, details or data. Alembic has already entered
into a confidentiality Agreement with Bio-Ved in this respect and this
confidentiality Agreement dated January 28, 1997 is binding on both
the parties from that date.
SIGNED & DELIVERED BY SIGNED & DELIVERED BY
For Bio-Ved Pharmaceuticals For Alembic Chemical Works
Pvt. Ltd. Co. Ltd.
s/Ajit P. Chitre 10/9/1997 [Illegible]
Mr. Ajit P Chitre Mr.
Director (Operations) Authorised Signatory
<PAGE>
Exhibit 10.9
MEMORANDUM OF UNDERSTANDING
THIS AGREEMENT made and entered into at Pune, this 23rd day of October, 1997,
between: KANCOR FLAVOURS AND EXTRACTS LIMITED, a Company incorporated under the
Companies Act, l956 and having its registered office at Angmaly, Cochin, Kerala
682 002; hereinafter called "Kancor" (which expression shall unless repugnent to
the context or meaning thereof be deemed to mean and include its
successors-in-title and assigns) of the One Part AND BIO-VED PHARMACEUTICALS
PRIVATE LIMITED, a Company incorporated under the Companies Act, 1956 and having
its registered office at 6, Pradeep Chambers, Bhandarkar Institute Road, Pune -
411 005; hereinafter called "Bio-Ved" (which expression shall unless repugnent
to the context or meaning there of be deemed to mean and include its
successors-in-title and assigns) of the Other Part.
WHEREAS:
A. Bio-Ved holds and is otherwise entitled to technology, technical know-how
including expertise and has made available the same to Kancor in respect of
extraction, preservation and processing of a natural herb/root viz.
[*****];
B. Bio Ved, a subsidiary of AyurCore, Inc., USA is engaged in manufacturing
ayurvedic formulations/preparations by using the extracts [*****].
C. The parties hereto have arrived at an agreement in respect of supply of
extracts of certain natural herbs/roots of specified quality and quantity
by Kancor to Bio-Ved to enable later to manufacture ayurvedic formulations/
preparations and are desirous of reducing the same in writing.
NOW THIS AGREEMENT WITNESSETH AND IT IS HEREBY AGREED BY AND BETWEEN THE PARTIES
AS FOLLOWS:
1. Kancor supply to Bio-Ved and Bio-Ved shall purchase from Kancor
[*****]; with concentration/specifications and quality described in
the First Schedule hereunder written (hereinafter called "the Products")
in accordance with the terms, conditions and stipulations appearing
hereinafter.
2. a) Each such consignment shall be at the Kancor's risk whilst in transit
and the property in the goods/products shall pass to Bio-Ved only on
delivery thereof to Bio-Ved or its nominee/s. Kancor shall insure the
products/goods whilst in transit at its own risk and build the cost in
the selling cost of extracts to Bio-Ved.
- --------------------
* Confidential provisions omitted and filed separately with the Commission.
<PAGE>
b) Kancor shall not supply [*****] extracts of the agreed
specification thereof to any person, firm or a company other than
Bio-Ved during the period of this Agreement
c) Kancor shall supply the products to Bio-Ved as per the orders placed
by Bio-Ved at an ex-factory price, (exclusive of Excise, Central Sales
Tax, Octroi, Freight) set out in the Second Schedule hereunder
written. The joint efforts will be focused thereof to prevent delay in
supply by advance planning and shared projections on offtakes. During
the trial marketing such projection will be given to Kancor by Bio-Ved
after six months or latest by 1st July, 1998.
In order to avoid delays, Kancor will at any given time hold inventory
of finished products, to the tune of two months projections at their
own cost as given by Bio-Ved; which will be quality approved by
Bio-Ved and certificates and batch data will be available with Bio-Ved
to call for, on those products on the agreed schedule or earlier as
found necessary. In case, this inventory is not called off within the
two months agreed as above, Bio-Ved will be liable to reimburse the
inventory carrying cost at the rate of 18% per annum for the period
beyond two months.
3. Kancor shall supply the Products accompanying with Certificate of Analysis
thereof Bio-Ved or to any party as may be informed by Bio-Ved from time to
time within 60 days from receipt of the Orders thereof; the time being
essence of the contract. To meet the maximum permissible period, Kancor
shall be at liberty to make or arrange any alternative source at its own
expense and subject to quality assurance as required by Bio-Ved. Supply
shall be C.I.F. destination to be mentioned in the purchase order by
Bio-Ved. Each consignment delivered by Kancor shall be accompanied by a
Test Certificate by Chief Quality Controller of Kancor in accordance with
the specifications set out in the first schedule.
4. Bio-Ved shall in respect of supply of products used to manufacture
formulations in India, pay to Kancor, on a running account basis, at least
50% of the value of invoices raised each calendar month by the end of that
particular month. Provided, all invoices and deliveries will be accompanied
with the certificate of Quality Analysis issued by Kancor laboratories, and
Bio-Ved has received the approval of the lots from any one of its appointed
labs. The balance on all these invoices will be settled fully by the end of
that particular calendar quarter.
It is further agreed that Bio-Ved shall pay and settle all dues to Kancor
in respect of products/consignments used for export within 90 days of
export. Bio-Ved shall be liable to pay to Kancor and Kancor shall be
entitled to receive from Bio-Ved an interest at the rate of 18% per annum
on delayed payment of the purchase price beyond stipulated period.
5. Bio-Ved has already provided and furnished to Kancor its (Bio-Ved's)
technical
<PAGE>
know-how and expertise for extraction and processing of [*****] Kancor
shall use Bio-Ved's such technical know-how and expertise in supplying
Ashwagandha extract to Bio-Ved. Kancor hereby agrees and covenants with
Bio-Ved not to make use of Bio-Ved's such technical know-how and expertise
for supplying Ashwagandha extract or any other similar products to any
other party for atleast 5 years from termination or determination of this
Agreement as the case may be. However, Kancor may supply [*****] to
patties other than Bio-Ved subject to the following conditions;
a) Kancor fully meets the [*****] requirements of Bio-Ved without
delaying/disturbing the delivery schedule of other raw materials also
to Bio-Ved.
b) Kancor takes prior written approval/permission from Bio-Ved after
fulfilling condition (a) above.
c) Kancor agrees to pay mutually agreed compensation and royalty to
Bio-Ved for the sales effected to the parties other than Bio-Ved.
6. Kancor hereby declares that it has infrastructure, licences/permissions
from the Government, quasi-government and/or local authorities under
various statutes, rules and regulations necessary for carrying out its
obligations hereunder and shall keep the same valid and subsisting during
the period this Agreement shall remain in force. Kancor shall not carry on
any of the activities/business which may obstruct its obligations hereunder
or which is in any manner detrimental to Bio-Ved's interest.
7. a) Bio-Ved shall appoint/designate a laboratory/ies (hereinafter called
"the Appointed Laboratory/ies") for checking and ascertaining quality
of the Products supplied hereunder. Bio-Ved shall be entitled to
appoint, from time to time, different laboratory/ies in respect of any
or all of the Products. Based on the Quality Analysis Report of the
Appointed Laboratory or otherwise, Bio-Ved shall have the sole
discretion of either accepting or rejecting the Products or any of
them wholly or in part if the quality and/or quantity of the products
do not match with the specifications stipulated by Bio-Ved and
Kancor's liability shall be limited to the precise specifications as
required Bio-Ved only. Bio-Ved's discretion/decision in this regard
shall be final and binding and shall not be disputed by Kancor.
Bio-Ved designates the following laboratories as the Appointed
Laboratories:
Beepharmo Laboratories, Mumbai.
Eisen Pharmaceutical Co. Ltd., Pune.
Poona College of Pharmacy, Bharati Vidyapeeth, Pune.
b) Kancor shall replace free of charge any of the products which is/are
not in accordance with the specifications or is/are damaged or lost in
transit within 10 days from the date of notice/intimation given by
Bio-Ved in that behalf.
c) Kancor shall comply with and complete all necessary Quality Assurance
at the production and ensure storage under conditions specification by
Bio-Ved (i.e. at temperature not exceeding 25 degrees centigrade in
sealed drums of the products).
<PAGE>
8. During the course of implementation hereof, Kancor shall:
a) preserve (at cool temperature) at least 500 gms. of original part of
the plant (Control Sample) used for manufacturing every batch of plant
extracts supplied to Bio-Ved for a period of 3 years from the date of
manufacturing,
b) allow Bio-Ved's technical person to quality systems audit, verify
documents related to manufacturing of each/all extract batches
supplied to Bio-Ved. Kancor will try to upgrade its systems/operations
wherever necessary or when Bio-Ved calls upon Kancor to do so;
c) manufacture all batches of plant extracts with GMP with all required
precautions for maintenance of hygiene and hygienic conditions
throughout the manufacturing and packing process of plant extracts.
9. Kancor shall not divulge, disclose or communicate to any person(s) other
than those to whom it is necessary for the purpose hereof; the technical
know-how, expertise, data, specifications, drawings and/or other secret
information provided by Bio-Ved. Kancor shall take all reasonable care and
efforts to ensure that secrecy of such technical
know-how, expertise data, drawings etc., will be maintained during the term
of this Agreement and after its termination or determination also. This
clause shall be binding upon Kancor even after determination or earlier
termination of this Agreement.
10. a) Bio-Ved shall furnish semi-annual volume projections after every six
months to enable Kancor to make suitable arrangements for manufacture
and supply to Bio-Ved. The details of the supply of the minimum
quantity of the four products mentioned in "Schedule 1" will be
specified in the addendum to this agreement by 1st July, 1998.
b) Bio-Ved may increase the above quantities as per its requirements from
time to time. The parties hereto shall be entitled to revise and
mutually agree upon the price at which Kancor shall supply the
products at the end of first six months from the date of execution
hereof. Thereafter the prices will be reviewed and revised annually
only. However, if the projections exceed by 30%, then the prices will
be reviewed and revised, if necessary. The price once fixed by and
between the parties for the products shall hold good for a period of
minimum one year. Kancor shall not divulge any of the agreed prices at
any time to any third party without prior consent from Bio-Ved.
11. Kancor will accept responsibility only to the extent of supply of extracts
to the analytical specifications as given by Bio-Ved. Kancor makes no claim
on the functionality of the extracts.
12. Neither party to this Agreement shall be responsible for non-fulfillment,
part-fulfillment, or
<PAGE>
delay in fulfillment of its obligations under the Agreement, directly or
indirectly caused by reason of Act of God, Public enemies, fire, explosion,
flood, earthquake, drought, strike, lockout, labour dispute orders or
restrictions imposed by Government or any other public authority, war,
hostilities, rioting, civil commotion, looting, any circumstances
preventing, restricting, delaying or interfering with transportation,
breakdown or accident and any other cause or circumstances beyond the
control of the parties hereto.
13. a) This Agreement is executed in two originals of the same contents and
validity, one to be retained by each of the parties hereto.
b) This agreement shall be valid and be subsisting for a period of five
years and shall be renewed for further period as may be mutually
agreed.
14. Either of the parties hereto shall be entitled to terminate this Agreement
in the event of breach of material terms hereof. Neither party hereto shall
be considered in default hereunder if its failure to perform or observe any
or all of the terms, conditions or stipulations herein contained shall be
caused by circumstances not within the control of such party. Provided
always that, if either party aforesaid shall commit any breach of, or shall
make any default in the performance or observance of, any of the terms,
conditions or stipulations aforesaid, the other may give notice to it in
writing specifying in detail such breach or default and no responsibility
or liability shall accrue for any such breach or default aforesaid unless
it shall remain uncured for more than three months after the giving of such
notice; Provided that the defaulting party shall be deemed to have cured or
remedied any such breach or default aforesaid if and when it shall, bona
fide, have commenced appropriate action to cure or remedy the same provided
that such action shall be prosecuted thereafter by such defaulting party
with all due diligence.
15. The termination of this Agreement shall be without prejudice to any claim
or right of action previously accrued to either party against the other.
16. This Agreement is valid for the period of Five years from the date of
execution hereof. Unless expressly terminated earlier or in the absence of
any contrary intention communicated in this regard, the Agreement shall
deem to have been renewed for a further period of five years thereafter,
without any further act on the part of any of the parties hereto.
17. The parties designate the following persons and addresses for serving any
notice/communications hereunder:
Mr. Mr. Sanjay Mariwala Mr. Ajit P. Chitre
Kancor Flavours and Extracts Bio-Ved Pharmaceuticals
Pvt. Ltd. Pvt. Ltd.
Angamally, 6, Pradeep Chambers,
Cochin, Bhandarkar Institute Road,
<PAGE>
Kerala - 683 573 India Pune - 411 005 India
Fax No.: 0484-452662 Fax No: 0212-357944
Such notice/communication shall come into effect immediately on receipt
thereof by the addressee.
l8. In the event of any dispute or differences of opinion arising out of or in
relation to this Agreement, the same shall be resolved the Arbitration held
at Mumbai in accordance with the Arbitration and Reconciliation Act, 1996.
19. If any of the parties hereto is constrained to have recourse to the Court
of Law for enforcing their rights hereunder, the court of Law within
territorial jurisdiction of Mumbai shall have exclusive jurisdiction in
this regard.
IN WITNESS WHEREOF the parties hereto have set and subscribed their respective
hands and seals on the day and year hereinabove written.
SIGNED & DELIVERED BY SIGNED & DELIVERED BY
For Bio-Ved Pharmaceuticals For Kancor Flavours & Extracts
Pvt. Ltd. Pvt. Ltd.
s/Ajit P. Chitre s/Sanjay Mariwala
Mr. Ajit P. Chitre Mr. Sanjay Mariwala
Director (Operations) Managing Director
In the presence of In the presence of
s/S.V. Kanataki s/V. Muraleedharan
Mr. S.V. Karnataki Mr. V. Muraleedharan
INSERT PAGE HERE
SECOND SCHEDULE
PRICE OF PLANT EXTRACTS TO BE SUPPLIED BY KANCOR FLAVOURS AND EXTRACTS LTD;
KERALA TO BIO-VED PHARMACEUTICALS PVT. LTD.; PUNE
<PAGE>
KANCOR shall supply the plant extracts to BIO-VED at the following prices which
are exclusive of excise duty, central sales tax, and octroi.
<TABLE>
<CAPTION>
I.
Sr. No. Plant Extracts Price Rs./Kg.
<S> <C> <C>
1 [******] [******]
[******]
2 [******] [******]
[******]
3 [******] [******]
[******]
4 [******] [******]
[******]
Cost of Insurance and Freight will be added to the above price.
</TABLE>
*Confidential portions ommitted and filed separately with the Commission.
<PAGE>
BIO-VED PHARMACEUTICALS PVT. LTD.
SPECIFICATIONS OF PLANT EXTRACTS TO BE PROCURED FROM
M/s. KANCOR FLAVOURS AND EXTRACTS PVT. LTD., COCHIN, KERALA.
(TO BE REVIEWED AFTER SUPPLY OF 10 BATCHES OF EACH.)
<TABLE>
<CAPTION>
LOD (AT
90 DEG. C
UNDER 15
MM. HG. PH OF 5% %
SR. FOR AQ. TLC VOLATILE MICROBIAL
NO. DESCRIPTION 4 HRS.) SUSPENSION WT./ML (GM) PATTERN OIL QUALITY ASSAY OF ACTIVES
- --- --------------- ----------- ------------- ----------- ----------- --------- ------------- ---------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C>
1 [*****] [*****] [*****] [*****] [*****] [*****] [*****] [*****]
- -----------------------------------------------------------------------------------------------------------------------------------
2 [*****] [*****] [*****] [*****] [*****] [*****] [*****] [*****]
- -----------------------------------------------------------------------------------------------------------------------------------
3 [*****] [*****] [*****] [*****] [*****] [*****] [*****] [*****]
- -----------------------------------------------------------------------------------------------------------------------------------
4 [*****] [*****] [*****] [*****] [*****] [*****] [*****] [*****]
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------
* Confidential provisions omitted and filed separately with the Commission.
3
<PAGE>
Exhibit 10.10
AGREEMENT
THIS AGREEMENT made at Pune this l0th day of October 1997, between M/s
Bio-Ved Pharmaceuticals Pvt. Ltd., a company incorporated under the
provisions of the Company Act, l956, and having its registered office at
Office No. 6, Pradeep Chambers, Bhandarkar Institute Road, Pune 411 005,
Maharashtra, hereinafter referred to as "the Company" (which expression shall
unless repugnant to or inconsistent to the context or meaning thereof the
deemed, mean and include its successors and assignees) of the ONE PART AND
Eisen Pharmaceutical Co. (Pvt.) Ltd., a company incorporated under the
provisions of the Company Act, 1956, and having its registered office at
34/7, Erandavana, Pune 411 004, Maharashtra, hereinafter referred to as "the
Manufacturer" on loan license basis (which expression shall unless repugnant
to or inconsistent to the context or meaning thereof the deemed, mean and
include its successors and assignees) of the OTHER PART.
WHEREAS:
A. The Company is carrying on business of manufacturing and sale of
pharmaceuticals and possesses expertise, technical know how and
technology for the manufacture thereof;
B. The Manufacturer has represented to the Company that it has the necessary
manufacturing facilities, including that of capsulation and packaging as
per the requisite specifications of quality control as required by the
Company, spare capacity, adequate equipment and competent staff at its
factory situated at 34/7 Erandavana, Pune 411 004, has offered the same
to the Company.
C. The Company is desirous of utilizing the manufacturing facilities and the
spare capacity of the manufacturer to manufacture ARTREX subject to the
terms and conditions hereinafter appearing.
NOW IT IS HEREBY MUTUALLY AGREED TO BY AND BETWEEN the parties hereto as
follows:
I. MANUFACTURE (LOAN LICENSE ARRANGEMENT):
i) The Manufacturer shall manufacture at its factory situated at
34/7,Erandavana, Pune 411 004, for and on behalf of the Company the
product ARTREX as per the orders placed by the Company in terms of
this agreement as per the standards and specifications and the
Quality Assurance requirement as specified in the "Proposed
Manufacturing Guide" or "Master Formula" given by the company (and
currently in force) to the Manufacturer. No deviation and/or
alterations in part or whole from standards shall be carried out
without prior written permission of the Company.
ii) The Company shall provide the Manufacturer with manufacturing
<PAGE>
program/schedule at least Eight weeks in advance and the
Manufacturer shall make available the required facilities to the
company as per the schedule previously agreed upon.
iii) The manufacturer shall make adequate arrangement for storage of raw
materials, packaging materials, required for maximum one and half
month's production, requirement in-process goods, finished product
and change-parts as per the guidelines given by the Company.
iv) The Company shall make arrangement of procuring and supplying raw
and packaging materials to the Manufacturer in advance in such a
manner as to allow sufficient time for its analysis and release for
use in manufacturing as per the schedule given by the Company. The
Manufacturer shall make arrangements to analyze all starting
materials so as to achieve production scheduled quantity on time.
v) The Manufacturer shall follow and comply with all the statutory/
regulatory requirements mentioned in Drug Act 1940 and Rules 1945
including Amendment to Drug Act 1988 -- Good Manufacturing Practices
(as per Schedule M and U).
vi) The Manufacturer shall document the batch details on the protocol of
Batch Mfg Record (B.M.R.) as provided by the Company and arrange to
send a photocopy of B.M.R. of each batch along with the Certificate
Of Analysis (COA) to the Company to obtain their "Release Note"
before releasing a batch of finished product for sale from the
warehouse of the Manufacturer.
vii) The Manufacturer shall furnish to the Company every month a
statement in the standard format given by the company showing
therein.
a) quantities of raw materials including the packaging materials
received from the Company and for the Company's suppliers
during the preceding English calendar month.
b) quantities of raw and packaging materials actually used and in
process by the Manufacturer during the preceding English
calendar month
c) quantities of raw and packaging materials and finished products
in stock at the beginning and end of each English calendar
month.
d) quantities of raw and packaging materials in process at the
beginning and end of each English calendar month.
<PAGE>
e) quantities of finished products manufactured and supplied to
the Company.
viii)It shall be the duty of the manufacturer to keep the raw and
packaging materials and finished products under proper and adequate
storage conditions.
ix) The manufacturer shall take adequate steps to securely and safely
store the raw packaging, in-process and finished goods. However,
the manufacturer shall not deal with or dispose off the same or any
part thereof without prior written consent of the Company.
II. PERMISSIONS:
i) The Company and the Manufacturer shall obtain from the authorities
concerned and maintain from time to time and at all times during the
continuance of this Agreement all necessary permits, approvals and
licenses, requisite, usual, expedient or proper in relation to or in
connection with the manufacture of the product under this Agreement.
ii) The Company shall obtain the necessary licences under the Drugs and
Cosmetics Act, 1940 and the rules framed thereunder and wherever
Manufacturer is required to obtain any licences, approvals or
permissions viz. loan licences under the said Drugs and Cosmetics
Act and the rules or under any other law, Central or State, the
Company shall render to the manufacturer all possible assistance in
this regard and shall obtain wherever necessary in their name the
requisite permissions, approvals or licences.
III. EQUIPMENT, MACHINERY AND OTHER FACILITIES:
The Manufacturer shall ensure and guarantee that adequate facilities
are available at all times for manufacture of the said products as per
the manufacturing schedule given by the Company.
IV. RAW & PACKAGING MATERIALS & FINISHED PRODUCTS:
The Company shall supply to the Manufacturer the necessary raw
materials including packaging materials for the manufacture and
packing of the products under this Agreement as listed in "Schedule I"
hereto annexed which the Manufacturers shall manufacture as per the
specifications provided by the Company and supply the same to the
Company.
V. INDEMNITY & COMPENSATION FOR LOSSES ETC.:
i) In the event of all or any of the said raw and/or packaging
materials, semi-finished goods or finished goods,
stock-in-process are lost due to thefts the Manufacturer shall be
liable to reimburse to the Company such costs. However, the
company shall arrange for the insurance cover for all materials
<PAGE>
supplied and kept in storage.
ii) If the Manufacturer contravenes any provisions of any Acts, Rules
or Regulations or the conditions of the loan licences or commits
breach of any other terms and/or conditions of this Agreement as
a result of which the Company incurs or suffers any loss, damage
or expense, the Manufacturer shall fully indemnify and keep
indemnified the Company of and from the same.
VI. RAW MATERIALS, FINISHED PRODUCTS AND CHANGE-PARTS TO BE HELD IN TRUST:
It is hereby agreed and declared that the raw materials to be supplied
by the Company to the Manufacturer are intended solely for the purpose
of being utilized in the manufacture or processing of ARTREX ordered
by the Company and for no other purpose and consequently the said raw
materials and/or the finished product resulting therefrom as well as
packing materials supplied to the Manufacturer and finished product
resulting therefrom shall be the property of the Company and be held
by the Manufacturer in trust for the Company and for the purpose of
being delivered to the Company.
VII. DISPATCHES:
The Company will lift the finished goods after paying the necessary
taxes/ duties etc. For this purpose the Manufacturer will make the
necessary documentations (including challans, debit notes, memos,
etc.) which shall accompany the goods to various destinations.
Transportation costs including loading/unloading of goods shall be
borne by the Company.
VIII. QUALITY ASSURANCE:
i) The Manufacturer shall analyze all the raw and packaging
materials as per the specifications provided by the Company
before using the same for manufacturing purpose. In case of any
problem of non-compliance with any of the control parameters of
specifications, the Manufacturer shall consult the Company
immediately and in such case the Company's decision shall be
conveyed to the Manufacturer in writing and will be final and
binding on the Manufacturer.
ii) The Company reserves the right to analyze independently any or
all batches of starting materials and reject if found
substandard. It also reserves the right to reject partly or
wholly the finished product based on its independent analysis or
suggest reprocessing method to be carried out by the
Manufacturer. In an event of reprocessing, the Company shall bear
the reprocessing charges.
iii) The Company shall have an access to any and all documentation
pertaining to the manufacturing and testing documents of the
product including the inspection of storage conditions and Q.A
systems. The Company may carry out an
<PAGE>
audit of the Manufacturer's premises, systems and documents to
ensure the Quality, Purity and Integrity of the Company's product
/ s.
iv) The Manufacturer shall arrange to hand over "Control Samples" of
each batch of ARTREX manufactured in its premises to the Company
as per the Sample quantity specified by the Company in writing.
This may include samples for stability studies. The Manufacturer
shall maintain documentation records of all such samples drawn by
the Company on BMR.
v) The Company shall make payment for the analytical charges as per
the quotation given by the Manufacturer and given here in
SCHEDULE II within one week after the receipt of the invoice.
vi) The norms for material loss in handling and processing shall be
as under (based on an average of 6 months' production):-
Active raw materials : Not more than 2 %
Excipients : Not more than 0.5 %
Packaging materials : Not more than 3 %
vii) The yield of Finished Products of the first 10 production batches
ready for dispatch after setting aside analytical and retention
samples, will be validated mutually by Manufacturer and the
Company and revised if necessary based on the trend analyst.
viii) The Manufacturer shall observe the Company's authorized Standard
Operating Procedure for addition of Recovery and also for
Destruction of Non-recoverable materials including finished
product time.
IX. CHARGES:
i) For carrying out the manufacturing of the products and other
obligations herein contained satisfactorily, the Company shall
pay to the Manufacturer, charges at the rates per product
mentioned in the "Schedule II" hereto annexed.
ii) The Manufacturer shall submit its debit notes immediately after
completion of the analysis of material/finished products. These
charges of the finished products, shall be payable, regardless of
whether they are lifted or not by the Company when the
Manufacturer had kept them ready for dispatch after compliance of
all the necessary procedures and formalities. The Manufacturer
shall not be entitled to any other payment except charges
referred to above and other duties payable in terms of Clause X
hereunder. The Manufacturer shall bear the necessary tax
deductions at source (T.D.S.) which are applicable and the
Company will issue a certificate in respect of the same.
<PAGE>
EXCISE DUTIES & OTHER LEVIES:
i) The Company shall bear and pay excise duties, if any or any
other taxes, levies, etc., imposed in respect of the said
product. The Manufacturer shall maintain, keep and make available
to the Company all such records and documents that may be
required in connection therewith.
ii) The Manufacturer shall bear and pay all other taxes, duties,
assessments, etc. applicable under Loan-License arrangement to
them.
XI. DURATION:
This agreement shall commence on 10th day of October, 1997 and shall
be in force for a period of five years from that date subject to its
prior termination or determination as hereinafter provided.
XII. RENEWAL:
This Agreement may be renewed by either party by giving to the other
three months' notice in that behalf on terms and conditions to be
mutually agreed upon.
XIII. TERMINATION:
i) Either party shall be entitled to terminate this agreement on the
happening of any of the following events -
a) If counter part commits a breach of any of the terms or
provisions of this Agreement and fails to rectify or remedy
the breach within seven days from the date of receipt of
written notice calling upon it to do so.
b) If the counter part goes into liquidation, voluntary or
otherwise.
c) If counter part makes any arrangement or compensation with
its creditors or if distress execution or other process of
the court is levied upon or if any incumbrancer takes
possession of or a receiver or other officer of the court is
appointed in respect of its assets or properties.
ii) Notwithstanding anything contained herein above and without
prejudice to the rights and remedies upon, either party shall be
entitled to terminate this Agreement by giving three months'
notice to the other party. However, before the termination of
this Agreement, the parties shall discuss the cause of
termination. In such event, none of the parties herein shall be
entitled to any compensation or payment of any kind whatsoever
except as provided in Clause XIV herein after.
XIV. CONSEQUENCES OF TERMINATION:
Upon termination of this Agreement in any manner -
i) The manufacturer shall immediately discontinue the
manufacture/packaging of the
<PAGE>
products.
ii) The manufacturer shall immediately return to the Company all raw
and packaging materials and the finished goods and stock in
process along with the requisite statements after full settlement
of accounts.
iii) The Company shall pay and settle with the Manufacturer all the
due charges against production of bills, invoices, vouchers, etc.
in respect thereof.
iv) The Manufacturer shall not be entitled to any other compensation
or reimbursement of whatsoever nature.
v) The Manufacturer shall not claim any right, title or interest in
respect of the trade marks of ARTREX whether registered or not as
well as any similar trade marks of the product ARTREX.
vi) For a period of at least 10 years, the Manufacturer shall not
manufacture or produce directly or indirectly the same product
for itself or for any other person whatsoever.
XV. SECRECY CLAUSE AND UNDERTAKING:
The Manufacturer undertakes that it shall keep directly secret and
confidential and shall not disclose, divulge or reveal during the
continuance of this Agreement or at any time thereafter the know-how,
formula, manufacturing process and its details or any part disclosed
or communicated by the Company to it under this Agreement relating to
the manufacturing or packaging of the products or otherwise gained or
acquired by virtue of or as a result of the implementation of this
Agreement to any person, firm, company, body corporate or authority
and shall ensure that the same is kept strictly secret and
confidential.
i) The Manufacturer further undertakes not to manufacture/pack
ARTREX or the product with the same composition and formulation
of ARTREX while this agreement is in force and for at least 10
years from the termination of this agreement for whatever reason.
The Company is aware that Manufacturer has its own products
"Articulin and Articulin Forte" which are marketed by the
Manufacturer for more than last eight (8) years and both the
parties have no objection for the same. It is expressly agreed
and understood by and between the parties that the aforesaid
stipulations shall not apply to "Articulin" and "Articulin Forte"
which are already being manufactured by the manufacturer.
ii) The Manufacturer further undertakes to take all reasonable
measures to ensure that its employees and/or personnel are
responsible for the satisfactory performance of conditions and
obligations herein including condition to preserve strict secrecy
of the information disclosed to them.
<PAGE>
XVI. TRADE MARKS:
i) The Manufacturer hereby agrees forthwith upon the expiry or
earlier termination of this Agreement for any cause whatsoever or
any or all the rights or permission herein granted, to
discontinue any and every application and/or affixation
whatsoever of the said trade mark "ARTREX" and/or any other trade
mark of "ARTREX" in connection with any goods, products, service
or business or trade as also of any other word, name, logo,
device, alphabets, script or language so closely similar in
sound, appearance or meaning to the trade mark "ARTREX" words,
names, logos or devices whether applied and/or affixed separately
or in conjunction or juxtaposition with or to the said trade mark
or any other trade mark as to be likely to cause confusion or
deception or to detract from or adversely affect the right, title
or interest of the Company in or to any other trade mark in any
manner whatsoever.
However, the manufacturer shall be entitled to manufacture and
distribute its existing products "Articulin" and "Articulin
Forte" which are already registered trade marks of the
Manufacturer.
The Manufacturer further agrees and undertakes that upon the
termination of this Agreement, it will not directly or indirectly
represent or describe or cause to be represented or described on
any labels, advertising materials, circulars or in any other
manner whatsoever that represents that Manufacturer was formerly
manufacturing the said goods under the said trade mark of the
Company and/or any other trade mark of the Company.
Upon the termination of this Agreement for any reason whatsoever
the Manufacturer shall return all the said goods including the
raw materials which are in their possession, custody or control
and which are in a good and saleable condition to the Company.
XVII. INSURANCE:
The Company shall insure all the raw materials and packaging
materials, finished products and stock in process to its own account.
The Manufacturer shall render the necessary documents in connection
therewith.
XVIII. JURISDICTION:
This Agreement shall be deemed to be an Agreement made in Pune and the
jurisdiction of Courts other than in Pune is hereby excluded by the
consent of the parties hereto.
IN WITNESS WHEREOF the parties hereto have these present the day and year
first hereinabove written.
SIGNED AND DELIVERED BY SIGNED AND DELIVERED BY
<PAGE>
withinnamed "The Company" withinnamed "The Manufacture"
For Bio-Ved Pharmaceuticals For Eisen Pharmaceuticals Co.
Pvt. Ltd. (Pvt.) Ltd.
Mr Ajit P. Chitre Mr Shrikant V Godbole
Director (Operations) Managing Director
in the presence of in the presence of
Dr. Bhushan Patwardhan Mr. Heramb B Joshi
Schedule I
[INSERT 2 PAGES HERE]
Schedule II
MANUFACTURING AND TESTING CHARGES
FOR ARTREX CAPSULES AT
EISEN PHARMACEUTICAL CO. ( PVT. ) LTD., PUNE
a) Manufacturing Charges : [*****]
b) Packing Charges : [*****]
c) Testing Charges
For every packing material : [*****]
For Finished Goods Physical Tests : [*****]
For Microbial Testing : [*****]
Every raw material : [*****]
* Confidential provisions omitted and filed separately with the Commission.
<PAGE>
SPECIFICATIONS OF RAW MATERIALS
(Planned Extract Specifications to Be Reviewed after Receiving First 10 Batches
of Each Extract)
<TABLE>
<CAPTION>
LOD (AT
90 DEG. C
UNDER 15
SR. MM. HG. FOR PH OF 5% AQ. TLC MICROBIAL
NO. DESCRIPTION 4 HRS.) SUSPENSION WT./ML(gm) PATTERN QUALITY STORAGE
- --------- -------------------- ------------ -------------- ------------- ---------------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 [******** [*****] [*****] [*****] [*****] [*****] [*****]
********
********]
2 [******** [*****] [*****] [*****] [*****] [*****] [*****]
********
********]
3 [******** [*****] [*****] [*****] [*****] [*****] [*****]
********
********]
4 [******** [*****] [*****] [*****] [*****] [*****] [*****]
********
********]
</TABLE>
Excipients viz. Starch Maize, Collodal Slicone Dioxide, Methylparaben,
Citric Acid, BHT, Isopropyl Alcohol,
Purified Water and Hard Gelatin Capsule shells to be analysed as per latest
I.P. specifications and
Docusafe Sodium as per B.P. 1993 specifications.
* Confidential provisions ommitted and filed separately with the Commission.
<PAGE>
ARTREX CAPSULES
PACKING MATERIAL SPECIFICATIONS
<TABLE>
<CAPTION>
LOD (AT
90 DEG. C
UNDER 15
SR. MM. HG. FOR PH OF 5% AQ. TLC MICROBIAL
NO. DESCRIPTION 4 HRS.) SUSPENSION WT./ML (gm) PATTERN QUALITY STORAGE
- --------- -------------------- ------------ -------------- ------------- ---------------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 [********** 25 to 35% 4.5 to 6.5 1.25 to 1.40 Complies with E. coli and Store at a temp.
********** that of the Salmonella below 25 DEG. C.
********** working absent.
**********] standard.
2 [********** NLT 40% 4.5 to 6.5 0.95 to 1.10 Complies with E. coli and
********** that of the Salmonella
**********] working absent.
standard.
3 [********** NLT 15% N.A. N.A. Compiles with E. coli and Store at a temp.
********** that of the Salmonella below 25 DEG. C.
**********] working absent.
standard.
4 [********** NLT 15% N.A. N.A. Complies with E. coli and Store at a temp.
********** that of the Salmonella below 25 DEG. C.
**********] working absent.
standard.
</TABLE>
[*****]
[*****]
[*****]
* Confidential provisions ommitted and filed separately with the Commission.
<PAGE>
ARTREX CAPSULES
PACKING MATERIAL SPECIFICATIONS
<TABLE>
<CAPTION>
SPECIFICATION ALUMINUM FOIL PVC/PVDC FOIL SALES CARTON P.S. CARTON CORRUGATED BOX
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
<C> <S> <C> <C> <C> <C> <C>
1 Description Silver colored Clear, Box made of Box made of Brown colored,
foil plain on transparent PVC white back white back ply shipper
one side and foil with PVDC duplex duplex (with 2 gap
printed with coating chromoboard chromoboard plates and 1
text mate as per paper, printed paper, printed centre plate 5)
the approved as per the as per the printed on
approved artwork approved artwork both side
ARTREX Capsules of ARTREX sales of ARTREX sample (length wise)
foil on the carton. carton. as per the
other side. Foil approved
is free from artwork of
pinholes. ARTREX
corrugated
box.
2 Dimensions Width 87 + 1 mm Width 91 + mm 90 x 64 x 90 mm 90 x 10 x 65 mm 465 x 330 x 195 mm
3 Grammage About 70 gsm PVC. 345 gsm+ NLT 290 gsm NLT 290 gsm 1 x 150 A, 4 x
10%, PVDC about 100 A
40 gsm.
4 Thickness NLT 0.02 mm About 0.26 mm N.A N.A. N.A.
5 Printing Printing -with N.A. Printing - with Printing - with Printing -with
green and black green and black green and black green and black
colors, is clear colors; is clear colors; is clear colors; is clear
without smugging without smugging without smugging without smugging
or any othe or any other or any other or any other
defect. defect defect defect.
</TABLE>
<PAGE>
Exhibit 10.11
THIS AGREEMENT IS MADE AT PUNE ON THIS 28 DAY OF SEPTEMBER 1994.
BETWEEN
BIO-VED, INC. 911, Bern Court, # 110, San Jose, CA 95112 USA (hereinafter
referred to as THE COMPANY) of the FIRST PART.
AND
DR. BHUSHAN PATWARDHAN 1471, Shukrawar Peth,
Tulshibag. Chowk, Pune 2, (Hereinafter referred to as DR. PATWARDHAN) of the
SECOND PART.
WHEREAS
1. REPRESENTATIONS:
Dr. Patwardhan represented to the Company that:
a) He has developed a PHARMACEUTICAL FORMULATION (named by him as RA-1
and hereinafter referred to as RA-1).
b) He is the absolute owner of RA-1 and process for extraction and
manufacture of RA-1.
c) The said formula RA-1 is useful in the method of treating
musculoskeletal diseases.
d) Dr. Patwardhan has filed an application for a patent in the United
States of America under Application No. OR/273, 189 on July 11th 1994
for method of treating musculoskeletal diseases and with the use of
the formula RA-1.
e) Dr. Patwardhan has also filed two applications for patents in India
for and in respect of RA-1, and the property and ownership in RA-1 and
the method of manufacture/extraction of RA-1 and its uses and
application, on 17.8.1994 and 2nd application on 23rd August, 1994.
f) No other person other than Dr. Patwardhan has any right, title
interest or claim in the development of the formula RA-1 and its uses,
extraction and manufacture; and that the ownership and/or intellectual
property in RA-1 and the development manufacture and extraction of
RA-1 belongs exclusively to Dr. Patwardhan.
2. The representation made by Dr. Patwardhan and briefly narrated in para (1)
above from the basis of this agreement.
3. GRANT:
<PAGE>
Dr. Patwardhan agrees to grant to the Company, the exclusive rights for the
use, development, extraction, manufacture, sale and commercial exploitation
of formulation RA-1, either as sole formulation or in combination with
other products or formulation or formulations throughout the world. (These
rights are hereinafter referred to as Rights in RA-1).
4. PAYMENTS:
In anticipation of this agreement, the Company had started clinical and
other trials. If the Company is satisfied about the use of the said RA-1
for treatment of musculoskeletal diseases and/or any other disease, for
which the Company may use the said formulation RA-1, then the Company
agrees to make the following payments to Dr. Patwardhan.
[*****] After the Company is satisfied about the clinical and other
trials of the formulation RA-1; the trials are expected to
be completed in the approximate period of three months
hereto.
[*****] Upon signing of the definitive documents, actually
transferring the property and rights in RA-1, shall be
deposited in an escrow account by the company and be payable
to Dr. Patwardhan with interest, if any, paid by the Bank on
the US patent application, filed by Dr. Patwardhan on July
11, 1994, being granted.
[*****] After vetting by the US Attorney of the Company of the
application for US patent made by Dr. Patwardhan. This
vetting is expected within one month of Dr. Patwardhan
giving all the papers relating to the patent and the product
to the Company. This amount shall be paid only if U.S.
attorney of the Company is satisfied that the formulation
and the method of treatment and the composition of the
formulation RA-1 is patentable under US law.
5. In addition to the aforesaid sum, the Company shall pay to Dr. Patwardhan,
a sum of [*****] (inclusive of all costs, expenses, fees and charges)
per patent for two patents on Dr. Patwardhan obtaining two Indian patents
in respect of RA-1 including the patents for the said formulation and its
true use, extraction and method of manufacture.
6. CONFIDENTIALITY:
The documents and information given by Dr. Patwardhan to the Company shall
be treated as confidential by the Company and shall not be disclosed by
anybody except for the purpose of evaluation by the U.S. and Indian
Attorneys of the Company and Attorneys office for ascertaining whether the
RA-1 is mentioned of its manufacture, production and extraction as also its
use and application for treatment of diseases is patentable under U.S. Law.
* Confidential provisions omitted and filed separately with the Commission.
<PAGE>
7. The results of the clinical and other trials commenced by the Company
and/or under the authority of the Company, shall be kept secret by Dr.
Patwardhan and he shall not disclose the said results to anyone; nor shall
Dr. Patwardhan disclose any information coming to his knowledge regarding
the company or regarding any matter in connection with this agreement, to
anybody except with the written consent of the Company.
8. MARKETING:
The Company intends to use the said formulation and/or sell the said
formulation in the market for treatment of musculoskeletal diseases or any
other diseases. The Company intends to bring in the market, the said
formulation within a period of one year of the granting of two patents
under in India as mentioned earlier, as well as FDA approval. The Company
intends to market the said formulation worldwide within a period of 7 years
from the time of the signing of the definitive Agreement. It is intention
of the parties to market the formulation RA-1 as early as possible. The
Company expects to market the product in India as soon as possible and Dr.
Patwardhan agrees to co-operate with the company in it.
9. In the event of the Company failing to commence the marketing operation
in respect of the said product in India within the aforesaid period of one
year, Dr. Patwardhan shall have all rights to the said product in India. In
the event of the Company altogether failing to commence the marketing of
the said formulation within a period of 7 years anywhere in the world other
than India, then Dr. Patwardhan shall have all rights to the said product
outside India.
10. ROYALTY:
The Company shall pay to Dr. Patwardhan a royalty calculated at the rate of
[*****] of the gross revenue earned by it by marketing and sale of the said
formulation. The royalty shall be paid after the accounts are settled by
the Company at the end of each accounting year.
11. SUBLICENSING:
The Company shall be entitled to sublicense the use, manufacture and/or
sale of the said formulation RA-1. In the event of sublicensing, the
Company shall pay to Dr. Patwardhan [*****] of the royalty received by the
said sublicensing.
12. VESTING OF RIGHTS:
The entire rights in respect of the said formulation, its method of
extraction and manufacture and a commercial exploitation of the said
formulation and all the rights in RA-1 shall vest in the Company and Dr.
Patwardhan shall not be entitled to interfere in it any manner.
13. ARBITRATION:
In the event of any dispute arising between the parties regarding this
agreement and/or interpretation of the terms and conditions of this
agreement and/or liabilities arising out of this agreement, the same shall
be referred to an arbitration of two arbitrators, one to be
* Confidential provisions omitted and filed separately with the Commission.
<PAGE>
appointed by each party and in the event of arbitrators not being unanimous
in their decisions, the matter shall be referred to an umpire to be chosen,
and appointed by the arbitrators. The arbitration proceedings may be held
in India but the matter shall be decided in accordance with the law of the
country about which or within whose territory the subject matter of the
dispute arises, or relates.
IN WITNESS WHEREOF the parties have signed this Deed on the date and year
mentioned herein.
Signed by
s/Barry Wald
Mr. Barry Wald
President,
On Behalf of BIO-VED, Inc. USA,
On 28th September, 1994. (Party of the First Part)
Signed by
s/Bhushan Patwardhan
Dr. Bhushan Patwardhan,
on 28th September, 1994
at Bombay. (Party of the Second Part)
In the presence of :
1. s/Ajit P. Chitre
Ajit P. Chitre,
10, Shri Vishnubaug Society,
Pune 411 016.
2 .
<PAGE>
Exhibit 10.12
AGREEMENT
THIS AGREEMENT IS MADE AT PUNE ON THIS 7TH DAY OF APRIL 1995.
BETWEEN
DR. BHUSHAN PATWARDHAN of Pune, Indian Inhabitant, residing at 1471,
Shukrawar Peth, Tulshibag Chowk, Pune - 411002, (hereinafter referred to as
"Dr. PATWARDHAN" which expression shall unless repugnant to the context or
meaning thereof be deemed to mean and include his heirs, legal
representatives, executors and administrators) of the FIRST PART.
AND
BIO-VED, INC., a company incorporated under the laws of U.S.A. and having its
office at 911 Bern Court # 110, San Jose CA 95112, U.S.A. (hereinafter
referred to as "the Company" which expression shall unless repugnant to the
context or meaning thereof be deemed to mean can include its successors and
assigns) of the SECOND PART.
WHEREAS Dr. Patwardhan had developed a pharmaceutical preparation (named by
him as RA-1 and hereinafter referred to as "RA-1"). Dr. Patwardhan is the
absolute owner of RA-1 and process for extraction and manufacture of RA-1.
According to him, the said formulation RA-1 is useful in the method of
treating musculoskeletal disease;
AND WHEREAS Dr. Patwardhan has filed two Applications for patents in the
United States of America for and in respect of RA-1 and the proprietary and
ownership in RA-1 and its uses and applications on 11th July, 1994 under No.
08/273,189 Patent and Trademark Office, Washington DC. USA and the said
Application is pending for registration.
AND WHEREAS by the Agreement dated 28th September 1994, made between the
Company and Dr. PATWARDHAN, the latter agreed to grant to the Company the
exclusive right, title and interest in the formulation RA-1 and its uses,
extraction, and machinery to the Company on the terms and conditions stated
therein;
AND WHEREAS Dr. Patwardhan has agreed to grant to the Company the exclusive
right for the use, manufacture and sales of formulation RA-1 and patents
thereof with all future improvements and additions thereto to the Company.
NOW THIS INDENTURE WITNESSETH AND IT IS HEREBY AGREED BY AND BETWEEN THE
PARTIES HERETO AS FOLLOWS:
1. Dr. Patwardhan hereby agrees for the consideration hereinafter mentioned
to grant to the Company the exclusive license and rights to make use,
development, extraction, manufacture, sale and commercial exploitation of
formulation RA-1, either as sole formulation or in combination with other
products or formulation or formulations throughout the world including
India. (This rights
<PAGE>
are hereinafter referred to as "Rights in RA-1").
2. The entire rights in respect of the said formulation RA-1, its method of
extraction and manufacture and commercial exploitation of the said
formulation and all the rights, title and interest in RA-1 shall vest in
the Company and Dr. Patwardhan shall not be entitled to interfere in it in
any manner.
3. a) Dr. Patwardhan declares that he has received the Examination Reports
from the Patent Office in respect of the said Patent Applications. Dr.
Patwardhan will furnish the Company with the complete file of the
above referred Applications and copies of all the papers filed in and
received from the Patent Office in India and keep the Company informed
of the progress of the Applications.
It is hereby agreed by and between the parties hereto that the
following its review of the Applications, the Company will prosecute
the said Patent Applications and Dr. Patwardhan agrees to furnish all
information, cooperation and render all assistance to the Company and
its advocates for prosecution of the said Patent Applications till the
patents are sealed and issued in his favour.
Dr. Patwardhan agrees to sign Form of Authorization in favour of the
Advocates and Patent Attorney of the Company. Dr. Patwardhan also
agrees to sign and execute all applications, letters and other papers,
as may be required by the Company or its Advocates from time to time.
b) The Company shall pay to Dr. Patwardhan, a sum of US [*****] only
(inclusive of all costs, expenses, fees and charges) for one patent in
respect of RA-1 including the patent for the said formulation and its
true use, extraction and method of manufacturing. A further sum of US
[*****] will be placed into an interest bearing escrow account in Pune
payable to Dr. Patwardhan upon the granting of the US patent
application. In case the patent is not granted by the Patent Office
within three years from February 1, 1995, Dr. Patwardhan will return
to the Company within 60 days thereafter, US [*****] plus interest at
the rate of 10% per annum upto the date of payment. All monies in the
escrow account will also be returned to the company at that time. The
period of three years and continuance of the escrow account may be
extended by the Company at its sole discretion. The Company intends to
bring in the market (outside India), the said formulation within a
period of seven years of the granting of the patent. In the event of
the Company failing to commence marketing in respect to said product,
outside India, within the aforesaid period of seven years, Dr.
Patwardhan shall have all rights to the said product outside India.
4. Dr. Patwardhan shall in regard to the above referred application if and
when patent has been granted, and in regard to the patent, execute a formal
license or
* Confidential provisions omitted and filed separately with the Commission.
<PAGE>
several licenses as the case may require, and the parties shall register
with the Patent and Trademark Office, Washington DC., USA. Any such formal
license shall operate subject to the terms of this agreement
and the terms of such formal license shall be deemed to be incorporated
into this agreement. The license hereinafter agreed to be granted is
exclusive both of Dr. Patwardhan and those claiming through him, and
others.
5. Dr. Patwardhan warrants that there are no subsisting licenses in respect of
formulation RA-1 and he covenants that no further licenses will be granted
to any other person. Dr. Patwardhan also confirms that no other person
other than himself has any right, title, interest or claim in the
development of the formulation RA-1 and its uses, extraction and
manufacture and that the ownership and/or intellectual property in RA-1 and
the development, manufacture and extraction of RA-1 belong exclusively to
him.
6. Pending the grant of patents on the applications, payments made by the
Company under this Agreement expressed to be or implied by way of royalty
on sales of the formulation RA-1 shall not operate as an estoppel so as to
prevent the Company from contending that the formulation RA-1 does not
infringe the claims allowed on such applications or any of them.
7. Any or all of the formulation RA-1 manufactured by the Company may be
exported for use or sale to any country of the world notwithstanding that
Dr. Patwardhan may be in possession of intellectual property rights in
respect thereof and the rate of payment in respect thereof by the Company
to Dr. Patwardhan shall be same as for formulation RA-1 manufactured and
sold in United States of America.
8. The company is hereby granted the right to grant sublicenses to its
affiliated and/or associated companies to use, manufacture and/or sales of
the said formulation RA-1. Sublicenses hereunder shall be non-exclusive and
non-assignable. In the event of sublicensing, the Company shall pay to Dr.
Patwardhan, 1% of the royalty received by the said Sublicensing.
9. Nothing in this agreement shall restrict the right of the Company to enter
into sub-contracts for the manufacture of the said formulation RA-1.
10. a) The Company shall pay to Dr. Patwardhan for the license and other
rights hereby secured as from the first day of sale outside India, a
royalty calculated at the rate of [*****] of the gross revenue (defined
as sales proceeds received by BIO-VED before any operating expense or
tax liability has been deducted) earned by it by marketing and sale of
the said formulation RA-1. The royalty shall be paid after the accounts
are settled by the Company at the end of each accounting year.
* Confidential provisions omitted and filed separately with the Commission.
<PAGE>
b) The Company shall at its decision, elect to market RA-1 outside India,
in advance of the granting of the said patents. The royalty, as
defined in Clause 10a above, shall be calculated at the same rate. If
the patents are not granted during which time the Company, has
commenced marketing outside India, the rights of the company, as
defined in Clause 3-b shall nonetheless apply. Dr. Patwardhan and the
Company agree to abide by all other clauses of this Agreement
even in the event that the Patents are not granted.
c) Dr. Patwardhan shall do all such acts and things as may be necessary
to maintain and keep on foot the patents.
d) Dr. Patwardhan agrees and undertakes not to abandon or allow to lapse
any such patents and not to amend the specification of any of them or
the specification accompanying any application for patent within the
scope of this Agreement without the consent of the Company.
e) Dr. Patwardhan shall defend every proceeding or application in the
Patent Office for opposition to the grant of or for revocation of the
patents or the Applications or any of them or in respect of
Applications for improvement inventions by Dr. Patwardhan.
f) The Company shall pay for all patent registration fees and all costs
and fees payable in respect of the Applications. In respect of
Applications for patent based on improvement inventions within the
terms of the Agreement, BIO-VED will decide when and if to apply for
patent(s) in respect thereof, and shall bear the costs and fees
thereof.
g) The Company may render all assistance which it may reasonably be
required to render to Dr. Patwardhan in the prosecution of the above
referred patent Application. Dr. Patwardhan will furnish the company
with a complete file of the above referred Application and copies of
all papers filed in and received from the Patent Office in the USA and
keep the Company informed of the progress of the Application.
h) The Company will pay for all renewal fees and other obligations in
this clause and the Company shall do all things in its power towards
the maintenance of the validity and enforceability of the patent in
the USA and for the prevention of the infringement thereof.
11. a) If any infringement or threatened infringement of any patents comes to
the notice of the Company, it shall, forthwith, notify to Dr.
Patwardhan giving particulars thereof.
b) If Dr. Patwardhan fails to take any action against the infringers
<PAGE>
within a period of 10 days from the date of the notice, in that event
the Company is at liberty, at its own costs, to take an action against
the infringers at the cost and consequence of Dr. Patwardhan.
12. a) If any proceedings are threatened or commenced by a third party
against either the Company or sublicensee or any of their customers or
Dr. Patwardhan on the ground that the said formulation RA-1 infringe
any patent monopoly rights vested in such third party, the party so
threatened or sued shall inform the other forthwith and the matter
shall be referred to leading patent counsel for the purpose of
obtaining his advice on whether a defense or a threat action will have
a reasonable chance of successful outcome and whether there any
circumstances making it imprudent to defend or commence the
proceedings.
b) If both Dr. Patwardhan and the Company decide that any such
proceedings shall be defended, the Company shall bear the whole legal
costs. Damages and costs awarded against Dr. Patwardhan in favour of
such third party, shall be borne by Dr. Patwardhan.
13. Subject to the provisions for termination hereinafter contained, this
agreement shall operate as from 28 day of September, 1994 and shall
continue in force for the entire terms of the patents.
14. Dr. Patwardhan may terminate this Agreement if the Company fails to perform
any of the terms hereof and fails to remedy such breach within 30 days of a
written notice from Dr. Patwardhan to remedy the same.
15. The Company shall pay the legal costs incurred in respect of the
preparation of all drafts and engrossment's of this Agreement and of any
formal license hereunder.
16. This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their successors-in-title or assigns as the case may be.
17. Dr. Patwardhan hereby agrees that he shall, at the request of the company,
sign and execute all such licenses, deeds, documents, applications,
instruments and writings as may hereinafter be required by the Company for
the purpose of vesting in the Company the Rights in RA-1.
IN WITNESS WHEREOF THE PARTIES HERETO HAVE EXECUTED THESE PRESENTS THE DAY
AND YEAR FIRST HEREIN ABOVE WRITTEN.
Signed and Delivered by
/s/ Bhushan Patwardhan /s/ Barry Wald
--------------------- ---------------------
Dr. BHUSHAN PATWARDHAN BARRY WALD
Pune 411 030. President,
<PAGE>
BIO-VED, INC. USA.
In the presence of
1) 1) /s/ Ajit P. Chitre
---------------------
AJIT P. CHITRE
10, Vishnubaug Society,
Pune 411 016. INDIA.
2) 2)
<PAGE>
Exhibit 10.13
AGREEMENT
THIS AGREEMENT IS MADE AT PUNE ON THIS 7TH DAY OF APRIL 1995.
BETWEEN
DR. BHUSHAN PATWARDHAN of Pune, Indian Inhabitant, residing at 1471, Shukrawar
Peth, Tulshibag Chowk, Pune - 411002, (hereinafter referred to as
"Dr. PATWARDHAN " which expression shall unless repugnant to the context or
meaning thereof be deemed to mean and include his heirs, legal representatives,
executors and administrators) of the FIRST PART.
AND
BIO-VED, INC., a company incorporated under the laws of U.S.A. and having its
office at 911 Bern Court # 110, San Jose, CA 95112, U.S.A. (hereinafter
referred to as "the Company" which expression shall unless repugnant to the
context or meaning thereof be deemed to mean can include its successors and
assigns) of the SECOND PART.
WHEREAS Dr. Patwardhan had developed a pharmaceutical preparation (named by
him as RA-1 and hereinafter referred to as "RA-1"). Dr. Patwardhan is the
absolute owner of RA-1 and process for extraction and manufacture of RA-1.
According to him, the said formulation RA-1 is useful in the method of
treating musculoskeletal disease;
AND WHEREAS Dr. Patwardhan has filed two Applications for patents in India
for and in respect of RA-1 and the proprietary and ownership in RA-1 and its
uses and applications on 17th August, 1994 under No. 188/BOM/93 and second
application on 23rd August, 1994 under No. 189/BOM/93 with the Patent Office,
Bombay and the said Applications are pending for registration;
AND WHEREAS by the Agreement dated 28th September 1994, made between the
Company and Dr. PATWARDHAN, the latter agreed to grant to the Company the
exclusive right, title and interest in the formulation RA-1 and its uses,
extraction, and machinery to the Company on the terms and conditions stated
therein;
AND WHEREAS Dr. Patwardhan has agreed to grant to the Company the exclusive
right for the use, manufacture and sales of formulation RA-1 and patents
thereof with all future improvements and additions thereto to the Company.
NOW THIS INDENTURE WITNESSETH AND IT IS HEREBY AGREED BY AND BETWEEN THE
PARTIES HERETO AS FOLLOWS:
1. Dr. Patwardhan hereby agrees for the consideration hereinafter mentioned
to grant to the Company the exclusive license and rights to make use,
development, extraction, manufacture, sale and commercial exploitation of
formulation RA-1, either as sole formulation or in combination with other
products or formulation or formulations
<PAGE>
throughout the world including India. (This rights are hereinafter referred
to as "Rights in RA-1").
2. The entire rights in respect of the said formulation RA-1, its method of
extraction and manufacture and commercial exploitation of the said
formulation and all the rights, title and interest in RA-1 shall vest in
the Company and Dr. Patwardhan shall not be entitled to interfere in it in
any manner.
3. a) Dr. Patwardhan declares that he has received the Examination Reports
from the Patent Office in respect of the said Patent Applications. Dr.
Patwardhan will respond to the Patent Office within a period of not
more than 30 days and will furnish the Company with a complete file of
the above referred Applications and copies of all the papers filed in
and received from the Patent Office in India and keep the Company
informed of the progress of the Applications.
It is hereby agreed by and between the parties hereto that following
its review of the Applications, the Company will prosecute the said
Patent Applications and Dr. Patwardhan agrees to furnish all
information, extend cooperation and render all assistance to the
Company and its advocates for prosecution of the said Patent
Applications till the patents are sealed and issued in his favor.
Dr. Patwardhan agrees to sign Form of Authorization in favor of the
Advocates and Patent Attorney of the Company. Dr. Patwardhan also
agrees to sign and execute all applications, letters and other papers,
as may be required by the Company or its Advocates from time to time.
b) The Company shall pay to Dr. Patwardhan a sum of [*****] only
(inclusive of all costs, expenses, fees and charges) for two patents
in respect of RA-1, including the patents for the said formulation and
its true use, extraction and method of manufacturing. In case patents
are not granted by the Patent Office within two years from February 1,
1995, Dr. Patwardhan will return to the Company within 60 days
thereafter, [*****] plus interest at the rate of 10% per annum up
to the date of payment. In case only one patent is granted by the
Patent Office within two years and the other rejected, Dr. Patwardhan
will return to the Company within 60 days thereafter, [*****] plus
interest at the rate of 10% per annum up to the date of payment. In
both the above cases, the period of two years may be extended by the
Company at its sole discretion. The company intends to bring in the
market, the said formulation within a period of one year of the
granting of two patents under in India. In the event of the Company
failing to commence the marketing operation in respect said product in
India within the aforesaid period of one year, Dr. Patwardhan shall
have all rights to the said product in India.
4. Dr. Patwardhan shall in regard to the above referred applications, if and
when patents have been granted, and in regard to the patents execute a
formal license or several licenses as
* Confidential provisions omitted and filed separately with the Commission.
<PAGE>
the case may require, and the parties shall register with the Patent
Office, Bombay. Any such formal license shall operate subject to the terms
of this agreement and the terms of such formal license shall be deemed to
be incorporated into this agreement. The license hereinafter agreed to be
granted is exclusive both of Dr. Patwardhan and those claiming through him,
and others.
5. Dr. Patwardhan warrants that there are no subsisting licenses in respect of
formulation RA-1 and he covenants that no further licenses will be granted
to any other person. Dr. Patwardhan also confirms that no other person
other than himself has any right, title, interest or claim in the
development of the formulation RA-1 and its uses, extraction and
manufacture and that the ownership and/or intellectual property in RA-1 and
the development, manufacture and extraction of RA-1 belong exclusively to
him.
6. Pending the grant of patents on the applications, payments made by the
Company under this Agreement expressed to be or implied by way of royalty
on sales of the formulation RA-1 shall not operate as an estoppel so as to
prevent the Company from contending that the formulation RA-1 does not
infringe the claims allowed on such applications or any of them.
7. Any or all of the formulation RA-1 manufactured by the Company may be
exported for use or sale to any country of the world notwithstanding that
Dr. Patwardhan may be in possession of intellectual property rights in
respect thereof and the rate of payment in respect thereof by the Company
to Dr. Patwardhan shall be same as for formulation RA-1 manufactured and
sold in India.
8. The company is hereby granted the right to grant sublicenses to its
affiliated and/or associated companies to use, manufacture and/or sales of
the said formulation RA-1. Sublicenses hereunder shall be non-exclusive and
non-assignable. In the event of sublicensing, the Company shall pay to Dr.
Patwardhan, [*****] of the royalty received by the said Sublicensing.
9. Nothing in this agreement shall restrict the right of the Company to enter
into sub-contracts for the manufacture of the said formulation RA-1.
10. a) The Company shall pay to Dr. Patwardhan for the license and other
rights hereby secured as from the first day of sale in India, a
royalty calculated at the rate of [*****] of the gross revenue (defined
as Sales proceeds received by BIO-VED before any operating expense or
tax liability has been deducted) earned by it by marketing and sale of
the said formulation RA-1. The royalty shall be paid after the accounts
are settled by the Company at the end of each accounting year.
b) The Company shall at its decision, elect to market RA-1 in India, in
advance of the granting of the said patents. The royalty, as defined
in Clause 10a, above, shall be calculated at the same rate. If the
patents are not granted during
* Confidential provisions omitted and filed separately with the Commission.
<PAGE>
which time the Company, has commenced marketing in India, the rights
of the company, as defined in Clause 3-b shall nonetheless apply. Dr.
Patwardhan and the Company agree to abide by all other clauses of this
Agreement even in the event that the Patents are not granted.
c) Dr. Patwardhan shall do all such acts and things as may be necessary
to maintain and keep on foot the patents.
d) Dr. Patwardhan agrees and undertakes not to abandon or allow to lapse
any such patents and not to amend the specification of any of them or
the specification accompanying any application for patent within the
scope of this Agreement without the consent of the Company.
e) Dr. Patwardhan shall defend every proceeding or application in the
Patent Office for opposition to the grant of or for revocation of the
patents or the Applications or any of them or in respect of
Applications for improvement inventions by Dr. Patwardhan.
f) The Company shall pay for all patent registration fees and all costs
and fees payable in respect of the Applications. In respect of
Applications for patent based on improvement inventions within the
terms of the Agreement, BIO-VED will decide when and if to apply for
patent(s) in respect thereof, and shall bear the costs and fees
thereof.
g) The Company will pay for all renewal fees and other obligations in
this clause and the Company shall do all things in its power towards
the maintenance of the validity and enforceability of the patents in
India and for the prevention of the infringement thereof.
11. a) If any infringement or threatened infringement of any patents comes to
the notice of the Company, it shall, forthwith, notify to Dr.
Patwardhan giving particulars thereof.
b) If Dr. Patwardhan fails to take any action against the infringers
within a period of 10 days from the date of the notice, in that event
the Company is at liberty, at its own costs, to take an action against
the infringers.
12. a) If any proceedings are threatened or commenced by a third party
against either the Company or sublicensee or any of their customers or
Dr. Patwardhan on the ground that the said formulation RA-1 infringe
any patent monopoly rights vested in such third party, the party so
threatened or sued shall inform the other forthwith and the matter
shall be referred to leading patent counsel for the purpose of
obtaining his advice on whether a defense or a threat action will have
a reasonable chance of successful outcome and whether there any
<PAGE>
circumstances making it imprudent to defend or commence the
proceedings.
b) If both Dr. Patwardhan and the Company decide that any such
proceedings shall be defended, the Company shall bear the whole legal
costs thereof not including any damages and costs awarded against him
in favor of such third party.
13. Subject to the provisions for termination here in after contained, this
agreement shall operate as from 28 day of September, 1994 and shall
continue in force for the entire terms of the patents.
14. Dr. Patwardhan may terminate this Agreement if the Company fails to perform
any of the terms hereof and fails to remedy such breach within 30 days of a
notice from Dr. Patwardhan to remedy the same.
15. The Company shall pay the legal costs incurred in respect of the
preparation of all drafts and engrossment's of this Agreement and of any
formal license hereunder.
16. This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their successors-in-title or assigns as the case may be.
17. Dr. Patwardhan hereby agrees that he shall, at the request of the company,
sign and execute all such licenses, deeds, documents, applications,
instruments and writings as may hereinafter be required by the Company for
the purpose of vesting in the Company the Rights in RA-1.
IN WITNESS WHEREOF THE PARTIES HERETO HAVE EXECUTED THESE PRESENTS THE DAY AND
YEAR FIRST HEREIN ABOVE WRITTEN.
Signed and Delivered by
s/Bhushant Patwardhan s/Barry Wald
Dr. BHUSHAN PATWARDHAN BARRY WALD
Pune 411 030. President,
BIO-VED, INC. USA.
In the presence of
1) 1) s/Ajit P. Chitre
<PAGE>
AJIT P. CHITRE
10, Vishnubaug Society,
Pune 411 016. INDIA.
2) 2)
<PAGE>
Exhibit 10.14
AGREEMENT
This Agreement is made at PUNE on this 7th day of April 1995.
BETWEEN
BIO-VED, INC., 911 Bern Court, # 110, San Jose, CA 95112 USA (hereinafter
referred to as THE COMPANY) of the FIRST PART
AND
Bhushan Patwardhan, Ph.D 1471, Shukrawar Peth, Tulshibag Chowk, Pune - 411 002,
India, (hereinafter referred to as DR. PATWARDHAN) of the SECOND PART;
WHEREAS
1. REPRESENTATIONS:
Dr. Patwardhan represented to the company that:
a. He has developed an extract of [*] based upon a method of extraction
contained in two patent applications No's. 188/BOM/93 and 189/BOM93
with the Patent Office, Bombay and the said Applications are pending
for registration.
<PAGE>
b. He is the absolute owner of the process for extraction.
c. The said extract has been evaluated and found useful in rodent animals
as an immunomodulator (stimulant) when the immune system of these
animals had previously been suppressed, and in vitro as a scavenger
for free circulating oxygen radicals.
d. No other person other than Dr. Patwardhan has any right, title
interest or claim in the development of the said extract in the uses
as described in Para 1 (c)
2. The representation made by Dr. Patwardhan and briefly narrated in Para (1)
above form the basis of this Agreement.
3. The Company has, for purposes of identification, has referred to the use
of said extract as described in Para 1(c), as IM-10.
4. GRANT
Dr. Patwardhan agrees to grant to the Company, the exclusive rights (a) to
seek any and all possible patents, (b) for the use, development,
extraction, manufacture, sale and commercial exploitation of IM-10 either
as sole formulation or in combination with other products or formulation or
formulations throughout the world. (These rights are hereinafter referred
to as Rights in IM-10).
5. PAYMENTS
<PAGE>
The Company agrees to compensate Dr. Patwardhan as follows:
a. US [***] at time of signing, for receipt of all copies of preclinical
evaluations and studies completed or in process and right of first
refusal upon completion of clinical study.
b. US [***] at sixty (60) days after receipt of preclinical evaluations
and studies if BIO-VED decides to proceed with a confirming clinical
study. In the event that BIO-VED declines to proceed with the
clinical study, it shall return all materials defined in (a) above
within thirty (30) days.
c. US [***] at sixty (60) days after completion of Clinical Study if
BIO-VED accepts future development and marketing. In the event that
BIO-VED declines future development and marketing, it shall return all
materials defined in (a) above within thirty (30) days.
d. US [***] at sixty (60) days after first sale in India.
6. CONFIDENTIALITY
The documents and information given by Dr. Patwardhan to the company shall
be treated as confidential by the Company and shall not be disclosed by
anybody except for the purposes of evaluation for clinical confirmation and
for potential patent application.
7. The results of the clinical trial shall be kept secret by Dr. Patwardhan
and he shall not disclose the said results or its methodology to anyone;
nor shall
* Confidential provisions omitted and filed separately with the Commission.
<PAGE>
Dr. Patwardhan disclose any information coming to his knowledge regarding
the company or regarding any matter in connection with this agreement, to
anybody except with the written consent of the Company.
8. MARKETING
The Company intends to use the said formulation and/or sell the said
formulation in the market for the claims to be supported by clinical
evaluation. The Company intends to bring in Indian market, the said
formulation within a period of one year of clinical confirmation as well as
FDA approval. The Company intends to market the said formulation worldwide
within a period of seven years from the marketing in India. It is the
intention to market the formulation IM-10 in all forms or in combinations
as early as possible and Dr. Patwardhan agrees to co-operate with the
company in it.
9. In the event of the Company failing to commence the marketing operation in
respect of the said product in India within the aforesaid period of one
year, Dr. Patwardhan shall have all rights to the said product in India.
In the event of the company altogether failing to commence the marketing of
the formulation within a period of 7 years anywhere in the world other than
India, then Dr. Patwardhan shall have all rights to the said product
outside India.
<PAGE>
10. ROYALTY
The Company shall pay to Dr. Patwardhan a royalty calculated at the rate of
[***] of the gross revenue earned by it by marketing sale of the said
formulation. The royalty shall be paid after accounts are settled by the
Company at the end of each accounting year.
11. The Company shall be entitled to sub-license the use, manufacture and/or
sale of the said formulation of IM-10. In the event of sub-licensing the
Company shall pay to Dr. Patwardhan [***] of the royalty received by the
said sub-licensing.
12. VESTING OF RIGHTS
The entire rights in respects of the said formulation, its method of
extraction and manufacture and a commercial exploitation of the said
formulation and all rights in IM-10 shall vest with the company and Dr.
Patwardhan shall not be entitled to interfere in it in any manner.
13. INTELLECTUAL PROPERTY
The Company will at its own expense, evaluate and if feasible, pursue
patent applications on the said formulation and/or its uses. Dr.
Patwardhan agrees to provide all technical assistance in the preparing of
applications, preparing responses to all examiner inquiries or challenges,
and presenting himself as needed, travel expenses at the cost to the
Company, in defense of any applications.
* Confidential provisions omitted and filed separately with the Commission.
<PAGE>
14. ARBITRATION
In the event of any dispute arising between the parties regarding this
agreement and/or interpretation of the terms and conditions of this
agreement and/or liabilities arising out of this agreement, the same shall
referred to an arbitration of two arbitrators, one to be appointed by each
party and in the event of arbitrators not being unanimous in their
decisions, the matter shall be referred to an umpire to be chosen, and
appointed by the arbitrators. The arbitration proceedings may be held in
India but the matter shall be decided in accordance with the law of the
country about which or within whose territory the subject matter of dispute
arises, or relates.
IN WITNESS WHEREOF the parties have signed this DEED on the date and year
mention herein.
Signed by
/s/ Barry Wald
- -------------------------------
Mr. Barry Wald
President
On Behalf of BIO-VED, Inc. USA
On a7th April, 1995 (Party of the First Part)
Signed by
/s/ Bhushan Patwardhan
- -------------------------------
Dr. Bhushan Patwardhan
On 7th April, 1995 (Party of the Second Part)
<PAGE>
Exhibit 10.15
AGREEMENT
This Agreement is made at PUNE on this 26th day of June 1995.
B E T W E E N
BIO-VED, INC., 911 Bern court, #110, San Jose, CA 95112 USA (hereinafter
referred to as THE COMPANY) of the FIRST PART
A N D
S.V. Karnataki, 399/28, P.C.N.T.D.A., Nigdi,
Pune - 411 002, India, (hereinafter referred to as
Mr. Karnataki) of the SECOND PART;
WHEREAS
1. REPRESENTATIONS:
Mr. Karnataki represented to the Company that :
a) He has developed a surgical antibacterial scrub and disinfectant
solution known as SA-12.
b) He is the absolute owner of the process and formula.
c) The said solution has been evaluated and found superior to a well
known standard antibacterial solution in the market known as
Sterillium.
d) No other person other than Mr. Karnataki has any right, title,
interest or claim in the development of the said solution in the use
as described in Para 1(c).
2. The representation made by Mr. Karnataki and briefly narrated in
Para (1) above form the basis of this Agreement.
3. The Company has, for purposes of identification, has referred to the
use of said solution as described in Para 1(c), as SA-12.
4. SALE:
Mr. Karnataki agrees to sell to the Company, the exclusive rights (a) to
seek any and all possible patents, (b) for the use, development,
extraction, manufacture, sale and commercial exploitation of SA-12 either
as sole formulation or in combination with other products or formulation
or formulations throughout the worlds. (These rights are referred to as
Rights in SA-12). Mr. Karnataki relinquishes these rights forever.
5. PAYMENTS:
The Company agrees to compensate Mr. Karnataki as follows:
a) [******] at the time of signing of the Agreement.
b) [******] at time of successful completion of at
least 3 manufacturing batches.
c) [******] within thirty days after first six month of sale in
India.
* Confidential provisions omitted and filed separately with the Commission.
<PAGE>
6. CONFIDENTIALITY:
The documents and information given by Mr. Karnataki to the company shall
be treated as confidential by the Company and shall not be disclosed by
anybody except for the purposes of evaluation and for potential patent
application.
7. MARKETING
The Company intends to use the said formulation and/or sell the said
formulation in the worldwide market for the claims to be supported by
clinical evaluation.
8. SUBLICENSING:
The Company shall be entitled to sublicense the use, manufacture and/or
sale of the said formulation of SA-12.
9. VESTING OF RIGHTS:
The entire rights in respect of the said formulation, its method of
manufacture and a commercial exploitation of the said formulation and all
rights in SA-12 shall vest with the company and Mr. Karnataki shall not be
entitled to interfere in it in any manner.
10. INTELLECTUAL PROPERTY:
The Company will at its own expense, evaluate and if feasible, pursue
patent applications on the said formulation and/or its uses. Mr. Karnataki
agrees to provide all technical assistance in the preparing of
applications, preparing responses to all examiner inquiries and presenting
himself as needed, travel expenses at the cost to the Company, in defense
of any application.
11. ARBITRATION:
In the event of any dispute arising between the parties regarding this
agreement and/or interpretation of the terms and conditions of this
agreement and/or liabilities arising out of this agreement, the same shall
be referred to an arbitration of two arbitrators, one to be appointed by
each party and in the event of arbitrators not being unanimous in their
decisions, the matter shall be referred to an umpire to be chosen, and
appointed by the arbitrators. The arbitration proceedings may be held in
India but the matter shall be decided in accordance with the law of the
country about which or within whose territory the subject matter of dispute
arises, or relates.
IN WITNESS WHEREOF the parties have signed this DEED on the date and year
mentioned herein.
Signed by
s/Barry Wald
Mr. Barry Wald
President
On Behalf of BIO-VED, Inc. USA
On June, 1995.
<PAGE>
(Party of the First Part)
Signed by
s/S.V. Karnataki
Mr. S.V. Karnataki
On 26th June, 1995
(Party of the Second Part)
In presence of
s/Shrikant Dmrani
Mr. Shrikant Dmrani
Bombay
<PAGE>
Exhibit 10.16
PATENT AGREEMENT
This Patent Agreement is between DR. ABRAHAM ROSENBERG ("ROSENBERG"), and
AYURCORE, INC. ("AYURCORE"), and is made with reference to the following
recitals:
RECITALS
A. ROSENBERG is the owner of the U.S. Patent Application identified below, and
of the technology and materials described therein, along with rights in
related technology and materials.
B. AYURCORE desires to secure, and ROSENBERG is willing to grant, ownership of
such patent, in accordance with the terms and conditions of this Agreement.
AGREEMENTS
In consideration of the covenants and obligations set forth below, ROSENBERG and
AYURCORE agree as follows:
1. DEFINITIONS
1.1 Agreement. "Agreement" means this Patent Agreement.
1.2 Assigned Rights. "Assigned Rights" means the U.S. Patent Application
(a draft of which has been prepared) to be filed on the invention
entitled "COMPOSITIONS FOR MODULATING INTRACELLULAR INOSITOL
TRISPHOSPHATE CONCENTRATION AND USES THEREOF," and all foreign and
domestic patents or patent-like rights, continuation and
continuation-in-part applications, divisional applications, reissue
patents, extensions, and the like, having a priority date based on
such U.S. Patent Application.
1.3 AYURCORE. "AYURCORE" includes any corporation, partnership, or
organization, whether now existing or hereafter created, which
directly or indirectly controls, is controlled by, or is under common
control with, AYURCORE, INC. "Control" means (1) the legal power to
direct or cause the direction of the general management or partners of
such entity, whether through the ownership of voting securities or by
contract, or (2) ownership (directly or
indirectly) of more than 50% of the outstanding shares conferring a
right to vote at general meetings, or (3) the right to elect the
majority of the Board of Directors or its equivalent.
1.4 Improvement. "Improvement" means any alteration or modification of any
<PAGE>
Invention, but such that the altered or modified version comes within
any issued claim of the Assigned Rights.
1.5 Invention. "Invention" means the structure, materials, design,
concepts, techniques, and processes embodied in the Assigned Rights.
1.6 Know-how. "Know-How" means the confidential technical information of
ROSENBERG relating to the Invention and Products and useful in the
manufacture, use, or sale of Products, and further includes all
samples, sources of supply, documentation, and other similar tangible
and intangible information and property relating to the Products and
in ROSENBERG's possession or control as of the effective date of this
Agreement.
1.7 Legal Action. "Legal Action" means any legal or equitable suit,
proceeding, action, or arbitration.
1.8 Manufacture. "Manufacture" means make or have made.
1.9 Net Receipts. "Net Receipts" means the total amounts of money or other
consideration received or earned by AYURCORE from all Transfers of
Products, less any of the following amounts if itemized separately
from the Transfer price:
(1) shipping and insurance charges or allowances,
(2) customary trade discount allowed, or any commission paid in lieu
of a trade discount (other than commissions paid to employees of
AYURCORE);
(3) refunds, credits, or allowances given or made on account of the
return or rejection of any Products;
(4) tax, duty, tariff or other governmental charge on the making,
having made, use, transportation, or Transfer of the Products;
and
(5) reasonable compensation received by AYURCORE for delivery or
installation services, or as interest or finance charges.
1.10 Net Royalties. '`Net Royalties" means the gross amount of license fees
and royalties (or payments in lieu of license fees or royalties), net
of withholding taxes, received or earned from any sublicensee by
AYURCORE pursuant to a sublicense agreement between AYURCORE and such
sublicensee.
1.11 Parties, Party. "Parties" means ROSENBERG and AYURCORE, collectively.
"Party" means either R0SENBERG or AYURCORE.
1.12 Patent Jurisdiction. "Patent Jurisdiction" means any country or
territory where ROSENBERG owns or controls an issued, unexpired, and
enforceable patent coming under the Assigned Rights.
<PAGE>
1.13 Products. "Products" means any method, machine, manufacture, or
composition of matter (1) made or practiced in accordance with or
incorporating the teachings of any Invention and covered in whole or
in part by any of the now pending or issued claims of the Assigned
Rights, or (2) incorporating any Knowhow provided by ROSENBERG to
AYURCORE.
1.14 Territory. "Territory" means the entire world.
1.15 Transfer. "Transfer" means any sale, lease, rental, or other
commercial disposition, with or without consideration.
2. ASSIGNMENT
2.1 Grant. ROSENBERG hereby assigns to AYURCORE, and AYURCORE accepts,
all of ROSENBERG's right, title, and interest in and to the Assigned
Rights and Know-how, subject to all of the rights and obligations set
forth in this Agreement.
2.2 Permits. AYURCORE shall be responsible for obtaining any permits,
licenses, authorizations, or approvals required or necessary by any
government or other entity to Manufacture, use, offer to sell, or
Transfer any Products.
2.3 Marking Requirement. AYURCORE agrees to mark Products made by or on
behalf of AYURCORE with the patent number or numbers of the Assigned
Rights. The notice shall be directly applied to the Products, or when,
from the character of the Products this cannot be done, by fixing to
the Products or their packaging a label containing a like notice.
2.4 Patent Filings & Maintenance. AYURCORE shall file and prosecute such
U. S. patent applications as are reasonably required to protect the
Assigned Rights. AYURCORE, in its discretion, may file and prosecute
related foreign patent applications as it deems appropriate. AYURCORE
shall use reasonable diligence, under the circumstances, to prosecute
and maintain in force any resulting patent rights.
2.5 Assistance by ROSENBERG. ROSENBERG agrees to assist AYURCORE with
respect to any Legal Action brought by AYURCORE relating to the
enforcement of the Assigned Rights. ROSENBERG shall be entitled to
receive reimbursement of any reasonable out-of-pocket expenses
incurred by it in rendering such assistance.
3. COMPENSATION AND ROYALTIES
3.1 Agreement for Royalties. AYURCORE agrees to pay ROSENBERG a royalty at
the following rates:
<PAGE>
(1) A rate of [***] of all Net Receipts from Transfers of Products to
be used in, or which are imported into, any Patent Jurisdiction
by or on behalf of AYURCORE.
(2) A rate of [***] of all Net Royalties received or earned by
AYURCORE from sublicensees.
3.2 Payment. The royalty on the Transfer of each Product is earned on the
earlier of (l) the day on which the Product is shipped to a
distributor or customer, or (2) the day on which an invoice issues for
the Product. Each royalty payment to ROSENBERG must be paid within 30
days after the end of the calendar quarter in which the royalty is
earned. Royalties earned on Products for which refunds, credits, or
allowances are given or made by AYURCORE or its sublicensees shall be
credited against future royalties due to ROSENBERG, Royalties shall be
paid in U S dollars. For those Transfers of Products made by AYURCORE
in other currencies, the Net Receipts shall be converted to U.S.
dollars in accordance with the exchange rates published in the Wall
Street Journal at the end of the respective royalty period.
3.3 Statements. With each royalty payment, AYURCORE must submit to
ROSENBERG a statement of. (1) the number of Transfers of Products from
all sources during the applicable period, (2) the total of the Net
Receipts during the applicable period, and (3) a clear computation of
the royalty payment.
3.4 Inspection. AYURCORE agrees to keep or have kept separate and
adequately detailed accounting records of all Transfers of Products.
Such accounting records shall be kept for a minimum of 2 years. During
the term of this Agreement and for one year thereafter, ROSENBERG or
its agents have the right to inspect the relevant accounting records
of AYURCORE to verify the accuracy of the royalties paid or payable to
ROSENBERG. All inspected information shall be kept in confidence from
third parties. ROSENBERG must give at least 10 days' written notice to
AYURCORE before any inspection, and may not inspect more than once in
any 12 month period. All inspections must be during ordinary business
hours, and shall be conducted so as to not unreasonably interfere with
AYURCORE's normal business activities. If any inspection discloses
that the amount of royalties paid by AYURCORE is incorrect in either
ROSENBERG's or AYURCORE's favor, then any amount due to either Party
must be paid within 30 days by the other Party. If ROSENBERG's
inspection demonstrates that the royalties paid for the period in
question are less than 95% of the correct amount owing, AYURCORE shall
be liable for ROSENBERG's cost of inspection. Otherwise, ROSENBERG
must pay all of ROSENBERG's costs for any inspection.
3.5 Credit for Expenses. Any expenses incurred by AYURCORE to obtain
patent protection for the Assigned Rights, from preparation of an
application through response to the first substantive office action
(i.e., excluding a restriction
* Confidential provisions omitted and filed separately with the Commission.
<PAGE>
requirement), shall be credited against future royalties owed by
AYURCORE to ROSENBERG. In addition, any expenses incurred by AYURCORE
to obtain regulatory approval of any Product shall be credited against
future royalties owed by AYURCORE to ROSENBERG.
4. TERM AND TERMINATION
4.1 Term. The term of this Agreement shall be from its effective date as
defined in PARA6.15 to the expiration of the last to expire patent in
the Assigned Rights (unless this Agreement is sooner terminated in
accordance with any of the provisions of this Agreement).
4.2 By Mutual Agreement. The Parties may mutually agree in writing to
terminate this Agreement, and all rights granted under this Agreement,
at any time.
4.3 Option by ROSENBERG. ROSENBERG, at its option, may immediately
terminate this Agreement and all rights granted under this Agreement
if AYURCORE defaults in the performance of any material obligation and
if the default has not been remedied within 30 days after written
notice to AYURCORE describing the default. The following events shall
constitute a default in the performance of a material obligation of
this Agreement.
(1) AYURCORE's failure to pay when due any amount payable under this
Agreement.
(2) The liquidation or dissolution of AYURCORE.
(3) If AYURCORE ceases to be actively engaged in business or
financially capable of fulfilling its obligations under this
Agreement.
4.4 Accrued Royalties Payable. Within 30 days after any termination of
this Agreement by ROSENBERG for cause, AYURCORE must pay all royalties
accrued up to the date of termination, and provide an accounting for
the final period.
4.5 Reversion of Rights. If AYURCORE has not cured a material default
under this Agreement after due notice and expiration of the remedy
period, all rights, title, and interest in and to the Assigned Rights
shall be promptly assigned by AYURCORE back to ROSENBERG.
4.6 Option by AYURCORE. AYURCORE, at its option, may immediately terminate
this Agreement and all of its obligations under this Agreement if
ROSENBERG defaults in the performance of any material obligation and
if the default has not been remedied within 30 days after written
notice to ROSENBERG describing the default.
<PAGE>
4.7 Rights re Inventory. Notwithstanding any contrary provision of this
Agreement, AYURCORE shall have the right, for a period of one year or
until AYURCORE's inventory of PRODUCTS is exhausted (whichever comes
first), to dispose of any Products (including in-process Products) in
its possession or control at the date of termination by ROSENBERG.
However, AYURCORE must make all royalty payments relating to such
Products as are otherwise required by this Agreement. Within 30 days
after any termination, AYURCORE shall provide ROSENBERG with a report
of AYURCORE's current inventory of Products as of the date of
termination.
5. REPRESENTATIONS AND DISCLAIMER OF WARRANTIES
5.1 Representation re Ownership. ROSENBERG represents that it is the sole
owner of the Assigned Rights, that ROSENBERG has not granted any other
entity any right or license under the Assigned Rights, and that
ROSENBERG has the right to assign the rights granted to AYURCORE by
this Agreement.
5.2 No Warranty re Usefulness. ROSENBERG makes no warranty or
representation that AYURCORE can successfully use the Assigned Rights
to make Products.
5.3 No Warranty re Infringement. AYURCORE acknowledges that ROSENBERG
makes no representations that any Product will not infringe the
intellectual property rights of any third party. However, ROSENBERG
represents that, to the best of his knowledge, he is not aware of any
such infringement as of the execution date of this Agreement.
5.4 No Assistance to Competitors. During the term of this Agreement,
ROSENBERG shall not create and/or provide products directly
competitive with any of the Products to any other entity without
giving AYURCORE the right of first refusal to acquire or license such
competitive products. If ROSENBERG patents any Improvement to any
Invention within 10 years after the effective date of this Agreement,
ROSENBERG shall promptly disclose any issued patent covering the
Improvement to AYURCORE, and AYURCORE shall have the right of first
refusal to acquire or license such patent.
5.5 No Minimum Sales. AYURCORE makes no representations to ROSENBERG
regarding minimum sales and/or royalties relating to Products.
5.6 Exclusion and Limitation of Liability. In no event shall ROSENBERG be
liable to AYURCORE or any third party for direct, indirect,
consequential, incidental, or punitive damages, lost profits or lost
savings, resulting from any defect in or use of any Product. In no
event shall ROSENBERG be liable to AYURCORE for indirect,
consequential, incidental, or punitive damages, lost profits or lost
savings, for any breach of this Agreement.
<PAGE>
5.7 Indemnification by AYURCORE. AYURCORE agrees to indemnify, defend, and
hold harmless ROSENBERG from and against any and all liabilities,
costs, expenses, damages, losses, actions, causes of action, and the
like arising from or relating to (directly or indirectly) any
determination that ROSENBERG is liable for any direct, indirect,
consequential, incidental, or punitive damages, or lost profits or
lost savings, resulting from any Manufacture, marketing, Transfers, or
use of, or defect in, any Products. The indemnification required by
this Paragraph shall include the payment of all attorneys' fees and
other expenses (not limited to taxable costs) incurred in settling or
defending any threatened or actual Legal Action.
6. GENERAL TERMS AND CONDITIONS
6.1 Arbitration. All disputes between the Parties concerning (l) the terms
and conditions of this Agreement and involving less than $50,000, or
(2) enforcement of the Assigned Rights against third parties (but
excluding any issue about the validity of the Assigned Rights), shall
be subject to expedited binding arbitration outside of the American
Arbitration Association ("AAA") before an attorney or expert who is
knowledgeable and experienced in the patent field, and who is selected
by mutual agreement of the Parties. A Party shall commence arbitration
by delivering written notice to the other Party. If the Parties fail
to agree on an arbitrator within 30 days after notice of a
commencement of arbitration is delivered, arbitration shall be by the
AAA, subject to the rules of the AAA then in effect, except that, in
any case, the arbitrator shall provide for discovery in accordance
with the Federal Rules of Civil Procedure and Federal Rules of
Evidence for a period of 120 days following the selection of the
arbitrator. Questions relating to such discovery shall be determined
by the arbitrator. Until a determination is made in the arbitration,
each Party shall share equally in the payment of the expenses of the
arbitrator, and AYURCORE shall continue to pay to ROSENBERG all
royalties required by this Agreement. Judgment upon the award rendered
in any arbitration may be entered in any court having jurisdiction of
the matter.
6.2 Attorneys' Fees. If any arbitration, litigation, or other legal
proceeding occurs between the Parties relating to this Agreement, the
prevailing Party shall be entitled to recover (in addition to any
other relief awarded or granted) its reasonable costs and expenses,
including attorneys' fees, incurred in the proceeding.
6.3 Relationship of the Parties. This Agreement does not constitute a
partnership agreement, nor does it create a joint venture or agency
relationship between the Parties. Neither Party shall hold itself out
contrary to the terms of this Paragraph. It is specifically understood
that each Party is an independent contractor and shall not be
considered an employee, agent, or consultant of the other Party.
Neither
<PAGE>
Party shall be liable for the representations, acts, or omissions of
the other Party contrary to the terms of this Agreement.
6.4 Notices. Unless otherwise provided for in this Agreement, all notices
or other communications required or permitted under this Agreement
must be in writing and either personally delivered or sent in any
fashion that provides written proof of actual delivery by a third
party. The effective date of delivery shall be considered to be the
next business day after actual delivery. Until written notice to the
contrary is given, the addresses of the Parties are as shown on the
signature page of this Agreement.
6.5 Waiver and Amendment. No waiver, amendment, or modification of any
provision of this Agreement shall be effective unless in writing and
signed by the Party against whom the waiver, amendment, or
modification is sought to be enforced. No failure or delay by either
Party in exercising any right, power, or remedy under this Agreement
shall operate as a waiver of the right, power, or remedy. No waiver of
any provision, condition, or breach of this Agreement shall be
construed as a waiver of any other provision, condition, or breach.
6.6 Assignment. This Agreement is binding upon and inures to the benefit
of the successors and assigns of the Parties. However, no right or
interest in this Agreement shall be assigned by either Party without
the written permission of the other Party, except that either Party
may assign its rights in this Agreement without the permission of the
other Party to any majority owned subsidiary, or in the event of a
merger, consolidation, or sale of substantially all of the assets of
the assigning Party.
6.7 No Third Party Rights. This Agreement is not for the benefit of any
third party, and shall not be deemed to grant any right or remedy to
any third party, whether or not referred to in this Agreement.
6.8 Interpretation. The section and paragraph headings of this Agreement
are intended as a convenience only, and shall not be used to interpret
its provisions. Where the context of this Agreement requires, singular
terms shall be considered plural, and plural terms shall be considered
singular.
6.9 Ambiguities. The Parties have reviewed this Agreement, and have either
had this Agreement reviewed by legal counsel or declined to do so.
Accordingly, no rule of preferential interpretation for the
non-drafting party shall be applied to this Agreement.
6.10 Severability. If any provision of this Agreement is finally held by a
court or arbitration panel of competent jurisdiction to be unlawful,
the remaining provisions
<PAGE>
of this Agreement shall remain in full force and effect to the extent
that the intent of the Parties can be enforced.
6.11 Governing Law and Forum. The validity, construction, and performance
of this Agreement is governed by the laws of California. Suit or
arbitration with respect to this Agreement may be brought only in
California. The Parties agree to submit to personal jurisdiction in
California.
6.12 Further Assurances. The Parties agree to execute any and all
agreements and documents in connection with this Agreement in order to
complete and fulfill the terms of this Agreement. Where this Agreement
provides that documents are to be signed and/or filed, such shall be
done within a reasonable time after the signing of this Agreement.
6.13 Signature Authority. The persons executing this Agreement warrant that
they have the right, power, legal capacity, and appropriate authority
to enter into this Agreement on behalf of the Party for which they
have signed below.
6.14 Publicity. The Parties shall be free to publicize the existence of
this Agreement after the effective date. However, each Party shall use
its best efforts not to disclose specific clauses (particularly those
clauses relating to payment of fees or royalties) to any third party
during the term of this Agreement, except as required by law, or by
governmental regulation, requirement or order, or as may be required
to establish its rights under this Agreement.
6.15 Counterparts. This Agreement may be executed in counterparts. Each
executed counterpart shall be considered an original of one and the
same document if each Party has executed at least one counterpart.
Each Party's signature to a counterpart may be appended to any other
Counterpart. Each Party shall deliver to every other Party a duplicate
original of the counterpart executed by such Party. This Agreement
shall be effective on the date that all Parties have signed at least
one counterpart.
6.16 Entire Agreement. This Agreement constitutes the complete and final
agreement etween the Parties, and supersedes all prior negotiations,
agreements, and understandings between the Parties concerning its
subject matter.
AGREED:
ABRAHAM ROSENBERG AYURCORE, INC.
By: s/Abraham Rosenberg By: s/Barry Wald
<PAGE>
Date: 12/9/95 Name: Barry Wald
Title: President
Date: 12/15/95
<PAGE>
Exhibit 10.17
AyurCore, Inc.
DISTRIBUTION AGREEMENT
AyurCore, Inc. ("AyurCore"), a Delaware Corporation, located at 1737 N. First
St. #290, San Jose California 95112, appoints MD Pharmaceuticals Laboratories
Ltd. ("MD"), 896 Dunearn Road, #04-03 Sime Darby Centre, Singapore 589472,
acting through its distributor, the Sime-Darby Ltd. Company located at
Sime-Darby Centre, 896 Dunearn Road, Singapore 589472, to sell the AyurCore
products listed in Exhibit I ("Products) in the countries of Singapore,
Malaysia, Thailand, Myanmar (Burma) Viet Nam, Laos and Cambodia
("Territory"), as discussed in Paragraph 3 of the Agreement. The specific
terms and conditions of this Distribution Agreement, which, for reference
purposes, shall be dated as of 1st September 1997, are set forth in the
following paragraphs.
In consideration of the mutual covenants and agreements hereinafter set
forth, the parties hereto agree as follows:
1.0 PRODUCTS
1.1 Current Products
The products listed in Exhibit 1 are the current products. Products will be
added to or deleted from this list by mutual written consent of AyurCore and
MD.
1.2 Compliance with Law
MD will be solely responsible for registration applications of PRODUCT in the
TERRITORY (i) to secure government approvals, certifications, authorizations,
and registrations for the Products in the Territory, (ii) complying with all
regulations and laws applicable in the Territory relating to the importation
and sale of the Products including regulations and laws relating to labeling
and packaging. In addition, MD will keep AyurCore advised of the steps it
proposes to take to comply with said regulations. MD shall promptly advise
AyurCore of any changes in the Products, labeling or packaging that MD
believes are necessary in order to comply with applicable law.
1.3 Forecast
MD will provide to AyurCore, by Fax or Electronic mail (reconfirmed by mail
post) a 12 month forecast annually and place advance orders by quarters of
its product needs giving a month to month schedule. Individual minimum order
requirements are; ARTREX - 10,000 blisters of 10's (100,000 capsules) and
PERIBAN - 500 Liters (may be combined order of 200 and 500 ml bottles).
1.4 Product Discontinuation
AyurCore reserves the right, without limitation but with six (6) months prior
notice to MD, to cease manufacturing particular Products herein listed
(Exhibit I). AyurCore agrees to refund the purchase price paid by MD for any
Product which remains in MD's inventory as a result of Product
discontinuation by AyurCore, or replace the inventory with comparable ongoing
Product if available.
<PAGE>
2.0 MARKETING AND SALES
2.1 Product Samples
AyurCore agrees to provide sample packs of product at no charge to support
the introductory marketing launch by MD. The amount of said samples will be
determined by AyurCore and dependent upon the sales forecast by MD prior to
the launch. MD will pay CIF charges associated with the free goods for
sampling.
2.2 Packaging and Labeling
Within the general and reasonable cost structure, AyurCore will provide
labels and color schemes/designs to meet MD requirements. AyurCore will
comply with local regulatory requirements as specified by MD.
3.0 EXCLUSIVITY
3.1 Exclusivity
AyurCore shall not appoint any other person or entity to distribute the
Products in the Territory during the term of this Agreement. Ayurcore will
not knowingly sell to any person or party who will resell the Products in the
Territory.
4.0 TRADEMARKS
4.1 Trademarks
MD recognizes that AyurCore owns the trademark(s) and trade names of its
Products, processes and services. As part of this Distribution Agreement,
AyurCore grants to MD the royalty free right to use these trademarks in its
product advertising as appropriate and necessary to sell the Products.
Product advertising material used by MD shall discontinue the use of all
AyurCore trademarks and trade names upon the termination of this Agreement.
5.0 CONFIDENTIALITY
5.1 Confidentiality
A confidentiality (Non-Disclosure) Agreement between MD and AyurCore covering
transfer of information relating to products, product development and
commercial issues was signed on May 14, 1997 and remains in force.
6.0 PRICING/PAYMENT
6.1 Prices
Prices covered for the Products are listed in Exhibit I commencing
September 1, 1997.
Prices for new Products, if any, added to the list of Products covered under
this Agreement will be negotiated at the time such Products are added.
<PAGE>
6.2 Price Changes
AyurCore will review current prices with MD at six month intervals. AyurCore
will solely revise these prices as appropriate. New prices will come into
effect with the first purchase order issued by MD to AyurCore following the
written price change notice.
6.3 Payment Terms
Payment terms are US dollars within 60 days. MD agrees to pay a late fee of
1 1/2% per month that any amount due under this Agreement is not paid within
60 days of receipt of shipment.
The first shipment payment will be accomplished through a Letter of Credit.
AyurCore will receive payment from the Sime-Darby Ltd. Company located at
Sime-Darby Centre, 896 Dunearn Road, Singapore 589472. Sime Darby is the
authorized distributor for MD. Payments will be made though wire transfer to
the bank to be stipulated by AyurCore. MD guarantees all payments due from
Sime-Darby to AyurCore.
AyurCore may withhold further shipments if payment is overdue.
MD has total responsibility for payment of any local taxes due.
6.4 Shipping and Handling Costs
Products will be shipped as specified to Singapore Air/Sea port. Shipping
and handling costs are included in the price schedule shown in Exhibit I.
7.0 TERM
7.1 Term
This Distribution Agreement shall remain in force for three years beginning
1st September, 1997 and ending 31st August, 2000. Following This three year
period, the Distribution Agreement would be renewed for another Three year
period unless terminated in writing as specified in Paragraph 8.1.
8.0 TERMINATION
8.1 Termination
This Distribution Agreement may be terminated by each of the parties at any
time with six (6) months notice. In the event of termination, all rights
revert to AyurCore.
Either party may also terminate this Distribution Agreement for cause by
written notice with immediate effect, in the event that the other party
(1) fails to cure any material breach of this Agreement within thirty
days after written notice of such breach; or
(2) commits or suffers an act of insolvency or bankruptcy.
9.0 PRODUCT WARRANTY
<PAGE>
9.1. Product Warranty
Ayurcore warranty to MD that the Products shall:
(1) conform with all written guidelines and specifications thereof
(including but not limited to the guidelines and specifications
issued by the relevant authorities in respect of the Products or
products of a similar nature) and shall be free from manufacturing
and other defects.
(2) shall be suitable for the purposes for which the Products are
manufactured and sold.
AyurCore hereby undertakes to hold MD harmless from and to indemnify MD fully
against any action, proceeding, loss damages (including damages arising from
injuries to persons) and any cost or expenses suffered or incurred by MD as a
result of any manufacturing defect in the Products or any defect in the
materials used in the manufacture of the Products.
9.2 Indemnity
AyurCore hereby indemnifies and holds harmless MD from any and all claims,
proceedings, costs, or judgments which may be made by a third party arising
as a result of a manufacturing defect in the products as manufactured by
AyurCore or a defect in the raw materials included in the Products as
manufactured by AyurCore.
10.0 MISCELLANEOUS
10.1 Applicable Law
The Agreement shall be governed by and interpreted under the laws of the
State of California USA.
10.2 Forum and Attorney's Fees
Any legal proceeding pertaining to this Agreement shall be brought in US
Federal District Court in , except that if jurisdiction in the Federal Court
is not applicable than such proceeding shall be brought and tried in the
appropriate State Court situated in San Jose, California.
If this Agreement or any provision thereof becomes the subject of any legal
proceeding, then the party prevailing in such proceeding shall be entitled to
reasonable attorneys fees upon the trial thereof and upon any appeal
therefrom.
10.3 Amendments
All amendments and modifications of this Agreement must be in writing and
signed by both parties.
10.4 Assignments
This Agreement shall be binding upon the parties and their respective
successors and assigns. Neither party shall have the right to transfer or
assign this Agreement or any interest in this Agreement without the prior
written authorization of the other party. Notwithstanding the foregoing,
either party may assign this Agreement to its parent , subsidiary or
affiliate (under ownership or control) corporations.
10.5 Entire Agreement
This Agreement, including all exhibits attached and all agreements of the
parties referred to in this document, including the Confidentiality Agreement
referred in Paragraph 5.1, represent the entire Agreement between the parties.
<PAGE>
10.6 Force Majeure
The obligations by either party to perform under this Agreement shall be
excused when caused by uncontrollable factors, such as strikes, shortages of
raw materials, or acts of God, which are beyond the control of the parties.
10.7 Notices
Notices required by this Agreement shall be sent certified mail, return
receipt requested, postage prepaid to the address of either party, as set
forth in the initial paragraph of this Agreement or at such subsequent
address for either party pursuant to notification of change of address made
in accordance with this Paragraph 9.9.
Notices to AyurCore shall be sent to the attention of either: President,
International Operations or Chief Financial Officer. Notices to MD shall be
sent to the attention of: Managing Director.
10.8 Product Quality
AyurCore will replace, at no cost to MD, or, at AyurCore's option, refund the
purchase price of, any Products that are shipped to MD by AyurCore that, when
shipped, did not meet the specifications for such Products set forth in the
Exhibit II hereto.
10.9 Status of Parties
The relationship of MD to AyurCore and AyurCore to MD is that of an
independent contractor. Nothing in this Agreement shall be deemed to
authorize or empower MD or AyurCore, their agents or employees, to act as
agent for AyurCore or MD or conduct business in the name, or for the account,
of AyurCore or MD.
IN WITNESS WHEREOF this Distribution Agreement has been executed as of the
date hereinabove first specified by the representative of each such Corporate
entity thereunto duly authorized.
AyurCore, Inc. MD Pharmaceuticals Laboratories Ltd.
By: s/Barry Wald By: s/Melvin Woner
Print: Barry Wald Print: Melvin Woner
Title: President, International Title: Managing Director
Operations
<PAGE>
EXHIBIT I
ADDENDUM
MD DISTRIBUTION AGREEMENT PRODUCT AND PRICE LIST
Trademark Package Size Price Shipped To/By
- --------- ------------ ----- -------------
ARTREX TM Blisters of 10 capsules [*****] Singapore Airport
packed 10 blisters in Air
labeled carton
PERIBAN-TM- 200 ml HDPE labeled bottle [*****] Singapore Port/Sea
500 ml HDPE labeled bottle [*****] Singapore Port/Sea
* Confidential provisions omitted and filed separately with the Commission.
<PAGE>
EXHIBIT II
ADDENDUM
PRODUCT SPECIFICATIONS
ARTREX: Green and white capsules packaged in blisters of tens (10s) and
ten blister packs of ten (10) to a carton. Each pack is identified with the
imprint of ARTREX and each carton is labeled for recommended indications,
dosage and storage information.
PERIBAN: Packaged in 200ml and 500ml HDPE bottles with leak proof stoppers.
Each bottle is labeled for recommended uses and storage information.
<PAGE>
Exhibit 10.18
MEMORANDUM OF UNDERSTANDING
BETWEEN
BIO-VED PHARMACEUTICALS PVT. LTD., OF PUNE, INDIA (BIO-VED)
AND
BLUE CROSS LABORATORIES LTD., OF MUMBAI, INDIA (BLUE CROSS)
1. BIO-VED with the help of its Associates in USA have developed certain
Antiseptic formulations and have perfected their manufacturing know-how,
keeping qualities, use benefits and technical data. They desire to
commercialise these products.
2. BLUE CROSS is an established manufacturer and marketeer of pharmaceutical
products and they desire to expand their product range by marketing the said
Antiseptic formulations.
3. The said Antiseptic formulation will be made properly at SIMRONE
PHARMACEUTICAL INDUSTRIES LTD., PALGHAR, purchased by BIO-VED and resold to
BLUE CROSS on an exclusive basis.
4. Trade Mark "Multicidal" will be used for the said Antiseptic formulation.
This mark will be assigned by BLUE CROSS to SIMRONE. The package design and
get-up will be provided by BLUE CROSS and copyrights thereof will also be
assigned to SIMRONE. BIO-VED will ensure that both trade mark and copyrights
are fully and promptly protected at their costs in case of any infringement.
5. "Multicidal" products will strictly comply with BLUE CROSS requirements
in regard to pack sizes/designs, contents, labelling, colour schemes, flavour
and shipper packs. They will also fully comply with FDA and other statutory
requirements. No changes whatsoever will be made without BLUE CROSS'
approval. Products contravening this condition will be taken back by BIO-VED
and full value thereof will be refunded to BLUE CROSS.
6. All supplies of "Multicidal" products made to BLUE CROSS will be
accompanied with copies of SIMRONE's test reports. In case of any doubt,
BLUE CROSS will be at liberty to send samples for test to an independent FDA
approved laboratory whose report will be final and binding for both BIO-VED
and BLUE CROSS.
7. BIO-VED will purchase "Multicidal" sales products from SIMRONE at such
prices as both parties may agree. BIO-VED will resell said "Multicidal"
sales products to BLUE CROSS at such prices as BIO-VED and BLUE CROSS may
mutually agree. All samples for promotion will be transferred by SIMRONE to
BIO-VED and by BIO-VED to BLUE CROSS at cost inclusive of applicable central
excise and sales tax. BLUE CROSS will decide its selling
<PAGE>
prices including Maximum Retail Price (MRP) at its sole discretion. BLUE
CROSS will pay to BIO-VED for all the supplies, within 45 days of the receipt
of the same.
8. BLUE CROSS will pay BIO-VED [*****] of Net Sales Value Realised (NSVR) by
BLUE CROSS from "Multicidal" products' sales in 1996-97 as "Know-How and
Research Fee". For sales in 1997-98, such fee will be [*****]. For sales in
1998-99, 1999-2000 and 2000-01, such fee will be restricted to [*****]. All
payments will be made by BLUE CROSS on quarterly basis within 90 days of the
close of the quarter, subject to T.D.S. as statutorily required. No such fee
will be payable after 2000-01 and for any samples supplied or distributed
from April, 1996. NSVR shall be computed net of all taxes, levies, free
goods, discounts given and freight, as certified by BLUE CROSS' Auditors.
9. BLUE CROSS will place advance orders for "Multicidal" requirements on
quarterly basis with BIO-VED, giving a month to month schedule. BIO-VED will
keep minimum one month's safety stocks and is bound to deliver as per BLUE
CROSS' requirements. BIO-VED will follow the despatch instructions of BLUE
CROSS strictly.
10. In case BIO-VED, for any reason, fails to deliver BLUE CROSS'
requirements as per required schedule, BIO-VED will compensate BLUE CROSS for
loss of profit calculated at the difference between NSVR and BIO-VED's
selling price vide (7) above.
11. BIO-VED will be solely and fully responsible for all losses and claims
arising out of any product side-effects or product performance failures or
defective product manufacturing and will compensate BLUE CROSS fully and
promptly therefor.
12. This Memorandum of Understanding (MOU) will be for a period of 5 years
commencing from 1st April, 1996 and terminating on 31st March, 2001 subject
to termination by 6 months' notice on either side. No compensation or
damages would be payable to either party on termination.
13. Neither BIO-VED nor BLUE CROSS shall be liable for any inability on their
part to fulfil the commitments as envisaged in this MOU which is/are
occasioned in whole or in part by force majeure, strike, lockout, fire,
breakdown, war, destruction of plant, act or regulation of government,
inability to secure government authorization and/or approvals or any other
cause beyond their reasonable control. Such force majeure occurrence shall
be immediately notified to the other party in writing.
14. Any dispute or difference which may at any time arise between the parties
hereto as to the construction, meaning or effect hereof or as to any clause,
matter or thing herein contained or as to the rights or liabilities of the
parties aforesaid hereunder shall be referred to Arbitration under and in
accordance with and subject to provisions of the Arbitration Act, 1940 or any
statutory modifications or re-enactment thereof, and the award or awards in
any such Arbitration shall be made as per rules of the High Court of
* Confidential provisions omitted and filed separately with the Commission.
<PAGE>
judicature at Mumbai and the venue of such Arbitration shall be in Mumbai.
IN WITNESS WHEREOF, the parties hereto have caused this MOU to be executed on
the date indicated herebelow.
s/N.H. Israni s/Shrikant Umrani
N.H. ISRANI SHRIKANT UMRANI
MANAGING DIRECTOR GENERAL MANAGER
BLUE CROSS LABORATORIES LTD. BIO-VED PHARMACEUTICALS,
PVT. LTD.
Place: Bombay Pune
Date: 1st April, 1996 19/04/96
SUPPLEMENTARY MEMORANDUM OF UNDERSTANDING
BETWEEN
BIO-VED PHARMACEUTICALS PVT. LTD., OF PUNE, INDIA (BIO-VED)
AND
BLUE CROSS LABORATORIES LTD., OF MUMBAI, INDIA (BLUE CROSS)
1. Both BIO-VED and BLUE CROSS re-affirm their MOU dated 1st April, 1996.
2. In view of change in manufacturer of MULTICIDAL from Simrone
Pharmaceutical Industries Ltd., Palghar, to S.P.B. (Inc.), 179/2/A, Garmal,
Wadgoan Dhayari, Sinhagar Road, Pune - 41, both BIO-VED and BLUE CROSS agree
to amend the said MOU as follows:
(a) In place of "Simrone Pharmaceutical Industries Ltd., Palghar", the name
"S.P.B. (Inc.)" will be substituted.
(b) In place of "SIMRONE" the word "S.P.B." will be substituted.
<PAGE>
s/N.H. Israni s/Ajit Chitre
N.H. Israni Ajit Chitre
MANAGING DIRECTOR DIRECTOR (OPERATIONS)
BLUE CROSS LABORATORIES LTD. BIO-VED PHARMACEUTICALS.
PVT. LTD.
Place: Mumbai Pune
Dated: 11th June, 1997 19th June 1997
<PAGE>
Exhibit 10.19
AyurCore, Inc.
PROMISSORY NOTE
January 29, 1996
FOR VALUE RECEIVED, AyurCore, Inc., a Delaware corporation
("Borrower"), promises to pay Irwin Rosenthal, ("Lender") the principal amount
of $25,000, together with interest on the unpaid balance thereof from the date
of this Promissory Note to the date such balance is paid, at the prime rate
shown in the Western Edition of the Wall Street Journal, plus 2% per annum.
Interest shall be due and payable on June 30 and December 31, of each year.
Principal shall be due on demand commencing one year from the date hereof;
provided, however, that if, after the date of this Promissory Note, Borrower
shall concluded a debt or equity financing, of $500,00 or more, the unpaid
principal and accrued interest hereunder shall be payable on the fifth business
day after the closing of such financing.
If any one or more of the following events ("Events of Default") shall occur:
a. Borrower shall fail to pay any amount under this Promissory Note when
the same shall become due and payable, whether at maturity or by
acceleration or otherwise; or
b. (i) the Borrower shall commence any action (A) under any law relating
to bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to the Borrower or its debts
or (B) seeking appointment of custodian, receiver or similar office for the
Borrower or any substantial part o its property; or (ii) any action of a
nature referred to above shall commenced against the Borrower and results
in an order for relief or is not dismissed, discharged or fully bonded
within 30 day; or (iii) there shall be commenced against the Borrower any
action seeking attachment, execution or similar process against any
substantial part of the Borrower's property, which action is not within 30
days discharged or stayed or fully bonded; or (iv) the Borrower shall, by
act or omission, indicate its consent to or acquiescence in any of the
foregoing, without regard to the grace periods set forth above; or (v) the
Borrower shall be unable, or admit in writing inability, to pay the
Borrower's debts as they become due; or (vi) the Borrower shall transfer or
conceal its property within intent to hinder, delay or defraud any
creditors or to benefit any class of creditors or creditors generally or
shall suffer for 30 days or longer while insolvent any lien on the
Borrower's property resulting from judicial proceedings; or
c. the dissolution or other winding up of the Borrower; then, in such
event and at any time thereafter, if such event shall then be continuing,
Lender may, at its option upon written notice to Borrower, declare this
Promissory Note to be due and payable, whereupon (or without the necessity
for such notice in the case of any event described in clause (i) or (ii) of
paragraph (b) above, the entire balance of this Promissory Note shall
forthwith become and be due and payable.
<PAGE>
Except as otherwise hereinabove expressly provided, Borrower hereby waives
diligence, demand, protest, presentment and all notices (whether of nonpayment,
dishonor, protest, acceleration or otherwise) and consents to acceleration of
the time of payment and to surrender, substitution or any other action or
inaction with respect to security and to forbearance and to other indulgence,
all without notice. Failure of Lender to assert any right herein shall not be
deemed a waiver thereof.
The Borrower shall have the right, at any time, to prepay without penalty
all of this Promissory Note together with accrued interest thereon.
Lender shall not assign its rights hereunder without the prior written
consent of Borrower.
This Promissory Note shall be governed by and construed in accordance with
the laws of the State of New York applicable to contracts made and to be
performed wholly within such State.
IN WITNESS WHEREOF, the Borrower has signed this Promissory Note as of the
date first written above.
AyurCore, Inc.
By:_______________________________
Authorized Signature
<PAGE>
Exhibit 10.20
AyurCore, Inc.
PROMISSORY NOTE
July 14, 1997
FOR VALUE RECEIVED, AyurCore, Inc., a Delaware Corporation ("Borrower"),
promises to pay to the order of Sanjeev Chitre ("Lender"), the principal amount
of $204,700, together with interest on the unpaid principal balance thereof from
the respective dates Lender loaned such amounts to the Borrower as set forth on
Schedule A attached hereto to the date such balance is paid, at the prime rate
shown in the Western Edition of the Wall Street Journal, plus 2% annum.
Interest shall be due and payable on June 30 and December 31, of each year.
Principal shall be due on demand from and after the respective maturity dates
set forth on Schedule A; provided, however, that if Borrower shall conclude a
debt or equity financing of $500,000 or more at any time after the date hereof
and prior to the date any principal amount hereunder shall otherwise become due
and payable, such unpaid principal and accrued interest hereunder shall be
payable on the fifth business day after the closing of such financing.
If any one or more of the following events ("Events of Default") shall occur:
(a) Borrower shall fail to pay any amount under this Promissory Note when the
same shall become due and payable, whether at maturity or by acceleration or
otherwise; or
(b) (i) the Borrower shall commence any action (A) under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an
order for relief entered with respect to the Borrower or its debts or (B)
seeking appointment of a custodian, receiver or similar officer for the Borrower
or any substantial part of its property; or (ii) any action of a nature referred
to above shall be commenced against the Borrower and results in an order for
relief or is not dismissed, discharged or fully bonded within 30 days; or (iii)
there shall be commenced against the Borrower any action seeking attachment,
execution or similar process against any substantial part of the Borrower's
property, which action is not within 30 days discharged or stayed or fully
bonded; or (iv) the Borrower shall, by act or omission, indicate its consent to
or acquiescence in any of the foregoing, without regard to the grace periods set
forth above; or (v) the Borrower shall be unable, or admit in writing, inability
to pay the Borrower's debts as they become due; or (vi) the Borrower shall
transfer or conceal its property within intent to hinder, delay or defraud any
creditors or to benefit any class of creditors or creditors generally or shall
suffer for 30 days or longer while insolvent any lien on the Borrower's property
resulting from judicial proceedings; or
(c) the dissolution or other winding up of the Borrower;
then, in such event and at any time thereafter, if such event shall then be
continuing, Lender may, at its option upon written notice to Borrower, declare
this Promissory Note to be due an payable, whereupon (or without the necessity
for such notice in the case of any event described in clause (i) or (ii) of
paragraph (b) above) the entire balance of this Promissory Note shall forthwith
become and be due and payable.
Except as otherwise hereinabove expressly provided, Borrower hereby waives
diligence, demand, protest, presentment and all notices (whether of nonpayment,
dishonor, protest, acceleration or otherwise) and consents to acceleration of
the time of payment and to surrender, substitution or any other action or
inaction with respect to security and to forbearance and to other indulgence,
all without notice. Failure of Lender to assert any right herein shall not be
deemed a waiver thereof.
The Borrower shall have the right, at any time, to prepay without penalty all of
this Promissory Note together with accrued interest thereon.
Lender shall not assign its rights hereunder without the prior written consent
of Borrower.
This Promissory Note shall be governed by and construed in accordance with the
laws of the State of New York applicable to contracts made and to be performed
wholly within such State.
IN WITNESS WHEREOF, the Borrower has signed this Promissory Note as of the date
first written above.
AyurCore, Inc.
By: /s/ Barry Wald
- ---------------------
Barry Wald, President
Authorized Signature
<PAGE>
SCHEDULE A
Chitre Promissory Note
Principal Amount Loaned
Date by Lender to Borrower Maturity Date
1/15/96 $25,000 1/15/97
8/15/96 $38,000 8/15/97
9/5/96 $6,300 9/5/97
9/17/96 $6,150 9/17/97
9/30/96 $4,000 9/30/97
10/8/96 $8,000 10/8/97
10/11/96 $4,250 10/11/97
10/23/96 $25,000 10/23/97
2/20/97 $25,000 2/20/98
3/20/97 $25,000 3/20/98
5/28/97 $15,000 5/28/98
6/15/97 $5,500 6/15/98
6/29/97 $2,500 6/29/98
7/14/97 $15,000 7/14/98
$204,700
<PAGE>
Exhibit 10.21
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT made as of the 31st day of October, 1997,
between AyurCore Inc., a Delaware corporation, whose principal offices are
located at 1737 N. First Street, Suite 290, San Jose, California 95112 (the
"Company"), and Fred Kassner (the "Purchaser").
WHEREAS, the Company desires to issue and sell to the Purchaser, and the
Purchaser desires to purchase from the Company, that number of shares set
forth on the signature page hereto (the "Shares") of the Company's Common
Stock, $.001 par value per share (the "Common Stock"), on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto do hereby agree as
follows:
I. AGREEMENT OF PURCHASE AND SALE
1.1 Subject to the terms and conditions hereinafter set forth, the
Purchaser agrees to purchase the Shares from the Company and the Company
agrees to issue and sell the Shares to the Purchaser.
1.2 The purchase price for the Shares shall be $4.00 per Share and shall
be paid by the tender to the Company for cancellation of all principal and
accrued interest owing to the Purchaser under the Company's (i) Convertible
Promissory Note, dated October 14, 1994, and (ii) Promissory Note, dated
April 4, 1996 (such notes, copies of which are attached hereto as Exhibit A
and Exhibit B, respectively, the "Notes") owned by the Purchaser.
1.3 Simultaneously with the execution of this Agreement, the Purchaser
is delivering the Notes to the law firm of Rubin Baum Levin Constant &
Friedman to be held in escrow pending an amendment to the Company's charter
(i) reclassifying the Company's Class A and Class B common stock into one
class of common stock and (ii) increasing the number of authorized but
unissued shares of common stock to make available a sufficient number of
shares for the issuance of the Shares contemplated hereby (the "Charter
Amendment"). Effectiveness of the Charter Amendment shall be deemed a
condition precedent to the purchase and sale of the Shares contemplated
hereby.
1.4 The Purchaser hereby authorizes and directs the Company to deliver
the Shares to be issued to the Purchaser pursuant to this Agreement to the
address set forth on the signature page hereto.
<PAGE>
1.5 The Purchaser understands that the Company reserves the right to
reject the purchase of the Shares hereunder if any of the Purchaser's
representations contained herein shall prove to be untrue.
II. REPRESENTATIONS BY THE PURCHASER
2.1 The Purchaser recognizes that an investment in the Company is highly
speculative and subject to a high degree of risk. The Purchaser understands
that the Company is in need of immediate substantial additional financing in
order to meet its business objectives. The Purchaser understands that if the
Company is not able to obtain additional financing, the Company will not be
able to conduct its operations and Purchaser will in all likelihood lose a
substantial portion or all of the Purchaser's investment. The Purchaser
acknowledges that the Company is in the development stage and has not
conducted any significant operations to date or received any meaningful
operating revenues and expects to incur operating losses for the foreseeable
future. The Purchaser acknowledges that there is no assurance that the
Company will ever achieve meaningful revenues or profitable operations. The
Purchaser is aware of the problems, delays, expenses and difficulties
encountered by an enterprise in the Company's stage of development, many of
which may be 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.
2.2 The Purchaser acknowledges that the Purchaser must be a qualified
investor, as described herein, to qualify for the purchase of the Shares, and
that the Purchaser must be able to bear the economic risk of this investment.
2.3 The Purchaser represents that the Purchaser is an "accredited
investor" as such term is defined in Rule 501 of Regulation D promulgated
under the Shares Act of 1933, as amended (the "Act").
2.4 The Purchaser acknowledges that the Purchaser has prior investment
experience, including investment in non-listed and non-registered securities,
or the Purchaser has employed the services of an investment advisor, attorney
or accountant to read all of the documents furnished or made available by the
Company to the Purchaser and to evaluate the merits and risks of such an
investment on the Purchaser's behalf; that the Purchaser recognizes the
highly speculative nature of this investment; and is able to bear the
economic risk the Purchaser hereby assumes.
2.5 The Purchaser represents that the Purchaser has been furnished by
the Company during the course of this transaction with
<PAGE>
all information regarding the Company which the Purchaser had requested or
desired to know; that all documents which could be reasonably provided have
been made available for the Purchaser's inspection and review; that the
Purchaser has been afforded the opportunity to ask questions of and receive
answers from duly authorized officers or other representatives of the Company
concerning the terms and conditions of the investment, and any additional
information which the Purchaser had requested; and that the Company has made
no representations concerning the Company except as set forth herein.
2.6 The Purchaser acknowledges that this transaction has not been
reviewed by the Securities and Exchange Commission ("SEC") and is intended to
be exempt from the registration requirements of the Act. The Purchaser
represents that the Shares being purchased hereunder are being purchased for
the Purchaser's own account, for investment and not for distribution or
resale to others. The Purchaser agrees that the Purchaser will not sell or
otherwise transfer such securities or any interest in such securities unless
they are registered under the Act or unless an exemption from such
registration is available. The Purchaser further agrees that notwithstanding
the availability, if any, of any such exemption, the Purchaser will not sell
or otherwise transfer the Shares or any interest in the Shares except in
compliance with all of the provisions and conditions of Rule 144 promulgated
under the Act as if such Rule were applicable.
2.7 The Purchaser consents that the Company may, if it desires, permit
the transfer of the Shares received out of the Purchaser's name only when the
Purchaser's request for transfer is accompanied by an opinion of counsel
reasonably satisfactory to the Company that neither the sale nor the proposed
transfer results in a violation of the Act or any applicable state "blue sky"
laws (collectively "Securities Laws").
2.8 The Purchaser agrees to hold the Company and its directors, officers
and controlling persons and their respective heirs, representatives,
successors and assigns harmless and to indemnify them against all
liabilities, costs and expenses incurred by them as a result of any
misrepresentation made by him contained herein or in the Confidential
Purchaser Questionnaire or any sale or distribution by the undersigned
Purchaser in violation of any Securities Laws.
2.9 The Purchaser consents to such restrictions on transferability and
sale of the Shares as may be requested by a managing underwriter in
connection with an initial public offering of the Company's equity securities
(an "IPO"), which restrictions may include, by way of example, a twelve month
lock-up period following consummation of an initial public offering.
2.10 The Purchaser consents to the placement of a legend on
<PAGE>
any certificate or other document evidencing the Shares stating that they
have not been registered under the Act and setting forth or referring to the
restrictions on transferability and sale thereof. The Purchaser is aware
that the Company will make a notation in its records with respect to the
restrictions on the transferability of such securities.
III. REPRESENTATIONS BY THE COMPANY
3.1 The Company represents and warrants to the Purchaser that prior to
the consummation of this purchase and at such date:
(a) The Company is a corporation duly organized, existing and in
good standing under the laws of the State of Delaware and has the corporate
power to conduct the business which it conducts and proposes to conduct.
(b) The execution, delivery and performance of this Agreement by
the Company will have been duly approved by the Board of Directors of the
Company and all other actions required to authorize and effect the sale of
the Shares will have been duly taken and approved.
(c) The Shares have been duly and validly authorized and when
issued and paid for in accordance with the terms hereof, will be validly
issued, fully paid and nonassessable.
(d) The Company has obtained, or is in the process of obtaining,
all licenses, permits and other governmental authorizations necessary to the
conduct of its business; such licenses, permits and other governmental
authorizations obtained are in full force and effect; and the Company is in
all material respects complying therewith.
(e) The Company knows of no pending or threatened legal or
governmental proceedings to which the Company is a party which could
materially adversely affect the business, property, financial condition or
operations of the Company.
(f) The Company is not in violation of or default under, nor will
the execution and delivery of this Agreement, the issuance of the Shares and
the incurrence of the obligations herein and therein set forth and the
consummation of the transactions herein or therein contemplated, result in a
violation of, or constitute a default under, the certificate of incorporation
or by-laws, in the performance or observance of any material obligations,
agreement, covenant or condition contained in any bond, debenture, note or
other evidence of indebtedness to which the Company is a party or by which it
or any of its properties may be bound or in violation of any material order,
rule, regulations writ, injunction, or decree of any government, governmental
instrumentality or court, domestic or foreign. The Company represents that
presently it does
<PAGE>
not have a sufficient number of authorized but unissued shares of common
stock available for the issuance of the Shares contemplated hereby. The
Company agrees to use its best efforts to cause the Charter Amendment to
become effective.
IV. MISCELLANEOUS
4.1 Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, addressed to the Company, at its registered office, 1737
N. First Street, Suite 290, San Jose, California, 95112, Attention: Deepa
Chitre, M.D., CEO, and to the Purchaser at the address set forth on the
signature page hereto. Notices shall be deemed to have been given on the
date of mailing, except notices of change of address, which shall be deemed
to have been given when received.
4.2 This Agreement shall not be changed, modified or amended except by a
writing signed by the parties to be charged, and this Agreement may not be
discharged except by performance in accordance with its terms or by a writing
signed by the party to be charged.
4.3 This Agreement shall be binding upon and inure to the benefit of the
parties hereto and to their respective heirs, legal representatives,
successors and assigns. This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter thereof and merges
and supersedes all prior discussions, agreements and understandings of any
and every nature among them.
4.4 Notwithstanding the place where this Agreement may be executed by
any of the parties hereto, the parties expressly agree that all the terms and
provisions hereof shall be construed in accordance with and governed by the
laws of the State of New York. The parties hereby agree that any dispute
which may arise between them arising out of or in connection with this
Agreement shall be adjudicated before a court located in New York City and
they hereby submit to the exclusive jurisdiction of the courts of the State
of New York located in New York, New York and of the federal courts in the
Southern District of New York with respect to any action or legal proceeding
commenced by any party, and irrevocably waive any objection they now or
hereafter may have respecting the venue of any such action or proceeding
brought in such a court or respecting the fact that such court is an
inconvenient forum, relating to or arising out of this Agreement or any acts
or omissions relating to the sale of the securities hereunder, and consent to
the service of process in any such action or legal proceeding by means of
registered or certified mail, return receipt requested, in care of the
address set forth below or such other address as the undersigned shall
furnish in writing to the other.
<PAGE>
4.5 This Agreement may be executed in counterparts. Upon the execution
and delivery of this Agreement by the Purchaser, this Agreement shall become
a binding obligation of the Purchaser with respect to the purchase of the
Shares as herein provided.
4.6 The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect.
4.7 It is agreed that a waiver by either party of a breach of any
provision of this Agreement shall not operate, or be construed, as a waiver
of any subsequent breach by that same party.
4.8 The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this
Agreement.
[*****]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
AYURCORE, INC.
By: /s/ Deepa Chitre
-------------------------------------
Deepa Chitre, M.D.,
Chief Executive Officer
/s/ Fred Kassner
-------------------------------------
Fred Kassner
Address:
Number of Shares
Being Purchased: 154,967
--------------------
Total Principal and
Interest Being
Canceled: $619,868
---------------------------
<PAGE>
Exhibit 10.22
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT made as of the 31st day of October, 1997, between
AyurCore Inc., a Delaware corporation, whose principal offices are located at
1737 N. First Street, Suite 290, San Jose, California 95112 (the "Company"), and
Michael R. Splinter and Patricia Robestoff (together, the "Purchaser").
WHEREAS, the Company desires to issue and sell to the Purchaser, and the
Purchaser desires to purchase from the Company, that number of shares set forth
on the signature page hereto (the "Shares") of the Company's Common Stock, $.001
par value per share (the "Common Stock"), on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto do hereby agree as follows:
I. AGREEMENT OF PURCHASE AND SALE
1.1 Subject to the terms and conditions hereinafter set forth, the
Purchaser agrees to purchase the Shares from the Company and the Company agrees
to issue and sell the Shares to the Purchaser.
1.2 The purchase price for the Shares shall be $4.00 per Share and shall
be paid by the tender to the Company for cancellation of all principal and
accrued interest owing to the Purchaser under the Company's (i) Promissory Note,
dated March 22, 1996, and (ii) Promissory Note, dated August 12, 1997 (such
notes, copies of which are attached hereto as Exhibit A and Exhibit B,
respectively, the "Notes") owned by the Purchaser.
1.3 Simultaneously with the execution of this Agreement, the Purchaser is
delivering the Notes to the law firm of Rubin Baum Levin Constant & Friedman to
be held in escrow pending an amendment to the Company's charter (i)
reclassifying the Company's Class A and Class B common stock into one class of
common stock and (ii) increasing the number of authorized but unissued shares of
common stock to make available a sufficient number of shares for the issuance of
the Shares contemplated hereby (the "Charter Amendment"). Effectiveness of the
Charter Amendment shall be deemed a condition precedent to the purchase and sale
of the Shares contemplated hereby.
1.4 The Purchaser hereby authorizes and directs the Company to deliver the
Shares to be issued to the Purchaser pursuant to this Agreement to the address
set forth on the signature page hereto.
<PAGE>
1.5 The Purchaser understands that the Company reserves the right to
reject the purchase of the Shares hereunder if any of the Purchaser's
representations contained herein shall prove to be untrue.
II. REPRESENTATIONS BY THE PURCHASER
2.1 The Purchaser recognizes that an investment in the Company is highly
speculative and subject to a high degree of risk. The Purchaser understands
that the Company is in need of immediate substantial additional financing in
order to meet its business objectives. The Purchaser understands that if the
Company is not able to obtain additional financing, the Company will not be able
to conduct its operations and Purchaser will in all likelihood lose a
substantial portion or all of the Purchaser's investment. The Purchaser
acknowledges that the Company is in the development stage and has not conducted
any significant operations to date or received any meaningful operating revenues
and expects to incur operating losses for the foreseeable future. The Purchaser
acknowledges that there is no assurance that the Company will ever achieve
meaningful revenues or profitable operations. The Purchaser is aware of the
problems, delays, expenses and difficulties encountered by an enterprise in the
Company's stage of development, many of which may be 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.
2.2 The Purchaser acknowledges that the Purchaser must be a qualified
investor, as described herein, to qualify for the purchase of the Shares, and
that the Purchaser must be able to bear the economic risk of this investment.
2.3 The Purchaser represents that the Purchaser is an "accredited
investor" as such term is defined in Rule 501 of Regulation D promulgated under
the Shares Act of 1933, as amended (the "Act").
2.4 The Purchaser acknowledges that the Purchaser has prior investment
experience, including investment in non-listed and non-registered securities, or
the Purchaser has employed the services of an investment advisor, attorney or
accountant to read all of the documents furnished or made available by the
Company to the Purchaser and to evaluate the merits and risks of such an
investment on the Purchaser's behalf; that the Purchaser recognizes the highly
speculative nature of this investment; and is able to bear the economic risk the
Purchaser hereby assumes.
2.5 The Purchaser represents that the Purchaser has been furnished by the
Company during the course of this transaction with
<PAGE>
all information regarding the Company which the Purchaser had requested or
desired to know; that all documents which could be reasonably provided have been
made available for the Purchaser's inspection and review; that the Purchaser has
been afforded the opportunity to ask questions of and receive answers from duly
authorized officers or other representatives of the Company concerning the terms
and conditions of the investment, and any additional information which the
Purchaser had requested; and that the Company has made no representations
concerning the Company except as set forth herein.
2.6 The Purchaser acknowledges that this transaction has not been reviewed
by the Securities and Exchange Commission ("SEC") and is intended to be exempt
from the registration requirements of the Act. The Purchaser represents that
the Shares being purchased hereunder are being purchased for the Purchaser's own
account, for investment and not for distribution or resale to others. The
Purchaser agrees that the Purchaser will not sell or otherwise transfer such
securities or any interest in such securities unless they are registered under
the Act or unless an exemption from such registration is available. The
Purchaser further agrees that notwithstanding the availability, if any, of any
such exemption, the Purchaser will not sell or otherwise transfer the Shares or
any interest in the Shares except in compliance with all of the provisions and
conditions of Rule 144 promulgated under the Act as if such Rule were
applicable.
2.7 The Purchaser consents that the Company may, if it desires, permit the
transfer of the Shares received out of the Purchaser's name only when the
Purchaser's request for transfer is accompanied by an opinion of counsel
reasonably satisfactory to the Company that neither the sale nor the proposed
transfer results in a violation of the Act or any applicable state "blue sky"
laws (collectively "Securities Laws").
2.8 The Purchaser agrees to hold the Company and its directors, officers
and controlling persons and their respective heirs, representatives, successors
and assigns harmless and to indemnify them against all liabilities, costs and
expenses incurred by them as a result of any misrepresentation made by him
contained herein or in the Confidential Purchaser Questionnaire or any sale or
distribution by the undersigned Purchaser in violation of any Securities Laws.
2.9 The Purchaser consents to such restrictions on transferability and
sale of the Shares as may be requested by a managing underwriter in connection
with an initial public offering of the Company's equity securities (an "IPO"),
which restrictions may include, by way of example, a twelve month lock-up period
following consummation of an initial public offering.
2.10 The Purchaser consents to the placement of a legend on
<PAGE>
any certificate or other document evidencing the Shares stating that they have
not been registered under the Act and setting forth or referring to the
restrictions on transferability and sale thereof. The Purchaser is aware that
the Company will make a notation in its records with respect to the restrictions
on the transferability of such securities.
III. REPRESENTATIONS BY THE COMPANY
3.1 The Company represents and warrants to the Purchaser that prior to the
consummation of this purchase and at such date:
(a) The Company is a corporation duly organized, existing and in good
standing under the laws of the State of Delaware and has the corporate power to
conduct the business which it conducts and proposes to conduct.
(b) The execution, delivery and performance of this Agreement by the
Company will have been duly approved by the Board of Directors of the Company
and all other actions required to authorize and effect the sale of the Shares
will have been duly taken and approved.
(c) The Shares have been duly and validly authorized and when issued
and paid for in accordance with the terms hereof, will be validly issued, fully
paid and nonassessable.
(d) The Company has obtained, or is in the process of obtaining, all
licenses, permits and other governmental authorizations necessary to the conduct
of its business; such licenses, permits and other governmental authorizations
obtained are in full force and effect; and the Company is in all material
respects complying therewith.
(e) The Company knows of no pending or threatened legal or
governmental proceedings to which the Company is a party which could materially
adversely affect the business, property, financial condition or operations of
the Company.
(f) The Company is not in violation of or default under, nor will the
execution and delivery of this Agreement, the issuance of the Shares and the
incurrence of the obligations herein and therein set forth and the consummation
of the transactions herein or therein contemplated, result in a violation of, or
constitute a default under, the certificate of incorporation or by-laws, in the
performance or observance of any material obligations, agreement, covenant or
condition contained in any bond, debenture, note or other evidence of
indebtedness to which the Company is a party or by which it or any of its
properties may be bound or in violation of any material order, rule, regulations
writ, injunction, or decree of any government, governmental instrumentality or
court, domestic or foreign. The Company represents that presently it does
<PAGE>
not have a sufficient number of authorized but unissued shares of common stock
available for the issuance of the Shares contemplated hereby. The Company
agrees to use its best efforts to cause the Charter Amendment to become
effective.
IV. MISCELLANEOUS
4.1 Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, addressed to the Company, at its registered office, 1737 N.
First Street, Suite 290, San Jose, California, 95112, Attention: Deepa Chitre,
M.D., CEO, and to the Purchaser at the address set forth on the signature page
hereto. Notices shall be deemed to have been given on the date of mailing,
except notices of change of address, which shall be deemed to have been given
when received.
4.2 This Agreement shall not be changed, modified or amended except by a
writing signed by the parties to be charged, and this Agreement may not be
discharged except by performance in accordance with its terms or by a writing
signed by the party to be charged.
4.3 This Agreement shall be binding upon and inure to the benefit of the
parties hereto and to their respective heirs, legal representatives, successors
and assigns. This Agreement sets forth the entire agreement and understanding
between the parties as to the subject matter thereof and merges and supersedes
all prior discussions, agreements and understandings of any and every nature
among them.
4.4 Notwithstanding the place where this Agreement may be executed by any
of the parties hereto, the parties expressly agree that all the terms and
provisions hereof shall be construed in accordance with and governed by the laws
of the State of New York. The parties hereby agree that any dispute which may
arise between them arising out of or in connection with this Agreement shall be
adjudicated before a court located in New York City and they hereby submit to
the exclusive jurisdiction of the courts of the State of New York located in New
York, New York and of the federal courts in the Southern District of New York
with respect to any action or legal proceeding commenced by any party, and
irrevocably waive any objection they now or hereafter may have respecting the
venue of any such action or proceeding brought in such a court or respecting the
fact that such court is an inconvenient forum, relating to or arising out of
this Agreement or any acts or omissions relating to the sale of the securities
hereunder, and consent to the service of process in any such action or legal
proceeding by means of registered or certified mail, return receipt requested,
in care of the address set forth below or such other address as the undersigned
shall furnish in writing to the other.
<PAGE>
4.5 This Agreement may be executed in counterparts. Upon the execution
and delivery of this Agreement by the Purchaser, this Agreement shall become a
binding obligation of the Purchaser with respect to the purchase of the Shares
as herein provided.
4.6 The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect.
4.7 It is agreed that a waiver by either party of a breach of any
provision of this Agreement shall not operate, or be construed, as a waiver of
any subsequent breach by that same party.
4.8 The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.
[**********************]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
AYURCORE, INC.
By: /s/ Deepa Chitre
--------------------------
Deepa Chitre, M.D.,
Chief Executive Officer
PURCHASERS:
By: /s/ Michael R. Splinter
--------------------------
Michael R. Splinter
By: /s/ Patricia Robestoff
--------------------------
Patricia Robestoff
Address:
Number of Shares
Being Purchased: 54,741
--------------------
Total Principal and
Interest Being Canceled: $218,964.37
-----------
<PAGE>
Exhibit 10.23
CONSULTING AGREEMENT
___________, 1998
AyurCore, Inc.
1737 N. First Street
Suite 290
San Jose, California 95112
Attention: Deepa Chitre, M.D., President & CEO
Dear Dr. Chitre:
This will confirm the arrangements, terms and conditions pursuant to
which LT Lawrence & Co., Inc. (the "Consultant"), has been retained to serve
as a financial consultant and advisor to AyurCore, Inc., a Delaware
corporation (the "Company"), on a non-exclusive basis for a period of two (2)
years commencing on _________, 1998 [the Closing Date]. The undersigned
hereby agrees to the following terms and conditions:
1. Duties of Consultant. Consultant shall, at the request of the
Company, upon reasonable notice, render the following services to the Company
from time to time.
(a) Consulting Services. Consultant will provide financial
consulting services and advice pertaining to the Company's business affairs
as the Company may from time to time reasonably request. Without limiting
the generality of the foregoing, Consultant will assist the Company in
developing, studying and evaluating financing and merger and acquisition
proposals based upon documentary information provided to the Consultant by
the Company.
(b) Financing. Consultant will assist and represent the
Company in obtaining both short and long-term financing. The Consultant will
be entitled to additional compensation under certain circumstances in
accordance with the terms set forth in Section 3 hereof.
(c) Wall Street Liaison. Consultant will, when appropriate,
arrange meetings between representatives of the Company and individuals and
financial institutions in the investment community, such as security
analysts, portfolio managers and market makers.
The services described in this Section 1 shall be rendered by
Consultant without any direct supervision by the Company and at such time and
place and in such manner (whether by conference, telephone, letter or
otherwise) as Consultant may determine.
<PAGE>
2. Compensation. As compensation for Consultant's services
hereunder, the Company shall pay to Consultant an annual fee of Fifteen
Thousand Dollars ($15,000), the entire Thirty Thousand Dollars ($30,000)
payable in full, in advance, on ____________ __, 1998.
3. Additional Compensation in Certain Circumstances. In addition
to the financial consulting services described in Section 1 above, Consultant
may bring the Company in contact with persons, whether individuals or
entities, that may be suitable candidates to purchase substantially all of
the stock or assets of the Company, to have substantially all of its stock or
assets purchased by the Company or merge with the Company. If, at any time
up until the second anniversary of the date hereof, the Company enters into
an agreement with any such persons or their affiliates, or with any persons
introduced to the Company by any such persons or their affiliates, pursuant
to which substantially all of the Company's stock or assets is purchased or
the Company purchases substantially all of the stock or assets of another
entity or the Company is merged with or into another entity (each
"Transaction"), the Company will pay to Consultant, in accordance with the
formula set forth below, additional compensation based on the aggregate value
of the consideration, whether in cash, securities, assumption of (or purchase
subject to) debt or liabilities (including, without limitation, indebtedness
for borrowed money, pension liabilities and guarantees), or other property,
obligations or services, paid or payable directly or indirectly (in escrow or
otherwise) or otherwise assumed in connection with such Transaction (the
"Consideration"). For purposes of this Section 3, the "Company" shall
include its subsidiaries and any other entity in which it owns (directly or
indirectly) a majority interest.
The additional compensation to be paid will be paid upon the closing
of the Transaction (except that, if any part of the Consideration is in the
form of contingent payments to be calculated to reference to uncertain future
occurrences, such as future financial or business performance, then the
portion of the fees of Consultant relating to such part of the Consideration
shall be payable at the earlier of (i) the receipt or payment of such
Consideration; or (ii) the time that the amount of such Consideration can be
determined) by certificate check, in the following amounts:
5% of the first $5,000,000 of the Consideration;
4% of the Consideration in excess of $5,000,000 and up to
$6,000,000;
3% of the Consideration in excess of $6,000,000 and up to
$7,000,000;
-2-
<PAGE>
2% of the Consideration in excess of $7,000,000 and up to
$8,000,000; and
1% of any Consideration in excess of $8,000,000.
4. Available Time. Consultant shall make available such time as
it, in its sole discretion, shall deem appropriate for the performance of its
obligations under this agreement and may in certain circumstances be entitled
to additional compensation in connection therewith.
5. Relationship. Nothing herein shall constitute Consultant as
an employee or agent of the Company, except to such extent as might
hereinafter be agreed upon for a particular purpose. Except as might
hereinafter be expressly agreed, Consultant shall not have the authority to
obligate or commit the Company in any manner whatsoever.
6. Confidentiality. Except in the course of the performance of
its duties hereunder, Consultant agrees that it shall not disclose any trade
secrets, know-how, or other proprietary information not in the public domain
learned as a result of this Agreement unless and until such information
becomes generally known.
7. Assignment and Termination. This Agreement shall not be
assignable by any party except to successors to all or substantially all of
the business of either party for any reason whatsoever without the prior
written consent of the other party, which consent may be arbitrarily withheld
by the party whose consent is required.
-3-
<PAGE>
8. Governing Law. This Agreement shall be deemed to be a
contract made under the laws of the State of New York and for all purposes
shall be construed in accordance with the laws of said State.
Very truly yours,
LT LAWRENCE & CO., INC.
By:
--------------------------------------------
Name:
Title:
AGREED AND ACCEPTED:
AYURCORE, INC.
By:
------------------------------------
Name:
Title:
-4-
<PAGE>
EXHIBIT 10.24
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER THE ACT
AND SUCH LAWS OR (1) REGISTRATION UNDER APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED AND (2) AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY IS FURNISHED
TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED.
AYURCORE, INC.
WARRANT TO PURCHASE COMMON STOCK
This certifies that, for value received, ______________________ (the
"HOLDER") is entitled to subscribe for and purchase up to ______ shares (subject
to adjustment from time to time pursuant to the provisions of Section 5 hereof)
of fully paid and nonassessable Common Stock of AyurCore, Inc., a Delaware
corporation (the "COMPANY"), at the Warrant Price (as defined in Section 2
hereof), subject to the provisions and upon the terms and conditions hereinafter
set forth.
As used herein, the term "COMMON STOCK" shall mean the Company's presently
authorized Common Stock, $.001 par value per share, and any stock into or for
which such Common Stock may hereafter be converted or exchanged.
1. TERM OF WARRANT. The purchase or conversion right represented by this
Warrant is exercisable, in whole or in part, at any time during the period
beginning on the date hereof and ending on October 31, 2002.
2. WARRANT PRICE. The initial exercise price of this Warrant is $4.00
per share, subject to adjustment from time to time pursuant to the provisions of
Section 5 hereof (the "WARRANT PRICE").
3. METHOD OF EXERCISE OR CONVERSION; PAYMENT; ISSUANCE OF NEW WARRANT.
(a) EXERCISE. Subject to Section 1 hereof, the purchase right
represented by this Warrant may be exercised by the holder hereof, in whole or
in part, by the surrender of this Warrant (with the notice of exercise form
attached hereto as EXHIBIT 1 duly executed) at the principal office of the
Company and by the payment to the Company, by check or wire transfer, of an
amount equal to the then applicable Warrant Price per share multiplied by the
number of shares then being purchased. The Company agrees that the shares so
purchased shall be deemed to be issued to the holder hereof as the record owner
of such shares as of the close of business on the date on which this Warrant
shall have been surrendered and payment made for such shares as
<PAGE>
aforesaid. In the event of any exercise of this Warrant, certificates for the
shares of stock so purchased shall be delivered to the holder hereof within 15
days thereafter and, unless this Warrant has been fully exercised or expired, a
new Warrant representing the portion of the shares, if any, with respect to
which this Warrant shall not then have been exercised, shall also be issued to
the holder hereof within such 15 day period.
(b) CONVERSION. Subject to Section 1 hereof, the Holder may convert
this Warrant (the "CONVERSION RIGHT"), in whole or in part, into the number of
shares of Common Stock of the Company calculated pursuant to the following
formula by surrendering this Warrant (with the notice of exercise form attached
hereto as EXHIBIT 1 duly executed) at the principal office of the Company
specifying the number of shares of Common Stock of the Company, the rights to
purchase which the Holder desires to convert:
X = Y (A - B)
---------
A
where: X = the number of shares of Common Stock to be issued to
the Holder;
Y = the number of shares of Common Stock subject to this
Warrant for which the Conversion Right is being
exercised;
A = the fair market value of one share of Common Stock;
B = the Warrant Price.
As used herein, the fair market value of a share of Common Stock shall
mean, with respect to each share of Common Stock, the closing price per share of
the Company's Common Stock on the principal national securities exchange on
which the Common Stock is then listed or admitted to trading or, if not then
listed or admitted to trading on any such exchange, on the NASDAQ National
Market System, or if not then listed or traded on any such exchange or system,
the last sale price per share on NASDAQ Small-Cap Market. The Company agrees
that the shares so converted shall be deemed to be issued to the holder hereof
as the record owner of such shares as of the close of business on the date on
which this Warrant shall have been surrendered as aforesaid. In the event of
any conversion of this Warrant, certificates for the shares of stock so
converted shall be delivered to the holder hereof within 15 days thereafter and,
unless this Warrant has been fully converted or expired, a new Warrant
representing the portion of the shares, if any, with respect to which this
Warrant shall not then have been converted, shall also be issued to the holder
hereof within such 15 day period.
4. STOCK FULLY PAID; RESERVATION OF SHARES. All Common Stock which may
be issued upon the exercise or conversion of this Warrant will, upon issuance,
be fully paid and nonassessable, and free from all taxes, liens and charges with
respect to the issue thereof. During
- 2 -
<PAGE>
the period within which the rights represented by this Warrant may be exercised,
the Company will at all times have authorized, and reserved for the purpose of
the issuance upon exercise of the purchase rights evidenced by this Warrant, a
sufficient number of shares of its Common Stock to provide for the exercise of
the rights represented by this Warrant.
5. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The kind of
securities purchasable upon the exercise of this Warrant, the Warrant Price and
the number of shares purchasable upon exercise of this Warrant shall be subject
to adjustment from time to time upon the occurrence of certain events as
follows:
(a) RECLASSIFICATION, CONSOLIDATION OR MERGER. In case of any
reclassification or change of outstanding securities of the class issuable upon
exercise of this Warrant (other than a change in par value, or from par value to
no par value, or from no par value to par value, or as a result of a subdivision
or combination), or in case of any consolidation or merger of the Company with
or into another corporation, other than a merger with another corporation in
which the Company is a continuing corporation and which does not result in any
reclassification or change of outstanding securities issuable upon exercise of
this Warrant, or in case of any sale of all or substantially all of the assets
of the Company, the Company, or such successor or purchasing corporation, as the
case may be, shall execute a new Warrant, providing that the holder of this
Warrant shall have the right to exercise such new Warrant and procure upon such
exercise, in lieu of each share of Common Stock theretofore issuable upon
exercise of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification, change,
consolidation, or merger by a holder of one share of Common Stock. Such new
Warrant shall provide for adjustments which shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Section 5. No
consolidation or merger of the Company with or into another corporation referred
to in the first sentence of this paragraph (b) shall be consummated unless the
successor or purchasing corporation referred to above shall have agreed to issue
a new Warrant as provided in this Section 5. The provisions of this subsection
(b) shall similarly apply to successive reclassification, changes,
consolidations, mergers and transfers.
(b) SUBDIVISION OR COMBINATION OF SHARES. If the Company at any time
while this Warrant remains outstanding and unexpired shall subdivide or combine
its Common Stock, the Warrant Price shall be proportionately decreased in the
case of a subdivision or increased in the case of a combination.
(c) STOCK DIVIDENDS. If the Company at any time while this Warrant
is outstanding and unexpired shall pay a dividend with respect to Common Stock
payable in, or make any other distribution with respect to, Common Stock (except
any distribution specifically provided for in the foregoing subparagraphs (a) or
(b)) then the Warrant Price shall be adjusted, from and after the date of
determination of shareholders entitled to receive such dividend or distribution,
to that price determined by multiplying the Warrant Price in effect immediately
prior to such date of determination by a fraction (x) the numerator of which
shall be the total number of shares of Common Stock outstanding immediately
prior to such dividend or distribution and (y)
- 3 -
<PAGE>
the denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution.
(d) ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment in the
Warrant Price pursuant to any of Sections 5 (a) through (c), the number of
shares of Common Stock purchasable hereunder shall be adjusted, to the nearest
whole share, to the product obtained by multiplying the number of shares
purchasable immediately prior to such adjustment in the Warrant Price by a
fraction, the numerator of which shall be the Warrant Price immediately prior to
such adjustment and the denominator of which shall be the Warrant Price
immediately thereafter.
6. NOTICE OF ADJUSTMENTS. Whenever any Warrant Price shall be adjusted
pursuant to Section 5 hereof, the Company shall prepare a certificate signed by
its chief financial officer setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated, the Warrant Price after giving effect to such
adjustment and the number of shares then purchasable upon exercise of this
Warrant, and shall cause copies of such certificate to be mailed (by first class
mail, postage prepaid) to the holder of this Warrant at the address specified in
Section 11(d) hereof, or at such other address as may be provided to the Company
in writing by the holder of this Warrant.
7. FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor upon the basis of the
Warrant Price then in effect.
8. COMPLIANCE WITH THE ACT.
(a) COMPLIANCE WITH THE ACT. The holder of this Warrant, by
acceptance hereof, agrees that this Warrant and the shares of Common Stock to be
issued upon exercise hereof are being acquired for investment for such holder's
own account and not with a view toward distribution thereof, and that it will
not offer, sell or otherwise dispose of this Warrant or any shares of Common
Stock to be issued upon exercise hereof unless this Warrant has been registered
under the Act and applicable state securities laws or (i) registration under
applicable state securities laws is not required and (ii) an opinion of counsel
satisfactory to the Company is furnished to the Company to the effect that
registration under the Act is not required.
9. TRANSFER AND EXCHANGE OF WARRANT.
(a) TRANSFER. This Warrant may be transferred or succeeded to by any
person who is (i) an affiliate within the meaning of Rule 144 of the Securities
Act of 1933, as amended or (ii) a partner, shareholder, member or other equity
holder of such Holder; PROVIDED HOWEVER, that the Company is given written
notice by the transferee at the time of such transfer stating the name and
address of the transferee and identifying the securities with respect to which
such rights are being assigned. Additionally, with the prior consent of the
Company, which consent shall not be unreasonably withheld, this Warrant may be
transferred or sold to any other person PROVIDED,
- 4 -
<PAGE>
HOWEVER, that the Company is given written notice by the transferee at the time
of such transfer stating the name and address of the transferee and identifying
the securities with respect to which such rights are being assigned.
(b) EXCHANGE. Subject to compliance with the terms hereof, this
Warrant and all rights hereunder are transferable, in whole or in part, at the
office of the Company by the holder hereof in person or by duly authorized
attorney, upon surrender of this Warrant properly endorsed. Each taker and
holder of this Warrant, by taking or holding the same, consents and agrees that
this Warrant, when endorsed in blank, shall be deemed negotiable; provided, that
the last holder of this Warrant as registered on the books of the Company may be
treated by the Company and all persons dealing with this Warrant as the absolute
owner hereof for any purposes and as the person entitled to exercise the rights
represented by this Warrant or to transfer hereof on the books of the Company,
any notice to the contrary notwithstanding, unless and until such holder seeks
to transfer registered ownership of this Warrant on the books of the Company and
such transfer is effected.
10. MISCELLANEOUS.
(a) REGISTRATION RIGHTS. The registration of the securities granted
pursuant to any exercise hereunder are subject to a Registration Rights
Agreement, dated as of December 8, 1997, between the Company and
_______________
(b) NO RIGHTS AS SHAREHOLDER. No holder of this Warrant shall be
entitled to vote or receive dividends or be deemed the holder of Common Stock or
any other securities of the Company which may at any time be issuable on the
exercise hereof for any purpose, nor shall anything contained herein be
construed to confer upon the holder of this Warrant, as such, any of the rights
of a shareholder of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock, change of par
value or change of stock to no par value, consolidation, merger, conveyance or
otherwise) or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein.
(c) REPLACEMENT. On receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant and,
in the case of loss, theft or destruction, on delivery of an indemnity
agreement, or bond reasonably satisfactory in form and amount to the Company or,
in the case of mutilation, on surrender and cancellation of this Warrant, the
Company, at its expense, will execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
(d) NOTICE OF CAPITAL CHANGES. In case:
- 5 -
<PAGE>
(i) the Company shall declare any dividend or distribution
payable to the holders of its Common Stock;
(ii) there shall be any capital reorganization or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with, or sale of all or substantially all of its assets to,
another corporation or business organization; or
(iii) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give the holder of
this Warrant written notice, in the manner set forth in subparagraph (d) below,
of the date on which a record shall be taken for such dividend, or distribution
or for determining shareholders entitled to vote upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up and of the date when any such transaction shall take place, as the
case may be. Such written notice shall be given at least 15 days prior to the
transaction in question and not less than 5 days prior to the record date in
respect thereof.
(e) NOTICE. Any notice given to either party under this Warrant
shall be in writing, and any notice hereunder shall be deemed to have been given
upon the earlier of delivery thereof by hand delivery, by courier, or by
standard form of telecommunication or three (3) business days after the mailing
thereof if sent registered mail with postage prepaid, addressed to the Company
at its principal executive offices and to the holder at its address set forth in
the Company's books and records or at such other address as the holder may have
provided to the Company in writing.
(f) NO IMPAIRMENT. The Company will not, by amendment of its
Restated Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Company, but will
at all times in good faith assist in the carrying out of all the provisions in
the Warrant.
(g) GOVERNING LAW. This Warrant shall be governed by and construed
under the laws of the State of Delaware.
- 6 -
<PAGE>
IN WITNESS WHEREOF, this Warrant is executed as of this 8th day of
December, 1997.
AYURCORE, INC.
By:
---------------------------------
Name: Deepa Chitre, M.D.
Title: President
- 7 -
<PAGE>
EXHIBIT 1
NOTICE OF EXERCISE
TO: AYURCORE, INC.
1. Check Box that Applies:
/ / The undersigned hereby elects to purchase shares of Common
Stock of AYURCORE, INC. pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of such shares in full.
/ / The undersigned hereby elects to convert the attached warrant into
________ shares of Common Stock of AYURCORE, INC. pursuant to the terms of the
attached Warrant.
2. Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
----------------------------------------
(Name)
----------------------------------------
----------------------------------------
(Address)
3. The undersigned represents that the aforesaid shares of Common Stock
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
shares.
------------------------------
Signature
- 8 -
<PAGE>
EXHIBIT 10.25
AYURCORE, INC.
REGISTRATION RIGHTS AGREEMENT
December 8, 1997
To _____________________
Dear Sirs:
This will confirm that in consideration of your entering into the
[Waiver Agreement, dated December 8, 1997 (in the case of Marathon Investments,
LLC)/Stock Purchase Agreement dated as of October 31, 1997 (in the case of Fred
Kassner)], between you and AyurCore, Inc., a Delaware corporation (the
"Company") and the subsequent issuance to you of a certain Warrant Agreement
exercisable for Common Stock (the "Warrant"), the Company covenants and agrees
with you as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"COMMISSION" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act.
"COMMON STOCK" shall mean the Common Stock, $.001 par value, of the
Company, as constituted as of the date of this Agreement.
"EXERCISE SHARES" shall mean shares of Common Stock issued upon exercise of
the Warrants.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"REGISTRATION EXPENSES" shall mean the expenses so described in Section 6.
"RESTRICTED STOCK" shall mean the Exercise Shares, excluding Exercise
Shares which (a) have been registered under the Securities Act pursuant to an
effective registration statement filed thereunder and disposed of in accordance
with the registration statement covering them or (b) are eligible for sale
pursuant to Rule 144 under the Securities Act without regard to volume
limitations imposed by such Rule.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
<PAGE>
"SELLING EXPENSES" shall mean the expenses so described in Section 6.
2. RESTRICTIVE LEGEND. Each certificate representing Exercise Shares
shall, except as otherwise provided in this Section 2 or in Section 3, be
stamped or otherwise imprinted with a legend substantially in the following
form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN REGISTERED
UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE."
A certificate shall not bear such legend if in the opinion of counsel
satisfactory to the Company the securities being sold thereby may be publicly
sold without registration under the Securities Act.
3. NOTICE OF PROPOSED TRANSFER. Prior to any proposed transfer of any
Warrant, the holder thereof shall give written notice to the Company of its
intention to effect such transfer. Each such notice shall describe the manner of
the proposed transfer and, if requested by the Company, shall be accompanied by
an opinion of counsel reasonably satisfactory to the Company to the effect that
the proposed transfer may be effected without registration under the Securities
Act, whereupon the holder of such Warrant shall be entitled to transfer such
Warrant in accordance with the terms of its notice. Each certificate for
Exercise Shares granted under Warrants transferred as above provided shall bear
the legend set forth in Section 2, except that such certificate shall not bear
such legend if (i) such transfer is in accordance with the provisions of Rule
144 or Rule 144A (or any other rule permitting public sale without registration
under the Securities Act) or (ii) the opinion of counsel referred to above is to
the further effect that the transferee and any subsequent transferee (other than
an affiliate of the Company) would be entitled to transfer such securities in a
public sale without registration under the Securities Act. The restrictions
provided for in this Section 3 shall not apply to securities which are not
required to bear the legend prescribed by Section 2 in accordance with the
provisions of that Section.
4. INCIDENTAL REGISTRATION. If at any time after twelve months from the
effective date of the Company's initial Registration Statement on Form SB-2, the
Company proposes to register any of its securities under the Securities Act for
sale to the public, whether for its own account or for the account of other
security holders or both (except with respect to registration statements on
Forms S-4, S-8 or another form not available for registering the Restricted
Stock for sale to the public), each such time it will give written notice to all
holders of outstanding Restricted Stock of its intention so to do. Upon the
written request of any such holder, received by the Company within 15 days after
the giving of any such notice by the Company, to register any of its Restricted
Stock (which request shall state the intended method of disposition thereof),
the Company will use its best efforts to cause the Restricted Stock as to which
registration shall have been so requested to be included in the securities to be
covered by the registration statement proposed to be filed by the Company, all
to the extent requisite to permit the sale or other disposition by the holder
(in accordance with its written request) of such Restricted Stock so registered.
In the event that any registration pursuant to this
- 2 -
<PAGE>
Section 4 shall be, in whole or in part, an underwritten public offering of
Common Stock, the number of shares of Restricted Stock to be included in such an
underwriting may be reduced if and to the extent that the managing underwriter
shall be of the opinion that such inclusion would adversely affect the marketing
of the securities to be sold by the Company therein, PROVIDED, HOWEVER, that any
such reduction in the number of shares of Restricted Stock included in such
underwriting shall be pro rata among all selling security holders requesting
inclusion therein. Notwithstanding the foregoing provisions, the Company may
withdraw any registration statement referred to in this Section 4 without
thereby incurring any liability to the holders of Restricted Stock.
5. REGISTRATION PROCEDURES. If and whenever the Company is required by
the provisions of Sections 4 to register any shares of Restricted Stock under
the Securities Act, the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified in paragraph (a) above and comply with the provisions of
the Securities Act with respect to the disposition of all Restricted Stock
covered by such registration statement in accordance with the sellers' intended
method of disposition set forth in such registration statement for such period;
PROVIDED, HOWEVER, that the period during which the Company shall be required to
prepare and file amendments and supplements necessary to keep such registration
statement effective shall not continue beyond the first to occur of (i) the date
on which the Exercise Shares included therein are no long deemed Restricted
Stock or (ii) nine months from the date of the Prospectus.
(c) furnish to each seller of Restricted Stock such number of copies
of the registration statement and the prospectus included therein (including
each preliminary prospectus) as such persons reasonably may request in order to
facilitate the public sale or other disposition of the Restricted Stock covered
by such registration statement;
(d) use its best efforts to register or qualify the Restricted Stock
covered by such registration statement under the securities or "blue sky" laws
of such jurisdictions as the sellers of Restricted Stock or, in the case of an
underwritten public offering, the managing underwriter reasonably shall request,
PROVIDED, HOWEVER, that the Company shall not for any such purpose be required
to qualify generally to transact business as a foreign corporation in any
jurisdiction where it is not so qualified or to consent to general service of
process in any such jurisdiction;
(e) use its best efforts to list the Restricted Stock covered by such
registration statement with any securities exchange on which the Common Stock of
the Company is then listed;
- 3 -
<PAGE>
(f) promptly notify each seller of Restricted Stock under such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
of which the Company has knowledge as a result of which the prospectus contained
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing; and
(g) make available for inspection by each seller of Restricted Stock,
all financial and other records, pertinent corporate documents and properties of
the Company, and cause the Company's officers, directors and employees to supply
all information reasonably requested by any such seller, in connection with such
registration statement.
In connection with each registration hereunder, the sellers of Restricted
Stock will furnish to the Company in writing such information with respect to
themselves and the proposed distribution by them as reasonably shall be
necessary in order to assure compliance with federal and applicable state
securities laws.
In connection with each registration pursuant to Sections 4 covering an
underwritten public offering, the Company and each seller agree to enter into a
written agreement with the managing underwriter selected in the manner herein
provided in such form and containing such provisions as are customary in the
securities business for such an arrangement between such underwriter and
companies of the Company's size and investment stature.
6. EXPENSES. All expenses incurred by the Company in complying with
Section 4, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including counsel fees) incurred
in connection with complying with state securities or "blue sky" laws, fees of
the National Association of Securities Dealers, Inc., transfer taxes, fees of
transfer agents and registrars, costs of insurance, but excluding any Selling
Expenses, are called "Registration Expenses". All underwriting discounts and
selling commissions applicable to the sale of Restricted Stock are called
"Selling Expenses".
The Company will pay all Registration Expenses in connection with each
registration statement under Section 4. All Selling Expenses in connection with
each registration statement under Section 4 shall be borne by the participating
sellers in proportion to the number of shares sold by each, or by such
participating sellers other than the Company (except to the extent the Company
shall be a seller) as they may agree.
7. INDEMNIFICATION AND CONTRIBUTION. (a) In the event of a registration
of any of the Restricted Stock under the Securities Act pursuant to Section 4,
the Company will indemnify and hold harmless each seller of such Restricted
Stock thereunder, each underwriter of such Restricted Stock thereunder and each
other person, if any, who controls such seller or underwriter within the meaning
of the Securities Act, against any losses, claims, damages or liabilities, joint
or several, to
- 4 -
<PAGE>
which such seller, underwriter or controlling person may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such Restricted Stock was registered
under the Securities Act pursuant to Section 4, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each such seller, each
such underwriter and each such controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, PROVIDED, HOWEVER,
that the Company will not be liable in any such case if and to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by any such seller, any such
underwriter or any such controlling person in writing specifically for use in
such registration statement or prospectus.
(b) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Section 4, each seller of such Restricted
Stock thereunder, severally and not jointly, will indemnify and hold harmless
the Company, each person, if any, who controls the Company within the meaning of
the Securities Act, each officer of the Company who signs the registration
statement, each director of the Company, each underwriter and each person who
controls any underwriter within the meaning of the Securities Act, against all
losses, claims, damages or liabilities, joint or several, to which the Company
or such officer, director, underwriter or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in the registration statement under which such Restricted Stock was registered
under the Securities Act pursuant to Section 4, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission to state,
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and each such
officer, director, underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, PROVIDED, HOWEVER,
that such seller will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
such seller, as such, furnished in writing to the Company by such seller
specifically for use in such registration statement or prospectus, and PROVIDED,
FURTHER, HOWEVER, that the liability of each seller hereunder shall be limited
to the proportion of any such loss, claim, damage, liability or expense which is
equal to the proportion that the public offering price of the shares sold by
such seller under such registration statement bears to the total public offering
price of all securities sold thereunder, but not in any event to exceed the
proceeds received by such seller from the sale of Restricted Stock covered by
such registration statement.
- 5 -
<PAGE>
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 7 and shall only relieve
it from any liability which it may have to such indemnified party under this
Section 7 if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel reasonably
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 7 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected, PROVIDED,
HOWEVER, that, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be reasonable defenses available to it which are
different from or additional to those available to the indemnifying party or if
the interests of the indemnified party reasonably may be deemed to conflict with
the interests of the indemnifying party, the indemnified party shall have the
right to select a separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the expenses and
fees of such separate counsel and other expenses related to such participation
to be reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Restricted Stock exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 7 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 7 provides for
indemnification in such case, or, (ii) contribution under the Securities Act may
be required on the part of any such selling holder or any such controlling
person in circumstances for which indemnification is provided under this Section
8; then, and in each such case, the Company and such holder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that such holder
is responsible for the portion represented by the percentage that the public
offering price of its Restricted Stock offered by the registration statement
bears to the public offering price of all securities offered by such
registration statement, and the Company is responsible for the remaining
portion; PROVIDED, HOWEVER, that, in any such case, (A) no such holder will be
required to contribute any amount in excess of the public offering price of all
such Restricted Stock offered by it pursuant to such registration statement; and
(B) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.
- 6 -
<PAGE>
8. CHANGES IN COMMON STOCK. If, and as often as, there is any change in
the Common Stock by way of a stock split, stock dividend, combination or
reclassification, or through a merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof so that the rights and privileges granted hereby shall
continue with respect to the Common Stock as so changed.
9. RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Stock to the public without registration, at all times
after 90 days after any registration statement covering a public offering of
securities of the Company under the Securities Act shall have become effective,
the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to each holder of Restricted Stock forthwith upon request
a written statement by the Company as to its compliance with the reporting
requirements of such Rule 144 and of the Securities Act and the Exchange Act, a
copy of the most recent annual or quarterly report of the Company, and such
other reports and documents so filed by the Company as such holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing such holder to sell any Restricted Stock without
registration.
10. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to you as follows:
(a) The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and will not
violate any provision of law, any order of any court or other agency of
government, the Certificate of Incorporation, as amended to date, or By-laws of
the Company or any provision of any indenture, agreement or other instrument to
which it or any or its properties or assets is bound, conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any such indenture, agreement or other instrument or result in the
creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms.
- 7 -
<PAGE>
11. TERMINATION. This Agreement shall terminate on the earlier to occur
of (i) such time as all Restricted Stock shall have been disposed of or (ii)
such time as all Exercise Shares are eligible for sale pursuant to Rule 144.
12. MISCELLANEOUS.
(a) All covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto (including without
limitation transferees of any Warrants or Restricted Stock), whether so
expressed or not, PROVIDED, HOWEVER, that registration rights conferred herein
on the holders of Warrants or Restricted Stock shall only inure to the benefit
of a transferee of Warrants or Restricted Stock if (i) there is transferred to
such transferee at least 20% of the total shares of Restricted Stock originally
issued pursuant to the member Warrants to the direct or indirect transferor of
such transferee or (ii) such transferee is a partner, shareholder or affiliate
of a party hereto.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be delivered in person, mailed by
certified or registered mail, return receipt requested, or sent by telecopier or
telex, addressed as follows:
if to the Company or any other party hereto, at the address of such
party set forth on the signature page hereto;
if to any subsequent holder of Warrants or Restricted Stock, to it at
such address as may have been furnished to the Company in writing by such
holder;
or, in any case, at such other address or addresses as shall have been furnished
in writing to the Company (in the case of a holder of Warrants or Restricted
Stock) or to the holders of Warrants or Restricted Stock (in the case of the
Company) in accordance with the provisions of this paragraph.
(c) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
(d) This Agreement may not be amended or modified, and no provision
hereof may be waived, without the written consent of the Company and the holders
of at least two-thirds of the outstanding shares of Restricted Stock.
(e) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(f) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this
- 8 -
<PAGE>
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
(g) each of the parties acknowledge that any breach of this Agreement
by any one of them will cause irreparable harm to the other parties thereto and
that in the event of such breach, the parties hereto shall be entitled, in
addition to monetary damages and to any other remedies available under this
Agreement and at law, to equitable relief, including injunctive relief.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
- 9 -
<PAGE>
Please indicate your acceptance of the foregoing by signing and returning
the enclosed counterpart of this letter, whereupon this Registration Rights
Agreement shall be a binding agreement between the Company and you.
Very truly yours,
AyurCore, Inc.
1737 N. First Street, Suite 290
San Jose, CA 95112
-------------------------
Deepa Chitre, M.D.
President
AGREED TO AND ACCEPTED as of the date first above written.
- -------------------------
- 10 -
<PAGE>
EXHIBIT 11
<TABLE>
<CAPTION>
AYURCORE, INC.
COMPUTATION OF NET (LOSS) PER COMMON SHARE (2)
Year Ended December 31, Nine Months Ended September 30,
----------------------------- --------------------------------
Primary 1995 1996 1996 1997
------- ---------- ----------- ----------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
Net (loss) $(1,163,000) $(1,327,000) $ (949,000) $ (704,000)
------------ ------------ ----------- ----------
------------ ------------ ----------- ----------
Weighted average number of common shares outstanding 1,986,106 1,999,994 1,999,994 1,999,994
Shares issuable upon exercise of stock options and
warrants, net of shares assumed to be repurchased 65,833 65,833 65,833 65,833
------------ ------------ ----------- ----------
Shares used for computation 2,051,939 2,065,827 2,065,827 2,065,827
------------ ------------ ----------- ----------
------------ ------------ ----------- ----------
Net (loss) per common share $ (.57) $ (.64) $ (.46) $ (.34)
------------ ------------ ----------- ----------
------------ ------------ ----------- ----------
</TABLE>
Notes and Assumptions:
(1) The Company issued common stock and common stock equivalents for
consideration below the initial public offering price of $6.00.
Consequently, in accordance with Staff Accounting Bulletin 83 (during
the periods covered by statements of operation included in the
registration statement) the followng methodology was used in determining
weighted average shares outstanding:
Stock issued in a one year period immediately prior to the offering was
treated as outstanding for the entire period and repurchase of shares using
the treasury stock method at an offering price of $6.00.
(2) Adjusted to reflect retroactively, a 18,333.486-for-1 stock split
approved by the Board of Directors of the Company on November 18, 1997.
<PAGE>
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
NAME COUNTRY OF ORGANIZATION
- ---- -----------------------
BIO-VED Pharmaceuticals Pvt. Ltd. India
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this registration statement on Form SB-2 of
our report, dated October 9, 1997 (with respect to Notes J[1] and J[2], November
18, 1997, and with respect to Note N, December 8, 1997), based on our audit of
the combined financial statements of AyurCore, Inc. and Bio-Ved Pharmaceuticals
Private Limited as of December 31, 1996 and for each of the years in the
two-year period ended December 31, 1996 and for the period from January 11, 1993
(Inception) through December 31, 1996. We also consent to the reference to our
firm under the caption "Experts" and "Selected Combined Financial Data".
Richard A. Eisner & Company, LLP.
New York, New York
December 8, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 SEP-30-1997
<CASH> 83,000 165,000
<SECURITIES> 0 0
<RECEIVABLES> 0 12,000
<ALLOWANCES> 0 0
<INVENTORY> 12,000 1,000
<CURRENT-ASSETS> 134,000 194,000
<PP&E> 75,000 92,000
<DEPRECIATION> 21,000 49,000
<TOTAL-ASSETS> 216,000 303,000
<CURRENT-LIABILITIES> 1,658,000 2,401,000
<BONDS> 0 0
0 0
0 0
<COMMON> 2,000 2,000
<OTHER-SE> (1,444,000) (2,100,000)
<TOTAL-LIABILITY-AND-EQUITY> 216,000 303,000
<SALES> 0 83,000
<TOTAL-REVENUES> 0 195,000
<CGS> 0 83,000
<TOTAL-COSTS> 0 83,000
<OTHER-EXPENSES> 1,245,000 708,000
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 82,000 108,000
<INCOME-PRETAX> (1,327,000) (704,000)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,327,000) (704,000)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,327,000) (704,000)
<EPS-PRIMARY> (.64) (.34)
<EPS-DILUTED> (.64) (.34)
</TABLE>
